patrick.net

Yup-life ain't fair. The more you rise up the corporate ladder, the more you realize it is thin air!

curious2 says

If, in reality, choosing a particular CEO or CFO has a material effect on the probability of good or bad decisions, then these can easily translate to many billions of dollars in shareholder value or tax dollars; the question is, how do you know whether that's really what's going on?

Here's the thing, many of these execs come from a clubhouse, whether it's management consulting (MC) or the bulge bracket (a.k.a Wall St's IBs), and sometimes both.

And then, in place of actually thinking and doing real work, they hire a cadre of consultants, many of whom are cronies with the C-levels in the Fortune 2000, Once this happens, the ownership of the actual decision is then outsourced. When many of these junior MCs are 26 year old, with little actual hands-on experience in operations a/o deliveries, they basically parrot whatever paper the junior partner on the team is pushing, so that it appears that a consensus was formed by an experienced committee.

The end result is that if an initiative fails, the managing director can then tells the COO and that he'd followed the Mercer Group's recommendations and thus, still gets that silver parachute because he lived up to his contract.

curious2 says

Consider the example of W "The Decider" who decided that America should invade Iraq. That decision has cost trillions of dollars. A better chief executive might have been worth many billions of dollars, even trillions, vastly more than 350 soldiers or programmers, not because the chief is a better or smarter person than they but simply because of the importance of choosing the right person for that job.

I would argue that your example isn't one of a good executive generating trillions of dollars, but rather of a bad executive costing trillions of dollars. Thus the solution is simply to decrease the power of the executive position so that no one holding it can cost the organization (company or country) so much or to eliminate the position altogether.

I would also suggest that if only Bush and his cabinet wanted war, he would not have gotten it. Congress and a good third of the public were for the wars.

curious2 says

The question you should be asking is, can the employer hire a similarly qualified person to make the same or better decisions for less money?

That is also a good question to ask. However, the typical worker at any company isn't going to get paid more than what he produces even if he's the cheapest labor available. So it's still valid to ask if this executive position is even worth fulfilling at that ludicrous rate. What is being done at that level that well-paid and highly qualified accountants (a mere six figures a year) can't do?

curious2 says

Another question: why do certain fields become exempt from the competitive pressures that others face? Your 350 programmers face global competition, but the American medical sector does not, and Wall Street gets around global competition by pulling the strings of government to enact lemon socialist protectionism

To escape global competition requires some kind of requirement that cannot be fulfilled, typically by design, from foreign countries. In the case of doctors, foreigner doctors can't practice medicine in the U.S. Medical tourism does place a little downward pressure on prices, but not much because of how our health insurance system works. In the case of lawyers, the law also prevents practicing of law unless a law license is given by the state. Nuclear engineers must be onsite, and that keeps their wages up.

What I don't understand is how executives can keep from global pressure since Google could easily outsource it's financial position to someone far more qualified in China. Google could also hire three CFOs for a fraction of this person's asking compensation and if any of the CFOs disagree on an action Google could then outsource analysis of the decision to more CFOs on a contract basis and still pay less while having less risk of a drastically bad decision being made.

Dan8267 says

Congress and a good third of the public were for the wars.

and another third plus were more than willing to join the bandwagon if the invasion panned out.

Dan8267 says

how executives can keep from global pressure

GOOG is not money-bound. They've got 700 million shares outstanding so if you own 1000 shares this $70M is costing you $100/yr.

GOOG C-suite's time is money. There's no reason to fuck around with committees and random outsourcing to Timbuktu or whatever. Find the guy you want to work with and pay them what they want to work with you. That's GOOG's approach, and it's working for them.

Dan8267 says

Medical tourism does place a little downward pressure on prices, but not much because of how our health insurance system works.

Not to mention it's utterly farcical to fly to Asia or down to Mexico to get treatment.

Her job is to make more Double Dutch-Irish Tax Sandwiches with a little Cayman Islands on top to avoid paying evil taxes.

thunderlips11 says

Her job is to make more Double Dutch-Irish Tax Sandwiches with a little Cayman Islands on top to avoid paying evil taxes.

And even that you could pay an account and a lawyer to do for a dime a dozen.

Dan8267 says

What I don't understand is how executives can keep from global pressure since Google could easily outsource it's financial position to someone far more qualified in China.

She is part of a club where they throw each other that kind of bones.
There is no incentive for them to stop doing it.

Bellingham Bill says

fly to Asia or down to Mexico to get treatment.

If she outsources GOOG's medical coverage via videoconferencing to India and elective procedures in Mexico and the Caymans, GOOG will save more than her entire entire salary and bonuses. GOOG employees will fly to quality, while you wait for an appointment with your local pill pushers and butchers, who send your X-rays and other records off to Pakistan.

As a bonus, if a company or the executives want to have the Caymans as a corporate tax haven, it might help to have the executive medical facilities already there, so the executives have a non-tax reason to spend time there.

Dan8267 says

I would argue that your example isn't one of a good executive generating trillions of dollars, but rather of a bad executive costing trillions of dollars.

No need to argue, that was in fact the point that I was trying to get across, and arithmetically it works out the same (a penny saved is a penny earned).

Dan8267 says

Congress and a good third of the public were for the wars.

