The Dumb and the Arrogant

The human condition is to have a very limited perspective. We are all dumb about many things. Just being dumb is no big deal. If we have the humility to understand where our perspective falls short, we can trade with others for services that help fill in our knowledge gaps. Being dumb is no barrier to a successful and happy life, but living without humility—also called being arrogant—is a tremendous barrier. And when you combine stupidity and arrogance along with the power to coerce others, you are able to create misery not only for yourself but for many others as well.

Only a few short years ago, a student in my class told the story of his participation in the General Motors/United Auto Workers “job bank” program. As a laid-off union worker, he was eligible to collect a full salary of over $30 hour; all he had to do was sit in a room with other job bank participants and do nothing. He related how most of his colleagues simply talked, sat there staring at the walls, or did crossword puzzles. He couldn’t recall anyone even reading a book while they sat there all day, and he was the only one who was making use of the educational benefits that the union contract also provided. If the autoworkers went back to school, they didn’t have to sit around in the room—they would collect their salary, as well as get a free education. Amazingly, every other participant in the “job bank” program chose to simply sit, instead of choosing to get a free education.

By the time that this student had related his story, GM, Ford, and Chrysler had already spent hundreds of millions of dollars on these job bank programs. Apparently, my student’s fellow, laid-off autoworkers thought the party would go on forever. They thought that the power of the unions to coerce the automakers and consumers would continue unabated.

Remember, if Congress votes for an automobile bailout, part of the money will pay for workers to sit and refuse to change.

And what of the auto executives that signed such insane contracts? In their stupidity and arrogance, they believed that they could get consumers to purchase inferior products, carrying inflated price tags, and that they themselves would never bear the consequences. As they destroyed shareholder wealth, they paid themselves exorbitant salaries.

Remember, if Congress votes for an automobile bailout, part of the money will pay the salaries of these dumb and arrogant executives.

Mark Twain used to frequently include this joke in his lectures: “Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself.”

The powerful Congressman Barney Frank, chairman of the Financial Services Committee, would have to make anybody’s list of dumbest (at least about economics) and most arrogant Congressmen. This week Frank said about the proposed bailout of U.S. automakers, “There’s no downside to trying.”

No downside to trying! Since the 1980s, GM, Ford, and Chrysler according to David Yermack have collectively destroyed $465 billion dollars in capital. About the bailout for automakers, Yermack writes, “We would do better to set this money on fire rather than using it to keep these dying firms on life support, setting them up for even more money-losing investments in the future.”

In contrast to the automakers, according to Geoff Colvin in his book Talent is Overrated, Microsoft has created about $200 billion in shareholder wealth; Google has created about $120 billion in shareholder wealth. How did they do that? Compared to some other corporations, they better served the needs of the consuming public; and in the process, together they have created about $300 billion dollars in new wealth. Google has put at our fingertips the wealth of information on the Internet, and Microsoft (for all our complaints about them) has built an operating system and office suite that almost all of us use every day.

No downside to trying! More taxpayers’ money is wasted, setting the stage for an even more severe economic depression. Less capital remains for productive industries and firms; as a consequence, jobs are lost—not saved.

The problem is of course, when you are dumb and arrogant, you think you deserve the power to coerce others so that you can have your way. The autoworkers, the auto executives, and Barney Frank are more alike than they would like to believe. It is amazing how many Americans are fooled by their economic sophistry and bullying.

packard

This is the former Packard Motor Car plant which closed in 1958 (source). Would we be better off today if we were still driving Packards? Who could possibly believe we would be?

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13 Responses to The Dumb and the Arrogant

  1. Frank says:

    It’s kind of hard to stomach supporting somebody with my tax dollars making $70+ dollars a hour at the automakers when I am stuggling to get by with a fraction of that amount along with those hot-shot pretty boys at the investment banks.

  2. James D. says:

    Some of the testimony from Congress has been telling, though. Rick Wagoner, CEO of GM, apparently pulls down 10 million a year. The CEO of Toyota gets 900,000. Big difference. The heads of the Detroit 3 were asked how many of them flew to Washington via commercial airliner; none indicated they had done so. All flew in on private jets.
    Between unions which would rather watch people sit idle than change any minor part of the job (funny, the union leaders don’t seem to be losing their jobs!), and overpaid, undertalented management, no bailout will save the Detroit 3. Only prolong the end.

  3. Frank,

    I used to be able to tall people that I thought that the game was basically fair, with every unfair transfer of wealth (bailout) it is becoming harder and harder to do so.

    Jim,

    So many still want to prolong the end. Of course the problem is not that they want to sit idle, the problem is that they wanted the consumer and now the taxpayer to pay for it.

  4. Steve Pilotte says:

    Barry,
    Good article. The contrast you presented between the Big 3 and actually productive companies like Google and Microsoft is stark. Its possible that during the coming economic depression many, if not most, unionized companies will fail. Though overpaid corporate execs bear much of the responsibility, unions almost make it impossible for companies to adequately serve their customers. We’ll be better off without them. And Barney Frank. Yikes. I agree. The epitomy of combined ignorance and arrogance (although Maxine Waters still has him beat in the first department). And regarding his comments on the automotive industry; what he probably meant was that there was no downside (personally for him) for trying. :)

    Lastly, I’d just liketo point out that the very term “bail-out” appears to carry with it the automatic implication of some sort of successful action. Perhaps this is one reason why legislators continue to prefer its use over alternatives such as “rescue package” or “aid plan”. You see, without even knowing beforehand any of the details or merits of the plan, it’s already assumed by those using the term “bail-out” that whatever they come up with is going to work. This only serves to perpetuate the myth of government competence and the viability of central economic planning and interventionism.

