Tradeoffs

“How Twitter Pushed Stakeholders under the (Musk) Bus”

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Here.

Abstract:

This paper provides a case study of the acquisition of Twitter by Elon Musk. Our analysis indicates that when negotiating the sale of their company to Musk, Twitter’s leaders chose to disregard the interests of the company’s stakeholders and to focus exclusively on the interests of shareholders and the corporate leaders themselves. In particular, Twitter’s corporate leaders elected to push under the bus the interests of company employees, as well as the mission statements and core values to which Twitter had pledged allegiance for years.
 
Our analysis supports the view that the stakeholder rhetoric of corporate leaders, including in corporate mission and purpose statements, is mostly for show and is not matched by their actual decisions and conduct (Bebchuk and Tallarita (2020)). Our findings also suggest that corporate leaders selling their company should not be relied upon to safeguard the interests of stakeholders, contrary to the predictions of the implicit promises and team production theories of Coffee (1986), Shleifer-Summers (1988) and Blair-Stout (1999).

There is tension between the interests of owners and those of other “stakeholders”, which is why the interests of non-owner stakeholders require justification as in the linked article. The authors beg the question — they assume stakeholder interests are comparable to owner interests — then find a problem because Musk values his ownership interest in Twitter above the interests of the people he bought out and of the company’s non-owner employees. So what should Musk get in exchange for the $billions he spent? Arguments for more stakeholder rights are arguments for less property rights.

Quote of the Day

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“E.g it would help America/Britain far more to close 99% of ‘conservative’ think tank activity in DC/London and put the energy and money into expanding school choice and breaking the state’s grip on education by creating new institutions, given how much of politics is downstream of education and how ineffectual most conservative thinking/activity is.”

–Dominic Cummings

Selfish, Personal Post: If You Were to Start Tomorrow, What e-mail service would you use?

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After a day of waiting on hold with my new internet server (I “bundled” for considerable savings but also because our local cable provider had been swallowed in a buy-out),  the last techie informed me that it was surprising I still got any e-mails – not that they were disappearing from my inbox and from deleted, etc.  (And pretty soon I wouldn’t get any.)   Suddenlink addresses, apparently, were being sent to some black hole.  Meanwhile, Optimum does not provide that service.

I guess I need to move on.  Opinions are generally well supported (and not in short supply) among Chicagoboyz; what has your experience taught you?  I’d love anecdotes  but statements like – XX is wonderful or terrible will also help.   After all, who is more savvy than a Chicagoboy?  On the other hand, I’m incompetent and totally rely on the Greek Squad so simplicity and safety are my biggest concerns.

Koonin Offers a Check on “The Science”

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I ordered Steven Koonin’s Unsettled? more out of perversity than honest curiosity. It was a vote for a skeptic, for a man labelled a “denier” and thus worthy of canceling. I was wrong on several counts: it is holding on Amazon with a fairly high rating, and, I was able to get something out of it. He clearly wants to reach people like me, bewildered by charts and graphs. The tables are there, but his style and analogies accessible. (Which means it is dumbed down, but I appreciate his desire for a larger audience.) He has some of the commonsense of Lomborg: practical, prioritizing what is certain, seldom emphasizing the “wrong” and more often the imprecise, the unknown. Some reviewers found him full of himself, but his voice is that of a close reader, looking at the body of reports, comparing assertions and data with the summaries and interpretations. I assume his readings are honest and he is a good physicist but what do I know.

What struck me were the assumptions of a method he promotes, one other disciplines use and he sees as appropriate. In Chapter 11, “Fixing the Broken Science,” he suggests major reports on climate would benefit from being “Red Teamed.” The “Red Team” critiques it, “trying to identify and evaluate its weak spots,” “a qualified adversarial group would be asked ‘What’s wrong with this argument?’” Then the authors, the “Blue Team” rebuts, seeking more information, firming up arguments, gaining precision. He looks at examples where a report’s data did not support the conclusions or summaries (sometimes leading to popular articles with further overstatements). Perhaps the authors had more data, perhaps the summaries were written by those holding too strong an opinion to let the results stand on their own. Perhaps. . . But, of course, if conclusions don’t match research, that’s important.

