Tag: organized irresponsibility

Entrenched elites and the fallacy of hope

America is bogged down in an economic and political crisis, but the overarching problem is that of a failure of elites. The people who have gained top leadership positions in business, government, and non profit institutions in the last two decades have demonstrated extremely poor performance. Why can’t we replace this generation of bad leadership? Because the elites have learned how to defend themselves through elaborate networks of personal alliances.

Any attempt to remove a top leader is checked by that leader’s allies. You can’t get rid of idiot NY Times columnists like Friedman or Brooks, because they are defended by incompetent chief editor Keller. You can’t get rid of Keller, because he is defended by irresponsible owner Sulzberger. You can’t get rid of Sulzberger because he is defended by investors who owe him favors.

The same problem exists in just about every large, dysfunctional institution. Nobody bucks authority, because authority has the power to crush dissent. In a short time, America has changed from a pragmatic and independent nation to an enfeebled society dominated by cronyism. Managing “relationships” is now the crucial career skill, and every other consideration, including the public welfare, is secondary.

There will never be incremental reform of these elites. They must be replaced wholesale, and unfortunately that will not happen without considerable social turmoil. America’s elites have decided to defend their rich franchises against the public interest, but the public interest will prevail. This harsh and difficult struggle will define the next decade.

A death foretold: the strange case of satellite radio

Many years ago, in the mid 90s, I was peripherally involved with the analysis of the two startup satellite radio companies, XM and Sirius. It was apparent to me then that the advent of mobile Internet access would kill these companies. The superior versatility, unlimited programming choices, and precision advertising capability of the mobile Internet platform would do to satellite radio what talkies did to silent films.

The only question in 1994 what when (not if) Internet audio programming could be streamed to cars and hand-held devices. It might be argued that this competitive uncertainty was so great as to provide ample justification for the lavish investments required to orbit radio broadcasting satellites and the corresponding programming and marketing infrastructure, but was this really so?

Unlike earlier eras of technological progress, the microelectronic revolution has been a forecaster’s dream. Because of Moore’s law, which describes the exponential increase of microcircuit density, it has been possible to predict the price/performance and the feature/performance characteristics of future consumer electronic devices with considerable precision. Moore’s Law was well understood at the time that the radio satellites were launched.

In retrospect, it is difficult to avoid concluding that the backers of satellite radio, their contractors, and their consultants fully understood the high probability that mobile Internet technology would wipe out their business model. Why did they proceed? I believe that the ventures were funded because of what C. Wright Mills calls “organized irresponsibility.” The people behind the schemes had front-loaded rewards, in the form of commissions, contracts, bonuses, and IPO proceeds that provided ample inducements to launch a doomed venture. Many of these players privately reasoned that they would make a lot of money – no matter what happened to satellite radio.

Does this pattern sound familiar? It is the same thing that happened in the financial sector and resulted in the near-meltdown of the world economy. People deliberately made deals that they knew were tainted or ill-fated because their short-term gains would outweigh any long-term losses – especially if the losses would be borne by others.

The bad news is that almost any industry in America over the last 20 years shows evidence of organized irresponsibility misdirecting investments with ruinous results: automobiles, aerospace, telecommunications, banking – you name it. Our business culture has contracted a disease of predatory bad-faith dealing, and until it is cured we will continue on the road to national ruin.