Andy Kessler

WSJ: A Universally Bad Idea

https://www.wsj.com/articles/a-universally-bad-idea-1540147422

Bad ideas just won’t die. Ronald Reagan’s goal was to “leave Marxism and Leninism on the ash heap of history.” But they keep coming back, albeit in different forms. Of today’s bad ideas—from net neutrality to open curriculum and living wages—the most dangerous is the universal basic income.

For twisted reasons, Silicon Valley, the embodiment of meritocracy and incentives, thinks universal basic income will be the next great economic force. Facebook co-founder Chris Hughes is helping to fund a UBI pilot program in Stockton, Calif. He even wrote a book about the idea—something about 1%-ers paying money via tax credits—hardly original.

He’s not alone. Barack Obama has recently expressed interest in the idea. So have Bill Gates, Richard Branson, Mark Zuckerberg, Elon Musk, Marc Benioff and others in Silicon Valley. Why? I figure it’s their misplaced guilt about patriarchal dominance over workers displaced by automation. That’s a triple crown of bad excuses.

The enthusiasm seems infectious. In July, Chicago Alderman Ameya Pawar told the Intercept, “We need to start having a conversation about automation and a regulatory framework so that if jobs simply go away, what are we going to do with the workforce?” It wasn’t a long chat. This summer, Mr. Pawar introduced legislation for a pilot program that would give $500 a month to 1,000 families. Think of it as a new version of walking-around money. Never mind that Chicago can’t even afford to fund its public-employee pensions.

It sounds eerily similar to startup incubator Y Combinator’s Basic Income Project Proposal. It’s the harebrained idea of the organization’s president, Sam Altman. A thousand lucky folks would receive $1,000 a month for as long as five years. Another 2,000 would form a control group and might get $50 a month for their troubles.

WSJ: Think You’re Smarter Than Your Boss?

 https://www.wsj.com/articles/think-youre-smarter-than-your-boss-1539546566

Oct. 16 is National Boss Day, a Hallmark holiday if there ever was one. It’s a funny holiday, because almost all employees hate their bosses or at a minimum think they can do the job better. CEOs are especially reviled—slightly above cable installers and just below lawyers on the Rodney Dangerfield “no respect” totem pole.

Popular opinion insists that chief executives are greedy: CBS’s Les Moonves paid himself $69 million each of the last few years to air “NCIS” reruns. Or heartless: Amazon’s Jeff Bezos paid meager wages until a tight labor market forced him to raise them. Or scheming: Mark Zuckerberg and Facebook know our wants and desires. Or truth-challenged: Investors in Elizabeth Holmes’s Theranos learned that the hard way. Or plain clueless, like Lehman’s Dick Fuld and just about every other CEO.

But where would we be without them? Despite an industry of business schools, management books and seminars, nobody can teach you how to be an effective boss, leader or entrepreneur. They’re all self-taught. I’m always impressed when one is actually successful.

Most of investing is analyzing management. When I ran an investment fund, my partner and I would visit a dozen-plus CEOs a week in their offices. One rule of thumb was that if they closed their door, it was because they didn’t want their staff to catch them lying to us. Silly, I know, but it worked more often than you’d think. We’d grill them on their organization—how many people report to them directly, how soon after the quarter closes do they get accounting numbers, who signs off on contracts? The answers didn’t mean much; we were more interested in how the CEOs answered—confused, confident or hubristic—and seeing how good a handle they had on their teams.

We learned that running a company is like driving a tank down the middle of the road, except there are no windows so you can’t see the road. There are dozens of levers and knobs to adjust the tank’s direction. Your team works together to drive this machine as efficiently as possible with the fuel (capital) on hand. You’re doing fine until you sense a giant tree right in your path, and you make a million small decisions in short succession as your team scrambles to adjust the levers and knobs to get around it safely. Oh, and unknown to you, a few members are plotting a mutiny to oust you.

It’s not easy.

WSJ: Lessons From an ’80s Trade War

https://www.wsj.com/articles/lessons-from-an-80s-trade-war-1538950192

An extra two grand for a Harley Hog because of steel tariffs? We can’t be wimps in the world of trade, but tariff wars are never good. I would know: I was in the middle of one. In the mid-1980s, when Donald Trump was in casino mode and hosting prizefights, the Japanese were knocking out U.S. memory-chip makers.Hitachi instructed salesmen to “quote 10% below their price. If they requote, go 10% again. Don’t quit until you win.” The company later claimed it was never official policy, but the Japanese controlled 90% of the market for some crucial chips. Something had to be done, right? Well, no. Bear with me.

In early 1986, President Reagan’s Commerce Department cited Section 301 of the Trade Act of 1974 and ruled that the Japanese were selling chips below cost. The administration threatened dumping duties of up to 146% on Japanese memory chips. Never mind the oversupply and industry recession. To avoid duties, Japan came to the table and signed an agreement to limit exports and increase U.S. market share in Japan. Sounds like the current tariff tiff with China?

Here’s where things got weird. The chip recession continued, and the Japanese didn’t live up to the agreement. At the time, I was a 20-something Wall Street analyst, way over my head, running around the world tracking all this. In early 1987, I figured out the U.S. government was going to do something big: impose duties on computers, TVs and other products that use chips. I alerted every investor who would listen, but no one seemed to care. At a boxing match I met a reporter from the New York Times. I laid out the whole story to him. (Sorry, I didn’t know anyone from the Journal at the time.) He told me it wasn’t his beat but he’d look into it.

Sure enough, the Times ran a front-page story quoting me. And another the next day. I was sitting in my office, probably playing Tetris on my computer, when a producer from Ted Koppel’s “Nightline” called. I remember it went something like this: “I know you are very busy, but I was hoping we could send over a camera crew to talk about dumping.” I didn’t know much, but I was the expert! I thought of a good quote before they came. The interview lasted 30 minutes, but one line made it to national TV: “We can’t be wimps in the world of trade.”

I still believe that’s true, but duties and tariffs are a fool’s game. Memory chips are a notoriously low-margin commodity business. Intel got out of the memory business. So did AT&T . I’m still not sure why it was making chips in the first place.

Getting out of the dynamic random-access memory market, which Japan was dominating, was the best thing that ever happened to U.S. semiconductor industry.