How We Fail: Middle America’s Inability to Gauge Wealth

We’re taught to think of wealth in absolute terms. But doing so prevents us from understanding the relative difference in the costs of living between ourselves and the fantastically over compensated.

Instead, we’ve got to think of wealth in relative terms.

You know what stuff costs you relative to your salary. What you don’t know is what stuff would cost you if you earned double (half), triple (1/3), ten times (10%), one hundred times (1%) your current salary.

So, I did the math for you.

If you earn $50,000 a year, gas costs you $4 a gallon. If you earn $5 million a year, gas costs just 4 cents a gallon. Relatively speaking, why would the rich care if it goes up a dollar a gallon. To the wealthy, that’s only a penny more.

That Harley you want? $20k. A $5M man pays just $200.

That $400,000 dream house you’re looking at? Super affordable at $40,000.

Why’d I pick $5M to compare? Because the CEOs of 171 publicly traded companies all earn at least $5M a year in 2010.

The best-compensated CEO earned $84.5M. Relative to someone earning $50,000 a year, he pays 2/10ths of one cent per gallon of gas. This guy will only start to feel your pain when gas reaches $2000/gallon! But of course, he’s an insider sitting on boards of directors and leveraging his obscene salary to build more, so his wealth has ballooned beyond imagination long before that’s happened. Meanwhile, you’re still waiting on that cost of living adjustment that adds $85/month to your takehome.

PS. You’re what we refer to as the middle class.

Now You Can Be a War Profiteer

During the next month and a half that U.S. troops fought their way through Iraq, Halliburton’s stock languished, dipping as low as $9.59, then closing at $10.13 on May 1st, the day President Bush announced the end of major hostitilites. Total coalition deaths stood at 1731.

Exactly two months after the start of the “operation”, as it became more and more apparent that our involvement in Iraq wouldn’t end with Saddam’s overthrow, HAL had increased 9.34% to $11.00 per share. That’s good profit. Hopefully, you hung on to that stock. By year-end, Halliburton had rocketed to $12.59. Now, I didn’t own Halliburton stock, but I can tell you, the stock I did have during 2003 pretty much stunk in terms of making me money.

Six months and 862 dead Americans later, it was obvious that the end of major combat operations had been replaced by really deadly minor operations. Not to worry, though, as Halliburton had become a darling of Wall Street, trading at $14.78/share on June 30, 2004 (representing a 46.9% gain in 15 months). If you sold then, you were happy. Until you watched it move even higher, closing the year out at $19.30. No matter that the green was fringed in red. Christmas colors, you say.

As 2005 rolled around, HAL investors were giddy with anticipation. Insurgents in Iraq were literally bathing the country in the blood of American soldiers as well as innocent Iraqi civilians. When you’re in the business of war and oil, carnage and uncertainty are great for profit! Halliburton’s stock performed admirably, closing the year out at $30.78, representing year-over profit of 59.48% for stockholders. Of course, we’d be remiss not to mention the 6.25 cents dividend paid out over each of these very good years ($0.1875/share). Those in know held on to their shares from the day the “Operation” began, logging a robust 206% profit. Man, war without end is sounding better and better every day!

The sad news is that HAL has struggled as of late, closing down to $27.84 last night. This was after it hit $41.99 on April 20th, and after another 7.5 cents dividend (wow, stock price up, dividend payouts up). As capitalism demands, HAL has rewarded CEO David J. Lesar, paying him $100 million since the war began. Sell high, and you’d have cleaned up on this whole Iraqi War affair too: 317% profit in 1127 days. That’s 3 years and 1 month of doubling your money every year. That’s 1.18% for every ten US soldiers who gave their lives.

Perhaps it’s time for us to put the words of our Glorious Leader into practice in our stock trading habits:

“Our nation is somewhat sad, but we’re angry. There’s a certain level of blood lust, but we won’t let it drive our reaction. We’re steady, clear-eyed and patient, but pretty soon we’ll have to start displaying scalps.” â??George W. Bush

Source: George W. Bush

U.S. Army Pays $400 per Gallon for Gas

Four hundred dollars for a gallon of gas. Crazy, right? Not if you’re war profiteering!

