Category: Business

The NHL Is Dumb. The Lockout Is Dumb.

As I wrote earlier in the week, I love hockey and the NHL. I want to watch games every minute of every day. I watch old games on NHL Network during the summer, even when I know the outcome. It’s a fantastic sport. I wish more people watched.

The NHL is currently working to guarantee fewer people watch. It’s engaged in a lockout of its players, its second lockout in eight years and third in eighteen. It was the second major professional sports league to cancel its championship, the first to do so as a result of its own actions¹. It’s the only professional sports league to cancel an entire season (i.e. 2004-2005), which didn’t even happen during World War II. This shameful fact is an indictment on the league’s negotiating skills and tactics. We’re again learning how putrid the league is at both. The former is probably defensible. The latter is not.

As we’d already lost the first two weeks of the 2012-2013 season, the NHL made a surprise proposal to the NHL Players Association on Tuesday. It offered an attempt to save the full 82 game schedule for all teams and what seemed to be an excellent start to resolve the core economic differences between the two sides. A few days have now passed. The league now says its offer was not its starting point, but its finish line. Its tactic is to require capitulation. Whether that happens now or in August 2013, the league provides no reason to believe it cares when. It appears quite ready to destroy another season if that means “winning”. Past evidence suggests that wouldn’t be fatal, or even significantly damaging. The past’s applicability to the future is open for debate here. The league appears indifferent to fatigued diehards and the growing-but-fragile fan support it’s gained in the last few years from a resurgence of big-market teams.

Reports indicate that the league recently received pressure from its major sponsors and television partners in Canada and the United States. This, to me, is the most interesting aspect of the continuation of the lockout. Obviously everyone wants a healthy business going forward. And the league’s sponsors want to be associated with a sport that is stable, exciting, and growing. They had a chance to continue getting that from the league until its proposal shifted from an opening offer to its final offer without announcement. The league is so determined to get its deal that it will accept an unnecessarily damaged, smaller revenue stream from its victory. This is idiotic. Its sponsors will attach their brands to a league that embraces upheaval, ruthlessness, and repeated disregard for its customers. We’ll find out how willing and committed they are to supporting that combination in the post-lockout NHL, whenever that arrives.

I doubt sponsors will feel the same level of enthusiasm they’ve shown in recent years if a deal can’t be reached by Thursday. That failure would likely mean a large chunk of the season being axed next Friday. (Missing the Thursday deadline would also mean the season will likely die.) The league is about to find out how much of its projections is hubris. As I wrote before, the diehards will be back whenever the league returns. That includes lifelong fans and more recent converts like me. The league is correct on that. I wonder how much revenue it expects from me if that happens. It will get my $170 or whatever it will charge for the Center Ice television package because I am out-of-market for the Blackhawks and I like watching other teams. But I bet the league thinks I will also still want t-shirts and jerseys and other branded merchandise. I will want them. I will not buy them. The League’s revenue will not be zero. But its revenue will not be what it was before. It will get the smaller revenue base it deserves. I am foolish. I am not a complete fool without any respect for myself.

The league takes the support of its fans for granted. It thinks we’re stupid. It’s told us for several years that the league is growing and experiencing record revenues. It said so earlier in this now-extended off-season. Yet, now it also demands immediate givebacks from the players because teams can’t survive without them. It wants us to ignore that more than half of the cumulative losses experienced by the weaker teams last season belonged to the Phoenix Coyotes, a team owned by the league itself. On average the teams losing money are losing just under $2 million each. (This is based on reported numbers. Possible accounting tricks are not considered for the validity of this loss.) If team owners can’t absorb a $2 million loss for a few years as the league transitions to a more stable economic structure, they shouldn’t be involved in this high risk, high dollar business. As a fan I want my team and the league to be healthy. I do not want to be treated as though my only involvement is to hand over my money as often as possible.

