Tuesday assorted links

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"Management advice improved firm performance, unless it was being received by an MBA."

Hats off, Mr Cowen - I'm not going to click through in case it spoils the joke.

Involved in the computer industry, as founders, mostly engineers, or as salesmen, as managers were replaced by MBAs, every dynamic firm stalled, and then declined to oblivion.

Salesmen led firms served customers and became mostly services, with hardware and software requirements driven by services.

Engineer founders got to lead firm's by either leading sales to engineers, or partnering with a salesman, but drove products ahead of 99% of customers, pursuing the needs of 1% who are most innovative.

MBAs focused on metrics, comparing to peers, reducing the firm to the mean, and focusing on the mean customer. Not the customer who was failing to innovate, but especially not the most innovative customers.

MBAs turned firm's into followers. When one or three firm's were leading, MBAs served as anchors that ensured the firm products became obsolete, and only servicing the past sustained the firm, until it didn't.

Of course, every sector reaches a point so where innovation can not be done. For example, the food value chain. Economists teach MBAs to focus on metric and in the food value chain that might mean seed growing, but in practice it's limited to 1% of the seeds, wheat, corn, soybean, but not the 100 varieties of corn that cooks pick, the 100 varieties of greens, the 100 varieties of roots, 1000 varieties of fruits.

If you garden or forage or hunt, you can serve your family a hundred foods you can not buy in supermarkets. If you serve the public, and have skill and imagination, you will be considered innovative for doing as most people did a thousand years ago.

In the past thousand years, food value system iinnovation has been created that can eliminate food need, but that doesn't, but could. Division of labor and scale have been the innovation that most increased productivity.

"Beer" has long been a food staple, a "shelf stable" healthy source of water and nutrients. Made with local ingredients, economies of scale gave us AB-InBev and lite beer. Innovation has been going back in time to brew pubs and craft beer.

AB-InBev now twiddle some flavor elements to produce 100 brands of lite beer. Driven by MBAs.

China has focused on division of labor to employ 50% of its population, that were in food production without division of labor, in industrial production. In need of imports, China has focused on value added exports. Exported value-add to pay for raw material, and capital "raw material". Very MBA. Driven to the mean, with the US, Japan, Korea, economic rise, the European empires, and China's past, as well as lots of other economies, like Mideast and African mining economies basis for metrics. Fit into Keynes capitalism model. Turn the crank.

"I feel sure that the demand for capital is strictly limited in the sense that it would not be difficult to increase the stock of capital up to a point where its marginal efficiency had fallen to a very low figure. This would not mean that the use of capital instruments would cost almost nothing, but only that the return from them would have to cover little more than their exhaustion by wastage and obsolescence together with some margin to cover risk and the exercise of skill and judgment. In short, the aggregate return from durable goods in the course of their life would, as in the case of short-lived goods, just cover their labour costs of production plus an allowance for risk and the costs of skill and supervision.

"Now, though this state of affairs would be quite compatible with some measure of individualism, yet it would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital."

I know a youngish chap who is an executive in what he calls a FMCG corporation: fast-moving consumer goods. When he's off duty he calls it "selling crap to morons". Did he learn that at business school?

Comparing the periods 1970-89 and 2000-15, patenting in the current period has been primarily by entrant assignees, with the exception of neural networks.

In corporations today, the actual R&D is done by younger engineers, so they are the ones generating the patents.

There are some career researchers around, but they tend to be managing and mentoring said younger engineers. Also recently these career researchers have been going to work for Chinese companies.

Re #7 - I see two possible explanations:
1) MBAs are less modest, think they know everything, and therefore don't respond to advice:
2) The MBA is more likely to already be familiar with the advice given and is already incorporating it into their business

It's #2, but why deny Tyler a chance to take a cheap shot at hundreds of thousands of people?

In other news, taking tennis lessons at the YMCA will improve your game... unless you've already won Wimbledon.

Maybe a little of both?

I guess we found the MBA who thinks he knows everything.

