Tuesday, September 30, 2008

Advice for our daughters

Since my daughter is not yet 2, it's a little weird that I am thinking about what I want to teach her about men and relationships when she's older but that is where my wandering mind is right now. Perhaps it's escapism from the fact that the economy -- and perhaps our personal finances -- are swirling the drain right now.

I just finished reading "The Last Lecture" by Randy Pausch. As I'm sure everyone knows, he was a well-known (in his field) computer science professor who was diagnosed with pancreatic cancer when his three children were all under the age of 6. With only months to live, he poured some of his remaining time and energy into a last lecture to give at Carnegie Mellon, where he had taught. The larger point of the lecture was to impart some wisdom and life lessons to his kids.

The part that really got my attention was something he wrote about for his one-year old daughter. Thinking of her and having her father die so young was especially hard. Of all his kids, she was the one who would have no memories of her father. His advice for her was something he learned from a woman friend, and it makes so much sense:

"When it comes to men who are romantically interested in you, it's really simple. Just ignore everything they say and only pay attention to what they do."

I found myself sharing this very simple advice with a heart-broken friend recently. I also wished for a time machine so I could go back to my roller-coaster dating days of long ago and take this good advice to heart. If there is any way to save my daughter all the wasted hours of analyzing the nonsense that a guy has said or not said to her and just cut to the chase, I'll take it.

There are a lot of little pearls of wisdom in Pausch's book. Most of them are not original. As he admits, he is a big fan of cliches. But finding that very clear bit of advice that might help my girl some day cut through all the b.s. of dating was worth the hour or two of my time that it took to read the book.

Wednesday, September 24, 2008

An Alternative to the $700,000,000 Bailout

Everyone is worried about the economy, including me. What really worries me though is the speed with which things are happening and how quickly we seem to be on the verge of spending a staggering amount of money to prop up private companies.

Last week, while we were on our family vacation in Disneyland, it felt as if we’d dropped into an alternate universe, where up was down and down was up. We were, of course, having a ball and wandering around in “the happiest place on earth,” which was the perfect antidote to the news of the day. One morning that news was of plummeting stocks (meaning our 401Ks were rapidly halving in value); then it was huge companies filing for bankruptcy or being bought by other huge companies (did Bank of America really buy Merril Lynch?). Finally, it seemed that global credit markets had simply ground to a halt and were on the brink of collapse. Every day the news seemed more and more unbelievable.

And to cap it all off on the last day of our trip, the government rolled out the idea of the bailout. Seven hundred BILLION dollars. I’ve been trying to get my head around how much money that is. The Iraq War so far has cost $2 trillion so this bailout would cost roughly 1/3 as much. But the Iraq War has been going on for five and a half years! The government is now proposing to give the Treasury Secretary the authority to spend these hundreds of billions as fast as he can.

In all the questioning of the bailout that I’m hearing on the news and radio, what I haven’t been hearing is alternatives. Surely there is some alternative to spending an ungodly amount of taxpayer money to prop up the economy?

It turns out there is. Two of the countries leading economists, writing in an online economics journal I subscribe to called “The Economists Voice,” recommend a plan that sounds much more sensible. It’s called debt for equity swaps and it is what normally happens when big companies file for bankruptcy. The idea comes from an article written by Luigi Zingales, who is a professor of economics and entrepreneurship at the University of Chicago School of Business. He has won all kinds of awards for his work. Interestingly, he wrote a book called Saving Capitalism from the Capitalists. He is now proposing a way to do just that since his fear is that greedy capitalists (my words, not his) will destroy capitalism with this bailout. The heart of the matter is that people who work at the big banks and investment firms – and more importantly their shareholders -- have all profited over the years while this crisis was brewing. But the losses they would now suffer if the full meltdown occurs won’t be borne just by them. Under the bailout plan those losses will be suffered by all taxpayers since we’ll be paying for it. So they get the profits and we get the losses? Not only does that seem morally wrong, it is also wrong in terms of how capitalism is supposed to function. If you profit, you take risks in order to do so. But surely it should be those who profit who also stand to lose or else how will they ever adjust the risks they take?

Back to Zingales’ idea. He explains that normally, when companies have a huge liability to pay, they file for Chapter 11 bankruptcy and they basically get debt forgiveness in exchange for equity. He explains how it works:

In Chapter 11, companies with a solid underlying
business generally swap debt for equity: the
old equity holders are wiped out and the old
debt claims are transformed into equity claims
in the new entity which continues operating
with a new capital structure. Alternatively, the
debtholders can agree to cut down the face
value of debt, in exchange for some warrants.
Even before Chapter 11, these procedures were
the solutions adopted to deal with the large
railroad bankruptcies at the turn of the twentieth

Zingales goes on to explain that the reason this “normal” way of dealing with the current situation is not being talked about much is time. It takes time to negotiate Chapter 11 arrangements. And U.S. credit markets don’t have time anymore. But our existing bankruptcy system has a way of dealing with this already. Bankruptcy judges just cram a restructuring deal down the throats of shareholders when they’re out of time or when the proceedings are too large or contentious for a negotiated settlement.

He also gives an example of how a similar situation happened during the Great Depression – when the government and courts forced a debt forgiveness plan onto firms -- and how both stock and bond prices soared afterwards. In other words, markets ended up liking this solution because it had benefits for everyone and it restored confidence in our finance system. That sounds like exactly what we need right now. It is certainly an idea worth exploring before we give away $700,000,000 of taxpayer money.