I’d resolved myself to the reality that this lockout would cost a significant chunk of the season. Then, the league worked to win back support by making an offer. I’m optimistic but I do not appreciate being used in what is now an obvious ruse to win an irrelevant PR war the NHL deserves to lose worse than it was losing it on Monday. I’m not interested in subjective notions of fairness. A 50/50 split is no more fair than a 57/43 or a 43/57 split. Context matters. Fairness here is negotiating honestly and striving to satisfy as many goals as possible. The owners want a 50/50 split. The players want their existing contracts honored. Great, there’s a deal to be made. But the fans are lost in this equation. We are customers, not equal participants in the product. We want hockey. There are many ways for the owners and players to get – or get close to – what they want. Fans have no involvement to get we want. We have only the power of the dollar after the fight is over, whenever that might be. It should be by Thursday. It probably won’t be. The clock is unforgiving against a battle of egos. If/when I lose, most of the dollars I’ve spent in the past will remain in my wallet.

In the end the owners will win this lockout. They have all the power. I don’t much care where they end up. I care a lot how – and when – they get there. They should start asking themselves what they’ll win if there is no deal by Thursday. They should ask this without first using their assumed answer to beg the question. Fifty percent of nothing is no better than fifty-seven percent of nothing. Without a deal that enables a full season, everyone loses.

¹ Major League Baseball lost its World Series in 1994 due to a players strike. Current NHLPA executive director Don Fehr was the players’ union chief at the time.

New Jersey Worries About Body Hair Removal

I’ve seen this story floating around for a few days, from multiple sources.

Things could get hairy in New Jersey this summer for women who sport revealing bikinis or a little bit less.

The painful Brazilian wax and its intimate derivatives are in danger of being stripped from salon and spa menus if a recent proposal to ban genital waxing is passed by the state’s Board of Cosmetology and Hairstyling.

Before I get into my brief take, I’ll stress what I think explains this, which is what Brad Warbiany pointed out at The Liberty Papers:

[Cherry Hill, New Jersey salon owner Linda] Orsuto said that the proposal may be the state’s way of diverting a long-established salon procedure “perfected by aestheticians” to the medical community, where hair can be removed via laser treatment by dermatologists.

As Mr. Warbiany stated perfectly:

Follow the lobbying money.

Those four words explain most government actions, no?

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My take: If this passes, it will be illegal in New Jersey for a woman to have her pubic hair waxed from her genitals, but she will still be free to have her son’s healthy foreskin surgically removed for any reason she can imagine. We have a long way to go before people understand individual liberty.

Searching for a Solution’s Problem

John Cole writes about the direction of health care in America (in response to an entry by Andrew Sullivan).

… Only a fool can not see the writing on the wall- we are going to have to move to single-payer at some point, because businesses can not compete and the largest problem for Detroit is… their health care obligations and other retiree benefits. Likewise, we spend an enormous amount of our GDP on health care yet have rankings that look third world on issues like infant mortality. Something has to give.

I don’t want to play the fool here, because I see that we’re moving to single-payer at some point. That’s the obvious political outcome driven by our unthinking, economically-illiterate public debate. This is a Bad Idea because of the problems everyone is glossing over, particularly those involving rationing.

But that’s not my quibble here. We do not have to move to single-payer. If part of the problem for American business is the cost of health care, the proper step is to separate health care from employment. Single-payer is one route to attempt that, but it is not the only route.

Do we have a national automobile insurance crisis because our employers do not provide subsidized auto insurance? The comparison is weak, as I’m happy to admit. The absurdity is intentional. But it points out that options exist beyond Employer or Government. The incentive system involved in employer-provided health insurance is flawed. We need to move beyond our limited mindset that if someone doesn’t take care of us, we’re all going to die a horrible, uninsured death.

Mr. Cole is more cautious about the possibility of success from that outcome than most, but he uses emotional justifications to support the national undertaking. For example, infant mortality is more complex than just reciting statistics. As the link shows, there are ways to look at the complexities that don’t prove that U.S. infant mortality rates are meaningless as a comparison. But this issue is too big and the outcomes too loaded with consequences to disregard the nuances and uncertainty in favor of a pre-determined solution.

When a politician offers to save the economy, he will seek to destroy it first.

