Tuesday, October 26, 2004

Channeling Ronald Reagan

When I heard President Reagan speak, I would mentally cross my fingers. Would he stumble, looking for the right words? Would the baying media hounds finally overwhelm the aging lion? Television loves officials who are quick on their feet. They can speak, impromptu, in perfect declarative sentences, each thought building upon its predecessor. Mr. Reagan, for all his vaunted experience before the camera, seemed a half-beat slower than others who often appeared on television. Perhaps it was the natural easing due to age, or perhaps it was the hidden precursors of his Alzheimer’s disease, or maybe it was just due to the slower cadences of an older America that was more rural than urban.

Most of his enemies are gracious today, but I remember their viciousness well. He was too old, tottering and doddering, a warmonger, a simplistic cowboy who would be lost without his 3x5 cards. I ended up voting for him twice but, two years into his first term, wondered if I had made the right decision.

Mr. Reagan didn’t trim taxes, he took an axe to them. Marginal rates were halved and deductions and credits dramatically expanded. If companies couldn’t use the credits because they had no income to be taxed, they could sell them to other companies who could use them. The deficit mushroomed.

Meanwhile, the Federal Reserve under Paul Volcker tightened the money supply to wring inflation out of the system. The rate on the 30-year Treasury bond climbed past an unprecedented 14%. “Crowding out” entered the popular lexicon. (The U.S. Government, which is the risk-free borrower, i.e., the only borrower which is 100% certain to pay its debts, the only condition being the continued existence of the United States of America, can set its borrowing rate as high as it needs in order to attract funds. It is the 800-pound gorilla in the credit markets and crowds out other borrowers, regardless of their creditworthiness.) Mortgage rates soared; the housing and automobile markets collapsed, dampening the rest of the economy.

Mr. Reagan removed the last controls over the price of oil. The price of gasoline fell, and I had to write off the investment in an energy partnership, which represented a sizeable portion of my net worth at the time. Consumers benefited while energy investors lost.

Mr. Reagan believed that deregulation and lower taxes would free the animal spirits of the American people and that the economy would surge. He did it boldly, amidst much hand-wringing by detractors and some supporters. His belief that these policies would work was based more on his understanding of human nature than macroeconomic evidence, which had been heretofore limited.

President Reagan not only spoke against totalitarianism—all Presidents do--but, over vociferous objections both here and abroad, he introduced weapons systems into Europe that first halted the expansion of the Soviet Empire, then contributed to its dissolution.

George W. Bush has been compared to Ronald Reagan, usually for the purpose of drawing an unflattering contrast with the former, but for those of us with clear memories, the comparison is apt. The criticisms are exactly the same as we heard 20 years ago:
  • The President’s mental faculties are suspect (almost by definition, conservative principles are held by those with substandard intelligence, but he’s even dumber than the average conservative).
  • He draws his main support from right-wing religious extremists, most of whom also have IQ’s under a 100.
  • He wraps himself up in the flag as if it were a security blanket.
  • He vacations too much at his ranch [think how much damage he could have caused if he didn’t take so much time off!]
  • He cut taxes and caused the deficit to balloon, putting Social Security, Medicare, and the welfare of future generations at risk.
  • Academics, mass media, and the European intelligentsia are overwhelmingly united in their opposition; many don’t even try to hide their scorn for the simpleton in the White House.
  • The President is way too quick to pull the trigger and scares friend and foe alike, except for the British Prime Minister, who inexplicably is a person of rare intelligence who not only gets along with but admires the President.

  • Unlike Ronald Reagan, George W. Bush will not win 49 states in his campaign for re-election; it is very possible that he will lose. Yet I do believe in one final similarity: posterity will be kind to Mr. Bush, because the big decisions he made will have resulted in a better life for many millions of people. © 2004 Stephen Yuen

    Sunday, October 24, 2004

    Focus Group

    For years I had aspired to join the board of directors of a public company. All I would have to do was attend an all-expenses-paid quarterly meeting at a nice location, enjoy a sumptuous lunch, rubber-stamp a few management proposals, and collect a handsome director’s fee. Not a bad way to spend a day.

    Now that post-Enron regulations require board members to take seriously their fiduciary responsibilities, directors must spend a significant amount of time preparing for meetings, which are also occurring more frequently because more decisions are being kicked upstairs, and companies can’t wait three months for approval.

