Friday, September 28, 2012

Romney Apologists turn purple explaining "Transaction Man" but all I am hearing is "Fishwife"

Given the cascade of Romney statements shocking the public with Mitt's obvious belief that the public are not worthy of him, what can the Romney campaign do to shore up his image?  The answer came in a lengthy, and ridiculous apology for Romney in the "New Yorker" magazine (Oct. 1 issue) by Nicholas Lemann, entitled "Transaction Man."

One of the longest articles ever published on Romney, occupying a full thirteen pages of the magazine, the story is also very revealing for the biased ways Lemann has tried to explain and justify Romney, the missed linkages in his story that practically leap off the page to the non-Mormon reader, and ultimately for his failure to understand what he is reporting while unintentionally revealing it.  In the end, Lemann is negative, blaming Romney for not talking about himself and not trying harder to sell the public his worldview. In fact, the obvious conclusion for the reader is that Romney is more self-aware than that, and knows his election is not in the best interests of most voters.

Never has there been so tortured an attempt to put over a character on the public.  Lemann is dedicated to explaining Romney's campaign by explaining his small worlds of elite Mormonism and management consulting, reporting without comment obvious lies from the lips of the candidate himself, and then, seeing the candidate is not going over, subtly twists the story to draw the wrong conclusions. "He combines an utter confidence in his ability to fix anything," says Lemann, "with an utter lack of confidence in his ability to explain to people what he intends to do, which is why he appears so stiff and unspecific in talking about his prospective presidency."

This is a non-starter.  Lemann has already had people testify to Mitt as the man who could "sell used bubblegum" and pointed out that Mormons are trained in selling their religion from a very young age, given rather than earning responsibilities from the age of three. Indeed, one might take a Freudian view of Mitt's business career, of trying to punish companies with debt to motivate them the same way he was saddled with non-working wife, children, church, and the expectations of an entire religious community of millions before he was even out of college.  If Mormons and private-equity types are subject to "hostility" from the public, whose fault is it?  Mormons who are constantly proselytizing and even removing negative references to Mormons from the public libraries? Business school professors who cannot sell the public on the primacy of the deal?  What are these people if not salesmen?  What are politicians if not communicators?  If Mitt Romney can't make his case, isn't he just bad at his job? Romney doesn't think so: he blames the public, citing his dad's example. Lemann seems to think Romney could put the message over better.

In the end, Lemann falls back on seeing the "transaction" economy as inevitable "It's not clear," he says, "what will reverse the rise in economic inequality and uncertainty."  Yeah, it is clear, Mr. Lemann.  Re-establishing corporate governance to prevent Romney style raiding would help.  The corporation did not evolve to advance market economics but to fix the negatives caused by markets.  The first corporations were medieval workers' guilds who combined to fix prices, restrain competition, and protect and pass on trade secrets. They also handed employment from father to sons and strictly regulated their own numbers.   The modern corporation created by government's legal fictions  is not so terribly different.  It lets the investor risk no more than his investment, spreading the risk for failed businesses to the public instead. It creates permanence which cannot be achieved with partnerships, enabling technology to be retained and advanced, protected by patents and contracts, while letting costs like pollution and dangerous products be picked up by society.  It removes the uncertainty of the transactional labor market, enabling people to learn and improve skills that were unachievable when they had to sell their labor by the road every morning, days which have returned for much of the public under the dictatorship of the Deal and effectively cap future productivity growth in the U.S.

Bain Capital and the business school leaders of the 1970s were trying to reverse all those anti-market benefits of the corporation. They said it was to bring the "virtues" of competition to the firm by creating competition within the firm per Jack Welch (always "won" by the CEO and an inefficient use of labor),  by stressing the firm with debt per Michael Jensen (the primary virtue being that loans are not taxed as income and interest payments are charged against other income before tax, making tax avoidance rather than discipline a primary aim), and by maximizing cash flow per Bruce Henderson (depleting the firm's credit to pay off the raiders).

In truth, all these theories were driven by an arbitrage opportunity: there was a mismatch between the billions dollars of assets and billions of dollars in annual sales controlled by organization man within the corporation after years of continuous operational improvement and success, and the corporation's capitalization on the stock market, which typically was a few billion (representing discounted expected future profits net of expense) among diverse owners.  For a small investment of a few million, or better yet a borrowed investment of a few million, someone could buy enough shares to control an organization with billions of assets and billions in income, and all that had to happen to make a profit was to sell the assets or stop the expenditures, as long as you could skim the money before the assets dropped in value or the future profits were affected.  The result was organized looting of corporations, defrauding of the lending banks, and all the justifications that could be offered by  Romney could not be other than snake oil.  CEO's don't make 500 times what the worker does because they deserve it, as Romney partner Conard says, but because corporate governance has broken down in a welter of secrecy, bad laws, and the rise of corruption in business made possible by Romney and his friends. CEO pay=theft, and it is even more true of what Bain Capital was doing when Romney ran it.