I heard being one of thousands of bros traveling and getting shitfaced for two years while their parents pay for their new signal degree is the exact same accomplishment as winning Wimbledon.

“I heard being one of thousands of bros traveling and getting shitfaced for two years while their parents pay for their new signal degree is the exact same accomplishment as winning Wimbledon.”

There is a point at which cynicism shades into stupidity.

Yeah, like comparing an MBA to a tennis champion. That's how mocking works.

Sorry, I read the abstract. It says
"...entrepreneurs who received advice from peers with an active approach to managing people–instituting regular meetings, setting goals consistently, and providing frequent feedback to employees–grew 28% larger and were 10 percentage points less likely to fail than those who got advice from peers with a passive people-management approach two years after our intervention. Entrepreneurs with MBAs or accelerator experience did not respond to this intervention..."

In other words, MBAs ignored good advice. It doesn't say whether the MBAs considered the advisors "peers", btw.

#1 is not bad. Hang in there, Tyler.

Poem is kind of weak, to be honest. A poem should express a feeling that can't be expressed in mere words -- use rhyme, meter, etc to communicate the feeling. That poem expresses a point that can easily be explained in mere words. You're trying too hard to be precise instead of evocative.

Tyler didn't write it! I did. Thanks for the feedback.

I thought it was sweet and sweet things are just fine.

I thought it was sycophantic treacle.

I enjoyed it quite a bit and strongly agree with the sentiment. Thanks!

I liked the sonnets, too.

Poem was fine. Not all poems and prose have to be like Chekov's works, where it was said he described stuff indirectly, like instead of saying it was a full moon he would describe the strong reflections of light at night off a bottle. Sometimes you can be direct. Commentator Haiku Bill might disagree.

My vanity did not like the no mention of the commentators! :-0

Bonus trivia: there were exactly 65 comments--like the number of squares in a chess board--before I added this one. Funny how often that seems to happen--watch for it yourself!

Gratitude. MR is like a lighthouse, an anchor of sanity, for some of us.

+1. Now if MR would just implement a basic logon system to curtail the horrible trolling.

7. "Management advice improved firm performance, unless it was being received by an MBA."
I expected ...., "unless it was given by an MBA."

Lol that is how I initially read it as well!

#5—What strikes me is that they bothered to do trials with different interventions across hundreds of villages to figure out what worked before rolling out the solution. I'm inclined to check out Banerjee and Olken's other work; this looks like good stuff.

Yes, work that banerjee, Duflo etc do and work done at ALJ Poverty Action Lab is impressive.
https://www.theguardian.com/commentisfree/2011/jun/06/praise-esther-duflo-abhijit-banerjee

3. When I was a child, there was a shop on the corner down from the movie theater that sold all kinds of merchandise, including jewelry. Strangely, there were no price tags on the merchandise. If you asked the owner the price of an item, the owner would ask: "How much money do you have?" What an unusual concept: price merchandise according to how much money the buyer has. Of course, that's how health care is priced in America. Cowen calls this system a cross subsidy: buyers with more money (private insurance with generous benefits) subsidizing buyers with less money (Medicare and Medicaid). On the other hand, those with less money are also subsidizing those with more money by virtue of the tax benefits accruing to private insurance with generous benefits. Who comes out ahead in this game of cross-subsidies? If you believe the fellow with less money, you might consider broadening your reading habits.

...those with less money are also subsidizing those with more money by virtue of the tax benefits accruing to private insurance with generous benefits.

Not sure this makes much sense. Health expenditures are tax deductible, so even if you don't have health insurance, you can still claim a "benefit" for the costs incurred.

Take a look at the tax code (if you can stomach it). Health expenditures are only tax deductible if they are large enough - for many people this is not an option.

7. Lawyers have been considered good candidates for CEO jobs because they are generalists, accustomed to learning something new with every case they take, and advocates, able to communicate and promote whatever they have learned. The most impressive people I have met in business have both a law degree and an MBA. I am thinking in particular of a banker who was instrumental in taking many tech companies public. Whether he and his clients would have experienced the same success if he had only a law degree or an MBA is debatable, but he had both, to his and his clients' great good fortune.

