Way back in 2004 I wrote about how the lack of an intuitive sense of scale prevented many people from viewing the Lancet Iraqi Mortality survey with skepticism. The same lack of sense of scale shows up in other areas such as in this article (via Megan McArdle) about ending subsidies to the oil industry instead of levying a windfall-profits tax.
Business
The Clarity Clue
A clue to the future performance of a company may be found in the literary style of the CEO’s annual letter. That’s the opinion of Laura Rittenhouse, head of an investor relations consulting firm, who has studied this topic extensively.
A study found that when the letters are analyzed for clarity versus jargon, shares of bottom-ranked companies lost more than 18 percent of their value in a two-year period ending in 2002, compared with a 12.7 percent drop for the top-ranked companies. More recently, another Rittenhouse study focused on newly-appointed CEOs and their content scores versus those of their predecessors. For the group with the highest gains in content scores, stock prices increased an average of of 28.4% (in the year after the new CEOs were named) versus an average decline of 10.5% for the ground with the greatest declines in content scores.
The usual cautions about cause and effect analysis–correlation is not causation, the direction in which the arrow of causality is pointing is not always obvious–of course apply. Nevertheless, this is interesting.
Here’s a presentation which provides a little bit of detail on the Rittenhouse analysis method. Ms Rittenhouse quotes Orwell:
If thought can corrupt language, then language can corrupt thought
…and offers her own version:
If language determines actions and results, then corrupt language will lead to debilitating actions and unsatisfactory results.
See also The Edifice Clue, The Harvard Indicator, and Readin’, Writin’, and the Business Shtick.
See also this comparing writing at J P Morgan in 1933 and in 2006. (Although I thought Jamie Dimon’s letter in the recent annual report was pretty good–not sure what the Rittenhouse analysis process would have to say about it.)
Ships and the Global Economy
The ocean shipping industry is, and always has been, a major enabler of global trade. Air freight is very important, as are communications technologies such as the Internet…however, there exists a vast array of products and commodities for which the only economically-viable means of transportation is the ship. Hence, anything that affects the ocean shipping industry has the potential to influence the shape of the global economy.
The International Martime Organization has approved new rules which will ban ships from using their traditional fuel (very heavy oil, known as bunker fuel) in most parts of the world. The rules are stated in terms of sulphur oxide targets, which will phase in over time. Specially-treated bunker fuel may meet the initial targets in some areas, but only distillates are likely to meet the long-term targets. This implies an eventual potential fuel cost increase for shipping operators of fifty per cent. More at the WSJ.
Increased shipping costs will, at the margin, encourage domestic and regional production of goods at the expense of imports. The strength of this effect will of course depend on the nature of the particular products–shipping costs as a percent of overall value are much higher for washing machines, for example, than for flat-screen TVs.
The new regulations are probably good news for this company. But even if their technology is very successful, overall costs per ocean freight ton-mile will still likely be going up as a result of the new regulations.
A commenter at the WSJ link asks some interesting questions:
What is difficult to discover is just how many people will be adversely affected by increased shipping costs. How will it affect sub-Saharan economies? Will it cause more problems for the shortest lived poorest people on the planet? will it reduce their life expectancy still further? There are reports that indicate the importance of low shipping costs to these economies but unfortunately no one seems to have measured the cost in lives of the current high fuel costs nor what it will be when the new measures kick in.
Keeping Austin Weird
George Will looks at Austin’s campaign to keep itself weird. A useful contrast between the two flagship schools and the communities that house them might be interesting – community participation, generosity, attitude toward the “other.” Of course, analyzing levels of religious commitment, political philosophy, and applied citizenship in such minor commitments as voting and jury duty and larger ones such as enlistment would also be interesting. Last night, we watched Michael Apted’s Amazing Grace. He chooses to focus on the application of Wilberforce’s beliefs in the practical realm of politics, but the undercurrent (as certainly was true) was that the driving force that impelled him was his belief in the universal rights of man, his belief in a God and the God-given nature of those rights. But, of course, he was someone who was interested not just in believing but in acting. There is nothing more beautiful nor more useful than the practical application of the great beliefs.
Packing my boxes to move, I kept writing Austin, Nebraska – but once there, well, it felt like home for me as for so many others. Soon, Willy was setting up the first of the Dripping Springs concerts and I was reading manuscripts by the great twentieth century writers in one of the best two or three libraries in the world. Fromholz described himself as a rumor in his time and people claimed he’d run for governor (I don’t think very seriously, but who knew then). It’s cooler and dryer than much of the state and more laid back than about any place. Still, when both my kids packed up to move last year, they also felt they’d lived there long enough. I guess, in a way, so had we over twenty years before. It’s a good place to be young, but walking the dog down streets full of broken glass was getting to our daughter who lived in West campus; the rents had raised from our day but the druggies still dealt on the drag; the street people had gotten sadder (or maybe we’d just gotten older).
Extra Copies
A little while ago I got slagged pretty well  by our esteemed commenters for the practice of watching copyrighted material on websites that were not authorized to show it.  It was a pretty good discussion that I learned a lot from.  I thought about these conversations last week while I was cleaning up my basement.