ACCUMULATING PERIPHERALS


Hiring for experience vs hiring for talent by mattsteinglass
June 3, 2010, 7:27 am
Filed under: Business, Uncategorized

Andrew Sullivan passes on a letter from an unemployed reader who says that interviewers will only consider experience if you’ve already done exactly the job they’re hiring for. Kevin Drum writes that he’s always considered this widespread attitude to be bizarre, and that he always tried to hire the most talented person with any more or less relevant experience, figuring that after the first month or two the learning curves would cross and after that you’d be better off with the sharper, not more experienced, candidate.

I’ve only hired people one-by-one, for small groups, and only in two fields: web design, and journalism. In both fields, I’ve found talent is a lot more important than closely related experience. But the other thing I’ve found is that people have different kinds of talents and skills, and a lot of them don’t cross over very well. You know that thing they tell you about how anyone can learn to write? That doesn’t seem to me to be generally true, past a certain point. You may be smart, inquisitive, and well organized, but if you don’t know how to write by the time you’re 23 or so, I think the chances you’re ever going to be a passable writer decline very sharply. Conversely, you can be a great writer, but if you don’t know how to get organized by the time you’re 23…you get the idea.

But there are a couple of other things to note. First, motivation is extremely important. What does this person want to get out of this job? Does that mesh with what you need someone to do? And secondly, and relatedly, I’ve never been in an organization where people only did one narrowly defined task. Whatever the direct nature of their responsibilities, people generally fulfill a variety of roles in the organization, related to their talents. Some people are social bucker-uppers. Some people help keep everyone focused on whether tasks that need to be accomplished have been checked off. Usually when someone leaves the organization, or when the organization grows into a new role, what you need isn’t just somebody who can do one specific task; it’s somebody who can fill a range of functions that the group needs. So you need to think about that too.

Not that I’m particularly good at this, and the biggest group I’ve ever headed has consisted of four people. I’m sure at the higher levels of HR in large organizations things look very different.



Corporations shouldn't monopolize discourse, the Party should by mattsteinglass
February 5, 2010, 2:10 pm
Filed under: Business, Media, Politics

Julian Sanchez has the germ of a solid argument here. But only the germ. It is in fact true that the observed stupidity of the American people in, say, refusing to vote for cheaper and less discriminatory health insurance for themselves presents a problem for liberals. Basically, if people can’t engage in effective collective action to get themselves systems that benefit everyone, then why believe in collective action as a philosophy? If the American people really are too dumb to do anything for themselves, why try to do anything for them? Why not get a job on Wall Street, rob the taxpayer blind for a few years, and retire at 40 with a cool billion in a Cayman Islands account? Or whatever it is that Republicans do? Doesn’t the failure of collective action at the political level show that people, or Americans at least, are incapable of acting collectively and are best served by a system that ruthlessly screws over the less gifted and wealthy, while affording great opportunities for those of us who had the wisdom to be born into upper-middle-class families and attend Ivy League schools?

Sanchez thinks his own position is consistent because he’s “never been all that big on the intrinsic virtues of democracy” and thus thinks nobody is harmed when corporations get the ability to mislead us all with their expert demagoguery and obfuscation, at budgets of $100 million a buy. We’re so stupid we’d be getting conned by somebody regardless, so why not corporations? I’m with him on the skepticism about the intrinsic value of democracy. But the thing is that the type of regime I think might be better than democracy is a wise nationalist-fascist regime on the Chinese model, run by a political class interested in national greatness and not beholden to a particular class, sector or province. The corporatist model, on the other hand, is doomed to cronyism and collapse, because the bosses will sell out the nation for those Cayman Islands accounts every time. Because I don’t really care about the welfare of the individual and am only interested in national greatness, my position that corporations should be barred from political activity of any kind is more consistent than his.



Some sick stuff goes on in emerging markets by mattsteinglass
February 5, 2010, 1:43 pm
Filed under: Business, Sexuality and Gender, Vietnam

This is a picture from an expensive Hanoi shopping mall built with Ukrainian mafia money, but I think it could have been taken in about a hundred emerging-market countries.

russian levi's girlThat is an actual human girl sitting there being an advertisement for Levi’s jeans, or for some kind of retro lifestyle involving reel-to-reel tape decks and Stratocasters that Levi’s wants you to associate with their jeans, or something. Her name, if I recall correctly, was Verka, which was unusual-sounding, and she comes from somewhere in Russia. She said she’s studying at university here for a year.

I’m constantly shocked at the things some companies and people in some places don’t even think to be embarrassed about doing. This is a sort of Amsterdam Red Light District motif? Or something? What are they going for here?