Hydrogen fuel represents the great hope for energy independence. A friend of mine sent me a great link to a BBC video showing General Motors’ new Hy-wire, a functional concept car that is 100% powered by hydrogen. Sweet! But, as I began to do some followup research on the web, I stumbled across something that gave me pause:

The U.S. Army has spent as much as $400 PER GALLON to ship gas to Iraq. $400 a gallon?!

“The U.S. Army has the largest fleet of vehicles in the world. Improving fuel economy and reducing the logistics of the fuel supply chain could save millions of dollars. For example, it cost the U.S. Army up to $400 a gallon of gas to ship fuel to Iraq and Afghanistan.”

Source: General Motors

Reminiscent of the $800 toilet seat, $500 coffee maker, and the $400 monkey-wrench from the 1980s. Except, in this instance, I’ll bet we’re buying a whole lot more gas than toilet seats. Not to mention that gas is made from the raw materials just down the road in that little country we liberated a few years back: Kuwait.

Why profiling is such a bad idea

An email purporting to show why we should embrace profiling in order to combat terrorism just got my dander up. Let’s just call a spade a spade, shall we?

I recently received one of those dreaded “opinion” chain emails, this one supporting government profiling in order that we might somehow be safer from the dreaded terrorists. The email presented 15 select examples of barbarism by Muslim male extremists of a certain age. Surely we’re not expected to believe that these 15 examples represent an accurate sample of all the acts of barbarism occurring in the world today (or, for that matter, during the 40 years the email drew from). The email decried: “Nope, I really don’t see a pattern here to justify profiling, do you? So, to ensure we Americans never offend anyone, particularly fanatics intent on killing us, airport security screeners will no longer be allowed to profile certain people. They must conduct random searches of 80-year-old women, little kids, airline pilots with proper identification, secret agents of the President’s security detail, 85-year old Congressmen with metal hips, and Medal of Honor winners and former Governor Joe Foss, an American WWII hero.”

Wow.

Here’s why that’s not such a great idea:

Profiling creates a class with protected status. In this new America, it’ll be good to be an elected government official, or someone with proper identification, an employee of the state, a medal winner, or a hero of the motherland.

Profiling is an new name for an old trick. What is profiling, and how exactly does it work?

Profile: an analysis (often in graphical form) representing the extent to which something exhibits various characteristics.

What makes a profile an accurate measurement? Most importantly, a “profile” must be adequately discriminant, in that there must be evidence that a measure of a construct is indeed measuring that construct. So, since profiling is based upon the idea of discrimination, I will go ahead and call it what it is: Discrimination.

By the definition in the email, the discriminated class consists of Male, Muslim Extremists between the Ages of 17 and 40. Let’s examine this definition in order to ensure that we have a workable measurement.

How can we test for “extremist”? Unless they’re wearing a note from their Imam, we probably can’t. And extremists come from every corner of society. Not to mention that extremism ranges from violent acts to just extremist thoughts. So, lop that off the discrimination test. It’s impossible to test for.

So what do we have as our working list of discriminants: Male, Muslim, between 17 and 40.

Let’s tackle gender. Relatively easy, unless they’re dressed in hijab, which would make them look like a muslim woman. Maybe we should expand the discriminated class to include women. The Israeli’s would agree to that, seeing that female Palestinians are blowing themselves up there.

Our working profile now: Muslims between 17 and 40.

Age? Okay, but that would have to be a visual thing, since it’s reasonable to presume that extremists might forge their documents (that means we can’t trust members of the protected class who have traits of the discriminated class. Sorry, muslim war heroes with proper documentation). And now, upon a closer reading of your email, I notice the age discriminant varies between “17 and 40” and “mostly between the ages of 17 and 40″. So, we probably should just eliminate age as a decriminant altogether, or else we’ll have these nasty surprise attacks.

