The Squawk Box effect on CEO pay

From the Wall Street Journal:

How big is the CNBC effect? “CEOs who appear in CNBC interviews will earn $210,239 more” on average in the following year, the professors say, compared with similar CEOs who didn’t go on.

CEOs of small companies see a bigger bump. The effect for CEOs in the smallest firms was $130,925 greater than for CEOs in the largest companies, even though big business CEOs usually get paid more.

Cable TV is better than print. A CEO who got more print coverage than average in a year got a tiny boost in pay the next year.

About that whole power pose thing, it’s BS

Remember when striking a power pose would solve all your problems?

With this “no tech lifehack,” anyone can “embody power and instantly become more powerful.”

Power pose promoters say all you need to do is to get yourself in the Wonder Woman stance, and *BOOM* you’ll get “elevations in testosterone, decreases in cortisol, and increased feelings of power and tolerance for risk.”

There’s a hitch, though … It’s B.S.

According to Tim Harford, the “Undercover Economist,” a later—and bigger—study found that high-power poses were correlated with slightly lower testosterone and slightly higher cortisol.

In other words, the opposite findings from what the Power Posers found. Not only opposite, but tiny and statistically indistinguishable from chance.

The lesson: Bad science leads to crazy conclusions that grab big headlines. Don’t let those headlines drive your decisions.

Bad troll, good troll

 

First there’s this story about Putin’s “Troll House,” a secretive group of dozens of online “trolls” based in Russia who propagate lies and misinformation aimed at the U.S., Ukraine, and other supposed enemies of Russia.

For example, last September 11, this “news” broke on Twitter: “A powerful explosion heard miles away happened at a chemical plant in Centerville, La., #ColumbianChemicals.” Another tweet linked to a screenshot purporting to show the story featured on CNN. Another pointed to a YouTube video of ISIS claiming responsibility.

It took two hours for Columbian Chemicals to catch up and put out the truth: There was no explosion and the “news” was fabricated. It took months to figure out that “news” came from the Troll House.

The trolls also take jabs at President Obama. The Guardian provides this example:

Speech balloons read as follows: Hmm, need to think of a password … I’m going to make it “my dick” … Click OK … What? “Error: too short?!”

 

On the one hand, if you put together Putin’s Troll House and the China’s hacking of government servers (the latest hack got personal information on 4 million federal workers, or 1.25 percent of the U.S. population), it’s pretty clear that the cyberwar is on.

On the other hand, Putin’s trolls don’t seem to have any real or lasting impact.

Then there’s this story … Maybe trolling works.

The Sunday Oregonian newspaper recently published the following letter. The letter hit on some major themes that have been frustrating and angering residents and visitors for years: vagrancy, filth, crime, open drug use, and a deteriorating downtown.

 

andre-marcel

 

Turns out, there is no “Andre Marcel.”

The letter was troll. But it was effective—it’s one of the most read and comment-on letters on the Oregonian’s website.

It was effective because it touched a nerve, a nerve that was already exposed. While Andre Marcel is a false name, his letter spoke troubling truths that got a city thinking and talking.

Messaging millennials on the economy: An uphill battle

As college students make plans for graduation (and I make plans to teach a summer session at Portland State University), I am reminded how much the world has changed since I graduated college. The typical graduate this year was born sometime between 1990 and 1993. According to the Beloit College Mindset List, here’s how their worldview is different from mine:

  • MTV never featured music videos.
  • The Simpsons has always been on TV.
  • Microbreweries have always been ubiquitous.
  • There has always been an airline going into, or coming out of, bankruptcy.
  • Stadiums, sporting events, and music tours have always been sponsored.
  • Global warming has always been a crisis.
  • 9/11 is a meme (“jet fuel can’t melt steel beams”), rather than a national tragedy.
  • The Soviet Union never existed and there has only been one Germany.
  • Google has always been a verb, and Milli Vanilli has always had no meaning.
  • They have never used a floppy disk and they don’t know why CC stands for carbon copy.

But, here’s one that the Mindset List has missed:

  • Today’s college graduates do not remember a time that the economy was booming.

The last time the economy was booming with rapid employment and income growth, today’s college grads were early teenagers, watching the first Harry Potter movies while their parents were scandalized by Brokeback Mountain.

Then, as they were getting ready to leave high school and enter college, employment dropped. Their parents may have lost a home or a job.