W's Iraq invasion had majority support at the time, thanks to the same people who sold Obamneycare (e.g. the NY Times, Ezra Klein, etc.)

I always enjoy conversations about FIAT currency. Great artwork on nice paper.
......
curious2,
Would you have a list of all the right wing nut individuals & media that said "Iraq has WMD."?

HEY YOU says

Would you have a list of all the right wing nut individuals & media that said "Iraq has WMD."?

I don't have a complete list, but DCI George Tenet (appointed by Bill Clinton) called it "a slam dunk" and then Senators Hillary Clinton and John Kerry both voted to authorize W's use of force.

Oops.

curious2 says

If she outsources GOOG's medical coverage via videoconferencing to India

Do you know of any true success stories of outsourcing something to India? I am not talking about the hospitals that they run there that are efficient and make the news. I am talking about general outsourcing.

tr6 says

Do you know of any true success stories of outsourcing something to India?

Yes, with the financial advantage being greatest in the insurance-driven medical sector, where subsidized American prices are absurdly high.

Ppl, why is it, that the press focuses on India, all of the time, but then, forgets the bigger picture?

All of Asia, including India & China, is coming online. And thus, we'll be seeing work done in the Philippines, Malaysia, Vietnam, etc.

In many countries, outside of Korea and Japan, the cost of living is lower than in the USA and then, when you add in the fact that the population in Asia is greater than in the US, does it not surprise anyone that work is going there?

During the 80s, the press was harping on Japan Inc. When its stock and RE bubbles had bursted in the 90s, the electronics industry didn't magical re-appear in the US. Instead, it found a new home in Taiwan and Korea. Likewise, when India becomes too inefficient, outsourcing will simply move elsewhere. One of our IT providers, has a huge support team in Bulgaria, as the quality of work done there, was better than in India. If things continue to work out in Sofia, why would they be motivated to create jobs in the northeast corridor?

Yes, I know, Bulgaria isn't in Asia but the points remains and that's that the cost of living in eastern Europe is less that of America.

Rin is Nigeria on the radar yet?

indigenous says

Rin is Nigeria on the radar yet?

If they can diversify out of oil and have safety zones for ex-pat businessmen, as you see in Capetown or Johannesburg in South Africa, then it could happen, since they were already speaking English, due to the Empire.

The problem is that cities like Lagos are crime ridden war zones and ex-pats who work for the energy sectors, have security details posted on them. The team I knew, who did a telecom project there, had to travel with security guards at all time. That's not a conducive environment for international business, however, despite that, Nigerians had been able to partner with other nations and launch a few satellites during the 2000s.

So could they be an outsourcing area? I wouldn't rule 'em out for the 2020s or 2030s, if they can purge the Islamists and improve security for business travelers.

And it doesn't have to necessarily be tech either. There's plenty of paralegal and call center work which can be sent first.

The demographics are projected to make it the next China. I agree on the corruption, India would grow much faster if they could handle the corruption.

indigenous says

The demographics are projected to make it the next China. I agree on the corruption, India would grow much faster if they could handle the corruption.

The problem with India, unlike its competitors like Bulgaria or the Philippines, is that it's widely known among businesses that they provide a poor product. And since they haven't really fixed that issue during the past decade, they won't be the primary outsourcing destination as time goes by. Our IT vendor had dropped Bangalore support, a few years ago for Sofia, for this exact reason. So far, they haven't had a quality issue with Bulgaria so those jobs will most likely stay there.

Interesting, I would contend that a true market was never established in India nor the requirement for education that the market would force in. How does private property work in India?

indigenous says

Interesting, I would contend that a true market was never established in India nor the requirement for education that the market would force in. How does private property work in India?

All that I know, from friends of South Indian origin, is that bribes are huge part of getting leases, licenses, etc, all over the place. Thus, it's a Byzantine maze of corrupt govt and business interests, for someone to navigate through.

The only real reason why it became such a huge outsourcing venue was that corporate America's execs, being such original thinkers, followed the herd mentality of coping other executives. Since they could always point to Jack Welsh and say that "if G.E. could do it, then so can we."

This from Google:

The Indian Constitution does not recognize property right as a fundamental right. In the year 1977, the 44th amendment eliminated the right to acquire, hold and dispose of property as a fundamental right.

I would argue that this is the core problem. In the graph below there appears to be a correlation.

Whoops, ok in the index at this link India is 46th out of 97

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

indigenous says

The Indian Constitution does not recognize property right as a fundamental right. In the year 1977, the 44th amendment eliminated the right to acquire, hold and dispose of property as a fundamental right.

I would argue that this is the core problem. In the graph below there appears to be a correlation.

I believe a number of nations, including China, use a leasing strategy instead of pure ownership. And thus, when Asians or Russians acquire a lot of money, they tend to park it in London or NYC real estate, as well as our own stock markets. Any why not? As long as they pay their prop taxes, that's an asset which can't be confiscated by the the PRC or Putin.

But still, outsourcing to China is not a low end quality shop as in India, so I don't know where India went so wrong.

Property rights are fundamental to growth in an economy. After all, is it stealing if no one owns anything?

indigenous says

Property rights are fundamental to growth in an economy. After all, is it stealing if no one owns anything?

Read through that list, all of our outsourcing partners are ranked below 20.

But as far as money goes, one can make money, and send it to the City of London for laundering.