So, we’re left with “Muslim” as our working list of discriminants.

How in the world can we determine what a Muslim is? Probably only by appearance. Beards? Head-wear? Hmmm. They might wise up to that and shave or take off the towel. Tricky Muslim Extremists. Guess we’ll have to go with skin color and facial features. We could go with Country of Origin, but they might get smart and come through Mexico. Hey, that’d give us reason to close the border, plus, we wouldn’t have to scrutinize so hard, because Mexicans are brown too.

Gosh, this would be so much easier if we could force those in the discriminated class to wear some sort of identification.

So, there we have it. Our final discrimination test (okay, I’ll stop. Let’s call it a “profile”). Our profile is “brown skin with beards or head-wear of religious significance, or not beards, or not head-wear. Just brown”.

Well, that definition includes a lot of people. No matter, you’re white. You are a defacto member of the protected class. Phew, that’s good, seeing as how frustrating it is to risk being in the 2% of airline travellers who are randomly searched.

You know, it would be far easier to set up a national registry for brown muslims. Or just muslims. Or brown people. Whatever. But registering all muslims would allow us a greater measure of safety, since the problem seems to be exclusively a muslim one. Then, we could really take care of the problem. We’d finally have a solution.

We could start out by restricting their travel, and then we could restrict their ability to do business, so that they can’t fund their nasty plans. So as not to be too extreme (that might offend the delicate sensibilities of “those” Americans), we could still allow the brownies to travel, but they’d have to have their own airports and fly on their own airplanes.

Isn’t it weird how the one true measure of danger, the “extremist”, no longer exists in our profile, but our profile seems like that of an extremist?

Somebody heard, but is anyone listening?

Wow, the professor in BUAD400 just told me he wants to present my course reflection letter to the Chancellor of the university. Cool.

Several of us in the class agonized over whether to submit papers that honestly reflected how we felt about the course. Kudos to the instructor for taking the heat and stepping up to the plate. Now, if the people on both sides of equations such as this would respond more honestly and employ integrity, we might actually be able to change things. Of course, it remains to be seen what, if anything, comes from atop the tower of babel known as the administration building.

[EDIT: Of interest is that no response from the Chancellor has been received as of my graduation on May 19, 2006. Change starts at the top, and an organization reflects the characteristics of senior management. So as the Chancellor goes, so goes the institution.]

Business Ethics at UCCS

I wrote and submitted the following paper as my final assignment in a course on Business Ethics. The assignment was to write a paper, in the form of a letter to someone who didn’t attend the class, discussing what we got out of the course. For the most part, I detest this sort of assignment because they’re typically fluff and rarely (IMHO) do people really want the raw, honest truth.


BUAD400
Ethics and Stakeholder Management
Course Reflection Letter
December 12, 2005

Christopher Brewer

Melissa,

For so long, I have wanted you to know about my life since you died. I wish these words could find their way to your soul, and that you might know me through them now.

* * * * * * *
Recently I stood, staring out across the broad swath of sea, focused on a freighter no-doubt filled with goods from Asia, cleaving the horizon, awash in a rain squall not yet acquainted with the island. I found myself wondering aloud how I came to this place. Before me lay the great expanse of blue margarita water, teaming with life that I could only have begun to imagine in my National Geographic retardedness. Behind me, an 800 foot waterfall crashed down Hawaii’s Waipio cliffs. Great gusts of mist buffeted me, swirling downward to the young rocks below.

Just a year prior I had escaped my corporate employment, on the advice of your widower. I’d become disillusioned by the greed, dishonesty and narcissistic career-building that I had witnessed around me; a practice I had become a part of. It was a situation typical of the American corporate experience: a scenario claiming the best intentions of good people and turning them into ladder-climbing egocentrics, hell-bent on promotion.