    A board member’s potential liability, if he doesn’t perform his duties with care, greatly exceeds his director’s fee. Even if the directors and officers insurance policy covers the damages, a shareholders suit or SEC enforcement action generates a lot of grief, such as giving depositions or producing documents for a discovery proceeding, that a busy (c’est moi), important (n’est moi) person doesn’t need to deal with.

    A couple of weeks ago I chanced upon a great way to make some money, without being responsible for anything I said or did. A marketing research company had extracted my name from a financial managers’ mailing list and asked for a couple of hours one evening. And so it was that I participated in my first focus group.

    After snacking on some sandwiches, soft drinks and cookies, a dozen of us were ushered into a conference room with mirrored walls. Although we represented a cross-section of occupations and institutions (business, government, and education), I noticed that we had a few things in common: we had financial backgrounds, we worked with financial software, and we used Microsoft Excel for much, most, or all of our modeling work.

    The moderator gave a brief introduction and asked us our opinion about Excel. Although we all launched into gripes, in truth I find Excel to be an excellent, flexible tool, much more powerful than the original, pathbreaking Visicalc, Lotus 1-2-3 or the Excel of 10 years ago. However, I’ve had to review (or worse, take responsibility for) other people’s work, and frequently I’ve found errors, some minor, and a few major, that could have resulted in financial calamity for the project in question.

    Because spreadsheets have become so complicated, and many people plunge right into projects without a plan (like writing a book without sketching an outline), following the logic and checking the output can be quite difficult. For my own work I always prepare a summary sheet with control totals, but that takes time which is often in short supply.

    Specialized financial modeling programs, like accounting software, have built-in controls so their output is more trustworthy, but a) they require many hours to learn and b) they’re not as flexible as spreadsheets (if you have a project which has a few unusual features, it can be hard to adapt the program to represent those wrinkles accurately).

    After listening attentively to our criticisms, the moderator introduced us to a software product that will soon be marketed by a company that is well known in deal-making circles. Deal volume is down, so this company, which has spent millions in development of its in-house software, is spending millions more trying to license it to banks, insurance companies and any organization that makes investments which have a complex financial structure.

    A senior programmer, in his early to mid-30’s, entered the room and ran a demonstration. From his comments he had clearly been observing us from behind the mirrors. Also, unlike other programmers I’ve met, he had been practicing his people skills.

    I didn’t say anything right away. There were benefits and drawbacks to the software, and I like to take my time before venturing an opinion. What was astonishing to me was the reaction of the other participants. They immediately chimed in with banal observations: “I like the fonts you use”; “I like the easy way you can draw lines”; “You can fill in the rows without moving the mouse too much”. Then the lightbulb went off. They wanted my opinion, so I should say something, anything, no matter how ridiculous-sounding, because I would suffer no consequences.

    The bloviating continued for another 40 minutes, and I felt guilty that the sponsor was paying gold for such dross. After it was over, the moderator thanked us and said that they had gotten a lot of useful information, despite my misgivings. The two hundred bucks in the envelope assuaged my guilt, and I put my name in for the next focus group. I won’t get rich, but this is one job that I won’t take home with me. © 2004 Stephen Yuen

    Wednesday, October 20, 2004

    Unmotivated and Easily Distracted

    On a clear day you can see the Golden Gate Bridge from our floor.

    Writing this journal should be purely for pleasure, but I'm beginning to feel dissonant emotions, like guilt, because my entries have been infrequent. Yes, I've had a lot of work recently, but that's a pretty lame excuse. After a long day I like to go into my man cave and zone out in front of the boob tube. the remote control in my left hand and the snack bowl in my right. The laptop beckons, but a) it's hard to type with one hand, and b) peanuts and chips make the keyboard greasy.

    I'd spend more time on this subject, but one of my pet peeves is writers who write about the act of writing. How self-indulgent! Just like making a movie about film-making. So I'll stop now, with the hope (not the promise) that I'll make an entry tomorrow. After I go running. Which I haven't done for a week. Because I've had a lot of work recently.....

    It doesn't look that appetizing, but this lunch at a small eatery on Stockton Street costs only $2.50. You get chicken, rice, vegetables, and soup.

