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Archive for January, 2011|Monthly archive page

Why good ideas die..and a simple approach to saving them

In Uncategorized on January 21, 2011 at 4:52 am

 

Part 2

24 Attacks and 24 Responses

Here is a list and discussion of the 24 attacks that have been used quite commonly. As you will see, they all draw on one or more strategies based on confusion, fear mongering, death-by-delay, or ridicule and character assassination. There are many more slight variations on these 24, but these two dozen seem to be the most basic and confounding. There is also a response to each of the attacks which will not silence valid criticism, but will help stop verbal bullets from killing good ideas.

#1 "We’ve been successful, why change?!"

Attack:

We’ve never done this in the past and things have always worked out OK.

Response:

True. But surely we have all seen that those who fail to adapt eventually become extinct.

#2 "The only problem is not enough money."

Attack:

Money is the issue, not _____ (computers, product safety, choice of choir songs, etc).

Response:

Extra money is rarely what builds truly great ventures or organizations.

#3 "You exaggerate the problem."

Attack:

You are exaggerating. This is a small issue for us if it is an issue at all.

Response:

To the good people who suffer because of this problem, it certainly doesn’t look small.

#4 "You’re saying we’ve failed??!!"

Attack:

If this is a problem, then what you are telling us is that we have been doing a lousy job. That’s insulting!

Response:

No, we’re suggesting that you are doing a remarkably good job without the needed tools (systems, methods, laws, etc) which, in our proposal, you will have.

#5 "What’s the hidden agenda?"

Attack:

It’s clear you have a hidden agenda and we would prefer that you take it elsewhere.

Response:

Not fair! Just look at the track record of the good folks behind this proposal! (And why would you even suggest such a thing?)

#6 "What about this, and that, and that (etc.)?"

Attack:

Your proposal leaves too many questions unanswered. What about this and that, and this and that, and…

Response:

All good ideas, if they are new, raise dozens of questions that cannot be answered with certainty.

#7 "No good! It doesn’t go far enough" (or, "It goes too far")

Attack:

Your proposal doesn’t go nearly far enough.

Response:

Maybe, but our idea will get us started moving in the right direction, and do so without further delay.

#8 "You have a chicken and egg problem."

Attack:

You can’t do A without doing B, yet you can’t do B without doing A. So the plan won’t work.

Response:

Well actually, you can do a little bit of A which allows a little bit of B which allows more A which allows more of B, and so on.

#9 "Sounds like ‘killing puppies’ to me!"

Attack:

Your plan reminds me of a thing disgusting and terrible (insert totalitarianism, organized crime, insanity, or dry rot…)

Response:

Look, you know it isn’t like that. A realistic comparison might be…

#10 "You’re abandoning our values."

Attack:

You are abandoning our traditional values.

Response:

This plan is essential to uphold our traditional values.

#11 "It’s too simplistic to work."

Attack:

Surely you don’t think a few simple tricks will solve everything?

Response:

No – it’s the combination of your good work and some new things that, together, can make a great advance.

#12 "No one else does this!"

Attack:

If this is such a great idea, why hasn’t it been done already?

Response:

There really is a first time for everything and we do have a unique opportunity.

#13 "You can’t have it both ways!"

Attack:

Your plan says X and Y, but they are incompatible. You can’t have both!

Response:

Actually, we didn’t say X or Y—although, I grant you, it may have sounded that way. We said A and B, which are not incompatible.

#14 "Aha! You can’t deny this!"

Attack:

I’m sorry – you mean well, but look at this problem you’ve clearly missed! You can’t deny the significance of this issue!

Response:

No one can deny the significance of the issue you have raised, and, yes, we haven’t explored it. But every potential problem we have found so far has been readily solved. So in light of what has happened again and again and again, I am today confident that this new issue can also be handled, just like all the rest.

#15 "To generate all these questions and concerns, the idea has to be flawed."

Attack:

Look at how many different concerns there are! This can’t be good!

Response:

Actually, many the questions mean we are engaged, and an engaged group both makes better decisions and implements them more successfully.

#16 "Tried it before – didn’t work."

Attack:

We tried that before and it didn’t work.

Response:

That was then. Conditions inevitably change [and what we propose probably isn’t exactly what was tried before]

#17 "It’s too difficult to understand."

Attack:

Too many of our people will never understand the idea and, inevitably, will not help us make it happen.

Response:

Not a problem. We will make the required effort to convince them. It’s worth the effort to do so.

#18 "This is not the right time."

Attack:

Good idea, but it’s the wrong time. We need to wait until this other thing is finished (or this other thing is started, or the situation changes in a certain special way).

Response:

The best time is almost always when you have people excited and committed to make something happen. And that’s now.

#19 "It’s too much work."

Attack:

This seems too hard! I’m not sure we are up for it.

Response:

Hard can be good. A genuinely good new idea, facing time consuming obstacles, can both raise our energy level and motivate us to eliminate wasted time.

#20 "Won’t work here, we’re different!"

Attack:

It won’t work here because we are so different.

Response:

Yes it’s true, we’re different, but we are also very much the same.

#21 "It puts us on a slippery slope."

Attack:

You’re on a slippery slope leading to a cliff. This small move today will lead to disaster tomorrow.

Response:

Good groups of people—all the time– use common sense as a guard rail to keep them from sliding into disaster.

#22 "We can’t afford this."

Attack:

The plan may be fine but we cannot do it without new sources of money.

Response:

Actually, most important changes are achieved without new sources of money.

#23 "You’ll never convince enough people."

Attack:

It will be impossible to get unanimous agreement with this plan.

Response:

You are absolutely right. That’s almost never possible, and that’s OK.

#24 "We’re not equipped to do this."

Attack:

We don’t really have the skills or credentials to pull this off!

Response:

We have much of what we need and we can and will get the rest.

Why good ideas die… and a simple approach to saving them

In Uncategorized on January 21, 2011 at 4:41 am

Part 1

FROM RICHARD IVEY SCHOOL OF BUSINESS

Many a good idea has been sabotaged by a co-worker who, during a presentation, cuts right in to say, “That’s a good idea but…” Readers of this article will learn what tactics they can use to effectively disarm and discourage such a saboteur and allow their ideas to be heard fully and ultimately win acceptance.

“And another good idea is lost”

“Thank you. That concludes my presentation.  Are there any questions?”

Samantha has just presented her proposal to the Capital Investment Committee.  She has done everything right so far.  Her team was tasked with finding an “out-of –the-box” solution to a critical problem.  They consulted widely within the company, with customers, and outside experts.  When a great solution emerged they checked in with the various interest groups.  They adapted to feedback and kept key influencers informed.  Their clear, concise proposal outlines the main factors, the need for this proposed innovation, the method followed to develop the proposal, the alternatives that were considered and the advantages and risks of their recommendation.  They were also careful to get the “look and feel” right – their process was professional and appropriate.  It was all textbook classic.

At first, a few committee members ask Samantha some pretty innocuous questions. But then, all of a sudden, Dan Jones clears his throat and the room falls silent.  Here’s the thing about Dan Jones – he knows how to act like a team player, but in truth, he isn’t one.  In this case, Dan sees Samantha’s rapid career advancement as a personal threat.

He speaks: “Samantha, I appreciate your group’s hard work, but in all honesty, I have to question whether this was appropriate because [blah-blah…worry-worry…], so I move that before we consider your “scheme” it should first be referred to the Legal Issues Committee where these concerns can be properly addressed.”

Samantha opens her mouth but she just can’t find the right words.  Dan’s attack (and that’s really what it is) feels unfair and unjustified, but right now, at this critical moment, she does not have a simple, effective rebuttal.  She feels that whatever she says will make matters worse.  But she has to say something, and even as she speaks she knows her comments aren’t responding well to Dan’s “gotcha.” So, the pile-on begins. First, one person picks up a detail in her response and asks a question that she cannot entirely understand or answer. Then, Dan comes in with another zinger. She looks around the room for support. Silence.

The committee votes to send Samantha’s proposal to what might as well be called the Committee for Infinite Delay. As a result, the company misses an important opportunity.  In a few months, Samantha will leave.  She’ll be OK – but will the company she left behind also be OK?

Does this scenario seem familiar?  We have all witnessed, far too often, excellent ideas that die, even though they have been very well communicated.  They die for reasons that are not completely rational.  This can be infuriating and, more importantly, result in huge opportunity costs for the company.

It shouldn’t have to be this way. Moreover, for business leaders today, such lost opportunities are simply not acceptable.  The stakes are higher and the challenges greater now because our world is changing at a much more rapid pace than ever.  Businesses have always had to adapt in order to survive, and this has always been a challenge because adaptation requires good ideas, consumes resources, and entails risk.  But today the rate of change is easily twice what it was 20 years ago. Yet the resources and expertise available for adapting to change have increased very little, if at all.

