Author Archives: Jon Lowder

We Are What We Do

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Russell Roberts, an economics professor at my alma mater, has written a compelling paper about the financial meltdown.  An excerpt from the summary:

How did this happen? Whose fault was it? Some blame capitalism for being inherently unstable. Some blame Wall Street for its greed, hubris, and stupidity. But greed, hubris, and stupidity are always with us. What changed in recent years that created such a destructive set of decisions that culminated in the collapse of the housing market and the financial system?

In this paper, I argue that public-policy decisions have perverted the incentives that naturally create stability in financial markets and the market for housing. Over the last three decades, government policy has coddled creditors, reducing the risk they face from financing bad investments. Not surprisingly, this encouraged risky investments financed by borrowed money. The increasing use of debt mixed with housing policy, monetary policy, and tax policy crippled the housing market and the financial sector. Wall Street is not blameless in this debacle. It lobbied for the policy decisions that created the mess.

In the United States we like to believe we are a capitalist society based on individual responsibility. But we are what we do. Not what we say we are. Not what we wish to be. But what we do. And what we do in the United States is make it easy to gamble with other people’s money—particularly borrowed money—by making sure that almost everybody who makes bad loans gets his money back anyway. The financial crisis of 2008 was a natural result of these perverse incentives. We must return to the natural incentives of profit and loss if we want to prevent future crises. 

A Not So Surprising Effect of New Arizona Law

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A new law in Arizona has garnered a lot of attention nation-wide and in the process has stirred up quite a debate about issues like illegal immigration, civil rights and states' rights.  According to this blog post by Yes! Weekly's Jordan Green it is also already having an effect on the University of Arizona:

We have already begun to feel an impact from SB 1070. The families of a number of out-of-state students (to date all of them honors students) have told us that they are changing their plans and will be sending their children to universities in other states. This should sadden anyone who cares about attracting the best and brightest students to Arizona.

I think this is just the beginning for Arizona.  In the very near future I suspect you'll be seeing business conventions moved to venues in other states, business and leisure travel to the state curtailed, and boycotts called by special interest groups.

Usually hot-button issues like this result in a lot noise without much action for a short time and then blow over, but this one feels different.  It feels like this one could turn into a major economic and social event for Arizona.

Apparently in Mt. Airy Wine Ain’t Christian

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From a story on WXII's site about some Baptists in Mt. Airy getting ready to work a local wine festival:

A group of about 100 Baptists from 10 to 15 local churches plan to stand at four intersections in town to express their opinion to those who will be attending the Budbreak Wine Festival on Saturday.

Tim Crotts, pastor of Beartrail Baptist Church, is heading up the group.

“We are taking an opportunity to proclaim Christ. We will be holding signs and banners so people driving in and out from the event can see our message — Jesus saves,” Crotts said…

Crotts said drinking wine is “not a Christian thing to do.”

That last one has me scratching my head a little for a couple of reasons.  Namely the whole water to wine thing and the fact that Catholics (and some other mainstream religions) serve wine in church.  I do believe that Catholics count as Christians.

Congrats to a/perture

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Looks like Lawren and crew over at a/perture are making a nice splash in the Triad.  They won "Runner Up" in the "Best Blog" and "Best Facebooker" categories in Yes! Weekly's Best of 2010 survey.  Oh, and probably a little more important to them, they were "Noteworthy" in the "Best Cinema" category.

I'm still trying to get down there for beer and a movie.  Maybe next week I'll finally get the chance.

Governor’s Volunteer Service Award Breakfast

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From the day job: TAA's team was honored to be presented with a Governor's Award for Outstanding Volunteer Service (Forsyth County) in the "Team" category at a breakfast at Salemtowne this morning.  There were also winners in six other categories and it was a true pleasure to be surrounded by so many people doing incredible things for their community.  A big thanks to The Children's Home for nominating us for the project. Here's a couple of pics:

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The TAA Team

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TAA VP and Labor of Love Chair Marc Crouse

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Kind of cool shot of the program    

Things Are Getting Better, but…

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The Dixon Hughes Triad Business Index for March, 2010 shows that the local economy is improving, but it's not by much and we've got a heckuva long way to go before we can say things are good.  It will be interesting to see what happens in real estate when the stimulus plan expires at the end of this week, but when you read this from the report you wonder how much worse it can get (knock on wood):

At the end of the 1st quarter of 2010, the inventory of homes on the market was 9,098, or 6.3 times the number of homes sold in the 1st quarter.  At the current sales pace, it will take 18.9 months to exhaust the existing inventory.  The number of existing homes offered for sale was up 16.5% from what it was at the end of the 4th quarter, and it was 9.5% higher than at the end of the 1st quarter one year ago. 