    Wednesday, October 13, 2004

    10 Reasons Why Republicans Should Vote for John Kerry

    10. Democrat friends may burst a blood vessel if they are shut out from the halls of power (both houses of Congress, the Executive, and Supreme Court) for another two years. You want them to live, don’t you? Don’t you?

    9. Gridlock is good. Government causes less mischief when fewer laws are passed.

    8. Pleasure: Republicans historically have never been happier than when they battled the perfidy and harebrained plans of a Democratic President.

    7. The billionaire First Lady will put her wealth in a blind trust and won’t be as free to fund radical left-wing causes.

    6. If Kerry uses international alliances to try to clean up the mess in Iraq—and fails, the American public may finally give the boot to the United Nations, and a Republican will be the odds-on favorite to win the Presidency in 2008.

    5. If Kerry does succeed in Iraq, Western values will have gained a significant beachhead in the Middle East. The national interest will have been served, and all good Republicans will be happy to place the country’s welfare before that of the party (right?).

    4. No more movies where a drug-crazed Vietnam vet shoots up the post office.

    3. More pictures of the Kerry daughters.

    2. Knowing that everyone’s scrutinizing their tax returns, President and Mrs. Kerry will have to a) declare more income and b) claim fewer deductions, thereby making a huge dent in the national debt.

    1. President Hillary Clinton – not going to happen! © 2004 Stephen Yuen

    Monday, October 11, 2004

    French Fashion Leads the World

    The top five good things about this latest example ofhaute couture:

    5. French fashion statement of solidarity with Islamic sisters whose headscarfs are banned.

    4. Provides precious additional seconds of air during terrorist gas attack.

    3. Polarization keeps nasty UV rays out….cheaper than botox treatments!

    2. Opaque version doubles as elegant evening wear for bank robbers.

    1. Essential accessory for Red Sox fans after this year’s inevitable playoff disappointment.

    Poor Choice of Words

    I've found military historian Victor Davis Hanson's writings to be highly insightful, but in view of what's been happening to hostages almost daily, isn't there a better choice of words than "things are coming to a head in the Middle East"?

    Saturday, October 09, 2004

    P.O. on Friday

    After a long liquid evening Thursday, an informal cocktail party with people whom I didn't have to be on my best behavior, I showed up at the office a little late. It was quiet, with only four others on my side of the building, so I was able to knock off a couple of projects by 1 o'clock, after which I strolled to the post office at One Embarcadero Center to mail an overnight package to a friend.

    There were over a dozen people in front of me and only two windows open, and the customers through their questions ("Is that the only box you have?" "Why can't you deliver it on Columbus Day?") seemed oblivious to the communal desire to keep the line moving.

    Recognizing in myself the growing indicators of irritation--the more rapid breathing, the throbbing in my temples--I walked away from the stress to the Federal Express outlet three blocks away and willingly paid double the Post Office tariff. There was no waiting: the rush at FedEx doesn't normally start until after 4:30 p.m. And I could rest easy on Friday night, because I knew the package would get there on Saturday.

    A quiet lunch, then back to the office to watch the Snowbirds and pack up for the weekend.

    The Snowbirds, (above Coit Tower in the photo)Canada's elite flying squad, are here for Fleet Week.

    Thursday, October 07, 2004

    Afternoon with J

    I’ve known J since fourth grade but hadn’t seen him since our class reunion in 2000. He was on the final leg of a business trip and wore a suit to my office; I should have told him that we had gone casual six years ago. His thinning, gray-flecked hair accented the gravitas that had begun to blossom during his student council presidency decades ago. His suit gave him a distinguished appearance, but I could tell that he, like many people with Island roots, was not quite at home in a coat and tie.

    J was used to public speaking in front of large groups, so I was surprised that initially his body language was defensive. (It’s just me, a guy that played tetherball with you at recess.) So I started talking about myself, something I don’t normally like to do, but if I take the first step other people usually begin to open up.

    I told him about my undergraduate years in New England and subsequent life in the Bay Area. His college life, by contrast, was spent here, and he earned his graduate degrees back East. We talked about life’s unpredictable turns, our successes and failures, our children and parents, and the dreams we still hold. We discussed mutual acquaintances and larger purposes, and where we thought we would end up (me over there and him over here).

    J and I aren’t really close, but I was pleased that he stopped by to see me today. I promised to see him at the reunion next June.