"
Our research produces two conclusions. First, CEOs with legal expertise are effective at managing litigation risk by, in part, setting more risk-averse firm policies. Second, these actions enhance value only when firms operate in an environment with high litigation risk or high compliance requirements. Otherwise, these actions could actually hurt the firm." - https://hbr.org/2017/08/do-lawyers-make-better-ceos-than-mbas

1. The Guardian seems to have published a piece from Elena Ferrante lacking requisite specificity. She divides our attention between novels and news as sources of civil information and social orientation without qualifying the content or noting the identifiable qualities of either novels or news. Nor does she explain overmuch how she arrived at her narrow view of accepted narrative technique.

I don't read The Guardian regularly, Elena Ferrante's fiction at all: but one ready strategy available to all as we proceed from these heady days is absurdism, understood properly as "a teleological suspension of the rational undertaken to perfect the logical". As now we see daily, this narrative approach has begun to be exploited by commercial news outlets although in typical journalistic fashion the rubes get it only half right and succeed ONLY in suspending the rational.

#3: hospitals still typically make money on their Medicare patients, despite the discount. A lot of them make money on their Medicaid patients, too, despite the even lower reimbursement rates. As uninsured patient costs decline in Medicaid expansion states, the necessity of cross-subsidization ends, although I doubt it will in practice.

The interesting question to me here is how much of the lack of competition is driven by public policy (e.g., certificate of need laws) vs. healthcare simply being being a superior good?

They can probably cover marginal costs for Medicare patients, but that's different than covering average costs.

Each industry is different, of course.

At rural hospitals in an area with older inhabitants the Average substantial cost patient is a Medicare patient. This has been a factor in the ongoing bankruptcy of rural hospitals.

Don't think so. Most of the hospitals I deal with will tell you they make money overall on their Medicare patient population, even if they lose money on this one/that one/this other one.

That wasn't responsive to what I said.

To follow-up, it's not that every patient makes them money, it's that there are fixed costs that may not be covered by Medicare patients.

Say I get a last-minute stand-by on a flight for $30. I do that ten times a year, but one trip they have to handle an emergency where I end up costing them $40.

I'm not saying that the $40 trip means I wasn't profitable for them. They still made money off of me because the marginal costs of providing extra fuel, 10 snacks, and one $40 issue are covered by my $300. However, the airline could not function with every passenger paying $30.

So while I can say, totally accurately, that the airline made money off of me, that doesn't mean the airline can handle every customer being me.

Uh, I don't think these people are unfamiliar with the concepts of fixed costs, contribution margins, etc.

"Don't think so. Most of the hospitals I deal with will tell you they make money overall on their Medicare patient population, even if they lose money on this one/that one/this other one."

Would they make money if all their patients paid Medicare rates? (IE is it marginal money or can it cover a full share of the overhead).

1. Objecting to lies is a form of political correctness. Objecting to criticism of America's intelligence and law enforcement community is another form of political correctness. Objecting to offensive, misogynist, and racist behavior is another form of political correctness. Indeed, what's happened on the right side of the political spectrum is that political incorrectness has become political correctness.

Here is a creative explanation for Trump's behavior on Monday (Senator Mike Rounds, SD):

"Everything I’ve seen and all the facts are very clear: Russia did meddle in our election. That was very clear. So I think what actually happened, I think Mr. Putin just got out-Trumped by Trump. If Mr. Putin thinks he can tell a whopper, he’s not gonna be outdone by this president. And so if Mr. Putin is going to look at him and try to straight-faced tell him that they didn’t meddle, our president can look right back at him and tell just as big a whopper back to Putin as Putin told him."

That reminds me of the classic children's book by Sid Fleischman, _Chancy and the Grand Rascal_, a variation of the Huck Finn theme where a teenage or pre-teen boy travels down the river encountering rascals, rogues, and scalawags.