Traditionally, peer review even in the humanities is designed to note such problems, but these have been less and less rigorous as more subjective definitions of “truth” evolve (or perhaps of careerism). More importantly, “The Science” (climate consensus) is not limited to the ivory tower; it influences awards of positions, grants, research. And, it affects policy. Seeing “The Science” as “settled” tempts those doing “science.”

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“Follow the Science”: the Winning Political Slogan of 2020

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Voting in the 2020 American presidential election raised the question posed by Johnny Carson’s game show “Who Do You Trust” (1957-1963). Candidate Biden was chosen based on trust in his half century track record as a political centrist opposed to his Party’s left wing agenda to promote racial, economic and environmental justice. “Follow the Science” on the pandemic became a campaign theme to bolster trust because scientists – unlike lifetime politicians – are perceived as purveyors of truth. The campaign worked, then centrism was abandoned.

COVID 19 brought to the fore the differences between advocates of science-driven management – the premise of not just pandemic management but the entire Biden Administration agenda – and competitive markets. How can producers and consumers stumble onto greater truths than scientists? Economist Adam Smith’s “invisible hand” explained how – almost a century before the naturalist, geologist and biologist Charles Darwin’s “origin”. Scientific investigations were historically the domain of idle rich like Smith and Darwin, because in addition to the need for peer review independent from political influence, they were expensive, time consuming and only infrequently produced interesting results.

Today almost-universal government funding either directly or indirectly has inevitably and irredeemable introduced bias (and sometimes worse)  into science, particularly the social sciences. Political narratives feed back into the data, producing more noise .

To Tell The Truth, the Whole Truth and Nothing But the Truth

Panelists grilled witnesses on “To Tell the Truth” (1956-1968) to identify the real from fictitious characters. Economist Raj Chetty notes:

“As is the case with epidemiologists, the fundamental challenge faced by economists — and a root cause of many disagreements in the field — is our limited ability to run experiments. If we could randomize policy decisions and then observe what happens to the economy and people’s lives, we would be able to get a precise understanding of how the economy works and how to improve policy. But the practical and ethical costs of such experiments preclude this sort of approach.”

Hence economists, like virologists, rely on limited models to make generalizations. Virologists study the cellular makeup of a virus to explain pandemics. Economists study discrimination to reach a generalized truth about systemic racism, or financial panics to understand contagion. Physicists search for sub-atomic Higgs Boson particles to explain the origins and workings of the universe(s).

Witnesses in American court rooms on Perry Mason (1957-1966) swore to tell “the whole truth and nothing but the truth” under penalty of law. Scientific truth is a building block. Economists can then apply their tools, e.g., cost benefit, present value, probability, value of life, etc. to various alternatives to determine the whole truth and develop policies that are in the “public interest.”

But economists and politicians don’t take that oath. 95% of social scientists and historians identified as liberal/democratic, a bias toward progressive political action. The word “policy” derives from the Greek word for politics which is generally not aligned with the public interest.

Historians are even more liberal than economists, but most object to the 1619 Project. It’s not the income inequality caused by market capitalism, but government favoritism that’s unjust. Environmentalists use limited anti-capitalist models  to produce seriously sub-optimal policy recommendations. This science isn’t “the whole truth and nothing but.”

Scientific certainties spanning decades or even centuries are often proven wrong with better methods and larger samples or metadata. The federal government has for a half century warned against animal fats in favor of margarine even though metadata disproved the theory in 2018. Just as virology models assume contagion due to irrational public behavior, economic models of “financial panic” assume uninformed individuals irrationally run on solvent banks; in actual fact depositors acted perfectly rational, queuing only at insolvent banks that were paying out at face value on a first come, first served basis. Large scale economic models that suffer from the bias of small scale models tend to over-estimate the benefits of political intervention and under-estimate the unseen “unintended” but predictable indirect costs.

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