John Kotter, professor emeritus of Harvard Business School, has focused significant research on the challenge of large-scale change. From this research he has developed an 8-Step Process for Leading Change.  Critical to the success of this model is the concept of engaging the organization  – creating buy-in for the change.  We wrote our book, Buy-In: Saving Your Good Idea from Being Shot Down, to help address some of the challenges in getting that critical engagement and support. The only way to overcome these challenges is to develop an understanding of the problem and some possible solutions.  In the book and in this article, we will show you a counterintuitive, yet highly effective method to ensure that important good ideas can prevail. But first, we need to understand the problem of why people shoot down good ideas.

Idea-killing attacks

Why would anyone want to kill a good idea?  Most of our co-workers are decent people who want good things to happen. But people are also complex, and many of us, from time to time, may be susceptible to common, human failings that can lead to the premature demise of a good idea.  These failings may include: jealousy; fear; complacency; confusion; conflict of interest; short sightedness; vanity; and gullibility.  However, the causes do not really matter – you can only respond to the behavior, namely the launching of challenging attacks to your ideas. The best antidote (a respectful, clear, short, simple rebuttal) serves you well, regardless of the attacker’s motivation.

We’ve observed that these attacks all share several characteristics. They can be used to strike almost any good idea (which makes them useful for habitual attackers); they can be easily customized to suit the idea at hand (which makes them appear thoughtful and worth considering); they can seem well-intended (which builds sympathy for the attacker); and they are very difficult to refute if you are not prepared for them (which is why they usually work so well).

Through our research, we have identified 24 distinctly different attacks that are commonly used.  It seems a bit daunting, because this is too many for most of us to memorize.  But we have devised some simple, straightforward and easy-to-remember ways to understand and combat attacks.

Four tactics people use to attack good ideas

There are four underlying tactics for shooting down a leader’s suggested plan or proposal. Sometimes these tactics are used in combination.  These are:

Delay. Your opponent makes a reasonable-sounding case that we should wait (just a bit) until some other project is done, or that we should send this back into committee (just to straighten up a few points), or (just) put off the activity until the next budget cycle. He may then divert attention to another legitimate, pressing issue: There’s the sudden budget shortfall, the unexpected announcement from a competitor, the growing problem here, the escalating conflict there. This attack works well most of the time, often causing an irreversible slow-down in getting the group’s buy-in.

Confusion. Your opponent raises questions or concerns that so muddle the conversation with irrelevant facts, convoluted logic, or so many alternatives that it is impossible to have clear, intelligent dialogue upon which to build support for your idea (“If you will look at page 46 in the document I just passed out, it suggests that market share in China will fall within three years, and if you go to page 58…”). The conversation slides into endless side discussions. Eventually, people conclude that the idea has not been well thought-out. Or they feel stupid because they cannot follow the conversation, which causes anger that easily flows back toward you and your proposal.

Fear mongering. Someone seizes on an undeniable fact (“Your idea sounds a lot like the project we launched three years ago”) and then spins a tale around it, outlining consequences that can be truly frightening or, more often than not, simply push people’s hot buttons (“That failed, and several people on our team were laid off.”) The logic that connects a past fact to an imagined outcome will often be faulty, even silly, but it can still be very effective. Once aroused, the crowd’s anxieties won’t necessarily disappear when you offer an analytically sound rebuttal.

Ridicule. Your opponent doesn’t shoot bullets directly at the idea; she targets the person or people behind the concept instead.  Usually this works best when the attack is sugar coated.  You may be made to look silly, incompetent, hypocritical, or worse. This tactic is used less than the others, probably because it can backfire so easily on the attacker. But when it works, there can be collateral damage: Not only is the idea wounded, your reputation may be tarnished and your credibility takes a hit—hurting not only this idea but possibly future ones as well.

How can you overcome such attacks?

To combat the use of these tactics, we have developed methods for saving your good idea from getting shot down.  They are a bit counterintuitive.  As with many thing that are more an art than a science,  they require both the right attitude and the right actions. The keys to responding to an attack are:

Don’t push away opposing viewpoints; let the lions into the arena. As you try to build support for your idea, you may be inclined to clear the field of people who you think may oppose your good idea. Maybe you leave them off an e-mail distribution list or schedule meetings or teleconferences when you know the most disruptive types will be away. That may seem smart, some people have even had success with such approaches. But it is more powerful to use opposing viewpoints as a platform for gaining the attention and engagement your idea is going to need.  With more attention, you have a better chance to make your case. You may even draw some sympathy or admiration because you’re willing to stand in front of a firing squad.

Don’t respond with endless data and logic; simple common sense can be more powerful. It’s only natural, when your fabulous idea is attacked, to go over it again, explaining all its virtues in detail while emphasizing all those places where your opponent has gotten it wrong, wrong, wrong. For a very short while it may make you feel better, but it won’t work. It’s better to keep your responses—all of them—short and focused, allowing no time for thoughts to wander from the topic at hand. No jargon, no complex arguments, just a generous dose of common sense.  This can be particularly effective in warding off confusion attacks by removing the swirl of alternatives that may cloud people’s minds.

Always be respectful; don’t let it get personal; don’t fight back. It’s critical to bite your tongue, no matter how tempted you may be to lash out against what you perceive to be an unfair reaction to or representation of your idea. Gaining buy-in is as much about making an emotional connection as an intellectual one, and encouraging mutual respect in a heated discussion about a proposal can go a long way toward winning hearts.   Of course, we’re hardwired to want to fight, run away, or defend ourselves when attacked. But talking sensibly and respectfully works better. The more mindful we are of how easily dysfunctional behavior can pop up, the easier it is for us to keep others in check.

Focus on the crowd; not the attacker. It is natural, when hit with confusion, fear mongering, character assassination, or delay strategies, to focus one’s attention on the attacker. That’s a big mistake. At the risk of stating the obvious again, remember: You are seeking buy-in from a solid majority, which need not include those few who really want to sink the proposal. So don’t allow yourself to get sucked into a debate with a few disrupters, thereby losing touch with the quiet majority you need to reach. If you don’t pay sufficient attention to them, you may not realize in time that they are becoming confused, afraid, or being drawn into a delay. Watch the crowd very carefully for signs that you are losing their attention. Scan the nodding heads for smiles or frowns, for growing energy or the lack thereof.

Carry out careful, case-specific, preparation. Generally, you will find it very helpful to review the 24 specific generic attacks we identify in Buy-In, before you face the inquisition.  The Appendix below lists some of the most common ones and includes generic effective responses for each. They are presented in a deliberately simplistic manner, for you to enhance.  If the stakes are high enough, you may benefit from holding a small group-brainstorming session in which you review the possible forms of attack. For each, it’s very helpful to consider specific ways that an attacker may approach your particular situation. This is easier than it sounds, because in any given case, many of the attacks won’t apply, while others may be quite obvious and won’t need much thought.  But for the attacks you find both relevant and tricky–could be 5, could be 14– brainstorming will be invaluable.  You will uncover potential attacks that you otherwise would have missed, and you will discover the benefit of having a respectful, effective response at your fingertips when you really need it.  This homework needn’t take long and it is more than worth the effort, because very few of us can respond well in real time to completely unexpected attacks.

Samantha was blind-sided by Dan’s diversionary delay tactic.  Like many of us, she did not respond well to this unexpected attack. Had she prepared herself, she would have been able to respond smoothly by acknowledging Dan’s concern, while assuring the group that her team will successfully address it, just like the many others that were solved while developing the proposal.  Samantha should have confidently communicated that the task was well in hand and that the proposal should continue on its course, welcoming feedback in the process. The method proposed here for fending off unfair idea-killing attacks offers a straightforward way to prepare for the dreaded, inevitable unknown. It also can give you the confidence Samantha lacked. As a result, you will be able to reflect and react faster and more effectively during tough discussions. The net result will be that good ideas will more often be adopted, which will help both their proponents and their intended beneficiaries throughout our society.

APPENDIX: Some familiar and generic attack forms

Below is a sampling of the 24 generic attacks mentioned in this article. A generic response is suggested to help brainstorm each one. For the full listing of attacks and their responses visit http://kotterinternational.com/KotterPrinciples/BuyIn/AttacksAndResponses.aspx.

#1 We’ve never done this in the past and things have always worked out OK.

True. But surely we have all seen that those who fail to adapt eventually become extinct.

#3 You are exaggerating. This is a small issue for us if it is an issue at all.

To the good people who suffer because of this problem, it certainly doesn’t look small.

#14  I’m sorry – you mean well, but look at this problem you’ve clearly missed! You can’t deny the significance of this issue!

No one can deny the significance of the issue you have raised, and, yes, we haven’t explored it. But every potential problem we have found so far has been readily solved. So in light of what has happened again and again and again, I am today confident that this new issue can also be handled, just like all the rest.

#16 We tried that before and it didn’t work.

That was then. Conditions inevitably change (and what we propose probably isn’t exactly what was tried before).

#18 Good idea, but it’s the wrong time.  We need to wait until this other thing is finished (or this other thing is started, or the situation changes in a certain special way).

The best time is almost always when you have people excited and committed to make something happen. And that’s now.

#23 It will be impossible to get unanimous agreement with this plan.