At one point two of the characters have a contest to see who can tell the tallest tale. The grand rascal of the title says that he can top the other guy's tale in seven words. The other guy gives an unlikely story IIRC about growing and baking corn fritters or some such on the Ohio River during a drought and heat wave, and the grand rascal responds by saying "I believe every yee-hawin word you said!".

Watching Paul Ryan et al. struggle today to counter Trump's base comments without affecting the Base , the small mercies are that he is forcing great creativity on the Republicans. At least that is a treasonable explanation , to quote Kimmel.

As I was saying in the other thread, the Never Trump conservatives are really the only ones looking good at this point. Especially those who didn't shy or acquiesce.

Bruce Bartlett as the model?

It is amusing you think so. Yet again Journo-list, or whatever they call themselves these days, have tried to bring Trump down by throwing themselves on the floor and crying hysterically until they wet themselves.

Yet again they are destroying nothing but their own credibility.

But hey, if wetting the bed works for your side of politics, by all means, wet the bed.

Seriously? When I say Never Trump conservatives were right (in 2016), the best you can offer is a flashback to 2010?

https://en.m.wikipedia.org/wiki/JournoList

I don't think the Never Trump conservatives were really part of that anyway.

4. Given the current condition of the academy, one must wonder if this will mark any improvement over Universal History from the Earliest Account of Time (1747-1768) https://en.wikipedia.org/wiki/Universal_History_(Sale_et_al)

There is little innovation in software except a few advances in interpreters. One example is the single knob gumball machine. Bezos wanted to patent that using software, the one click purchase and was denied. Steve Jobs patented the digital coffee machine, thinks he is getting a patent because some 'AI' is deciding when the cup is full. Someone tried to patent the manila folder by adding a mechanical version of it on the screen. There is not much innovation in the current generation of AI, it is all mostly still if/then statements, except some work google did with the go machine.

Software developers are not mathematicians, mathematicians do the innovation and get real patents, software developers just copy crap and ultimately get the patent overturned because it was just a software version of something previously done with mechanics.

The point of these patents is to protect incumbents against smaller competitors. It is also a sort of signalling of power by conspicuous consumption.

Actually it's quite common for small companies to patent their technology before they partner with a big corporation.

Otherwise the big corporation will simply use the small company's product for a year or two until their own version is ready.

3.
This quote also works for colleges:

The quoted price is a fiction. It allows hospitals to declare lots of charity care when they treat uninsured people with no money at all. But more importantly, it gives them a great starting point for a one-on-one ex-post negotiation for the unwary.

And also, the pricing isn't sensitive, because in both cases, someone else pays for a substantial chunk of the cost.

I also noted that the article starts off with a great discussion about how market competition forces companies in industries to flood consumers with pricing information in order to get them to purchase their products.

It then goes on to explain that hospitals don't do that, but provides no reasons. So are hospitals not subject to market competition? Are there any economists who can explain whether or not hospitals are actually subject to market economics? And if they are, how is it that competition doesn't cause them to provide transparent pricing? Is medical care somehow not subject to the free market?

You might need to click through to his article about cross-subsidies, but the reason is because if the hospital said "this only costs $30,000" then the lies that it costs $140,000 would fall apart, and those lies are supporting other parts of the system.

No. I got that. I guess my question would be why can't the airline industry featured in the same article do the same thing? Or the car industry? Is the practice of medicine somehow different that it doesn't have to conform to free market pricing incentives?

I guess EMTALA. If the government gave indigent people money directly to buy health care outright, there would be real markets, but we try to hide that.

Well, I don't know if hospitals were heavily advertising competitive pricing prior to EMTALA. I think that was back in the '80's, before my time. I was a kid, so I don't know if I would have noticed a hospital commercial advertising knee replacements for $100.

I just can't think of any other industry that does this so persistently and at all levels.

That's a really good point. Why weren't they competing on price back then?