It is interesting that Lemann mentioned Bain's Vanderbilt roots, since Bruce Henderson taught there after leaving Boston Consulting Group. One of the people Henderson taught was me.  In his "Introduction to Strategy" class, he took us through all those brilliant BCG management innovations week by week, and explained the theory and also why the theory wasn't really true. By the mid-eighties Henderson was highly aware of the double edged nature of management consulting in the realm of "fixing" things.  Is it really believable that Mitt Romney is not aware of it more than ten years after he left Bain in charge of fellow Mormon Bob Gay?

Looting corporations and defrauding banks for greedy CEOs and for "transaction" shops like Bain Capital turned the theory of the firm inside out, destroying corporate organizations and creating this "global capitalism" force Lemann claims is Unstoppable. If it were unstoppable, Mormon business leaders would not have spent so much time, money, and effort trying to put it over on the public, still less showing their hand by making Romney president.

Lemann's description of Romney's privileged milieu does make it clear that Romney was never outside the bubble of Mormon privilege.  A business school professor visited Mitt's family once a month to make sure they were okay under the Mormon system of letting people know the church is watching them, and Mitt visited the future Harvard Business School dean's family once a month, and furthermore Lemann viewed this as "charity" and or even as getting first hand knowledge of all life's troubles in a way inaccessible to liberals! The fact that the stories about Mitt that Lemann gained from this circle were so odd should have made Lemann question them.  Christensen told him, with tears in his eyes, about how Mitt had passed by his house, saw him working through the window, went home and duct-taped brushes and a pole together and came back to present him with a helpful homemade tool.  Lemann didn't point out what an invasion of privacy it was that Romney was spying on Christensen through his window, "peeping tom" style.  Lemann didn't point out that Christensen didn't ask for Romney's help.  He didn't point out the obvious fact that Romney's tool wouldn't have worked (who over 50 has never tried to duct tape brushes together? What sort of "specialized expertise" is this?).  He didn't point out that even if it had worked, it could not give material help. He certainly didn't point out that this was a poor use of time for a man with a job and big family.  In short, this story meant to exemplify Mitt's helpfulness was fake and creepy at the same time, and revealing in that the example was so trivial that it reinforces the fact that Mitt's charity never amounted to anything much but supporting the Mormons with time and money....but with the expectation of a reward for it.  Indeed, Lemann's wonderment that Mormons go into business is more than explained by the presence of Mormons in business.  Romney left a Mormon in charge of Bain Capital.  The Marriotts left Mormons in charge of their hotel chain. Mormons take care of each other, and there is no doubt Mormons would do well from a Romney presidency.    What is not clear how is many jobs would go to non-Mormons in a Romney presidency.

In putting his case, Lemann has been forced to make damning admissions about Mitt. One is that "most people" have not benefited from the financialization of the economy, although Lemann has carefully avoided saying that on balance it has been negative by saying "a study" found trivial impact.  Whose study and who paid for it? I have no such scruples, being an MBA myself.  It has been a terrible thing for U.S. economy. Second, Lemann admits that the Salt Lake games were not in "quite so dire" a condition when took them over as Romney says, and that Romney sought the job. Indeed, Lemann notes that when Romney bought a car supplier, Romney met with their biggest customer before making his investment.  Surely, Romney would have been just as careful not to compete to handle the Olympics unless he knew they were going to succeed.  There were less than three years left before the Opening Ceremony, so it was already too late to move them anywhere else. Lemann also neglects to mention that it was Utah Governor Mike Leavitt, Romney's transition leader, who was responsible for getting his fellow governor and old friend Mitt Romney that job, and that Romney has apparently supported Leavitt in return.

Leavitt's description of the great things he expects Romney to do to "fix" America are also ridiculous, trivial, and organized around communication. "Job one, it's a disheartened country," says Leavitt. "Give people confidence again. Two, bring things into balance.  Give the speech about sizing our response to our resources. Three, build a team that can execute the plan."  Romney has been a national figure since 2002.  Why does he need to be president to give the nation a pep talk? How can he "build a team" when his campaign has been so lackluster? And what exactly is meant by "sizing our response to our resources"? Isn't this really just a threat to do even less than Obama, except in the military arena, where Romney wants to do more?

