Dodd-Frank: The Good, The Bad, and The Ugly


The 2008 financial crisis left many people with no homes, jobs, or way of life.  It affected the economy more significantly than any crisis since the Great Depression.  Dodd-Frank was created in response to this catastrophe to assure that it would never happen again.  The law imposes regulation in nearly every aspect of the financial industry, covering investment and commercial banks, insurance companies, rating agencies, hedge funds, and many others.  With the implementation of Dodd-Frank, we must consider the costs and benefits of such a bill.  If there is too much regulation on  banks, for example, they will be less likely to lend, decreasing liquidity in our economy and leading to a lack of economic growth or even a recession. Continue reading

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Bring Back the Failure


Somewhere over the last two or three decades, our society has fallen into a state of political correctness where children are taught that everybody wins.  Youth sports give out participation trophies and children are always told they are winners by parents, teachers, and public officials.  This creates a generation of entitlement, as many people believe that they “deserve” to get good grades, have a great job, earn a high salary, or ultimately be successful in life without putting in the work necessary to achieve that goal.  Yes, some people may have to work harder than others to achieve a certain goal, but everyone is capable of doing so.

Many areas of youth sports are guilty of political correctness in the use of participation trophies.  By giving everyone an award, winning is devalued and children are not taught how to handle failure.  There is then no incentive to work hard to get that trophy and it sets many young kids up for disappointment when they get older, as mediocre efforts are no longer rewarded.  Children who have been praised their whole life are likely to shy away from a difficulty for fear of failure.  They may take the easy way out, try to cheat, or do the minimum to get by, yet they would still expect to go to a great college or get an offer from a high-paying job.  Failure makes people stronger and makes it that much sweeter when people are awarded based on their merits.

I propose that we reinstate the merit-based society that was seen in previous generations and help children learn at an early age that they will not be given things in life and that every accomplishment must require a certain amount of work.  If we transition away from a society of entitlement, we will restore the American Dream mentality among U.S. citizens.  The change mainly will come from society as a whole, as parents, teachers and public officials must make conscious efforts to let the children fail.

The Facebook Friend Paradox


The recent developments in social networking sites have greatly increased our ability to communicate with large numbers of people at any given time.  We now have access to people all over the world and can share pictures, links, posts and many others to a wide range of people.  Intuitively speaking, one would think that this innovation would make us more social overall, as we have the potential to communicate with a very large number of people.  Though social networking sites have changed the way we communicate, they have not necessarily changed it for the better.

Based on Dunbar’s number, the limit to the number of stable social relationships a person can have at one time is 150.  Numbers larger than this begin to lose social connectivity, and we can see this phenomenon in social media.  Most people with a high number of Facebook friends do not interact with the majority of them.  They may know who most of them are, but would not invite them out to have a beer or send them a Christmas card.  Social media gives us the ability to communicate with others at the shallowest level, without speech or face-to-face interaction.  This shallowness, if used too frequently, can replace other communication skills, making people less experienced in more direct social interactions.

The main paradox of Facebook is that it is portrayed as a tool used to facilitate social interactions and social connections, but at the same time it can lead to prejudice and narcissism.  People generally try to boost their image as much as possible on Facebook, chasing the self-esteem boost that results when someone “likes” that person’s status or photo or wishes that person a happy birthday when the two haven’t spoken in years.  Many people attempt to make themselves appear popular by accumulating a lot of “friends” and others are prejudged as antisocial because they either don’t have a lot of “friends” or do not have a Facebook account.  Those who are engrossed in social networks can lack a critical aspect of social interactions.  A humorous portrayal of this can be found in the commercial below.

While social networking has good use in reaching a lot of people in a short period of time, it cannot replace direct communication or the development of real friendships.

Music in the Vietnam War


Music can tell you a lot about social and political movements of a certain time period.  During the Vietnam War, there were many songs, now considered timeless classics, which were based on war protests of the 60s.  For example, “Fortunate Son” by CCR protested the draft and the preferential treatment of those in the upper class, who were “born with a silver spoon in hand.”

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Using Practical Wisdom


I chose to watch psychologist Barry Schwartz’s TED talk entitled Using our practical wisdom.  The talk stressed that to solve the majority of problems in our society, excessive rules and laws are not the answer, nor are incentives to perform a particular action.  Schwartz talks about how practical wisdom, having the will to do the right thing and the skill to determine what is the right thing.  He mentions that rules, no matter how detailed, can be dodged and he gives the comparison of bankers to water in finding the cracks in rules (4:43).  In the case of incentives, Schwartz argues that if an incentive is given, people will only care about the incentive and not the underlying action.  Thus, people are more inclined to cut corners to achieve the maximum reward for their behavior.  Schwartz uses the example of incentivizing doctors to have more or less patients, which incentivizes doctors to increase or decrease their number of patients without addressing the quality of care.