You are absolutely right. That’s almost never possible, and that’s OK.

by Lorne Whitehead

Ivey Business Journal

Source: Ivey Business Journal

It pays to give

In Uncategorized on January 17, 2011 at 7:14 pm

taken from The Economist.

Allowing consumers to set their own prices can be good for business; even better if the firms give some of it to charity

IN OCTOBER 2007 Radiohead, a British rock group, released its first album in four years, “In Rainbows”, as a direct digital download. The move drew a fair bit of attention (including from this newspaper) not only because it represented a technological thumb in the eye to the traditional music industry, but also because the band allowed listeners to pay whatever they wished for it. Some 60% of those who seized the opportunity paid nothing at all, but the band seemed pleased with the result; one estimate had it earning nearly $3m from the experiment.

One group outside the music industry taking an interest was a trio of professors then at the Rady School of Management at the University of California, San Diego: Ayelet Gneezy, Uri Gneezy and Leif Nelson (who is now at the Haas School of Business at the University of California, Berkeley). Inspired, they designed a series of experiments to gauge whether pay-what-you-want pricing would work for other businesses. Their most recent experiment, co-authored with Amber Brown of Disney Research and published in Science, also stirred in a new element: would it make any difference if firms donated some of the pay-what-you-want fee to charity?

The authors set up their pricing experiment at the exit of a roller-coaster ride at a large amusement park. Riders were offered a photograph of themselves, snapped mid-coast. The usual price was $12.95, but on one day riders were told they could pay what they wished, including taking the photo for free. A second group was charged the full price but told that half the money would go to a well-regarded health charity. Yet a third group could set the price and see half of their chosen amount donated.

Allowing customers to set the price dramatically increased the percentage of buyers—from less than 1% to 8%. Even accounting for those who took a free photo, the amusement park collected more revenue on the pay-what-you-want day than when selling for the usual fixed price.

The authors also found that of the customers who were allowed to pay what they want, those who were told that half the money would go to a good cause paid substantially more than those who were not told about the charitable donation—to the point that revenue more than tripled. (The charity did, indeed, get its promised cut.) The smallest number of purchases, meanwhile, came the day that customers had to pay the full $12.95 but half was donated.

Therefore more than simple altruism was motivating the customers who gave money for a photo they could have had for free. “One of the quirks about paying what you want,” suggests Mr Nelson, “is that it starts to signal something about who you are. Every dollar you spend is a direct reflection of how much you care about this charity and what kind of person you are. No one wants to go cheap with a charity.” He calls this phenomenon “shared social responsibility”: instead of passively accepting a firm’s assertion of its charitable donations, the customer must actively agree to give money to charity, and determine how much.

But how widespread could shared social responsibility be? Ms Gneezy is the first to point out that customer-determined pricing works best for products with low marginal costs. Since publishing their findings, the researchers have spoken to several companies interested in pursuing similar experiments with their products, including software developers and video-game designers. But offering flexible pricing on a virtual product online, instead of in person at an amusement park, may make it easier for people to “go cheap” even if a charity is involved. Combining customer-determined pricing, corporate social responsibility, and increased profits will be tricky to pull off, and not every company will be able to do it—just like not every band can put their album online for free and still profit.

Readers’ comments

cyclam wrote:

Jan 11th 2011 3:33 GMT

Would be interesting to know if they’ve looked at the Humble Indie Bundle computer games package.

http://www.humblebundle.com/

It bundles together a group of games from independent designers, with the buyer setting the amount (minimum $0.01 if I remember correctly). The money is split between the game designers as a block, 2 charities, and a ‘tip’ for the organisers, with the buyer deciding what amounts go where.

Cleverly, they also show the average amount paid, split by operating system. When I bought, the overall average was around $6.50, whilst the Linux average was around $13.00. As Linux is my preferred operating system, sure enough I felt I had to do my bit to keep up appearances, so paid $15.00.

The scheme has run twice now, and there could be some interesting data to mine.

MicrosoftSam wrote:

Jan 11th 2011 5:14 GMT

WIth a photo from a roller coaster ride, you’ll buy one, and keep it for yourself. Now, I wonder what would happen if a consumer was allowed to choose a price on an item that could be resold e.g. a book.

If I was allowed to purchase a book at any price, say $0.01 USD, I’d take that book and resell it elsewhere and make a business out of it. In turn, the person who allowed me to choose the price is losing greatly.

In the end, if a business such as Wal-Mart or Best Buy allowed customers to choose their prices-they’d be bankrupt.

subcomandante wrote:

Jan 11th 2011 6:50 GMT

@ MicrosoftSam:
not if user is informed that you can buy that book at free pay conditions.

If I know I can go to Wal-Mart and pay whatever I want I can skip you freeloader.

D. Sherman wrote:

Jan 11th 2011 11:48 GMT

It’s an interesting idea, and I hope others will try it. I’ve read about "pay-what-you-want" restaurants that were successful. In business there’s folklore that says that people don’t value what’s free, but I will take experimental results such as these over conventional wisdom any day. The wrinkle in this new version is the charitable portion. That makes for an interesting study, but it complicates things tremendously in real life. For one thing, I might particularly dislike the charity and might decide not to buy the product for that reason. To avoid that, the vendor would have to offer a choice of charities. Ebay does a version of this, but with two catches — the seller chooses the charity, and Ebay’s charity-processing subsidiary siphons off most of the "donation" (read the fine print), which makes one cynical about the whole concept.

The roller-coaster photo also has several unusual features compared to most products. It’s totally an impulse purchase. It’s unique (no one else is offering photos of you on the roller coaster). It has a near-zero cost of production and hence a very high margin and almost nothing to be lost if the person simply takes the photo without paying. It’s harder to envision a commodity vendor such as a gas station making money with this concept.

Min King wrote:

Jan 12th 2011 2:41 GMT

The model of this should just be used in some special industries, the price of goods should be cheap and can be substituted easily

gone surfing wrote:

Jan 12th 2011 5:59 GMT

How about governments offering a pay-what-you-want tax offer?

antisense wrote:

Jan 12th 2011 9:24 GMT

The article offers few insights for which industries this pricing approach could be applied. I’m not sure that this was even the point.

I think that the experiment says much more about how we use purchases to signal something about who we are, to paraphrase Mr Nelson.

A similar process is at work when we choose to display brand names on our cars, clothing, and technological jewelry (like iPhones). For a very entertaining discussion of how we make consumer choices, I would recommend Geoffrey Miller’s book, Spent: Sex, Evolution, and Consumer Behavior.

antisense wrote:

Jan 12th 2011 9:29 GMT

I should have known that the Economist had already written about Mr Miller. Here is a link:

http://www.economist.com/node/9581656

oliverthebear wrote:

Jan 12th 2011 4:56 GMT

A nice idea but there are two caveats: low marginal cost, as you point out, and individual purchases – not corporate ones.

I’ve recently launched an e-learning programme aimed at corporate buyers, but I’m also interested in individual users and am having problems establishing a price, particularly as I want to sell into developing countries as well as developed ones. It’s giving me food for thought.

By the way, would the publishers of your esteemed publication care to adopt the same pricing model? (Please).

Finally, the last sentence of the article contains the phrase ‘for free’, specifically banned in your style guide. Stoppit. Now.

Important To Know

In Uncategorized on January 12, 2011 at 10:50 am

Answer the phone by LEFT ear.
Do not drink coffee TWICE a day.
Do not take pills with COOL water.
Do not have HUGE meals after 5pm.
Reduce the amount of OILY food you consume.
Drink more WATER in the morning, less at night.
Keep your distance from hand phone CHARGERS..
Do not use headphones/earphone for LONG period of time.
Best sleeping time is from 10pm at night to 6am in the morning.
Do not lie down immediately after taking medicine before sleeping.
When battery is down to the LAST grid/bar, do not answer the phone as the radiation is 1000 times.
Here are some healthy tip for your smartness & physical fitness.
Prevention is better than cure.

HEALTHY JUICES
Carrot + Ginger + Apple – Boost and cleanse our system.
Apple + Cucumber + Celery – Prevent cancer, reduce cholesterol, and eliminate stomach upset and headache.
Tomato + Carrot + Apple – Improve skin complexion and eliminate bad breath.
Bitter gourd + Apple + Milk – Avoid bad breath and reduce internal body heat.
Orange + Ginger + Cucumber – Improve Skin texture and moisture and reduce body heat.
Pineapple + Apple + Watermelon – To dispel excess salts, nourishes the bladder and kidney.
Apple + Cucumber + Kiwi – To improve skin complexion.
Pear & Banana – regulates sugar content.
Carrot + Apple + Pear + Mango – Clear body heat, counteracts toxicity, decreased blood pressure and fight oxidization .
Honeydew + Grape + Watermelon + Milk – Rich in vitamin C + Vitamin B2 that increase cell activity and str engthen body immunity.
Papaya + Pineapple + Milk – Rich in vitamin C, E, Iron. Improve skin complexion and metabolism.
Banana + Pineapple + Milk – Rich in vitamin with nutritious and prevent constipation

Does Your Blood Type Reveal Your Personality?
According to a Japanese institute that does research on blood types, there are certain personality traits that seem to match up with certain blood types. How do you rate?
TYPE – O
You want to be a leader, and when you see something you want, you keep striving until you achieve your goal. You are a trend-setter, loyal, passionate, and self-confident. Your weaknesses include vanity and jealously and a tendency to be too competitive.
TYPE – A
You like harmony, peace and organization. You work well with others, and are sensitive, patient and affectionate. Among your weaknesses are stubbornness and an inability to relax.
TYPE – B
You’re a rugged individualist, who’s straight forward and likes to do things your own way. Creative and flexible, you adapt easily to any situation. But your insistence on being independent can sometimes go too far and become a weakness.
TYPE – AB
Cool and controlled, you’re generally well liked and always put people at ease. You’re a natural entertainer who’s tactful and fair. But you’re standoffish, blunt, and have difficulty making decisions.

