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What Daniel Davies Learned In Business School

Now as readers of this blog are surely well aware, the Privateers have said many things that are untrue or designed to mislead. But as I noted earlier today all these little fibs and deceptions aren't merely incidental. Let's quote Frank Luntz, privatization strategist-in-chief, once again:

If Americans think you want to protect and enhance their retirement security, they'll back you. If they think you want to reduce their benefits, for ANY reason, they'll oppose you.
Now suffice it to say that while honest privateers have what they think are good reason for favoring benefit reductions (namely, this is the only way to forestall tax increases that they regard as intolerable) they do, in fact, want to reduce benefits. According to privatization's strategic maestro, the only way to accomplish this is to lie about it. Perhaps "lie" is too harsh. But the plan is to mislead. Which is a good time to revisit Daniel Davies' One Minute MBA: Avoiding Projects Pursued By Morons 101 explaining how he foresaw what so many liberal hawks did not, to wit: that the Bush administration would fuck everything up in Iraq. Key excerpts:

Good ideas do not need lots of lies told about them in order to gain public acceptance. I was first made aware of this during an accounting class. We were discussing the subject of accounting for stock options at technology companies. There was a live debate on this subject at the time. One side (mainly technology companies and their lobbyists) held that stock option grants should not be treated as an expense on public policy grounds; treating them as an expense would discourage companies from granting them, and stock options were a vital compensation tool that incentivised performance, rewarded dynamism and innovation and created vast amounts of value for America and the world. The other side (mainly people like Warren Buffet) held that stock options looked awfully like a massive blag carried out my management at the expense of shareholders, and that the proper place to record such blags was the P&L account.

Our lecturer, in summing up the debate, made the not unreasonable point that if stock options really were a fantastic tool which unleashed the creative power in every employee, everyone would want to expense as many of them as possible, the better to boast about how innovative, empowered and fantastic they were. Since the tech companies' point of view appeared to be that if they were ever forced to account honestly for their option grants, they would quickly stop making them, this offered decent prima facie evidence that they weren't, really, all that fantastic. . . .

Fibbers' forecasts are worthless. Case after miserable case after bloody case we went through, I tell you, all of which had this moral. Not only that people who want a project will tend to make innacurate projections about the possible outcomes of that project, but about the futility of attempts to "shade" downward a fundamentally dishonest set of predictions. If you have doubts about the integrity of a forecaster, you can't use their forecasts at all. Not even as a "starting point". By the way, I would just love to get hold of a few of the quantitative numbers from documents prepared to support the war and give them a quick run through Benford's Law. . . .

The Vital Importance of Audit. Emphasised over and over again. Brealey and Myers has a section on this, in which they remind callow students that like backing-up one's computer files, this is a lesson that everyone seems to have to learn the hard way. Basically, it's been shown time and again and again; companies which do not audit completed projects in order to see how accurate the original projections were, tend to get exactly the forecasts and projects that they deserve. Companies which have a culture where there are no consequences for making dishonest forecasts, get the projects they deserve. Companies which allocate blank cheques to management teams with a proven record of failure and mendacity, get what they deserve.

Daniel also picked up this important tidbit in accounting class:
[T]he difference between "making a definite single false claim with provable intent to deceive" and "creating a very false impression and allowing it to remain without correcting it" is not one that you should rely upon to keep you out of jail.
That's really all I have to say about that. Summing it up, however, if privatization's so great, why do its advocates deem it vitally important to lie about its crucial provisions in order to make it work? And, granted the details of policymaking are important, why would you think that a bunch of liars would do a good job of getting the details right?

February 21, 2005 | Permalink

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Comments

Benefits are currently indexed to wages--up to retirement that is, and to prices thereafter. The rallying cry of the privateers has been to use price indexing, on the belief that inflation will be less than wage growth.

Therefore, the privateers want to reduce benefits, and make no secret about it. What part of this is rocket science?

Posted by: Paul Callahan | Feb 21, 2005 12:35:51 PM

"Good ideas do not need lots of lies told about them in order to gain public acceptance."

This was the best reason to oppose the Iraq war during the runup.

Posted by: Petey | Feb 21, 2005 12:40:02 PM

Umm, Paul see Matt's post about Cato lying about cutting benefits.

Matt, its fairly easy. They are Straussians and believe less in democracy then even you do.

Posted by: Rob | Feb 21, 2005 12:40:41 PM

Speaking as a libertarian hawk, this is exactly right. I accepted Bush's numbers because a) he has more information than I do, and b) there was a metric for success.

That metric was, all conservative handwaving aside, that there were significant quantities of WMD in Iraq. I stated from the beginning that I supported this war because of the WMD threat, and if the threat did not materialize, Bush should step down or be impeached.

I believed in the humanitarian/democracy argument, primarily as a way to eventually defang the terrorists, but I do not agree that it was the central selling point of the Bush pre-war motivation. It was off to the side. That it has been successful is great, but it should have been the motivation sold to the American people.


Posted by: john brothers | Feb 21, 2005 12:42:43 PM

This is off topic, but I still want to respond.

I accepted Bush's numbers because a) he has more information than I do, and b) there was a metric for success.

How about c) He had an incentive to lie. d) He had a hunch there would be WMDs and the lack of evidence beforehand would be forgotten when they turned up after the fact.

I never believed that Bush had strong evidence for WMDs. There were numerous articles showing how intelligence was being manipulated. On the other hand, I thought Scott Ritter was really going out on a limb saying that no credible WMDs would be found. I believed that justification did not exist for an invasion, but that Bush would get away with it provided his hunch was right.