  5. Steve,

    I really appreciate your astute points particularly the idea that the public thinks that bailouts will be successful.

    Occasionally in the evening, after significant moves on Wall Street, I will turn on CNBC to gauge mood. Last night there was commentator after commentator who proclaimed that the bottom was in and that more bailouts were needed. The level of ignorance was breathtaking and the faith that bailouts would work was unabated. They are a business and they are just giving the public want they want to hear.

  6. igli1969 says:

    After a century, give or take a few decades, of public education, is it any wonder that so many people have an enduring faith in the efficacy of government? Despite one massive failure after another, most Americans still believe that government actions are beneficial. Oh, sure, they will gripe about the DMV, the Post Office, FEMA, TSA, and so on (damn near ad infinitum). But when Congress and the hacks in the Administration (it matters not which one) say they can save (fill in your example), everyone applauds and sighs with relief. The cavalry has arrived. (Or would that be the Calvary, because we’re all gonna be crucified, but on a cross of paper rather than a cross of gold.)

    The ruling class gained power and retains power not so much by intelligence as they do by networking and ruthlessness. While not stupid, they are not by any means super-smart. But they have the drive for power that ordinary people, who just wish to be left alone to live their live, do not. A company I used to work for had an in-joke about the qualifications to be a manager there: The only qualification was that you wanted to be a manager more than anything in the world. THAT, along with going to the right school and knowing the right people, gets one into the ruling class.

    This latest grab for more power (because that is what is at the heart of this exercise in fooling most of the people most of the time) is pissing a lot of people off, though. And if the right spark ignites that anger, the Third American Revolution (historians dishonestly call the Second the “Civil War”) will resemble the French one. Or worse, since we can do nearly anything better than the French. ;-)

    Chris C.

  7. Chris,

    Indeed, it is no wonder. Public schools no longer teach the founding principles of this country, they teach a view of history punctuated by dates and facts (rather than teaching a lens to understand events), textbooks lionize politicians and very importantly logic is no longer taught in the curriculum.

  8. James D says:

    I think it was Lincoln who noted that (and this is a paraphrase) “the philosophy of the schoolroom in one generation will be the philosophy of government in the next”. As Professor Brownstein so clearly notes, we are taught a history of dates and facts, completely stripped of the humanity inherent in our history, of the lessons we can learn from what they did, and what our history reveals about ourselves. We see in the ignorance of modern students what has happened because the left-wing has ruled the school systems for so long. Taught properly, the humanities (like history) can change the world for the positive by giving us a mirror; for in the mirror we see not only ourselves, but what is behind us. It is from this point we can truly make informed decisions about where, as people, as a culture, and as a society, we want to go.

  9. Tesh says:

    I actually started liking history only once I entered the AP U.S. History course back in high school. The teacher taught the dates as mooring points, but taught more about the “why”s of history than the “when”s and “who”s. I passed the AP test and never took another U.S. history class again. (I took World art history and Japanese art history in college.)

    The funny thing is, I like history a lot more now that I’m not being drilled on the dates and names. I can study it on my own and see the sweep and scope of the “why”s and the notion of choice and consequence. History is full of interesting lessons and fantastic realities. Distilling it into a series of memorized (and quickly forgotten) factoids does it a great disservice.

    I’ve been railing against our local school board for a while now regarding the woeful state of math education, but this reminded me that history teaching is another thing that needs a complete overhaul. It’s always seemed to me that the point of school is to teach people how to learn, not how to regurgitate. Teach logic, not rhetoric.

    Perhaps it’s no wonder that I’m seriously considering home school for my little ones. I’m a product of the public school system, but I think that my success is in spite of it rather than thanks to it. (That I was often bored in class and perpetually annoyed with busywork would seem to support such a theory.)

  10. Jim and Tesh,

    Thank you for your insights on history, so much richness is indeed being missed.

    We have homeschooled and the experience has been incredible in every way. I highly recommend Susan Bauer and Jessie Wise’s book on Classical Education as a starting point.

  11. HeathPie says:

    I agree that I bailout is a poor choice. But something has to be done.

    I grew up twenty miles south of Detroit, in an area “affectionately” known as Downriver. I was one of the lucky ones – my parents actually had graduate degrees. In a largely working-class area, evidence of the auto industry was all around me. The Big Three sponsored youth programs and community fundraisers, and I would estimate that more than half of my friends’ families had ties to the auto industry – either by working for one directly or for a related subsidiary company.

    Having returned to Michigan a year ago, I have seen the results of the auto industry’s demise, and it’s just awful. As plant after plant closes, all of those subsidiary businesses have been going under. This domino effect has touched every family in the area.

    There are huge problems with the auto industry, and while some people may have taken advantage of the “job bank” program, there were others who benefited greatly.

    The majority of stories you’re hearing in the news are the exception, not the norm. What’s been reported as representative is possibly true of top execs and lifetime employees, but Detroit and it’s surrounding suburbs are just like any other blue collar areas: full of hard-working, honest people who just want to provide for their families. You think that you’re unhappy with the actions of Big Three executives? Try talking to just one of these people.

  12. Heather,

    Thank you for your thoughtful voice. I’m sure the effects are heartbreaking and I agree that most are “hard-working, honest people who just want to provide for their families.” That’s why programs like the “job bank” is counter to their needs. It encourages actions (such as sitting) that don’t serve their long-term interests. Honda builds fine cars in America and so could the big three.

    Before this is all over many other areas will be heavily impacted and that’s why throwing good money after bad will compound the problem.

    Since you also oppose bailouts, what do you think should be done?

  13. [...] bookmarks tagged arrogant The Dumb and the Arrogant saved by 1 others     omayinoblivion bookmarked on 11/30/08 | [...]

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