September 20, 2005

Tying Together the Consumer Confidence Drop and Focus-Group Follies

Filed under: Economy,MSM Biz/Other Bias,Taxes & Government — Tom @ 4:51 pm

The Mainstream Business Press’s attempt to “talk down the economy” is starting to work.

Econbrowser has the grim news on consumer confidence (UofM site requires e-mail addy and name).

I meant to post this comment at his site, but HTML formatting isn’t working doesn’t work there in draft mode (so I thought it wouldn’t work for me when posted–I was wrong, oh well), so here it is:

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Some of the “Best” B-Schools Don’t Disclose Student Grades (Because the STUDENTS Demand It)

Filed under: Biz Weak,Business Moves,Corporate Outrage,Economy — Tom @ 3:05 pm

From Business Week (Biz Weak around here): a couple of uncharacteristically good pieces about graduate students getting by with what a seventh-grader who is struggling in school can only dream of.

First, the inmates running the asylum controversy (requires subscription; bolds throughout this post are mine):

Campus Confidential

Four top-tier B-schools don’t disclose grades. Now that policy is under attack

Students at some top-ranked B-schools have a secret. It’s something they can’t share even if it means losing a job offer. It’s one some have worked hard for and should be proud of, but instead they keep it to themselves. The secret is their grades.

At four of the nation’s 10 most elite B-schools — including Harvard, Stanford, and Chicago — students have adopted policies that prohibit them or their schools from disclosing grades to recruiters. The idea is to reduce competitiveness and eliminate the risk associated with taking difficult courses. But critics say the only thing nondisclosure reduces is one of the most important lessons B-schools should teach: accountability.

It’s a debate that’s flaring up on B-school campuses across the country…. And nowhere is it more intense than at University of Pennsylvania’s Wharton School, where students, faculty, and administrators have locked horns over a school-initiated proposal that would effectively end a decade of grade secrecy at BusinessWeek’s No. 3-ranked B-school. It wouldn’t undo disclosure rules but would recognize the top 25% of each class — in effect outing everyone else. It was motivated, says Vice-Dean Anjani Jain in a recent Wharton Journal article, by the “disincentivizing effects” of grade nondisclosure, which he says faculty blame for lackluster academic performance and student disengagement.

Who in the world ever let the STUDENTS decide whether or not grades are disclosed?

Not surprisingly, students without the incentive to perform often don’t work as hard, don’t excel, give the faculty headaches, and force some profs to treat them like children:

Just how contentious are things at Wharton? In cross-listed classes, Jain wrote, undergrads outperform MBAs, and the gap is widening. Annual student surveys, he wrote, show that the amount of time students spend on academics has fallen by 22% in just four years. Some of Wharton’s best faculty have stopped teaching MBA classes altogether, he added. And those who continue now go to great lengths to keep students in check. Many prohibit late arrivals, talking, and cell phones. Others take attendance, as Harvard Business School does, or give weekly quizzes to make sure students show up for class. “Just like with traffic,” says Edward I. George, a Wharton statistics professor. “You need traffic lights to function properly.”

What are potential employers supposed to do without grade information? More work than they should have to:

….. Professors aren’t the only ones complaining. Recruiters say nondisclosure forces them to resort to interview techniques that test a candidate’s quantitative skills. One is the “case interview,” which requires job candidates to dissect complex case studies on the spot. In the absence of grades, Andrew Schwedel, who oversees recruiting at Bain & Co.’s San Francisco and Palo Alto (Calif.) offices, asks detailed questions to evaluate a candidate’s potential — everything from study group experiences to the courses they took.

What would happen if enough major employers said “We don’t interview anyone who won’t tell us their grades, and we won’t come to a school that prohibits disclosure of grades”? (Better yet, recruiters visiting Wharton could make job offers to the undergrads who are outperforming their supposedly more gifted graduate classmates, and save those they hire a ton of grad-school tuition. That would get someone’s attention, wouldn’t it?)

It turns out that not everyone has lost their bearings:

At No. 1 Northwestern’s Kellogg School of Management and other top programs, including those at Cornell and Duke, students have opted to forgo nondisclosure, believing the value of their degrees would suffer. The University of Rochester’s Simon Graduate School of Business may even expand grade disclosure. If the proposal is approved, the school will release grades on team projects — an important indicator of whether a student pulls his or her own weight and works well with others. Says Dean Mark Zupan: “A business has a lot of team dynamic to it, and how well someone performs on a team is a valuable piece of information.”