Saturday, September 6, 2008

It's not rocket science

I couldn't have said it better myself! Look what appeared in Frank Rich's New York Times Op-Ed piece today. A journalist with The Washington Independent went and read old newspapers in Alaska and uncovered this revealing quote from Sara Palin:

As for her “executive experience” as mayor, she told her hometown paper in Wasilla, Alaska, in 1996, the year of her election: “It’s not rocket science. It’s $6 million and 53 employees.”

Thursday, September 4, 2008

Governor, Shmovernor

I’m already sick of the Palin nomination, and sicker still of John McCain and the pundits who scream at each other on T.V. Yet like someone in a crowd of gawkers unable to turn away from a train wreck, I can’t tear myself away. But I promise, this is my last post on this one.

We really need to put the experience issue to rest. Barack Obama is a United States Senator. John McCain is a United States Senator. They’ve both had fascinating and unique life stories prior to becoming senators, yet they are each running from the same position now. And McCain was never in an executive leadership position and never “ran” anything either.

But the nomination of Sarah Palin has raised the debate over “experience” to a fever pitch. Palin’s experience is having been governor of Alaska for less than two years. Being elected governor of any state is an accomplishment, I’ll give you that. But we need to keep it in context. According to the U.S. Census Bureau, Alaska has a grand total of 670,000 people. The city of San Jose, where I live, has roughly a million people. So the mayor of San Jose (America’s 10th largest city) governs one-third more people than the governor Alaska. And, unlike Alaskans, we are a diverse bunch. Our last big political brouhaha was when two different factions of Vietnamese San Joseans took on City Hall and staged hunger strikes over the naming of a Vietnamese Business District. Three-quarters of Alaskans are white. Their political dust-ups seem generally to revolve around how corrupt their politicians are.

The city of San Jose has had two women mayors in my lifetime. My Mom worked for the first one, Mayor Janet Gray Hayes. The second one, Susan Hammer, is a family friend. These women are smart, glass-ceiling busters who did great jobs governing a growing, redeveloping, diverse, economically thriving city. Yet no one would have ever thought to pluck them from their Executive Leadership positions in San Jose and put them on the ticket as Vice President. Why? Because running a city of between half a million and a million people is just not seen as VP-level experience. Yet that is essentially the path Palin took to the VP slot on McCain’s ticket. She ran a state that is much smaller (population-wise) than any major U.S. city. And now we have to hear ad nauseum about all her “executive experience”. In my book, governor or not, she definitely comes up short.

Monday, September 1, 2008

A Superwoman? I don't think so.

There was a great post on Silicon Valley Moms Blog from one of the co-founders about how much Sarah Palin scares her. I totally agree, but we’re just a couple of Californians who would be unlikely to vote for McCain-Palin anyway. I’m a coastal Democrat who has lived in places like Silicon Valley, New York, Washington, D.C., etc. Clearly, I don’t have a lot of first-hand red state experience. So I decided to see what Fox News was saying about her. Apparently, First Lady Laura Bush “electrified” the crowd at the Republican Convention when she introduced Palin and said “Every woman in this room knows that she is truly a superwoman.”

OK, so the red-meat, red-state conservatives are excited about her. No surprise there. I’m not sure why anyone would call her a superwoman though. Is it because she has a lot of children and works? So do most American women. Is it because she is governor of Alaska -- a state with a tiny population where she did not have strong opponents in the race? Is it because she decided (or more likely accidentally decided) to have a fifth child at age 44? None of these are decisions or achievements that I find especially impressive.

Sarah Palin is totally unqualified to be Vice President and her political views are so extreme as to be frightening. In addition to being anti-choice, she wants to drill for more oil, denies that global warming is man-made and thinks we should teach Creationism in school. Her Dad was supposedly a science teacher. Where does a college-educated person get such insane ideas about education? Is this how we will ensure that our country continues to excel in science and technology?

She is also an insulting choice to women on so many levels. The idea that Hilary supporters will blindly flock to vote for McCain because he nominated a (totally unqualified and extreme right-wing) woman is despicable. Are all women candidates supposed to be the same to us female voters? By that standard, how would men ever choose between 2 men to vote for? (Obama, McCain? Who cares? They're both guys.)

And what to say about her total lack of foreign policy experience or even foreign experience? Barack Obama has had to take positions and vote on nearly every major foreign policy issue as a senator, plus he is a global citizen who has spent time in Africa with his father’s family and lived in Indonesia. He is also smarter than smart, having graduated from Harvard Law School where he was editor of the Law Review. He is almost certainly more qualified in the area of foreign policy than either President Clinton or Bush was when they took office. And on the important matter of judgement – he chose one of the country’s top foreign policy practitioners to be his runningmate: Joe Biden, the Chair of the Senate Foreign Relations Committee.

I was a staffer on foreign policy issues for a United States Senator, and I clearly recall how much we respected Senator Biden’s work on that committee. He has only gained more foreign policy experience and influence in the fifteen years since. Choosing him as a runningmate was a great choice by Obama and reflects his sound judgement. McCain’s choice on the other hand reflects raw political calculation and a fundamental belief that we soft-headed women will vote for a woman regardless of her qualifications. Let’s prove him wrong.