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The Next Really, Really, Really, Big Thing

In Uncategorized on January 9, 2011 at 2:46 pm

2010 November 14

by Greg

Everybody should be excited about the next big thing.  And why not?  It’s very, extremely big.  Even bigger than anything that came before.  No, really, it’s that freakin’ HUGE.

If you don’t want to get left behind, you’ve got to hop on this right away.  Of course, you will need to be fast and smart and work late nights, but it will be worth it.  You can’t go halfway on a thing like this.  It’s all or nothing, baby!

I’m here to tell you what this big thing is.  But first, let’s take a quick look at past big things so that we can see why this one is so much bigger.

A Short History of Big Things

We live in interesting times.  Conventional wisdom says that it takes about 20 years for new technology to take its full effect.  These days, innovation cycles are much shorter, so we’re getting new stuff before we really know what to do with the old.

Many economists believe that these time lags account for the productivity paradox (i.e. it’s notoriously difficult to measure what we really get out of all this new stuff).  So it is always hard to see the next big thing until it’s already really big and you’ve missed out.

Nevertheless, there are always pundits and gurus to point the way.  Unfortunately, they are usually only partly right, which makes the history of big things somewhat muddled:

Digital Media: Sometime back in the 90’s, an extremely confident young man appeared on the TV show, 60 Minutes, and announced that he was going to put their company (CBS) out of business.

I don’t remember what actually happened to the guy, but last year CBS earned about a billion dollars in operating profit (Yahoo made about a tenth as much).  60 minutes, of course, is still on the air and still gets huge ratings.

E-Commerce: During the dot-com boom, many pointed out that a lot of the web revenues were driven by advertising (which, for some reason, is supposed to be a bad business).  However, selling things over the web was infinitely more promising.

Of course, many of those e-commerce start-ups failed, some did okay and some did extremely well.  Today, Amazon.com is enormously successful, but really not in Wal-Mart’s league.  I was at the mall the other day and it seemed pretty crowded.

Search: After the crash in 2000, Search emerged as the new, new thing.  Google has made a bundle on this one (and some regional players, like Yandex in Russia and Baidu in China, have also done well).  Yahoo and Microsoft… not so much.

Social Media: This is the most recent big thing (and, of course, has a big movie to prove it). Facebook has 500 million members, but profits remain elusive.  Others, such as MySpace, Friendster and Digg… well, we’ll see.

Big Things That Last

Of course, the biggest things get so big that they last for a very long time.  Jim Collins profiled a bunch of them in his book Built to Last.  He studied firms like Hewlett Packard, Sony and General Electric and found that much of what we hear about really big things is  untrue.

For instance, they often don’t start with very good ideas.  In fact, sometimes they begin with lousy ones (apparently Sony’s first product was a rice cooker).  Nor do they tend to have charismatic, visionary leaders.  What they do have is a lot of talented people who work as a team.

It seems to me, this is where a lot of technology driven companies go wrong.  We glamorize the vision and forget that it is people who actually make it happen.  Moreover, because our globalized, digitized world is so complex, these people have very diverse skills and perspectives and need to operate in an uncertain environment.

Getting really smart, driven people to work together well is the truly BIG thing.

Winning the Talent War

A while back, I wrote a post about how to win the war for talent, and I made the point that talent isn’t something you acquire, it’s something you build.  I think it’s worth summarizing the main points here:

In-House Training: While third party training can sometimes be helpful, having an in-house training program is much more valuable.  Companies like GE and McDonald’s have put enormous resources into training campuses, but even small companies can build good programs with a little effort and focus.

An often overlooked benefit of in-house training is the trainers themselves, who are usually mid and senior level employees.  They get to refresh basic concepts in their own minds while they teach more junior people.  This also helps the old guard get invested in the next generation.

Perhaps most importantly, training helps to bring people together who would ordinarily not meet and improves connectivity throughout the company.

Focus On Intrinsic Motivation: Most people want to do a good job.  Of course, money is important, but the best people want to achieve things and to be recognized for doing so.  Often, time and effort wasted on designing elaborate compensation schemes could be better spent on getting people recognized for true accomplishments.

A senior executive taking a minute or two to stop and recognize a job well done can often mean more than a monetary reward.  That doesn’t mean that people don’t need to be paid what they’re worth, but anybody can sign a check.  Paying big salaries is not, and will never be, a long term competitive advantage.

Best Practice Programs: One way for people to shine is to have regular meetings where they can present successful initiatives to their peers.  This also helps increase connectivity and gets good ideas spread throughout the company.

Another approach is to build an in house social network where people can share ideas and rate each others work (there are plenty of applications similar to slideshare that can be adapted easily and cheaply to a company intranet).

Coaches and Mentors: Getting regular feedback is essential for development.  We’re generally pretty bad judges of our own efforts.  Some companies have formal mentoring programs that are quite successful.  However, what is most important is a realization throughout the company that senior people are responsible for helping to develop junior ones.

Firing Nasty People: A long time ago, I decided that I didn’t want to work with nasty people, so I started firing them regardless of competency.  I’ve been amazed at what a positive effect it had and have never looked back.  Nasty people invariably destroy more than they create.

A Community of Purpose: Most of all, people need to believe in what they do; that their work has a purpose and makes a positive impact.  Nothing motivates better than a common cause that people value above themselves.

So the next big thing is really not much different than the previous ones.  There will be an interesting idea that has real value and most of the companies who jump on it will screw it up and lose a lot of money.

The difference, of course, will be made by the people who are working to solve everyday problems, how they are developed and how they treat each other.

If you wanna win a horse race, ya gotta have the horses.

– Greg

Why most Americans work ever more hours for ever less pay, while for most Europeans it has been exactly the opposite

In Uncategorized on January 9, 2011 at 2:41 pm

By Richard Clark

From 1820 to around 1970, workers’ average productivity rose every decade. Their hourly output of commodities rose because they were ever better trained, had ever more and better machines to work with, were ever more closely supervised, and worked ever faster. Over those same years, their real wages (what earned income actually afforded them to buy) also rose every decade.

However, after the mid 1970s, while worker productivity continued to increase, real wages tapered off in America and then actually began to slowly decline. This growing gap between stagnating wages and growing amounts of product value per hour worked, meant a huge and growing increase in the prots of American business owners.

So why did real wages (adjusted for inflation) in America stop growing while continuing to increase in various European countries?

It was because U.S. corporations did the following things, some of which the European countries either did not do, or did not do to nearly the same extent.

They:

(a) moved operations abroad so as to pay lower wages and make bigger prots,

(b) replaced workers with machines (especially computers), and

(c) hired ever more women and immigrants, at lower wages than men received.

For these reasons, real wages in the mid 1970s, in America, exceeded real wages today even though today’s workers produce vastly more in the course of an hour’s work.

As employers’ prots exploded, those entitled to portions of the prots also benefitted handsomely, those being the managers the employers hire, the shareholders who get dividends, and so on — but also the specialists who handled or managed each employer’s mushrooming prot, namely the nance industry that invested it, lent and borrowed it, managed it, etc.– they, too, got growing portions of the rising prots.

So what happened to a working class that measured individual success by rising consumption when it no longer had rising wages to pay for such consumption?

Even if individuals’ real wages per hour stagnate, total earnings can rise if each household does more hours of paid labor. And so it was that millions of American housewives entered the paid labor force over the last 30 years while their husbands took second jobs and both teenagers and retirees found paid work too. Today, as a result, we Americans work on average 20% more hours per year than workers in France, Germany and Italy. In the 1970s, 40% of adult women were in the paid labor force. Today it is twice that.

However, with more household members out working, new costs and problems beset American families. Women wage-earners needed new clothes, a second car, and services like daycare, prepared food, psychotherapy, and drugs to handle new pressures and demands. These extra costs soaked up women’s extra income, and not enough remained to fund rising household consumption. The net income gained from extra work thereby disappeared and disappointed, and so it was that US families were provided with opportunities to borrow money like no working class in history. And, as we shall see momentarily, this soaring household indebtedness became part of the groundwork of today’s crisis.