If we were at peak oil, wouldn't markets want to know? by mattsteinglass

This Guardian article saying that whistleblowers at the International Energy Agency are routinely deliberately putting out inflated figures for potential future oil production in order to avoid panicking the world market with the real figures is certainly interesting. And it’d be nice if oil production were hitting a wall, forcing radical increases in the price of fuel and thus pushing a transition to a non-carbon economy even without the need for cap-and-trade or massive carbon taxes. But the whole logic seems weird to me. Kevin Drum says there’s no way to know what to think of it, and while it sounds sort of plausible:

Now the “peak oil” theory is gaining support at the heart of the global energy establishment. “The IEA in 2005 was predicting oil supplies could rise as high as 120m barrels a day by 2030 although it was forced to reduce this gradually to 116m and then 105m last year,” said the IEA source, who was unwilling to be identified for fear of reprisals inside the industry. “The 120m figure always was nonsense but even today’s number is much higher than can be justified and the IEA knows this.

“Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources,” he added.

A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was “imperative not to anger the Americans” but the fact was that there was not as much oil in the world as had been admitted. “We have [already] entered the ‘peak oil’ zone. I think that the situation is really bad,” he added.

…but would anyone really try to hide information like this from the markets? By what mechanism could an organization systematically raise its real estimates of future production by 20% or more without leaving all kinds of holes in the analysis? And isn’t any attempt to conceal information like this merely postponing and exacerbating the real buying panic when the actual limits on production start to become transparently clear? Wouldn’t you want pessimistic estimates like this out there as early as possible, 10 or 15 years in advance, so as to cushion the surprises later on? I think the theory has a problem of motive.



What is Bolivia doing on top of our lithium? by mattsteinglass
October 2, 2009, 4:00 pm
Filed under: Business, War

Also, with regard to this, it seems to me Matthew Yglesias should consider that maybe the reason for American security hawks’ concern is that while Evo Morales will continue to sell America lithium, American mineral extraction companies will not be favored to win contracts to extract that lithium in Bolivia and will thus not reap as fabulous a share of the rewards.



The US does not have a free market in pharmaceuticals* by mattsteinglass
Bowl of Hygeia

Image via Wikipedia

Essay question: The US’s drug market is at least as artificial and overregulated as the European one. But in the US, the regulations create higher drug prices, while in Europe they create lower ones. Discuss.

Here’s the deal. In European countries, national drug price regulating bodies set the maximum price at which pharmaceuticals can be sold. They do so based on the average price at which the drug sells in other European countries. (For new drugs, the regulations are looser and based on cost-benefit analyses, to promote innovation.) Is this some kind of Soviet-style non-capitalist system? Of course not. There are still lots of different buyers of drugs; it’s just that these buyers have all banded together into cooperatives at the country level to leverage their purchasing power. And they all insist that they get the same price the other cooperatives (countries) get. That’s the same thing you do at the supermarket when you assume that you’ll pay the same price for a tube of toothpaste as the next guy in line, rather than have the cashier look you over and say “You look richer than him — for you, the price is ten bucks.” There are lots of markets in which the only buyers are a few large cooperative organizations. Iron ore, say. And the steel companies that buy iron ore presumably negotiate pretty hard to ensure they pay the same price as the other steel companies, without anybody accusing them of restricting the actions of the free market. The European market for pharmaceuticals is basically the same thing, but at the level of countries. It’s not an unfree market; it’s a free market with 25 large, powerful buyers (the EU countries) who each insist they get roughly the same price as the others.

Now, an iron ore miner could look at one steel company and say, wait, we’re not going to sell you ore at that price. You had much higher profits than the other guys last year, so we’re going to charge you more because we know you can afford it. But this obviously wouldn’t work. The steel company could just turn around and buy the iron ore from a middleman, another steel company perhaps, at a tiny markup from their low price. Similarly, if the cashier at the supermarket told you they were going to charge you $10 for a tube of toothpaste, you’d just ask somebody else in line to buy one for you for $1.50. And so you’d figure it would be impossible for pharmaceutical companies to charge Country A more than Country B — Country A would just start buying its drugs from Country B.

So how is it possible that pharmaceutical companies can charge more for their drugs in the US than they can in Canada, or France, or Germany? We all know the answer: because the US bars retailers or health care providers by law from reimporting drugs from other countries. That is a completely artificial market restriction that wildly distorts the prices of drugs in the US. No other commodity or manufactured good is restricted in this fashion in the US — it would be illegal under WTO rules. And the effect is to artificially jack up drug prices in the US, at the expense of US consumers and taxpayers, by allowing pharmaceuticals companies to price-discriminate against Americans.