Practical wisdom, Schwartz argues, is necessary to solve the problems of how our institutions are run.  He says that wise people know when to bend the rules in order to do the right thing and that people with practical wisdom have both the will and skill to do the right thing (8:11).

While I agree that people with practical wisdom would be the best way to create a more functional society, Schwartz does not offer any practical solution as to how this ideology would be implemented.  He mentions the notion of canny outlaws, who go around the rules to do the right thing, and system changers, who attempt to change the way society is run (15:16).  While these people are noble, there are others who, without rules or incentives, will promote only their own agendas despite allowance to do the right thing.  Schwartz does not address a way to help these people find practical wisdom and virtue, but rather says that legislators should listen more to psychologists than economists.  While I believe that practical wisdom is a good way for people to focus on the morality of their practices, there is no way to implement such an idea without rules or incentives to motivate those who are merely concerned with furthering their own self-interests.

A Merger of Corruption


This is a story about greed and corruption, about blind ambition and selfishness.  The merger between Bank of America and Merrill Lynch during the financial crisis is historically significant, and represents the unethical behavior of many executives on Wall Street.  John Thain, former CEO of Merrill Lynch, and Ken Lewis, former CEO of Bank of America, were so focused on their own pursuit of greater compensation and power that they ignored the warning signs and understated the severity of the financial situation.

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Crash of the Titans


I will be writing my paper 2 on the acquisition of Merrill Lynch and Bank of America during the financial crisis, analyzing the ethics behind the negotiation between Ken Lewis (CEO of Bank of America) and John Thain (CEO of Merrill Lynch).  This topic was particularly interesting to me because I worked at Merrill Lynch (and, by association, Bank of America) two years ago and had been exposed to the aftermath of the deal. Continue reading

The Not-So-Affordable Care Act


After going through the Kaiser Family Foundation quiz on Obamacare, I was surprised to get 8 out of 10 questions right.  Though I was familiar with most of the questions asked, my understanding of Obamacare is at a basic level and I was interested in learning more about the law.  As I read several articles discussing Obamacare, I learned more about the effect that the law would have on businesses.

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Refusal to Stop the Time Bomb


A protester depicts the frustration of the American people towards government officials

I must preface this post by saying that I lean toward a conservative political ideology, but after digging deeper into the viewpoints of liberals regarding the government shutdown and debt crisis, I understand their point of view.  Republicans were essentially holding the nation’s economy hostage in leaving the government unopened and threatening not to raise the debt ceiling if Obamacare is not repealed.  I agree that targeting the Affordable Care Act, the legacy of President Obama’s term, was a poor move because even if Republicans could muscle their way into getting enough votes to edit the legislation through Congress, the President would veto it.

That being said, Democrats are just as much to blame as Republicans.  They refused to negotiate on any terms unless the government was first opened and the debt ceiling was raised long-term. Harry Reid essentially was telling Republicans to concede to all of the Democrats’ terms and then negotiations will begin. This caused strict partisanship and lengthened the government shutdown, as Republicans could not find any common ground with Democrats.  Continue reading

Moral Hazard


I think that the concept of “too big to fail” still exists today, as the financial services industry is still an oligopoly with few banks controlling the fate of the economy.  If, for example, a company like Citigroup, J.P. Morgan, or Bank of America were to go under at some point, the economy would fall apart.  Though it has tried to address the concern that banks could dismantle the financial system by regulating proprietary trading, capital requirements and others, the government has not addressed the problem of “moral hazard,” where investment banks take bigger risks because they are dealing with other people’s money and not their own.  The way to reform the banking system is to shift the risk to those that make the decisions to take the risk in the first place.  Continue reading

The Whole Truth


I found the video “The Agony and Ecstasy of Steve Jobs” to provide a very interesting perspective on Mike Daisey’s performance.  I liked how there were periodic breaks in the performance to give commentary and additional notes to judge the validity of Daisey’s statements and provide additional sources.  The use of additional sources and perspectives put less weight on the Daisey’s story and offers the audience a more balanced and “true” point of view than Daisey’s original performance.  The historical portion of the performance also gave validity to the overall performance, as it presented facts easily accessible from other sources, rather than purely personal anecdotes where we have to take the speaker at their word.  When questionable anecdotes were used, there was a break in the performance to clarify or question the truth of the speaker’s remarks.

The performance stressed that we should always know where our products come from and should investigate the origin ourselves.  It is important to note the difference between theater and journalism and fact and fiction.  The play raises interesting questions as to what is true versus what is untrue and how can we know the difference.  I think that the play took a good approach in providing many different ways of presenting the information.  It included personal anecdotes from both Daisey’s and Bucknell students’ trips to China, interviews with Steve Jobs, historical facts on Apple and the state of China, clips from the retraction of Daisey’s article and others.  These gave the presentation more credibility, even though it was very clearly presented as theater rather than journalism, giving the audience very informational and moving entertainment.