My journey to this island could (and should) be traced back to a time prior to my abandonment of the corporate lifestyle.

You know I married young, at the age of 21, to an equally young and similarly naïve woman. I dreamt of stardom and chased it as a musician. She dreamt of being an artist, but then sold it for an opportunity to prove her love for me by working full-time as a payroll clerk. I didn’t see it that way then. It is only recently that I’ve come to that regrettable conclusion.

I failed pretty miserably as a musician, being a bit too right brained for heavy metal, a bit too impressionable for artistic integrity, and, as it were, a bit too eager to make the next move. My musical career culminated in the birth of my first child, whereupon I summarily quit the band, bought a house, and sought a respectable corporate job.

Fifteen years later, life has come around full circle. I find myself studying daily in the shadow of the building where you drew your last breaths ten years ago. That building, where you died, has changed, like I have. Neither looks anything like we did then. Yet inside, the memories of our past remain.

These days, I work adjacent to that memory, studying business and the various disciplines that make it work. And on Tuesday nights, this past semester, I have studied a topic I wish you and I could have discussed: the ethical responsibilities of business to stakeholders.

Given the experiences that led me to this place and time, I often struggled to bite my tongue, as waves of newly minted capitalists conveniently abandoned the teachings of their savior (beatitudes be damned), demonstrating their ability to justify the enrichment of the few on the backs of the poor. Apparently, Nike’s pursuit of profit absolves it of all but the most heinous forms of exploitation. It was fascinating to watch the oft unnoticed dichotomy of personal versus business ethics go unresolved as the weak-hearted chose the well-worn path that leads to the utterance of the line we’ve all heard: “Nothing personal — It’s just business.”

Do you remember Bhopal? It happened the year you graduated. To this day, people are still suffering from Union Carbide’s decision to operate a plant that failed to meet U.S. safety standards. They got away with it because they were operating in India. Faced with these sorts of cases, I was shocked to hear the opinions of most of my classmates; U.S. companies need only meet local safety requirements. Apparently, what’s good for white America is too good for the brown world. And the main reason given? It all boils down to low prices, Wal-mart style.

As the course progressed, I found myself feeling like a victim of a sham company — one who’d taken my money and disappeared into the night without a trace. Here we were, 100+ students, packed into an echo chamber masquerading as a classroom, studying the responsibility of business to its stakeholders, unable to hear an instructor who knew the environment wouldn’t support the format of the class before it even started. I was there during the summer, when he first got word of the University’s decision to merge multiple sections, including a Master’s class, into one giant free-for-all. As I watched the semester unfold, I realized that this institution had failed, at the most basic levels, to practice the very tenets of business which they so rigorously advocate across the curriculum: continuous improvement, customer-centrism, good faith, and the ethical treatment of stakeholders.

In the final analysis, as I reflect upon this course, I realize I got more out of the experience than I initially thought. I witnessed, first hand, how languid our attempts to right wrongs are, and how proficient we can be at adjusting our moral compass to point to whatever inner north benefits our desire to maintain status quo.

In Meditations, Marcus Aurelius speaks eloquently of such practices. It would seem that our business code of ethics has taken a page from Aurelius’ stoics, then applied it in some half-crazed psychotropic manner:

“Say to yourself in the early morning: I shall meet today ungrateful, violent, treacherous, envious, uncharitable men. All of these things have come upon them through ignorance of real good and ill… I can neither be harmed by any of them, for no man will involve me in wrong, nor can I be angry with my kinsman or hate him; for we have come into the world to work together…”
— Marcus Aurelius, Meditations, Book II, Part I

This is NOT to say that I was ever on a concerted journey towards altruism, for I understand ethics must be based on egoism. My direction, most simply described, is the pursuit of happiness; a state wherein I might find equilibrium in my emotional well-being. It is within this framework that I choose to weigh the merits of the actions of myself and others. It is this framework where I define my ethical ethos.

With love, your brother,

Chris