I might offer that prices only exploded after EMTALA and third-party insurance became standard, masking all the costs, so there was no real need to compete on price before then.

Also, a lot of the expensive things just weren't available back then. I kind of made that explanation up but then I googled and got https://www.medicographia.com/2013/10/knee-replacement-for-osteoarthritis-facts-hopes-and-fears/ and it turns out I was right. It's was essentially invented in the late 1970s.

Part of the problem is that the cash market has a high risk of default on medical debts, which is why hospitals were refusing to provide service to the uninsured in emergency rooms, which is what led to EMTALA in the first place. So, given that under EMTALA hospitals have to provide emergency service, that would explain exceptionally high emergency room list prices - -to cover the risk of default. But that doesn't really explain elective hip replacement. My wildly speculative guess is that the provides in Alabama are able to demand payment in cash up front, but they can't do that in Massachusetts for some reason.

"My wildly speculative guess is that the provides in Alabama are able to demand payment in cash up front, but they can't do that in Massachusetts for some reason."

I'd say it's more likely a difference in medical salaries and malpractice insurance. If your base medical salaries are substantially higher and your average malpractice suits are substantially higher, then you will charge more.

It's not a free market. The end consumer (patient/principal) takes a subordinate role in the transaction to the agent (insurance company).

You do see both advertising and haggling over things that are not covered by insurance (both alternative, non-western medical therpuetics and elective western medicine, for examples).

I see prices advertised in lasik and in cosmetic surgery--two areas where the patient pays, not a third party.

#3.
Speculatively, I wonder if the risk of not being paid is driving the relatively high "cash" prices, not lack of transparency as is often believed. Maybe insurers get steep discounts because it's a lot easier to collect payment from them, they aren't going to declare bankruptcy or otherwise renege after the surgery is performed. Maybe there are state laws which for some reason make it riskier to provide an expensive surgery to a direct cash buyer.

Possible explanation ... the homestead exemption in bankruptcy laws - the amount that the debtor can exempt in property value from being taken to pay debts is much greater in some states than others. So in those states, it's a lot harder for medical providers to collect on huge medical debts, since they can't take the debtors home.

Massachusetts:
Homestead or residential property. Debtors who file a “Declaration of Homestead” with the Registry of Deeds can exempt up to $500,000; otherwise, the exemption is $125,000. (Mass. Ann. Laws ch. 188, §§ 1-4) Interests of a non-debtor spouse in property held as tenancy by the entirety (an attorney can explain these rights). (11 U.S.C. § 522 (b)(3)(B).)

Alabama:

Homestead. Up to $15,500 in equity and up to 160 acres of real estate and the residence upon it, including a house, mobile home, or similar dwelling place. (Ala. Code 6-10-2)

Big difference between $500,000 and $15,500.

tenancy by the entirety only protects married couples, and even then it offers no protection if the creditor has a claim against both spouses. In the non-emergency situation the hospital can get both spouses to agree to the obligation. Similarly, Massachusetts allows home equity loans. Not sure why the hospital can't demand a mortgage before performing the operation. The bigger problem is that very few people have significant home equity much less $500,000 in home equity.

Also should be noted that the list prices are not necessarily "cash up front" prices, and we don't want to confuse cash up front prices with bill-me-later-in-bankruptcy-court prices, which the article might be doing.

Insurers deny claims, and individual line items within claims, all the time. They even do this when they have previously issued an authorization for the procedure. Healthcare providers thus have to maintain a small army of billing clerks to try to collect on those denied claims, either by arguing with the insurer, or by going after the patient.

#3: John H Cochrane is the best pundit on US health care. He writes the clearest explanations of the problems and writes great policy solutions. Trump should appoint Cochrane to author + advocate policy changes. The recent Whole Foods CEO John Mackey, would be a good second pick for a Trump Administration Make Health Care Great Again initiative.

Re #7 I refer you to Heller's Law (yes, it's from that Heller), "The first myth of management is that it exists".

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