The US business community had seen, and grasped, a fantastic double opportunity. First, as already described, it reaped huge prots from the combination of at wages and rising productivity. Secondly, however, it realized that it could lend a portion of those prots back to a working class traumatized by stagnant wages, so as to enable it to continue consuming more. Therefore, instead of paying their workers rising wages (as in the 1820-1970 period), employers (directly or through the banks) ooded very profitable loans onto desperate but also often nancially naive workers. For employers generally, and especially for nancial corporations, this seemed like the golden age of capitalism.

Underneath the magic, however, workers were increasingly exhausted, their families disintegrating, and their anxieties deepened by unsustainable levels of debt. At the same time, banks, insurance companies and other nancial enterprises proted by taking ever greater risks and designing and selling ever more exotic and questionable securities to systematically misinformed investors. In these heady times, non-nancial industries also took bigger risks, believing that "the new economy" touted by Alan Greenspan could only keep expanding. Before long, however, as housing values stopped rising, and then began to fall, workers by the millions would begin to default on their debts, and were soon joined by defaulting corporations. This credit-based house of cards then collapsed, housing prices tanked, and recession descended upon us.

Since mid-2008, the crisis has deprived unprecedented millions of their jobs, income, homes, and wealth, with the total value of the losses amounting to thousands of billions of dollars. A desperate population demanded explanations and solutions; they wanted changes that would x this economic disaster. So we dumped the Republicans and hoped for an economic revival from Obama, who talked a very good game during his campaign.

Once in office, however, Obama followed Bush’s sorry example, and for political reasons (future campaign contributions and the hope of avoiding massive, and very well funded attack ads on TV) his administration continued pouring trillions of dollars into the nance industry (thereby guaranteeing the debts of, and at the same time investing in, the nation’s biggest banks and insurance companies). These steps were supposed to "kick-start the economy" and "get the economy moving again" and "x the credit markets," so as to allow us, we all hoped, to resume the happy, high-consumption pleasures of the economy before the crisis hit in 2008.

The problem is, this strategy was and is absurd. Why? Because if such a resumption were to succeed (far from certain in the first place), it could only return the economy to the same web of problems that produced the crisis in the first place.

Workers in the US are now holding back on expenditures as they hunker down for what they correctly sense will be a long period of unemployment, lost pensions, decimated retirement accounts, and insecure jobs and incomes. And, as they spend less, economic recovery is thereby undermined. Obama and his minions futilely hope that consumers will somehow resume borrowing and spending, but that cannot happen. Why not? Because consumers are tapped out that’s why they defaulted on all those loans that set off the crisis. And even if they were by some miracle made capable of resuming their borrowing and spending — aliens dropping billions of dollars from UFOs? — they would (given their systematically lowered wages) sooner or later have to default once again, and we would once again be back to where we are now.

In short, an exhausted, anxious, and over-indebted working class cannot sustain the following:

1) a corporate sector facing permanently reduced consumer spending, struggling with its own excessive debts and unable to get credit as in the past,

2) a government now adding trillions to its national debt which will require more taxes from, and/or less provision of government services to, that same working class.

We are, therefore, faced with a crisis that requires basic structural change

The simple fact is that no supercial, back-to-business-as-usual program of throwing trillions at big banks, big insurers, and large auto companies — to boost the stock market, get everyone happy and spending again — will work. Short-term upswings just like this were repeatedly followed by crashes during the FDR years in the 1930s. Painfully, people then learned just how deep and serious that depression was. Will we need to rerun that tragic scenario and pay its heavy price in extended suffering again, today? Most likely we will, since people seldom learn from the lessons of the past.

We can no longer postpone the traumatic impact of the end of rising wages in the ’70s by still more work and more indebtedness. Those options have been exhausted. Workers can’t work more. They physically can’t handle it. Families are stressed beyond words, largely because women abandoned the households where they had been holding the emotional life of the family together. And families literally cannot carry any more indebtedness. Debt limits have been reached. This is implosion time.

So why again did real wages stop rising in America but not in Europe?

Five reasons, in somewhat more detail this time.

First came the 1970s technological revolution, associated mostly with the computer. Humans were increasingly replaced by computer-aided machines–30 to 40 people tracking inventory in a supermarket were replaced by a scanning system and one person watching a computer. This substitution happened everywhere, in every almost every industry and service, and the number of jobs was thereby greatly reduced.

Secondly, jobs were cut by the worldwide revolution in telecommunications and the Internet, which made it ever more feasible to move production to low-wage countries, outside of the US. There, US-based corporations increasingly chose to take advantage of cheaper workers, less stringent environmental regulations, lower taxes, and officials who were much more open to taking a bribe.

Third, President Reagan saw to it that the tariffs on goods produced by American companies operating abroad, for import into the US, were essentially eliminated, making it terribly profitable to manufacture inexpensively abroad almost everything that was sold at home.

Then, two things produced ever more workers looking for the reduced number of jobs that resulted from the three things just mentioned.

1) the massive movement of American women into the paid labor market and

2) waves of immigration–people from around the world who wanted to participate in the 150-year rising real wages in America.

This confluence of factors produced labor market conditions that had US employers, for the first time, in the enviable situation of no longer being required to raise wages to acquire or keep employees. And so, quite naturally, they stopped raising wages.

Thus we had an explosion of profitability and a wild ride in the stock market in the ’80s and ’90s, because the corporations–America’s primary employers–were profiting more than they had ever dreamed in their wildest fantasies as MBA students–getting ever more out of employees without having to pay them any more. As a result, large corporations began giving out huge bonuses and severance packages to top executives.

What are the "real" costs to the larger society and economy of these huge money grabs?

In Europe, a good portion of productivity gains are used to reward the society and populace as a whole: ever-more-productive workers are paid rising wages, thereby allowing them to share in the growing wealth that rising productivity makes possible. But not only that: With more evenly distributed productivity gains, college education, health care and child care can more easily be made available to one and all.

However, in the U.S. and U.K., there is an assumption that wages should stop rising whenever possible so that the wealth emerging out of growing productivity can be concentrated in the hands of a tiny number of people, the financial elite, who thereby receive stratospheric incomes and wealth holdings. The problem with this arrangement is that society can no longer produce for a mass market because the mass market isn’t growing in parallel with the growing productivity. And this is what is happening today in America. Sales of domestically produced products are steadily dwindling as consumer and government indebtedness reaches crisis proportions. Corporate owners are getting obscenely rich from all this, but with well-paid jobs, college, and good health care increasingly out of reach for ever more people, the society and economy beneath them is crumbling.

Taxes

When Reagan became president, the highest income tax rate, paid by top earners on all income in excess of $3 million (in today’s dollars), was in the 70 to 80% range. Reagan dropped that rate to approximately 35% — an unbelievable gift to the richest among us, who thereby became his greatest boosters and campaign financiers for the remainder of his political career. The rest of us are still laboring longer and harder as a result of that much-reduced tax rate for the rich, to make up for the loss of the larger share they used to pay.

Corporate income tax, which used to provide a much larger share of our total income tax revenue, now only brings in about 10 or 15% of it. Over the past 100 years, rich people moved the tax burden off themselves and onto everyone else. And corporations moved much–but not quite all–of their burden onto the individual. The result has been a double shift from the corporate to the individual, and from the richest individuals to everyone else, with the exception of the very poor on the bottom who were already too poor to be taxed.

When the average American gets upset by taxes going up, they are making an error. The taxes aren’t going up so much as they are being shifted. The tax may have gone up on you, but it has gone down on others. However, because it’s less dangerous politically, Republican politicians prefer to talk about taxes as if the issue is high or low, rather than who pays at a high rate and who doesn’t.

Reagan provided us with the perfect example and it was wonderfully clever politics on his part. He gave a big tax break to corporations and a huge tax cut to the richest among us. But he was smart enough to know that if that’s all you do you’re going to get crucified politically. So he added a mass tax cut for everyman. However, this tax cut for the average citizen was not only very small, but came by way of a little trick. While the Reagan Administration lowered the income tax rates on the average person a little, it raised the amount of their income that the Social Security tax applied to. So the government got to put back into Social Security most of what it gave to the mass of Americans in the lowering of the tax rate–which is why the size of people’s paychecks didn’t change much. The mass of Americans were so thrilled by their "tax cut’ that this bad news got lost in the shuffle. Not only was the cut given to the richest and the corporations much more substantial, but the masses were being hit with a rising Social Security cost.

Wealth, Income, and Power

In Uncategorized on January 9, 2011 at 2:24 pm
by G. William Domhoff
September 2005 (updated December 2010)

 

This document presents details on the wealth and income distributions in the United States, and explains how we use these two distributions as power indicators.

Some of the information may come as a surprise to many people. In fact, I know it will be a surprise and then some, because of a recent study (Norton & Ariely, 2010) showing that most Americans (high income or low income, female or male, young or old, Republican or Democrat) have no idea just how concentrated the wealth distribution actually is. More on that a bit later.

As far as the income distribution, the most amazing numbers on income inequality will come last, showing the dramatic change in the ratio of the average CEO’s paycheck to that of the average factory worker over the past 40 years.