As they began to see and understand the world around them, they saw recession bordering on depression. They saw job opportunities fade away. And they gained the feeling that the only way to “make it” in the world was in high tech, entertainment—“Apps and Raps”—or high finance. It seemed that success depended less on your skills and what you knew and more on who you knew and how you could game the system.

So, now, the Republican message of making it on your own through smarts and hard work is rejected as cynical when it comes from silver spooners like Mitt Romney. And the Democratic message of income equality is rejected as cynical when it comes from the Clintons who make 10 times more from giving a speech then the average family makes in a year.

And that’s the challenge in promoting economic opportunity through the free market.

Today’s college grads can’t remember a world where hard work, education, and the freedom to make money meeting the market were almost certain to produce prosperity.

The economic booms during the Ronald Reagan and Bill Clinton presidencies are ancient history to today’s young adults.

Older generations may say, “Remember what happened to the economy when we cut taxes and reduced regulations?” They don’t know that airline deregulation gave us cheap plane tickets. They don’t know that trucking deregulation paved the way for next day delivery. They don’t know that railroad deregulation is why we can get fresh produce all year ’round.

Today’s young adults will answer, “No. And we don’t believe you.” They only remember recession and sluggish recovery. They only remember failed solutions like the Stimulus, Cash-for-Clunkers, Recovery Summer, and Quantitative Easing. To them, nothing has worked, which means nothing will work. Only Charlie Brown will come back to the football after it’s been pulled away so many times.

 

Chinese wines are getting better and heading here soon, but what did the military have to do with it?

A few years ago, I did some consulting and testimony regarding a land use matter for a vineyard owner and winemaker. He bought 1,600 acres of wheat land in the Walla Walla Valley American Viticultural Area—home to some of the best red wines in world. He wanted to subdivide the wheat land into 40 acre vineyards that he would sell off. Because of Oregon’s one-of-a-kind land use laws, the process required a major hearing with expert testimony.

As we were touring his existing vineyards, the winemaker told me to keep an eye on China and Chinese wines, because someday they’d be big in the U.S. His thinking went like this:

  • Anywhere you can grow apples, you can grow grapes.
  • In the 1980s, China shrunk its military considerably to free up resources for economic development, nearly 1 million men were rotated out of the military. Because of the one child policy, there was a shortage of potential brides, so the Chinese government determined that these ex-military guys needed gainful employment.
  • Many of the former military men were given agricultural land and trained to run apple orchards.
  • As their agricultural skills improved, apple orchards were converted to vineyards.
  • Winemaking is a natural extension of vineyards, and the Chinese would quickly learn how to make good wines.

Now, it looks like that someday for Chinese wines is almost here.

The Wall Street Journal reports that China now accounts for nearly 11 percent of the land devoted to vineyards in the world, ranking second behind Spain.

On top of that, WSJ says that quality of Chinese wines is improving and have begun to win awards outside China. In addition, French luxury-goods conglomerate LVMH Moët Hennessy Louis Vuitton has built a winery in a place called Shangri-La in the Himalayan foothills that aims to produce China’s best, and probably most expensive, wine. Moët Hennessy, the LVMH unit that makes Dom Pérignon Champagne, already produces sparkling wine in Ningxia, with a bottle selling for $27.

You’ll know when Chinese wines have really hit the U.S. market when you see them on the shelves of Costco or Trader Joe’s.

Podcast – The worst solution to homelessness, Millennials and their parents, and a taste of Chinese wines

 

 

This week’s Econ Minute Podcast spans the globe and crosses generations.

First we have what may be the one of the worst solutions to urban homelessness. Cities across the globe go to great lengths to get their homeless population out from under bridges and away from railroad tracks. Progressive Portland turns that goal on it’s head. The city’s mayor is finalizing a deal to purchase some land under a under a bridge and only few feet away from an active railway line. His goal: Move some of downtown Portland’s homeless population to a place where they are out of sight and out of mind.

Next we follow up on our look at millennials and see how their parents are changing TV programming.

We end with a story of a bold prediction that came true regarding China’s burgeoning wine business.

The podcast is now available on iTunes. Please subscribe to make the most of your weekly Econ Minute.

MTV learns a Millennial lesson: Parents are OK

A recent Econ Minute Podcast featured a clip from Matt Edlen‘s presentation at the Portland State Center for Real Estate Annual Conference.