GM and Chrysler are back at the federal trough, this time hoping to extract billions more in “loans” from American taxpayers. This is not a surprise. David Z asks the right questions at no third solution:

What happens when April comes around, and General Motors still doesn’t have a viable future? Do they get more money? At what point does the nonsense end? At what point do the politicians recognize and accept the fact that continually taking money from the taxpayers and giving it to companies like General Motors in massive corporate welfare schemes can’t ever work? …

Giving money to Detroit auto makers is nothing more than a lesson in how to destroy wealth. First, we destroyed $17.4 billion. Next we’ll destroy at least $14 and probably $21.6 billion, as the article states. At some point we (i.e. Congress) need to realize that these companies are dead. Walking dead, but they’re dead. Treat the original “loans” as a sunk cost, hope to recover something in bankruptcy, and move on with a commitment to never make that mistake again with someone else’s money.

That won’t happen, as suggested by the Obama administration yesterday.

“The president of the United States wants to see a strong and vibrant auto industry that’s employing tens of thousands of hardworking Americans and building the cars of tomorrow for Americans right now. That’s what this president wants to see,” Obama spokesman Robert Gibbs told reporters aboard Air Force One.

President Obama apparently believes that wishing makes it so. It doesn’t. The rational economic perspective would remove obstacles to a strong and vibrant free market that deploys – and redeploys – its finite resources in the most productive manner possible. Employment of hardworking Americans (and Chinese and Germans and Brazilians and …) would follow.

But the president isn’t interested in a rational economic perspective because the president, like all the politicians in Congress, is interested only in political games. Watching as winners and losers emerge based on merit is too risky. Picking the winners and losers himself better enhances his power. That’s what this president wants to see. A free market without centrally-planned allocation of resources won’t provide that, so it mustn’t be allowed.

Ted Poe Field at House of Representatives Stadium?

Following up on a story I discussed last month, six U.S. House members from New York urged Treasury to ignore the call to cancel Citigroup’s naming-rights deal with the New York Mets:

“It is deceitful and unreasonable to single out Citigroup for an agreement signed several years ago,” they wrote, “without referencing the many other companies who have stadium naming rights deals and also received federal assistance.”

“Are we ready to remove their names from those stadiums?” Engel asked in a statement. “Or is this a rule to apply solely to Citigroup and the Mets?”

Naturally one of the original instigators, Rep. Ted Poe (R-Texas), gave a rebuttal:

“All companies that came to Washington with their hands out for taxpayer money should have to answer to the taxpayer as well,” he said. “This is the consequence of getting in bed with the federal government — they are going to tell you how to spend your money.”

Isn’t it interesting that Rep. Poe refers to this as “getting in bed”? A responsible government leader would’ve rebuffed such advances. Instead we have an excuse to force control of resources and business decisions – retroactively – upon those companies. This includes the companies that tried to refuse former Treasury Secretary Henry Paulson’s “take or take it” offer.

I have no reason to believe that the six New York representatives are acting out of principle. But the push is correct. And the Treasury Department is playing along:

“While we have implemented new restrictions on executive compensation and luxury perks, we will not get involved in individual companies’ marketing decisions,” Treasury spokesman Isaac Baker said Wednesday.

We’ll see.

John Harvey Kellogg’s Legacy

The “OMG Michael Phelps smoked marijuana” story is still a hot topic, with the general tone thankfully being that this is hardly worth wasting the effort of any brain cells. I concur, but that won’t stop the usual idiots from moralizing. The extends a little further to at least the appearance of moralizing, as evidenced by Kellogg dropping its endorsement deal with Mr. Phelps. I regard this as nothing more than a business decision. It’s weak and cowardly, but nothing in my support for capitalism suggests that individuals can’t be stupid.