Many people (not just Megan McArdle) argue that only the US still has a free market for pharmaceuticals, which is why pharmaceuticals companies can make such high profits here, and that the US market is thus underwriting all the R+D in new medicines. Whether the US actually is underwriting all the R+D is still something of a debatable question, but it’s absolutely false that the US has a free market in pharmaceuticals. The US prohibits anyone from buying drugs at low world prices. Meanwhile it pumps government money into buying drugs in the US, through Medicare (which is not allowed to negotiate for lower drug prices with manufacturers) and through the employer health insurance tax exclusion. The natural effect is to drive up drug prices in the US at consumer and taxpayer expense. It may be true that Americans are subsidizing R+D in the pharmaceuticals industry. But that’s because the government forces Americans to pay artificially high drug prices. If you believe free markets are the answer to high health care costs, you have to, at a minimum, allow US retailers to reimport equivalent drugs and medical equipment from Canada and Europe, where prices are lower. Then we can talk.

*Add: Megan points out in comments that this is the way it works for all IP. And she’s right. Good point. I should probably not think up posts on a Sunday while swimming laps. The market in pharmaceuticals isn’t as free as the market in, oh, apples, but it’s as free as the market in DVDs. This is in fact an unavoidable feature of an IP market and if the US went for David Vitter’s proposal to allow reimportation of drugs from Canada, you’d probably just end up with a lot of companies putting clauses in their distribution contracts with Canadian distributors that they’re not allowed to resell back into the US.

I remain somewhat baffled as to why large American drug purchasers are unable to negotiate prices at levels close to those in Europe. Kaiser Permanente says it has over 8 million members. That’s larger than the populations of Belgium or Denmark. Maybe drug manufacturers figure a decision by Kaiser not to buy their drugs would result in Kaiser clients switching to other insurers, which means Kaiser has less bargaining power than Denmark, whose citizens are unlikely to move to Germany just because a few drugs are unavailable. Also, while Kaiser actually might get good prices because it’s an integrated HMO, I would imagine that more traditional insurers would have the problem of separation between the docs who are prescribing the medication and the insurance company deciding whether or not to reimburse it; the insurer, who would be most interested in negotiating the low price, would not actually be the one purchasing the medicine, and that mean there’s no one bargaining agent who has both the client numbers and the strong interest in bargaining down the price.



Why Big Pharma wants health insurance reform by mattsteinglass

To recap: Initially, Megan McArdle wrote that she doesn’t want health insurance reform because it will entail the elimination of a robust private health care/insurance sector, and that will curtail innovation in pharmaceuticals and technology. I responded that the reforms proposed in Congress don’t eliminate private health insurance or care; they rely on it, like most of the world’s universal health care systems in Europe and elsewhere. Megan then responded that the current reforms in Congress are just the “camel’s nose”, and they will ultimately lead to the crushing of private health insurance and/or care. I responded that they won’t, because evidence shows that all those European health insurance systems that have for 60+ years relied on a robust, regulated private insurance sector (France, Germany, the Netherlands, etc.) still have robust, regulated private insurance sectors. In the Netherlands, I noted, they recently eliminated the public plan and moved to an all-private system. To this, Megan responds that underneath that surface of private health insurance in Europe, the government is actually controlling things, and she takes the example of pharmaceutical prices. In the Netherlands, as in most European countries, drug prices are tightly regulated by the government. This, Megan says, has crippled Europe’s ability to stimulate drug innovation and research, and if we adopt European-style health insurance systems, we will cripple the US’s ability to stimulate drug innovation, and since the US is the last free market for drugs left in the world, that will cripple drug innovation throughout the world.

I feel that we are really getting somewhere in this discussion. I have two basic questions here. The first is this: if Megan thinks the Dutch system is fine apart from the price controls on drugs, why don’t we adopt the Dutch system but not the price controls on drugs? If Megan’s problem with the House insurance reform bill is not the actual House insurance reform bill, but the prospect that it will ultimately lead to price controls on drugs, why doesn’t she back the House insurance reform bill and insist that it not adopt price controls on drugs?

The second question I have is this: if the House health insurance reform bill is so bad for drug innovation and research by pharmaceuticals companies, why are the pharmaceuticals companies buying $12 million in ads promoting the House health insurance reform bill?

I think I have a pretty good idea why they are, actually. Take a look at the current “CEO Voices” essay on the website of PhRMA, the pharmaceuticals industry business coalition, by Astrazeneca President Rich Fante.

As the debate on the future of health care reform unfolds, our leaders must strike a delicate balance between changing the system to address its weaknesses and protecting America’s lead in the search for new medical cures and treatments.

One of the first changes Congress should make is to increase resources for the Food and Drug Administration, so it can remain the world’s gold standard for consumer protection. A strong FDA will help bring safe and effective medicines from the laboratory to patients in a consistent, systematic way.