Nondisclosure policies were born during the dot-com boom, when MBAs had a choice of five or six job offers, each with promises of big signing bonuses and bloated benefits packages. At that point, grades didn’t matter; MBAs were going to get job offers whether they graduated summa cum laude or at the bottom of their class.

Times have changed, but the policies have not — and they’re unlikely to anytime soon, since student support remains strong at schools that have them.

Again, why are STUDENTS deciding this? Further, why is the decision binding on every student?

The second Biz Weak item editorializes on the non-disclosure idea, and says things that shouldn’t need to be said:

Join the Real World, MBAs

It’s not what you know, but where you went to school. Or so believe MBA students at top-ranked business schools Chicago, Wharton, Stanford, and Harvard, where students have in recent years adopted policies that prevent them or their schools from revealing grades to potential employers.

….. grade nondisclosure eliminates three defining features of the business world: risk-taking, accountability, and often ruthless competition. By removing grades from the B-school equation, the students are doing themselves a huge disservice — creating the illusion of a noncompetitive world that will be shattered upon graduation when they will find themselves poked, measured, and prodded like everyone else.

The irony is that these men and women will, as managers, be required to take others to task for their actions, doling out pay raises and promotions based on measurable performance. Maybe accountability is a lesson they should learn right now.

MAYBE? The fact that many students at four of the “best” business schools can bank on the institution’s reputation, coast while in school, and often get away with it without immediate negative consequences is an academic scandal. No wonder we have so many corporate executives who think they’re entitled to multimillion-dollar golden parachutes even whey they have run their companies into the ground.

A final question: What would happen if the annual “Best of” list compilers like Business Week and US News decided not to include schools where student disclosure of grades is prohibited?
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September 20 Outside the Beltway Jammer.

BizzyBlog Encore Post and Update: Music Industry, In a Hole, Still Wants to Keep Digging

Filed under: Business Moves,Consumer Outrage,Economy — Tom @ 12:08 pm

Reason for Encore Post–Fresh from a legal victory over Kazaa, the recording industry (read: the music cartel) feels they can put the squeeze on their digital customers:

PARIS (Reuters) – Apple boss Steve Jobs, the man behind the popular iPod digital music player, called the music industry greedy for considering a hike in the price of digital downloads, warning such a move would drive users back to piracy.

I suggested that a price hike was a dumb idea six months ago. It’s still a dumb idea.
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ORIGINAL POST (Feb. 28):
Music Industry, In a Hole, Keeps Digging

ORIGINAL TEXT:

The music biz gets about 65 cents out of each 99-cent download, but that’s not enough:

NEW YORK (CNN/Money) – Just as legal music downloading is taking off in earnest, the major record labels are in talks to raise the price they charge online retailers for song downloads, a newspaper reported Monday

This wouldn’t be the first time the music biz ignored reality. Illegal downloading caught on because for years music executives stubbornly refused to even consider the idea of making music available digitally. When they finally did, the sites they built were anything but consumer-friendly. Apple, Roxio, and others spent millions and solved their problem, and this is what they get?

They can run their business any way they want, but raising prices is a really bad idea for a lot of reasons:

  • 99 cents is a significant psychological barrier. Forcing Apple and others to raise the retail price to $1.19 per song (a 20% hike) would reduce demand by a lot more than 20%.
  • The acts hurt the most would be those in the second-tier. Britney and Hilary Duff will get theirs; buyers will be less likely to take a chance on lesser-known artists.
  • The industry makes plently of money on downloads, probably MORE than they make on CDs. A quick visit to Amazon shows me that a typical 12-15 song CD costs $14-$15, or just over $1 a song. There has to be a lot less than 65 cents a song left by the time you take out the material cost of the CD, duplication, packaging, shipping, the distributor’s cut, and the retailer’s cut–let alone having to deal with returns, product placement fees, and the other hassles inherent in retail.
  • If prices go too high, turned-off customers will go the illegal route. Though they’ll try, the industry can’t sue everybody.
  • The future is in downloads. Apple alone has sold over 250 million downloads (UPDATE: At an early September conference, Jobs announced that the figure is over 500 million, and that the download rate is over 1.8 million songs a day–Ed.). CDs are so 20th century. I for one will never buy packaged music again. Period.