First, though, some definitions. Generally speaking, wealth is the value of everything a person or family owns, minus any debts. However, for purposes of studying the wealth distribution, economists define wealth in terms of marketable assets, such as real estate, stocks, and bonds, leaving aside consumer durables like cars and household items because they are not as readily converted into cash and are more valuable to their owners for use purposes than they are for resale (see Wolff, 2004, p. 4, for a full discussion of these issues). Once the value of all marketable assets is determined, then all debts, such as home mortgages and credit card debts, are subtracted, which yields a person’s net worth. In addition, economists use the concept of financial wealth — also referred to in this document as "non-home wealth" — which is defined as net worth minus net equity in owner-occupied housing. As Wolff (2004, p. 5) explains, "Financial wealth is a more ‘liquid’ concept than marketable wealth, since one’s home is difficult to convert into cash in the short term. It thus reflects the resources that may be immediately available for consumption or various forms of investments."

We also need to distinguish wealth from income. Income is what people earn from work, but also from dividends, interest, and any rents or royalties that are paid to them on properties they own. In theory, those who own a great deal of wealth may or may not have high incomes, depending on the returns they receive from their wealth, but in reality those at the very top of the wealth distribution usually have the most income. (But it’s important to note that for the rich, most of that income does not come from "working": in 2008, only 19% of the income reported by the 13,480 individuals or families making over $10 million came from wages and salaries. See Norris, 2010, for more details.)

As you read through these numbers, please keep in mind that they are usually two or three years out of date because it takes time for one set of experts to collect the basic information and make sure it is accurate, and then still more time for another set of experts to analyze it and write their reports. It’s also the case that the infamous housing bubble of the first eight years of the 21st century inflated some of the wealth numbers.

So far there are only tentative projections — based on the price of housing and stock in July 2009 — on the effects of the Great Recession on the wealth distribution. They suggest that average Americans have been hit much harder than wealthy Americans. Edward Wolff, the economist we draw upon the most in this document, concludes that there has been an "astounding" 36.1% drop in the wealth (marketable assets) of the median household since the peak of the housing bubble in 2007. By contrast, the wealth of the top 1% of households dropped by far less: just 11.1%. So as of April 2010, it looks like the wealth distribution is even more unequal than it was in 2007. (See Wolff, 2010 for more details.)

One final general point before turning to the specifics. People who have looked at this document in the past often asked whether progressive taxation reduces some of the income inequality that exists before taxes are paid. The answer: not by much, if we count all of the taxes that people pay, from sales taxes to property taxes to payroll taxes (in other words, not just income taxes). And the top 1% of income earners, who average over $1 million a year, actually pay a smaller percentage of their incomes to taxes than the 9% just below them. These findings are discussed in detail near the end of this document.

The Wealth Distribution

In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one’s home), the top 1% of households had an even greater share: 42.7%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2010).

Table 1: Distribution of net worth and financial wealth in the United States, 1983-2007

Total Net Worth

Top 1 percent
Next 19 percent
Bottom 80 percent

1983
33.8%
47.5%
18.7%

1989
37.4%
46.2%
16.5%

1992
37.2%
46.6%
16.2%

1995
38.5%
45.4%
16.1%

1998
38.1%
45.3%
16.6%

2001
33.4%
51.0%
15.6%

2004
34.3%
50.3%
15.3%

2007
34.6%
50.5%
15.0%

Financial Wealth

Top 1 percent
Next 19 percent
Bottom 80 percent

1983
42.9%
48.4%
8.7%

1989
46.9%
46.5%
6.6%

1992
45.6%
46.7%
7.7%

1995
47.2%
45.9%
7.0%

1998
47.3%
43.6%
9.1%

2001
39.7%
51.5%
8.7%

2004
42.2%
50.3%
7.5%

2007
42.7%
50.3%
7.0%

Total assets are defined as the sum of: (1) the gross value of owner-occupied housing; (2) other real estate owned by the household; (3) cash and demand deposits; (4) time and savings deposits, certificates of deposit, and money market accounts; (5) government bonds, corporate bonds, foreign bonds, and other financial securities; (6) the cash surrender value of life insurance plans; (7) the cash surrender value of pension plans, including IRAs, Keogh, and 401(k) plans; (8) corporate stock and mutual funds; (9) net equity in unincorporated businesses; and (10) equity in trust funds.

Total liabilities are the sum of: (1) mortgage debt; (2) consumer debt, including auto loans; and (3) other debt. From Wolff (2004, 2007, & 2010).

Figure 1: Net worth and financial wealth distribution in the U.S. in 2007

In terms of types of financial wealth, the top one percent of households have 38.3% of all privately held stock, 60.6% of financial securities, and 62.4% of business equity. The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America.

Table 2: Wealth distribution by type of asset, 2007

Investment Assets

Top 1 percent
Next 9 percent
Bottom 90 percent

Business equity
62.4%
30.9%
6.7%

Financial securities
60.6%
37.9%
1.5%

Trusts
38.9%
40.5%
20.6%

Stocks and mutual funds
38.3%
42.9%
18.8%

Non-home real estate
28.3%
48.6%
23.1%

TOTAL investment assets
49.7%
38.1%
12.2%

Housing, Liquid Assets, Pension Assets, and Debt

Top 1 percent
Next 9 percent
Bottom 90 percent

Deposits
20.2%
37.5%
42.3%

Pension accounts
14.4%
44.8%
40.8%

Life insurance
22.0%
32.9%
45.1%

Principal residence
9.4%
29.2%
61.5%

TOTAL other assets
12.0%
33.8%
54.2%

Debt
5.4%
21.3%
73.4%

From Wolff (2010).

Figure 2a: Wealth distribution by type of asset, 2007: investment assets

Figure 2b: Wealth distribution by type of asset, 2007: other assets

Inheritance and estate taxes

Figures on inheritance tell much the same story. According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% of Americans receive $100,000 or more in inheritance. Another 1.1% receive $50,000 to $100,000. On the other hand, 91.9% receive nothing (Kotlikoff & Gokhale, 2000). Thus, the attempt by ultra-conservatives to eliminate inheritance taxes — which they always call "death taxes" for P.R. reasons — would take a huge bite out of government revenues (an estimated $1 trillion between 2012 and 2022) for the benefit of the heirs of the mere 0.6% of Americans whose death would lead to the payment of any estate taxes whatsoever (Citizens for Tax Justice, 2010).

It is noteworthy that some of the richest people in the country oppose this ultra-conservative initiative, suggesting that this effort is driven by anti-government ideology. In other words, few of the ultra-conservative and libertarian activists behind the effort will benefit from it in any material way. However, a study (Kenny et al., 2006) of the financial support for eliminating inheritance taxes discovered that 18 super-rich families (mostly Republican financial donors, but a few who support Democrats) provide the anti-government activists with most of the money for this effort. (For more infomation, including the names of the major donors, download the article from United For a Fair Economy’s Web site.)

Actually, ultra-conservatives and their wealthy financial backers may not have to bother to eliminate what remains of inheritance taxes at the federal level. The rich already have a new way to avoid inheritance taxes forever — for generations and generations — thanks to bankers. After Congress passed a reform in 1986 making it impossible for a "trust" to skip a generation before paying inheritance taxes, bankers convinced legislatures in many states to eliminate their "rules against perpetuities," which means that trust funds set up in those states can exist in perpetuity, thereby allowing the trust funds to own new businesses, houses, and much else for descendants of rich people, and even to allow the beneficiaries to avoid payments to creditors when in personal debt or sued for causing accidents and injuries. About $100 billion in trust funds has flowed into those states so far. You can read the details on these "dynasty trusts" (which could be the basis for an even more solidified "American aristocracy") in a New York Times opinion piece published in July 2010 by Boston College law professor Roy Madoff, who also has a book on this and other new tricks: Immortality and the Law: The Rising Power of the American Dead (Yale University Press, 2010).

Home ownership & wealth

For the vast majority of Americans, their homes are by far the most significant wealth they possess. Figure 3 comes from the Federal Reserve Board’s Survey of Consumer Finances (via Wolff, 2010) and compares the median income, total wealth (net worth, which is marketable assets minus debt), and non-home wealth (which earlier we called financial wealth) of White, Black, and Hispanic households in the U.S.

Figure 3: Income and wealth by race in the U.S.

Besides illustrating the significance of home ownership as a source of wealth, the graph also shows that Black and Latino households are faring significantly worse overall, whether we are talking about income or net worth. In 2007, the average white household had 15 times as much total wealth as the average African-American or Latino household. If we exclude home equity from the calculations and consider only financial wealth, the ratios are in the neighborhood of 100:1. Extrapolating from these figures, we see that 70% of white families’ wealth is in the form of their principal residence; for Blacks and Hispanics, the figures are 95% and 96%, respectively.

And for all Americans, things are getting worse: as the projections to July 2009 by Wolff (2010) make clear, the last few years have seen a huge loss in housing wealth for most families, making the gap between the rich and the rest of America even greater, and increasing the number of households with no marketable assets from 18.6% to 24.1%.

Do Americans know their country’s wealth distribution?