Still, this provides a reminder that the company’s co-founder, John Harvey Kellogg, endorsed and promoted a radical, not-uncommon opinion for the late 19th century. From Kellogg’s book, Plain Facts for Old and Young, here is Kellogg’s “cure” for masturbation in children:

In younger children, with whom moral considerations will have no particular weight, other devices may be used. Bandaging the parts has been practiced with success. Tying the hands is also successful in some cases; but this will not always succeed, for they will often contrive to continue the habit in other ways, as by working the limbs, or lying upon the abdomen. Covering the organs with a cage has been practiced with entire success. A remedy which is almost always successful in small boys is circumcision, especially when there is any degree of phimosis. The operation should be performed by a surgeon without administering an anæsthetic, as the brief pain attending the operation will have a salutary effect upon the mind, especially if it be connected with the idea of punishment, as it may well be in some cases. The soreness which continues for several weeks interrupts the practice, and if it had not previously become too firmly fixed, it may be forgotten and not resumed. If any attempt is made to watch the child, he should be so carefully surrounded by vigilance that he cannot possibly transgress without detection. If he is only partially watched, he soon learns to elude observation, and thus the effect is only to make him cunning in his vice.

This is one of the contributing arguments that encouraged the establishment of routine, medically unnecessary male circumcision in America. Anyone who denies this origin is misinformed when seeking a gender-based exception to the objective claim that medically unnecessary genital cutting on a non-consenting individual is unethical, whether the mutilated is female or male.

To demonstrate further, this is from Kellogg’s writing:

In females, the author has found the application of pure carbolic acid to the clitoris an excellent means of allaying the abnormal excitement, and preventing the recurrence of the practice in those whose will power has become so weakened that the patient is unable to exercise entire self-control.

Victorian-era Americans embraced circumcision because they replaced priests with doctors. They did not replace superstition with science. American medical knowledge of the foreskin accepted a religious foundation for any research, just as American medical knowledge today is ignorant of the foreskin because the circumcised penis is viewed as normal rather than common.

While I think boycotting Kellogg in 2009 because John Harvey Kellogg was despicable in 1888 is melodramatic, the history is worth repeating independent of the company. Boycotting Kellogg in 2009 because of it’s business decision regarding Mr. Phelps is a different matter. I support that.

Restrict Employer Choices, Have Fewer Employers

BusinessWeek has a debate today on the Employee Free Choice Act, which is up for consideration before Congress. I’m against based on the very little information I know. Essentially, the pro and con between Rep. George Miller (D-CA) and Home Depot co-founder Bernard Marcus provides the bulk of my knowledge. If Rep. Miller’s rhetoric sufficiently corresponds to what the Act would do, I’m against it because Rep. Miller demonstrates that he only recognizes rights that are convenient for his partisanship.

(Note: I’m not advocating the opposite of his view. Rather, I believe the relationship between employers and employees must be voluntary and mutual. I am not qualified to set all rules for all exchanges. No one is.)

To Rep. Miller’s essay:

Unfortunately, in recent years, the middle-class life has become increasingly difficult to maintain. Workers’ wages have stagnated as the cost of everything from milk to college tuition has skyrocketed. The staples of a middle-class life—a fair wage, access to health care, a sound retirement—are getting squeezed. The percentage of national income going to workers’ wages is at its lowest level since 1929, while the percentage of our nation’s wealth going to corporate profits is at its highest since the 1940s.

I’m a skeptic; I want data where Rep. Miller provides anecdote. He’s a politician, so I never expect to see it. But, for fun, I’ll assume he’s telling the truth. If “national” income is now being directed to corporate profits rather than to workers, then workers should become investors. They will claim “their” share of the “national” income.

Continuing:

The Employee Free Choice Act would fix this broken system so workers can freely exercise their right to organize. It would do three things. First, it would allow workers to use a majority sign-up process to form their union, without their employer vetoing that choice. Second, it would increase penalties on employers who violate workers’ rights. Third, it would ensure that, once workers form a union, collective bargaining leads to a first contract—not delay and more union busting.

Focusing on point two: what penalties do we have on employees who violate employers’ rights? (I refuse to concede Rep. Miller’s ridiculous use of employer/worker rather than the objective employer/employee.) To demonstrate what I mean by this, Rep. Miller later writes this:

If these advantages aren’t enough, an employer can fire a pro-union worker to make its point, or threaten to close the business down if workers vote the wrong way, without facing more than a slap on the wrist. At the end of this process, the NLRB holds an election on the employer’s premises.

