Business

A Great Journalist / Writer – Michael Lewis

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Recently on my travels to and from San Diego I had a few hours of uninterrupted time and I chose to read some interesting paperbacks. I usually pick something like a business book or a military history book but this time I decided to liven it up a bit and pick two books by Michael Lewis, one titled “Moneyball” about baseball and “The Blind Side” about football.

I remembered Michael Lewis from reading “Liar’s Poker” in the 90’s about Salomon Brothers, the famous trading firm. The name of the book was from a game that traders would play involving betting on the digits on US currencies, a game that could be played for big stakes.

Liar’s Poker is a fascinating book about a period of time when Salomon was essentially the “king of the world” to borrow a phrase from the highest grossing movie ever. If you are interested in what is happening in the sub-prime market with collateralized debt obligations (CDO’s) or the “securitization” of debt this is a great place to start since Salomon basically invented and popularized the practice for home mortgages.

One interesting element of the book is that Michael Lewis actually was a bond salesman in real life, and this enabled his book to be far more “real” than it would be if written in an interview type format. This was his first book; I think at the time he started out planning to get into finance and then decided to write a book; in retrospect you could also see him going into this business as a writing opportunity. To contrast this with other journalists that we take swipes at from time to time, Lewis clearly understood his material as only a true “insider” could.

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The Simple Things

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I run a relatively simple business. I am a middle man, in wholesale distribution of heating, ventilation and air conditioning parts and equipment. We sell exclusively to tradesmen and facilities. It is a very competitive business (aren’t they all?) but I do pretty well all things considered. My vendors expect certain things out of me (market share, paying my bills on time) and I expect certain things out of them (good delivery, good pricing, leads, etc.). It really is a two way street. They need distribution, and I need their goods to mark up and make money on.

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Business Fiction

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…and no, I’m not talking about pro-forma income statements, but about actual novels.

Howard Davis, writing in Financial Times (8/22) says:

It is often said, with some justification, that there is no current British novelist who shows an interest in, and understanding of business life to match, say, Tom Wolfe. I can think of no fictional representation of the flora and fauna of London’s financial markets to rival The Bonfire of the Vanities. Nor can I imagine a British novelist who could write a magnificent novel about an estate agent, like Richard Ford’s recent The Lay of the Land.

Actually, it seems to me that serious recent novels that deal with business are pretty scarce on both sides of the Atlantic. Right off, I can think of a couple:

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Better Greenery Through Tax Minimization

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Hardly a month goes by without an IKEA catalog showing up on my door. For those that haven’t been to an IKEA store, they are immense “destination” stores full of low priced furniture and other household items. IKEA is famous for its “green” activities; you can hardly walk without a placard explaining the pristine source of its raw materials and how they are operating in a sustainable fashion. Here is an article from their Seattle store lauding their commitment to the environment. I’d quote from the article but it is the usual “commitment” gibberish and not particularly enlightening.

One of the core elements of the environmental movement is a huge governmental role in the economy; we need to put taxes on activities that are not viewed as beneficial and an army of lawyers and regulators to ensure that “Big Business” doesn’t run roughshod over ma’ nature. In my experience a libertarian philosophy and serious environmentalism have very little in common.

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America’s Corporate Tax & Market Distortions

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One of the most troubling failures of the Republican led congress (which is no more) is their failure to substantially reform the US corporate tax code. I wrote an article that summarizes how the corporate tax is applied at an overview level and the fact that today the US is among the least competitive corporate tax regimes among developed countries. The Economist recently chimed in, too, with an article titled “Tax Reform – Overhauling The Old Jalopy” which does a decent job of summarizing the situation and stating that an average tax rate of 27% without major deductions would accomplish the same thing as our current tax rate of 34%. Not mentioned by the Economist is how this backfired on us with the Alternative Minimum Tax, when a simplified tax methodology with lower rates and a broadly applied based ended up netting millions of middle Americans, including the middle class.

All of these articles miss a more troubling trend, however – the issue isn’t as much the tax methodology applied to EXISTING companies (who have strong incentives to stay in place) but how the tax impacts NEW companies that are choosing where to set up shop and what sort of structure to utilize for their business. This photo is a cornerstone of the Accenture “Headquarters” in downtown Chicago – Accenture is the surviving consulting firm from the Arthur Andersen debacle (grist for a future post as I am an alumni) that chose to locate their headquarters in Bermuda rather than the United States, primarily to minimize their income tax burden.

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