A remarkable study (Norton & Ariely, 2010) reveals that Americans have no idea that the wealth distribution (defined for them in terms of "net worth") is as concentrated as it is. When shown three pie charts representing possible wealth distributions, 90% or more of the 5,522 respondents — whatever their gender, age, income level, or party affiliation — thought that the American wealth distribution most resembled one in which the top 20% has about 60% of the wealth. In fact, of course, the top 20% control about 85% of the wealth (refer back to Table 1 and Figure 1 in this document for a more detailed breakdown of the numbers).

Even more striking, they did not come close on the amount of wealth held by the bottom 40% of the population. It’s a number I haven’t even mentioned so far, and it’s shocking: the lowest two quintiles hold just 0.3% of the wealth in the United States. Most people in the survey guessed the figure to be between 8% and 10%, and two dozen academic economists got it wrong too, by guessing about 2% — seven times too high. Those surveyed did have it about right for what the 20% in the middle have; it’s at the top and the bottom that they don’t have any idea of what’s going on.

Americans from all walks of life were also united in their vision of what the "ideal" wealth distribution would be, which may come as an even bigger surprise than their shared misinformation on the actual wealth distribution. They said that the ideal wealth distribution would be one in which the top 20% owned between 30 and 40 percent of the privately held wealth, which is a far cry from the 85 percent that the top 20% actually own. They also said that the bottom 40% — that’s 120 million Americans — should have between 25% and 30%, not the mere 8% to 10% they thought this group had, and far above the 0.3% they actually had. In fact, there’s no country in the world that has a wealth distribution close to what Americans think is ideal when it comes to fairness. So maybe Americans are much more egalitarian than most of them realize about each other, at least in principle and before the rat race begins.

Figure 4, reproduced with permission from Norton & Ariely’s article in Perspectives on Psychological Science, shows the actual wealth distribution, along with the survey respondents’ estimated and ideal distributions, in graphic form.

Figure 4: The actual United States wealth distribution plotted against the estimated and ideal distributions.

Note: In the "Actual" line, the bottom two quintiles are not visible because the lowest quintile owns just 0.1% of all wealth, and the second-lowest quintile owns 0.2%.

Source: Norton & Ariely, 2010.

David Cay Johnston, a retired tax reporter for the New York Times, published an excellent summary of Norton & Ariely’s findings (Johnston, 2010b; you can download the article from Johnston’s Web site).

Historical context

Numerous studies show that the wealth distribution has been extremely concentrated throughout American history, with the top 1% already owning 40-50% in large port cities like Boston, New York, and Charleston in the 19th century. It was very stable over the course of the 20th century, although there were small declines in the aftermath of the New Deal and World II, when most people were working and could save a little money. There were progressive income tax rates, too, which took some money from the rich to help with government services.

Then there was a further decline, or flattening, in the 1970s, but this time in good part due to a fall in stock prices, meaning that the rich lost some of the value in their stocks. By the late 1980s, however, the wealth distribution was almost as concentrated as it had been in 1929, when the top 1% had 44.2% of all wealth. It has continued to edge up since that time, with a slight decline from 1998 to 2001, before the economy crashed in the late 2000s and little people got pushed down again. Table 3 and Figure 5 present the details from 1922 through 2007.

Table 3: Share of wealth held by the Bottom 99% and Top 1% in the United States, 1922-2007.

Bottom 99 percent
Top 1 percent

1922
63.3%
36.7%

1929
55.8%
44.2%

1933
66.7%
33.3%

1939
63.6%
36.4%

1945
70.2%
29.8%

1949
72.9%
27.1%

1953
68.8%
31.2%

1962
68.2%
31.8%

1965
65.6%
34.4%

1969
68.9%
31.1%

1972
70.9%
29.1%

1976
80.1%
19.9%

1979
79.5%
20.5%

1981
75.2%
24.8%

1983
69.1%
30.9%

1986
68.1%
31.9%

1989
64.3%
35.7%

1992
62.8%
37.2%

1995
61.5%
38.5%

1998
61.9%
38.1%

2001
66.6%
33.4%

2004
65.7%
34.3%

2007
65.4%
34.6%

Sources: 1922-1989 data from Wolff (1996). 1992-2007 data from Wolff (2010).

Figure 5: Share of wealth held by the Bottom 99% and Top 1% in the United States, 1922-2007.

Here are some dramatic facts that sum up how the wealth distribution became even more concentrated between 1983 and 2004, in good part due to the tax cuts for the wealthy and the defeat of labor unions: Of all the new financial wealth created by the American economy in that 21-year-period, fully 42% of it went to the top 1%. A whopping 94% went to the top 20%, which of course means that the bottom 80% received only 6% of all the new financial wealth generated in the United States during the ’80s, ’90s, and early 2000s (Wolff, 2007).

The rest of the world

Thanks to a 2006 study by the World Institute for Development Economics Research — using statistics for the year 2000 — we now have information on the wealth distribution for the world as a whole, which can be compared to the United States and other well-off countries. The authors of the report admit that the quality of the information available on many countries is very spotty and probably off by several percentage points, but they compensate for this problem with very sophisticated statistical methods and the use of different sets of data. With those caveats in mind, we can still safely say that the top 10% of the world’s adults control about 85% of global household wealth — defined very broadly as all assets (not just financial assets), minus debts. That compares with a figure of 69.8% for the top 10% for the United States. The only industrialized democracy with a higher concentration of wealth in the top 10% than the United States is Switzerland at 71.3%. For the figures for several other Northern European countries and Canada, all of which are based on high-quality data, see Table 4.

Table 4: Percentage of wealth held in 2000 by the Top 10% of the adult population in various Western countries

wealth owned
by top 10%

Switzerland
71.3%

United States
69.8%

Denmark
65.0%

France
61.0%

Sweden
58.6%

UK
56.0%

Canada
53.0%

Norway
50.5%

Germany
44.4%

Finland
42.3%

The Relationship Between Wealth and Power

What’s the relationship between wealth and power? To avoid confusion, let’s be sure we understand they are two different issues. Wealth, as I’ve said, refers to the value of everything people own, minus what they owe, but the focus is on "marketable assets" for purposes of economic and power studies. Power, as explained elsewhere on this site, has to do with the ability (or call it capacity) to realize wishes, or reach goals, which amounts to the same thing, even in the face of opposition (Russell, 1938; Wrong, 1995). Some definitions refine this point to say that power involves Person A or Group A affecting Person B or Group B "in a manner contrary to B’s interests," which then necessitates a discussion of "interests," and quickly leads into the realm of philosophy (Lukes, 2005, p. 30). Leaving those discussions for the philosophers, at least for now, how do the concepts of wealth and power relate?

First, wealth can be seen as a "resource" that is very useful in exercising power. That’s obvious when we think of donations to political parties, payments to lobbyists, and grants to experts who are employed to think up new policies beneficial to the wealthy. Wealth also can be useful in shaping the general social environment to the benefit of the wealthy, whether through hiring public relations firms or donating money for universities, museums, music halls, and art galleries.

Second, certain kinds of wealth, such as stock ownership, can be used to control corporations, which of course have a major impact on how the society functions. Tables 5a and 5b show what the distribution of stock ownership looks like. Note how the top one percent’s share of stock equity increased (and the bottom 80 percent’s share decreased) between 2001 and 2007.

Table 5a: Concentration of stock ownership in the United States, 2001-2007

Percent of all stock owned:

Wealth class
2001
2004
2007

Top 1%
33.5%
36.7%
38.3%

Next 19%
55.8%
53.9%
52.8%

Bottom 80%
10.7%
9.4%
8.9%

Table 5b: Amount of stock owned by various wealth classes in the U.S., 2007

Percent of households owning stocks worth:

Wealth class
$0 (no stocks)
$1-$10,000
More than $10,000

Top 1%
7.4%
4.2%
88.4%

95-99%
7.8%
2.7%
89.5%

90-95%
13.2%
5.4%
81.4%

80-90%
17.9%
10.9%
71.2%

60-80%
34.6%
18.3%
47.1%

40-60%
52.3%
25.6%
22.1%

20-40%
69.7%
21.6%
8.7%

Bottom 20%
84.7%
14.3%
2.0%

TOTAL
50.9%
17.5%
31.6%

Both tables’ data from Wolff (2007 & 2010).  Includes direct ownership of stock shares and indirect ownership through mutual funds, trusts, and IRAs, Keogh plans, 401(k) plans, and other retirement accounts. All figures are in 2007 dollars.

Third, just as wealth can lead to power, so too can power lead to wealth. Those who control a government can use their position to feather their own nests, whether that means a favorable land deal for relatives at the local level or a huge federal government contract for a new corporation run by friends who will hire you when you leave government. If we take a larger historical sweep and look cross-nationally, we are well aware that the leaders of conquering armies often grab enormous wealth, and that some religious leaders use their positions to acquire wealth.