Note to ignoramus artists who haven’t joined the digital age–If I can’t download it, I must not need it.
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UPDATE: A question: Now that anyone with time and a little talent can compose, publish, and mass-produce complete musical scores from scratch using more musical instruments and sounds than I even knew existed, will we even need a music industry cartel 10 years from now? Roger Simon also has the same question with movies and the big studios, but isn’t convinced that the results will be desirable.

Positivity: Katrina, What Went Right

Filed under: Positivity,Taxes & Government — Tom @ 2:15 am

A “read the whole thing” piece from a longer link-rich post at Real Clear Politics:

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FEC Fires First Shot at 527s, and Picks The Club for Growth

Filed under: Economy,Taxes & Government — Tom @ 2:13 am

While I strongly support the positions of The Club for Growth (CFG) on fiscal matters, I have questioned some of its campaign tactics (third item at linked post), particularly during the Second Congressional District primary here in Ohio in June.

That said, I’ve never suggested that they should be silenced, or even regulated.

But now The Federal Election Commission has finally dropped the big one free-speech advocates have been worrying about, and picked CFG as its first target:

Federal election officials on Monday sued a political group to try to force it to comply with campaign finance limits, the first lawsuit of its kind to arise from controversial big-money fundraising during the 2004 elections.

The Federal Election Commission filed a complaint in U.S. District Court in Washington against the Club for Growth. The pro-Republican group (note the blatant mischaracterization by AP–Ed.) spent at least $21 million in the 2003-04 election cycle. (Note: Figure is just over $11 million at OpenSecrets.org; HT Jack Lewis–Ed.)

The FEC contends the Club spent enough in federal races to require it to file with the commission as a political committee and abide by contribution and spending limits. It wants the court to fine the group and to order it to comply with campaign finance rules.

The FEC press release is here.

CFG’s public response states, in part:

We have consulted with counsel every step of the way and have followed the law and regulations that govern our work.

This action by the commission was triggered by a Democratic Senatorial Campaign Committee complaint about ads we ran criticizing former Sen. Tom Daschle’s refusal to back pro-growth tax cuts. The complaint had no supporting detail and the Commission allowed it to lie inactive for nearly a year and one half and then resurrected it as a platform to seek to take away our members’ rights and exact a huge civil penalty from the Club.

The Club will vigorously defend the rights of our members, and all Americans, to organize and speak out about our government’s policies. The FEC’s outrageous lawsuit will further boost our members’ determination to work harder than ever before for free speech and free markets.

I find the FEC’s test case of choice interesting, considering the much larger amounts of money spent by other 527s. Never mind the liberal or conservative tags–CFG doesn’t have the open-ended backing of big-big money types like George Soros or Peter Lewis, and has spent relatively little compared to the cumulative totals of America Coming Together, MoveOn.org, and organized labor. (italicized words added at 11AM on Sept. 20 for accuracy)

It couldn’t be that CFG was a player in the 2004 defeat of Senator Tom Daschle in South Dakota, could it? Well, yes:

The FEC investigated Club for Growth fundraising and spending after the Democratic Senatorial Campaign Committee complained to the commission about it.

The DSCC complaint stemmed from an ad the Club ran in the 2003-04 election cycle against then-Senate Minority Leader Tom Daschle, D-S.D., over his opposition to a tax-cut proposal. Daschle lost to a Republican in last November’s election.

What part of “Congress shall make no law” does the FEC, John McCain, Russ Feingold, both houses of Congress, the media, the President (he signed “Campaign Finance Reform,” remember?), and the Supreme Court (which should have laughed it off the docket) not understand?

Congress should end its fantasy of “taking the money out of politics,” legislate full and timely disclosure of all contributions (i.e., within 48 hours or when the contributions are made), totally repeal McCain-Feingold, and put the kibosh on the FEC’s mischief.
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UPDATE 1, 10:30 AM Sept. 20: Jack Lewis (“FEC carries water for DNC”) compares the spending using real numbers, noting almost $250 million in contributions to political campaigns just from the top 10 unions during the most recent election cycle.
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UPDATE 2, 11 AM Sept. 20: Give credit where it’s due: RedState.org diarist Vadum was on this story within an hour of its release yesterday. Vadum speculates that since CFG, contrary to AP’s “pro-Republican” characterization, aims a lot of its efforts at defeating free-spending Republicans (Republicans In Name Only, or “RINOs”), the FEC action may have something to do with CFG’s criticism of Campaign Finance Reform godfather John McCain.

Memo to RedState guys: Why does someone have to look through every diary to see if a story is being covered? (FEC story is currently a diary highlight on the front page, but I don’t think it was last night)