The price of the average home sold in the 1st quarter was down 2.8% from the previous quarter.  The average quality-adjusted price of an existing home in the Triad was $158,718.  The average this quarter was down 1.7% from the average recorded in the 1st quarter of last year.  By comparison, over the past year, consumer prices nationally have risen 2.2%.

Sociopathic CEOs

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Lex has linked to a very interesting piece that provides the following quote:

But what part of being a CEO could be so difficult — so impossible for mere mortals — that it would mean that there are only a few hundred individuals in the United States capable of performing it?

In my humble opinion, it’s the sociopath part.

CEOs of community-based businesses are typically responsive to their communities and decent people. But the CEOs of the world largest corporations daily make decisions that destroy the lives of many other human beings. Only about 1 to 3 percent of us are sociopaths — people who don’t have normal human feelings and can easily go to sleep at night after having done horrific things. And of that 1 to 3 percent of sociopaths, there’s probably only a fraction of a percent with a college education. And of that tiny fraction there’s any even tinier fraction that understands how business works, particularly within any specific industry.

Thus there is a shortage of people who can run modern monopolistic, destructive corporations that stockholders have to pay millions to get them to work. And being sociopaths, they gladly take the money without any thought to its social consequences.

This makes it much easier for me when I read business news and ask myself the question, "How do these people sleep at night?" The answer, of course, is "quite soundly."

I'm not a big believer in generalizations, so I my knee jerk reaction is to say that this description probably only fits the vast majority of the CEOs of the world's largest corporations. 

Trust and Judgment

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Today offered another one of those lessons you learn early but need to be reminded of often: leaping to conclusions usually lands you in the wrong place.  I was at lunch and the person I was sitting next to, someone whom I trust, started talking about the ongoing situation here in the Piedmont Triad between Waffle House Inc. and its (now former) local franchisee.  Long story short the local franchisee got out of the business and in the process some employees were issued paychecks that bounced.  Fingers were pointed, but early on the local franchisee looked like the bad guy.

Now it's important to provide some context here.  People in the Triad who pay attention to these kinds of things are likely predisposed to believing the worst in any story about employees being given rubber checks, because another local company recently went out of business, and in the process the owner really did screw his employees out of pay and health benefits. 

At lunch I was hearing from a trusted source that the Waffle House franchisee was one of the most honorable and ethical business people she had ever met.  Knowing what I know about the source, and knowing the number of people she knows in the business community, my angle on the story instantly shifted 180 degrees. After reading the initial coverage of the story I'd just assumed that the franchisee had gotten in too deep and had done what lots of companies do in that situation: tried to hold on and pray for a miracle while telling the employees nothing of the problems and then eventually bouncing paychecks. I also assumed that stories of delinquent payroll taxes would soon follow. A one minute conversation at lunch changed my assumptions, and I began to think that there's probably a whole lot more to the story and I probably needed to reserve judgment until the situation was fully aired.

Now don't get me wrong, I don't think the media did any faulty reporting.  The stories I read simply stated the facts: employees' paychecks bounced, the state's labor department was investigating and if they found any wrongdoing they were going to go after the franchisee for the employees' pay.  I did the rest of the work myself, leaping to conclusions and letting my own biases take me to an early, and potentially faulty, conclusion.  Luckily I was saved from myself today.

After lunch I got back to my desk and found this story waiting in my alert box. It seems that my source at lunch was right and it's the folks at Waffle House Inc. who haven't been behaving too well in this case, at least to this point.  And that's where I need to remember another lesson: there's usually more to a story than meets the eye, and it will probably be a while before we have the full story here.  Stay tuned.