Employees have rights, but employers do not. At least, they do not have the right to shut down their business if one of the inputs (labor) is not to their liking. That’s absurd. Rights belong to the individual, not groups. But if they applied to groups, all groups would have rights, not just the groups who agree with us. Starting a business is not an agreement to perpetuate the business beyond the owner’s desire to continue it. The Employee Free Choice Act seems to suggest that the ultimate decision in running a business – whether or not to continue – becomes the sole discretion of employees. This is a blatant violation of one individual’s rights to satisfy another’s (claimed) rights.

This is not any democracy that most Americans would recognize as such. Yet this is the system that opponents of the Employee Free Choice Act want to preserve. Another process exists. If an employer allows it, as some major companies already do, workers can avoid the conflict-ridden NLRB process and form a union by signing cards, the same way you might form a civic association. When a majority has signed up, the employer recognizes the union.

Unfortunately, current law allows employers to veto the use of this freer majority sign-up process—and they do. The Employee Free Choice Act would simply take this veto power away from the employer and restore the democratic principle of free choice to the workplace.

The right for an employer to determine that she will employ individuals on the condition that they deal with them individually rather than collectively – the employer’s freedom of (voluntary) association – is subject to the whim of the majority. Remember that potential and current employees for any organization can always refuse to continue providing their services. If the employer is unable to find enough people willing to agree to her terms, she will either offer better terms or go out of business. This is the freedom of association perpetuated by natural incentives for cooperation that need no encouragement from government. Rep. Miller’s advocacy for the Employee Free Choice Act shows his misunderstanding of the American concept of individual rights.

Returning with a bit of this and a bit of that.

My schedule’s been a bit chaotic over the last two weeks. It’s too late to start any in depth blogging tonight, so instead, here are a few quick recaps of the news items I’ve logged as interesting over the last week or so.

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First, I know nothing of the legal argument involved in the recent case of Major League Baseball and “its” statistics. I don’t doubt that the Supreme Court was correct to reject the case because there’s just no property right there to describing what happens during a game. The recap from a specific service provided would easily meet a licensing requirement, but I’m not paying a fee for saying that Chase Utley has a home run in five straight games or that he was 3-4 with a homer and two singles last night.

That said, anything that gives Commissioner Bud Selig a figurative black eye is good. He had “good enough”, which was more than the owners could legitimately claim. Yet they let greed at the expense of fans interfere with basic long-term business sense. Again. More than any other sport, statistics dominate baseball. Let fans have that and they’ll continue to demonstrate their love for the game by buying tickets and jerseys and the $200 television package. This is not complicated.

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I haven’t paid enough attention to the FLDS case in Texas to remark on the judge’s ruling that the State must return the children to their parents. However, this is not proof for those libertarians who believe that the state has no role in parent-child relationships. An anecdote makes a strained theory, at best. Many libertarians have made convincing arguments that the state has a legitimate role in the parent-child relationship, principally in protecting the rights of the child.

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Sebastian Mallaby misses on “pro-growth”:

… Given the yawning budget deficit and the coming demographic crunch, tax cuts aren’t affordable anyway.

The same goes for deregulation. Getting the nanny government out of trucking and airlines yielded huge benefits in the 1970s and 1980s. But the “price-and-entry” regulations that used to cosset such industries have long since gone, and remaining regulation is harder to demonize. We are left with government rules to protect the environment, check the safety of medicines and prevent systemic financial crises. These rules are generally helpful. There’s nothing “pro-growth” about bashing them.

“Generally helpful” is enough? Is Sarbane-Oxley hard to demonize for being only generally helpful? On what criteria may we base future decisions to cause just a little, allegedly inconsequential harm?

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Like extending movie franchises 20 years later, old habits die hard:

Members of the Russian Communist party have called for the new Indiana Jones film to be banned in the country because they say it distorts history.
…

St Petersburg Communist Party chief Sergei Malinkovich told the Reuters news agency it was “rubbish”.

“Why should we agree to that sort of lie and let the West trick our youth?”