Anderson's claim that his first knowledge of Romney was a stranger at Stanford running up to tell him "Mitt Romney is the finest person I have ever known!" is similarly lacking verisimilitude, as was Christensen's claim "He had a beautiful wife. His father was famous, he was handsome. Everybody wanted to be what Mitt was," as though teenage Mormons in the sixties would not have ridiculed this very portrait. Lemann admits this hagiography is all the product of Mormon society, but he doesn't go into the ritualized groupthink, very hierarchical nature of it.  When you are in a company, you always hear the CEO lauded as a "genius" and a "self-made" man. You are expected to parrot the company line, true or not. The reason is that people who don't say such things tend to disappear.  The fact that retired business professors who have no obvious claim on Romney's wealth say similar things about him tells you that the Mormon church is a hierarchy that can punish any apostates, even wealthy retirees, as effectively as a CEO can fire a worker.  That the unpaid Mormon hierarchy has such carrots and sticks suggests they make the whole church dependent on validating  leaders like Romney in a way that would be unthinkable to most Americans.   Truly, Romney has not risked much to gain much. He has not risked anything but exposure, exposure he dreaded and thought he could minimize in this campaign.

And that highlights the biggest weakness of Lemann's article, his failure to critically interview the candidate himself.  Lemann's interview with Romney is buried in part 3 of the article, and he mostly reports Romney's responses without comment, other than to imply Romney is more persuasive in person than in front of crowds or on television.  One problem, he suggests, is his "voice," and the other his unwillingness to talk about himself.  I would argue, on the contrary, it's what he says that is Romney's problem.  When Lemann asks what Obama did wrong, Romney gives a ridiculous answer.  He says Obama "did not make the economy his first priority." Obama's first achievement was the stimulus, and it came with a public warning from Congress that nothing more would be forthcoming.  Nonetheless, he got financial reform passed, and then health care reform.  In what sense is financial regulation not part of dealing with the economy? In what sense is dealing with health care not dealing with the economy?  If Obama didn't understand the gravity of the economic situation as well as many on the left or libertarians, would Mitt Romney have understood it any better? On the contrary, we know from his taped remarks to donors that he expects the economy to improve without his doing anything as president, just from the fact of his election.  In 2009, Romney would have done far less than Obama, and that in the wrong direction of deregulation.  It is simply not believable he would have done more or better.

Romney says that GM made a mistake in offering too much to union workers. He said a consultant estimated that it cost GM "two thousand dollars" more to build a car than its foreign competitors.   As a former GM employee in the mid eighties, I can relate that the manufacturing advantage was estimated at $1,500 per car and that labor cost was far from being the major part of it.  That disadvantage was not considered as important to GM's problems as its dealer network, whose inefficiency and need for service work to be profitable undermined GM's efforts to promote quality; the inefficient and far flung supply chain; and the inherently misleading issue of transfer prices in a vertically integrated company.  It is naked class warfare for Romney to blame unions for GM's trouble.  There is no GM retiree in history who lives as well as Romney's underemployed sons.  Romney's arrogance is still more evident when he blames immigrants for being unskilled and talks about offering every PhD in the world a green card.

What it shows is that it is Romney, not Obama, who doesn't understand how economies work.  Neither China nor India has ever been able to employ all its PhD's although we are told Education is the whole answer to making America work again.  All Romney really desires from education reform is more tax money diverted to private pockets.  He says we mustn't follow Europe's example, but isn't universal testing following Europe's example? Isn't the large scale social engineering of  "school choice" really mass conservative social engineering that so far has never improved conditions in any material way?  Oh yes, test scores have gone up, along with an explosion of cheating scandals.  But American performance compared to other countries has not improved.  We are falling further behind.

Both Romney and Obama give lip service to the crazy idea that American industry has 3 million job openings that cannot be filled for lack of skills; yet most job seekers find that most of the advertised positions in the listings aren't real, that they were placed by recruiters or resume writing companies to generate business.  Employers have been claiming since time began they cannot find good workers, but never hire any even when they are given a budget for it. Corporate training programs have never been so widespread, but what they are teaching is usually more propaganda than skill.

I am once again reminded of GM days I mentioned in my last blog entry, when we all had to take a class called "The Business of GM."  In that class, they explained the presence of imports in the U.S. auto industry as something that happened when GM had retooled to help the nation fight World War II.  I guess those German, Japanese, and Italian automakers had nothing better to do while GM was making tanks and airplanes than sneak cars into the U.S.!  Such is the integrity of corporate propaganda and training. In short, that whole "skilled labor shortage" is and has always been a scam.  There is no field in which the United States has any real labor shortage today, unless supply is being artificially held down such as in medicine.

What skills did Mitt Romney bring to the table as a JD-MBA, other than the miraculous ability to duct tape brushes together?  Isn't the common thread to missionary work, business, and politics the art of persuasion? And if he needs Nicholas Lemann to do his persuading for him, hasn't he already lost?  Nicholas Lemann calls Romney the "Transaction Man," the fast-moving, fast-talking deal maker.  Romney doesn't seem so fast moving to me.  All I hear from Romney is the cry of the fishwife in the market (I mean fishperson of course), complaining so loud that you might forget she is selling something that has been around too long and smells bad.


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