Mike Daisey Retraction


The retraction of Mike Daisey’s story about the terrible conditions at the Foxconn plant shows the importance of fact-checking in the world of journalism.  Daisey was able to manipulate his listeners into thinking that Apple was an evil company that forced its suppliers into terrible working conditions – or at least did nothing to stop them from occurring.  Daisey exaggerated and even fabricated parts of his story to influence the opinions of his listeners to fit his impression of Foxconn and Apple.  The graphic and descriptive nature of his story was so realistic that we all believed it to be true without looking at other sources to verify the facts behind his experiences.

While I am disappointed that Daisey’s story is fabricated, I cannot say that I am completely surprised.  Some of his anecdotes appeared to be stretched to the point where they were hard to believe he accomplished in a few days time, such as talking to “hundreds of workers” outside of the Foxconn gates; however, we believed them because they were on the news and were told in a manner so descriptive that there was an impression that these anecdotes couldn’t possibly be fabricated.  This retraction shows that we cannot always believe what we are told, even if it appears to come from a credible news source.  Facts can be twisted, exaggerated, or in this case, fabricated, to present a particular view of the person presenting the information.

This retraction shows that it is important to look at multiple sources when forming an opinion.  A simple Google search “Mike Daisey Foxconn” fills the first page with articles saying that the story was fabricated.  I personally feel foolish that I did not look into this or other sources regarding the reporting of Daisey’s story, but it shows that myself and others are quick to believe what is told to us without consulting other sources to verify the merits of a particular story.  This argument can be expanded to the news media that try to use facts in a certain context to spin news their way.  Whatever the story, it is important to have the facts straight before forming an opinion.

Daisy on Foxconn


I found that Mike Daisy’s recount of the conditions of the Foxconn plant to be very graphic and disturbing.  However, I do not think that this is the fault of Apple, but rather Foxconn and the totalitarian regime of China.  The reason that the majority of U.S. products are manufactured in China is because the cost is so much cheaper than in the United States.  Unfortunately, this cheap labor breeds awful working conditions.  The Chinese government does not enforce labor standards, allowing for underage workers, harsh conditions, extended hours, and low wages.  Foxconn operates on the basis of many Chinese companies that people are expendable and like parts of a machine.

Apple, on the other hand, has done nothing wrong.  It periodically checks the plants for stable working conditions and—at least on the surface—investigates any labor issues that occur.  Daisy even recounted that Foxconn knew when the plants were being audited and would adjust their standards accordingly.  But the real point—though a controversial one—is that Apple needs the low cost labor of Foxconn to exist in the first place.  If Foxconn increased wages and benefits to the levels that Americans enjoy, Apple would cease to exist, as the average wage in China is $2.00 compared to the average wage in the U.S. of $34.75 (this would be an additional $25 billion per year in costs and Apple makes roughly $14 billion) 1.

While the conditions in China are terrible, we cannot blame Apple for producing its products there to stay in business (focusing on the design of their products that consumers love so much).  It is the role of the Chinese government to enact and enforce laws that help the people gain better working conditions, as companies like Foxconn are designed to minimize costs at all costs.  However, as we have seen before from the communist China (i.e. sending a 14-year old to the Olympics in 2000), the government only views its citizens as tools to serve the state.

 

1 – http://www.forbes.com/sites/forbesleadershipforum/2012/01/25/the-real-reason-the-u-s-doesnt-make-iphones-we-wouldnt-want-to/

Milton and Ed Post


Apple is the largest technology company on the planet with over $140 billion in cash and products sold across the globe.  Within the last two months, it has been the topic of major news events, such as the alleged price fixation of its e-books and its legal avoidance of billions of dollars in taxes.  Friedman and Freeman have very different opinions on the morality of Apple in doing these actions along with to who the company is responsible.

Milton Friedman would argue that Apple is doing its capitalistic duty, and thus its moral duty, in creating the most value possible for shareholders by legally avoiding taxes through subsidiary companies in Ireland.  He would argue that if Apple had not done this, it would essentially be taxing itself (even though the government would be taxing them) and spending shareholder money in a way that would help the government, and, very arguably, the citizens under it.  Friedman would say that this is socialistic and immoral because it is not their money to waste.

Edward Freeman, on the other hand, would believe that Apple has not considered its stakeholders and has separated its business policy from its ethical policy, which, in his opinion, is immoral.  The alleged fixation of e-book prices does not consider the stakeholders—the consumers of the products.  Freeman would believe that Apple drove up the prices solely to earn more profit and create greater returns for shareholders.  Apple did not consider the individual, as Freeman would believe, or see itself as a means to a stakeholder end.  Nor did it follow the Principle of Emergent Competition, but instead tried to “get the other guy” by attempting to take market share from Amazon.com.