What totally blind-sided me was that Bush would get away with it if Scott Ritter turned out to be 100% right and Bush completely wrong. My mind still reels thinking about it.

Posted by: Paul Callahan | Feb 21, 2005 12:55:38 PM

What totally blind-sided me was that Bush would get away with it if Scott Ritter turned out to be 100% right and Bush completely wrong. My mind still reels thinking about it.

This country has gone somewhere wierd. It really has, I think Bush could be caught slaughtering babies for Satanic rituals and half of this country would make excuses for him and bitch about gay marriage and abortion (of which his reign hasn't seemed to even slow down either).


Posted by: Ed Marshall | Feb 21, 2005 1:01:29 PM

It remains to be seen whether it has been successful.

First, the humanitarian argument: sad to say, I think that by almost any reasonable standard you'd have to agree that the Iraqi people are not better off than they were before the invasion. They're living in a war zone. Their infrastructure, water and electricity and sewage, has been shattered. Several of their major cities are burning. Their death rates are higher than they were before the invasion---exactly how much higher is unknown, but certainly higher. Now you might say that's unfair, and in one sense it is. The humanitarian argument isn't really "the Iraqi people are better off now than they were before." Sometimes people say that, but it's really just shorthand for a different argument: "once all the dust has settled and the war is won and the country has been rebuilt, the Iraqi people will be better off than they were before." Quite possibly true. But by definition, we can't know that yet. The dust hasn't settled, the war hasn't been won, and the country hasn't been rebuilt. Too soon to tell.

Then the democracy argument. Again: too soon to tell. Iraq has had one election, with turnout that's pretty good by American standards. That is not a democracy. I hope it turns into a democracy, but we can't know that yet. If the Iraqis get a government that reflects what most of them thought they were voting for, then that'll be a good first step. There are grounds for optimism and also grounds for skepticism.

Posted by: Matt Austern | Feb 21, 2005 1:03:19 PM

One thing I don't get: you seem to be implying that if Iraq did have WMD, then it would be a valid reason for invasion. No, it would not.

Let's say there were WMD - so what? This 'significant quantities of WMD in Iraq' is bullshit squared - bullshit as a fact and bullshit as a pretext.

Posted by: abb1 | Feb 21, 2005 2:22:07 PM

"Let's say there were WMD - so what?"

Why does the left have a perception at being weak on national security?

Posted by: Sebastian Holsclaw | Feb 21, 2005 2:41:41 PM

This is not an aswer, buddy, it's just another layer of bullshit. Who cares about your perception, or about left and right for that matter?

Posted by: abb1 | Feb 21, 2005 2:47:37 PM

"Why does the left have a perception at being weak on national security? "

That's not an answer, it's a meaningless retort, made even more meaningless by comparing the very successful WMD programs of Iran and North Korea to the completely non-existent one of Iraq.

And the asinine fools who cheered this "strategy" have the nerve to consider themselves on being "serious" about "national security". Serious, my ass. If you wet your pants over Saddam's "aersenal" you should be in serious weeping hysterics about DPRK and Iran. But you aren't. (Bet you have a cool, analytical rationalization for that). "National security" is nothing more than a partisan game, with some gratuitous jingoism and sand-nigger killing thrown in the mix. Pass the popcorn.

Posted by: Fantazia | Feb 21, 2005 4:15:36 PM

Sebastain Holsclaw:

Why does the left have a perception at being weak on national security?

Because the right is willing to lie about national security. Willing to take us to war: Grenada, Iraq; for reasons that are unrelated to national security but have everything to do with election politics.

The world of international relations is complex. An honest recognition of this is called flip flopping. When the nation has truly been threatened, when have the Democrats not been on board with responding in a muscular fashion?

Posted by: epistemology | Feb 21, 2005 4:17:29 PM

Posted by: epistemology | Feb 21, 2005 4:23:23 PM

Italics cleanup in Aisle 5.

Posted by: chilly | Feb 21, 2005 4:24:26 PM

Italics cleanup in Aisle 5.

Posted by: chilly | Feb 21, 2005 4:24:26 PM

Whoops -- double AND unnecessary post. Sorry.

Posted by: chilly | Feb 21, 2005 4:25:11 PM

Whoops -- double AND unnecessary post. Sorry.

Posted by: chilly | Feb 21, 2005 4:25:11 PM

Half the time, we have a Democratic president. Another is inevitable. To say that the Democrats are weak on national security is to suggest to our enemies that the next time a Democrat is in office, an attack on the US will not be met with a robust response. This would undercut the President, and harm the securtiy of America.

Sebastian: why are you trying to undermine future presidents and harm the security of the United States?

The above kind of nonsense powered by ad campaigns, such as the one trying to link Max Cleland with bin Laden, leaves the impression that the Democrats are weak on national defense. Closer to the truth is that the Republicans feed the military industrial complex regardless of need, and use fearmongering to promote this agenda. Scared yet Sebastian?

Posted by: epistemology | Feb 21, 2005 4:27:35 PM

Thanks chilly, that was me. Sorry.

Posted by: epistemology | Feb 21, 2005 4:28:45 PM

"Why does the left have a perception at being weak on national security? "

Perhaps we should switch that around and put the burden on you, Sebastian: Why does the right have to rush to war on flimsy evidence that later turns out to be false?

A lot of parents, widows and children would certainly like to know.

Posted by: Randy Paul | Feb 21, 2005 7:33:33 PM

I miss D^2's solo weblog. I always feel tempted to read Crooked Timber even though the only authors in it I really like are Daniel Davies and Belle Waring, but time is limited and all that.

Posted by: Julian Elson | Feb 22, 2005 3:53:39 AM

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