He said many Russian cinemagoers were teenagers who would be “completely unaware of what happened in 1957”, when the film is set.

Good thing the censoring communists are no longer in charge in Russia. Oh, wait.

(I liked last year’s Die Hard movie, and I’m looking forward to seeing the new Indiana Jones movie.)

There are exceptions to “Always Be Closing.”

I don’t write about work here because it’s not that interesting, you don’t care, and it’s not a good idea. Some combination of those three is always in effect, so I leave it out. But I want to pull back the curtain once for a specific purpose.

Yesterday’s entry that I might miss voting on Tuesday referred to a contract I was negotiating that involved traveling. It was to start Monday, but I rejected it this morning. That’s not particularly useful to you, but the experience reminded me of a key lesson I’ve learned, whether in my negotiating class in business school or through experience. When you have the sale closed, shut up.

My adversary did not heed this lesson. (I would not normally use adversary in this context, but that’s what he wanted to be.) As I prepared to say “yes”, he interrupted me to question my decision-making process in an insulting manner, implicating my personal life as questionable. Thinking he was proving to me why I had to say “yes” and forcing me to appreciate his understanding while I was being unreasonable, he talked me out of the deal. I would have to work with him for the length of the contract. If he won’t trust my judgment now on my personal decision, I will not risk trusting him to trust me later on professional decisions.

As a blogger, I rarely practice this, but sometimes it’s important to keep one’s opinion quiet.

Addendum: Danielle and I ordered Chinese food last night. My fortune was: Any decision you have to make tomorrow is a good decision. It’s great knowing I couldn’t screw up.

The ability to vote does not qualify the voter as an entrepreneur.

Consider this another reason I neither live in the District of Columbia nor have my business registered there.

The District could become the second U.S. city to require employers to provide paid sick leave to all workers, a move advocates say could protect employees from having to choose between keeping themselves healthy and keeping their job. Opponents say such a law could prompt businesses to reduce benefits and lay off workers.

The D.C. Council is scheduled to vote on the measure Jan. 8 after several months of negotiations.

Under the bill, large businesses, defined as having 51 employees or more, would have to provide up to seven days of paid leave. Small businesses — those with 10 or fewer workers — would have to offer up to three days. Two other categories of employers would fall in between, and part-time workers would get half the number of days.

What makes the D.C. city council so confident that it knows better how to run the businesses in its borders than the owners of those businesses? More importantly, what makes it believe that it has the right to dictate its opinions on proper compensation packages?

Employers would pay an average of $10.35 more a week per employee to be in compliance, said Ed Lazere, executive director of the D.C. Fiscal Policy Institute, which studies the District’s finances. “It’s not nothing, but it’s not huge,” he said. “It’s not as big and scary as they think.”

Does the business owner think $10.35 more per week per employee, with no increase in productivity or revenue, is not huge? She bears the cost. Her opinion should matter exclusively, in anticipation and response to what her employees demand.

To put this in perspective, we must consider what that $10.35 means in practice, not in subjectively judged theory. Assume the minimum business required for full compliance, 51 employees. The cost is expressed as $10.35 because it appears insignificant. But the first thing the business owner will do is multiply $10.35 times 51 employees times 52 weeks. The result is a $27,448.20 increase in expenses for the employer. What could $27,448.20 buy instead? I’ll guess employee number 51 in my scenario, although the logic holds whether we’re talking about employee number 51 or employee number 63.

The first city to engage in this:

The D.C. measure falls short of a law on sick leave in San Francisco, which became a pioneer when 61 percent of voters approved a 2006 ballot initiative to require that employers of 10 or fewer workers provide five days of paid leave and that larger employers give nine days. The law went into effect in February.

How many of those 61 percent of voters malcontents run a business? Mob rule (allegedly) seeks to raise everyone up to a higher standard, but serves little purpose other than to bring everyone down to a base level. Aside from its illegitimacy, it is cruel. I doubt seriously that the employee who might’ve earned $27,448.20, or the customers who will now be asked to pay the expense, would prefer the sympathy over the money.