Second, reform efforts should expand coverage for the uninsured, so every American has affordable health and prescription insurance. Lack of insurance compromises people’s health because they receive less preventive care, are diagnosed at more advanced disease stages. Once diagnosed, they tend to have higher mortality rates.

To provide coverage for those without health insurance, we encourage efforts to increase access to market-based, private coverage and availability of public-sector programs.

So the president of Astrazeneca thinks the top two priorities are increasing the resources of the FDA (so it can approve more new drugs), and increasing the number of Americans who have health insurance, both public and private. The reason for that is obvious: if you don’t have health insurance, you can’t afford to buy drugs.

But there’s something else going on here as well. American health insurers are becoming increasingly reluctant to reimburse treatment with expensive new drugs that can’t be shown to work better than older, cheaper drugs. (This, by the way, is exactly the same process that goes on in all those European health care systems when they review how much to pay for new drugs.) This industry research report (which you and I can only read the abstract of, because the full report costs $11,000) argues that as insurers are getting more aggressive, drug companies must take into account the likelihood of insurers’ paying for new drugs, and drop research on drugs that are unlikely to be reimbursable.

For example, take this presentation a few months ago by John Watkins, who sets reimbursement policies for Blue Cross Premera in Washington State. Watkins explains that without evidence from direct head-to-head trials of new drugs against old ones, he is not likely to approve reimbursement. And in this article from 2006, Watkins explains that he was able to approve reimbursement for a new type of diabetes medication (developed from Gila monster saliva! Wow!) after very complex comparisons showed that for certain patients, it could save 11% in costs over a 10-year period, despite costing far more per dose. But Watkins explains that Blue Cross could do this because it has less client turnover than other insurers. For insurers who expect to lose a lot of their clients within a few years due to America’s balkanized market, such long-term cost savings don’t work. So they won’t approve reimbursement for new, more expensive drugs for chronic conditions like diabetes that only save money in the long term.

Diabetes drugs are a big area of investment for pharma. PhRMA boasts that the industry has 183 new diabetes medications under development. But it makes no sense to invest in these and other drugs if you don’t know whether insurers will reimburse for them. And that’s probably why pharmaceuticals companies have finally decided to get on board with health insurance reform: they need some predictability. The current American health insurance system is simply too big of a mess. They can’t invest in new drugs with any confidence that private insurers will pay for them.

But the main point here is simple: Megan is arguing that the House health care reform plan will in the long run devastate private pharmaceutical innovation in the US, but the US pharmaceuticals industry disagrees with her. They are backing this bill. They are advertising for it. They are calling for the government to get more people insured. Maybe Megan knows their business better than they do. But that just doesn’t seem likely to me.



If the free market is so great, why do all the phone companies suck? by mattsteinglass
August 10, 2009, 10:46 am
Filed under: Business

Kevin Drum has a dispositive and I think representative rant today about how awful mobile phone companies are, and how this is fairly representative of the way one gets treated in many situations by corporations these days. (Gist: he decided to use a supposed $100 “credit” to upgrade his phone, but found that in fact it would either cost him $240 to upgrade to a new network plan, or he’d have to pay $50 upfront and mail in a card to get a $50 rebate.) Punchline:

What’s really remarkable about all this is that I suspect most people don’t even complain about it.  It’s just the way corporations treat us these days and complaining about it is useless.  It’s not as if any other cell phone company would have treated me any better, after all.  They make their money on people who buy high-minute plans and send lots of text messages and download tunes and upgrade to email and broadband.  I don’t do any of that, so they don’t really care about my business.  And why should they?

I had a conversation about a related subject some months back with Deutsche Telekom’s representative here in Hanoi, who tried to explain to me why SMS’s cost so much. They used to be free; obviously, the marginal cost of an SMS, or a billion SMS’s for chrissakes, to the phone company is zilch; but nowadays they cost at least 10 eurocents each. So I asked him: why don’t some crazy college kids just start up a phone company, get some bandwidth, start charging people 2 eurocents per message, and bring mighty T-Mobile and Orange to their fat, pampered knees? He had a long and detailed response to this, and he’s an extremely smart guy, so I’m sure it made perfect sense. But I confess I didn’t understand a god damned word of it. Usually, when I understand something, I can repeat it in some adulterated version, but this explanation — there’s nothing left of it in my mind. I’m sure it didn’t run “All the CEO’s of the major European telecoms get together around an amoeba-shaped pool in Monte Carlo every six months with pitchers of mojitos and expensive hookers and set the new floor price for SMS’s, and occasionally some college kids try to start up a new mobile phone service with cheap SMS’s but they’re all buried in a forest in Belarus.” But other than that…I can’t remember a word. It’s like someone used a handheld device to wipe it out of my memory. Uncanny.




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