Price controls

Sep 122010

My comment in response to the WSJ article, “Sebelius Has a List : Political thuggery from HHS“:

Someone please explain me how Ms Sibelius’s attitude toward information she doesn’t like is different from that of someone who thinks the solution is to burn a pile of Korans. In both cases, people are trying to protect their version of the truth from competitors.

Dec 062009

Jason Zweig has an article in the WSJ “Intelligent Investor” section in which he says that sixty percent isn’t much better than a coin flip. He needs to learn some probability and statistics. You can make good money with odds like that, especially if you get hundreds of coin flips.

The article is about whether it does any good to hire a top-notch CEO to turn a company around. It’s important to get these things right, because CEO compensation is under attack by the Obama administration these days. The article doesn’t say anything specifically about that. However, it does use as a context the new CEO that GM needs to bring in.

Here is the weird paragraph:

If you took the CEOs with the best track records and brought them in to run the businesses with the worst performance, how often would those companies become more profitable? According to economist Antoinette Schoar of Massachusetts Institute of Technology’s Sloan School of Management, who has studied the effects of hundreds of management changes, the answer is roughly 60%. That isn’t much better than the flip of a coin.

I’m actually surprised that it works 60 percent of the time. I would have guessed a much smaller number. If those odds are correct, all the more reason for the Obama administration to quit trying to control wages and prices.

[Late note:   The Zweig article seems to appear in more than one place on the WSJ web site.  And at this one,  a couple of people made the same point I did about 60 percent being a lot better than a coin flip.]

Jul 092009

Interesting. Page one of the WSJ says, “U.S. Rethinks How Best to Pay Pros. I wondered how anyone could possibly know what the U.S. was thinking, so I clicked on the article. There I learned that the page one headline had lied to us. Instead of the U.S., it’s the White House that’s thinking these thoughts. (“White House Rethinks How Best to Pay the Pros.”)

That’s kind of what I suspected.

Actually, I’d rather leave it up to the U.S., or more specifically, to the hundreds of millions of people who have an even greater number of factors to consider in evaluating the services of these pros. The Obama administration may have a lot of intelligent people, but if these people think they are intelligent enough to design pay incentive systems for these professions, they are not nearly as smart as they think they are.

But if they think they can handle the job, maybe they should first prove it. They could start by designing and codifying an incentive pay system for the members of the administration.

Hah. I thought that was an original idea until I read to the end of the article.