One of the more mind blowing revelations (at 9:13 in the podcast) was that the GenY / Millennial generation shares many of the same values as their parents and they and their parents actually like each other. So much so, that many make an effort to live close to their parents.

A weekend feature on Vox re-enforces this point:

A distinctive characteristic of the millennial generation is that we’re closer with our parents. The president of MTV announced in 2013 that the network is overhauling its content because young people today are “not rebelling against their parents at all. They’re moving in with them. They don’t want to leave.” A therapist wrote in The Atlantic a few years ago that she keeps seeing clients who call their parents their best friends.

Too bad no one cares about GenXers anymore …

Secret, Pixar, Schumpeter, and Louis CK: The world’s shortest economics lesson

Flash-in-the-pan smartphone app Secret, has announced it’s shutting down after just 16 months and after raising $35 million from investors.

Secret allows users to post anonymous comments and read anonymous comments by others. Add in location services, and users can post and read comments to other people near them. Yes, it’s a bit creepy, but Secret is not alone in the creepy secret business.

Co-founder, David Byttow, made the announcement in a blog post:

Secret, Inc. still has a significant amount of invested capital, but our investors funded the team and the product, and I believe the right thing to do is to return the money rather than attempt to pivot. Innovation requires failure, and I believe in failing fast in order to go on and make only new and different mistakes.

In a world where hi-tech investors are treated as easy marks for fast-talking Millennials, Byttow shows a bit of class with his promise to return the money (although, one wonders if he’ll keep his Ferrari).

More important is Byttow’s acknowledgement that innovation requires failure. Pixar’s John Lasseter puts it best:

Be wrong as fast as you can. Mistakes are an inevitable part of the creative process, so get right down to it and start making them. Even great ideas are wrecked on the road to fruition and then have to be painstakingly reconstructed.

Lasseter’s wisdom is a version of economist Joseph Schumpeter’s concept of creative destruction in which the creation of new technologies destroys older technologies. While some may regret the loss of older technologies, the creation of new technologies pulls the economy forward in ever increasing prosperity.

And, if you don’t want to believe an economist, you can trust a comedian.

A surprising explanation why Indian children are so short

You learn something new every day. Today, we learned that the people of India are short. Really short.

As someone who went to graduate school to study economics, I’ve come to know quite a few Indians and people of Indian descent. Some have been tall, some have been short, some have been thin, and some have been fat.

But, I’ve never walked away thinking to myself, “Gee, Indians sure are short.”

That means I’ve never stayed up at night wondering, “Why are Indians so short?”

First, let’s get an idea of how short is short.

According to one easily obtainable set of data, the average American male age 20 and older is 5 feet, 9.5 inches tall. The average Mexican is 5 feet, 5.9 inches tall. And, the average Indian adult male is just under 5 feet, 4 inches tall. That’s shorter than the average North Korean male who has had to suffer through years of malnutrition.

Apparently this has been enough to keep two economists up at night asking “Why are Indians so short?” Indeed, their working paper published by the National Bureau of Economic Research has the obvious title, “Why are Indian children so short?

The authors begin by noting that Indian children are shorter than many poorer sub-Saharan African countries.

First, they account for some of the biggest differences, such as differences in healthcare such as vaccination.

Then, they note something curious. The authors find that the difference in height between Indian and African children gets worse with birth order. In other words, there’s a difference in height between Indian and African first born children and the difference gets bigger with the second child, the third child, and so on. And, the difference is bigger between Indian and African girls.

This finding leads the authors to conclude that a preference for eldest sons in India leads to a significant unequal allocation of resources within families in India. This preference includes a desire (1) to have at least one son and (2) for the eldest son to be healthy.

The researchers—who are themselves Indian—not that eldest son preference can be traced to at least two aspects of Hindu religion. First, Hinduism prescribes a system in which aging parents live with their son, typically the eldest, and bequeath their property to him. Second, Hindu religious texts emphasize post-death rituals which can only be conducted by a male heir such as lighting the funeral pyre, taking the ashes to the Ganges River, and organizing death anniversary ceremonies.

The result is a strong preference for son and a desire to for the eldest son be healthy enough to fulfill his obligations to his aging parents.

The other result is a nation with a small group of relatively tall men and a large group of much shorter men and women, leading to an overall depression in average height.

UPDATE: For a more in-depth discussion, without reading the actual working paper, the authors have written a summary at VoxEU.