There’s a fourth way that wealth and power relate. For research purposes, the wealth distribution can be seen as the main "value distribution" within the general power indicator I call "who benefits." What follows in the next three paragraphs is a little long-winded, I realize, but it needs to be said because some social scientists — primarily pluralists — argue that who wins and who loses in a variety of policy conflicts is the only valid power indicator (Dahl, 1957, 1958; Polsby, 1980). And philosophical discussions don’t even mention wealth or other power indicators (Lukes, 2005). (If you have heard it all before, or can do without it, feel free to skip ahead to the last paragraph of this section)

Here’s the argument: if we assume that most people would like to have as great a share as possible of the things that are valued in the society, then we can infer that those who have the most goodies are the most powerful. Although some value distributions may be unintended outcomes that do not really reflect power, as pluralists are quick to tell us, the general distribution of valued experiences and objects within a society still can be viewed as the most publicly visible and stable outcome of the operation of power.

In American society, for example, wealth and well-being are highly valued. People seek to own property, to have high incomes, to have interesting and safe jobs, to enjoy the finest in travel and leisure, and to live long and healthy lives. All of these "values" are unequally distributed, and all may be utilized as power indicators. However, the primary focus with this type of power indicator is on the wealth distribution sketched out in the previous section.

The argument for using the wealth distribution as a power indicator is strengthened by studies showing that such distributions vary historically and from country to country, depending upon the relative strength of rival political parties and trade unions, with the United States having the most highly concentrated wealth distribution of any Western democracy except Switzerland. For example, in a study based on 18 Western democracies, strong trade unions and successful social democratic parties correlated with greater equality in the income distribution and a higher level of welfare spending (Stephens, 1979).

And now we have arrived at the point I want to make. If the top 1% of households have 30-35% of the wealth, that’s 30 to 35 times what we would expect by chance, and so we infer they must be powerful. And then we set out to see if the same set of households scores high on other power indicators (it does). Next we study how that power operates, which is what most articles on this site are about. Furthermore, if the top 20% have 84% of the wealth (and recall that 10% have 85% to 90% of the stocks, bonds, trust funds, and business equity), that means that the United States is a power pyramid. It’s tough for the bottom 80% — maybe even the bottom 90% — to get organized and exercise much power.

Income and Power

The income distribution also can be used as a power indicator. As Table 6 shows, it is not as concentrated as the wealth distribution, but the top 1% of income earners did receive 17% of all income in the year 2003 and 21.3% in 2006. That’s up from 12.8% for the top 1% in 1982, which is quite a jump, and it parallels what is happening with the wealth distribution. This is further support for the inference that the power of the corporate community and the upper class have been increasing in recent decades.

Table 6: Distribution of income in the United States, 1982-2006

Income

Top 1 percent
Next 19 percent
Bottom 80 percent

1982
12.8%
39.1%
48.1%

1988
16.6%
38.9%
44.5%

1991
15.7%
40.7%
43.7%

1994
14.4%
40.8%
44.9%

1997
16.6%
39.6%
43.8%

2000
20.0%
38.7%
41.4%

2003
17.0%
40.8%
42.2%

2006
21.3%
40.1%
38.6%

From Wolff (2010).

The rising concentration of income can be seen in a special New York Times analysis by David Cay Johnston of an Internal Revenue Service report on income in 2004. Although overall income had grown by 27% since 1979, 33% of the gains went to the top 1%. Meanwhile, the bottom 60% were making less: about 95 cents for each dollar they made in 1979. The next 20% – those between the 60th and 80th rungs of the income ladder — made $1.02 for each dollar they earned in 1979. Furthermore, Johnston concludes that only the top 5% made significant gains ($1.53 for each 1979 dollar). Most amazing of all, the top 0.1% — that’s one-tenth of one percent — had more combined pre-tax income than the poorest 120 million people (Johnston, 2006).

But the increase in what is going to the few at the top did not level off, even with all that. As of 2007, income inequality in the United States was at an all-time high for the past 95 years, with the top 0.01% — that’s one-hundredth of one percent — receiving 6% of all U.S. wages, which is double what it was for that tiny slice in 2000; the top 10% received 49.7%, the highest since 1917 (Saez, 2009). However, in an analysis of 2008 tax returns for the top 0.2% — that is, those whose income tax returns reported $1,000,000 or more in income (mostly from individuals, but nearly a third from couples) — it was found that they received 13% of all income, down slightly from 16.1% in 2007 due to the decline in payoffs from financial assets (Norris, 2010).

And the rate of increase is even higher for the very richest of the rich: the top 400 income earners in the United States. According to another analysis by Johnston (2010a), the average income of the top 400 tripled during the Clinton Administration and doubled during the first seven years of the Bush Administration. So by 2007, the top 400 averaged $344.8 million per person, up 31% from an average of $263.3 million just one year earlier. (For another recent revealing study by Johnston, read "Is Our Tax System Helping Us Create Wealth?").

How are these huge gains possible for the top 400? It’s due to cuts in the tax rates on capital gains and dividends, which were down to a mere 15% in 2007 thanks to the tax cuts proposed by the Bush Administration and passed by Congress in 2003. Since almost 75% of the income for the top 400 comes from capital gains and dividends, it’s not hard to see why tax cuts on income sources available to only a tiny percent of Americans mattered greatly for the high-earning few. Overall, the effective tax rate on high incomes fell by 7% during the Clinton presidency and 6% in the Bush era, so the top 400 had a tax rate of 20% or less in 2007, far lower than the marginal tax rate of 35% that the highest income earners (over $372,650) supposedly pay. It’s also worth noting that only the first $106,800 of a person’s income is taxed for Social Security purposes (as of 2010), so it would clearly be a boon to the Social Security Fund if everyone — not just those making less than $106,800 — paid the Social Security tax on their full incomes.

A key factor behind the high concentration of income, and another likely reason that the concentration has been increasing, can be seen by examining the distribution of all "capital income": income from capital gains, dividends, interest, and rents. In 2003, just 1% of all households — those with after-tax incomes averaging $701,500 — received 57.5% of all capital income, up from 40% in the early 1990s. On the other hand, the bottom 80% received only 12.6% of capital income, down by nearly half since 1983, when the bottom 80% received 23.5%. Figure 6 and Table 7 provide the details.

Figure 6: Share of capital income earned by top 1% and bottom 80%, 1979-2003 (From Shapiro & Friedman, 2006.)

Table 7: Share of capital income flowing to households in various income categories

Top 1%
Top 5%
Top 10%
Bottom 80%

1979
37.8%
57.9%
66.7%
23.1%

1981
35.8%
55.4%
64.6%
24.4%

1983
37.6%
55.2%
63.7%
25.1%

1985
39.7%
56.9%
64.9%
24.9%

1987
36.7%
55.3%
64.0%
25.6%

1989
39.1%
57.4%
66.0%
23.5%

1991
38.3%
56.2%
64.7%
23.9%

1993
42.2%
60.5%
69.2%
20.7%

1995
43.2%
61.5%
70.1%
19.6%

1997
45.7%
64.1%
72.6%
17.5%

1999
47.8%
65.7%
73.8%
17.0%

2001
51.8%
67.8%
74.8%
16.0%

2003
57.5%
73.2%
79.4%
12.6%

Adapted from Shapiro & Friedman (2006).

Another way that income can be used as a power indicator is by comparing average CEO annual pay to average factory worker pay, something that has been done for many years by Business Week and, later, the Associated Press. The ratio of CEO pay to factory worker pay rose from 42:1 in 1960 to as high as 531:1 in 2000, at the height of the stock market bubble, when CEOs were cashing in big stock options. It was at 411:1 in 2005 and 344:1 in 2007, according to research by United for a Fair Economy. By way of comparison, the same ratio is about 25:1 in Europe. The changes in the American ratio from 1960 to 2007 are displayed in Figure 7, which is based on data from several hundred of the largest corporations.

Figure 7: CEOs’ pay as a multiple of the average worker’s pay, 1960-2007

Source: Executive Excess 2008, the 15th Annual CEO Compensation Survey from the Institute for Policy Studies and United for a Fair Economy.

It’s even more revealing to compare the actual rates of increase of the salaries of CEOs and ordinary workers; from 1990 to 2005, CEOs’ pay increased almost 300% (adjusted for inflation), while production workers gained a scant 4.3%. The purchasing power of the federal minimum wage actually declined by 9.3%, when inflation is taken into account. These startling results are illustrated in Figure 8.

Figure 8: CEOs’ average pay, production workers’ average pay, the S&P 500 Index, corporate profits, and the federal minimum wage, 1990-2005 (all figures adjusted for inflation)

Source: Executive Excess 2006, the 13th Annual CEO Compensation Survey from the Institute for Policy Studies and United for a Fair Economy.

Although some of the information I’ve relied upon to create this section on executives’ vs. workers’ pay is a few years old now, the AFL/CIO provides up-to-date information on CEO salaries at their Web site. There, you can learn that the median compensation for CEO’s in all industries as of early 2010 is $3.9 million; it’s $10.6 million for the companies listed in Standard and Poor’s 500, and $19.8 million for the companies listed in the Dow-Jones Industrial Average. Since the median worker’s pay is about $36,000, then you can quickly calculate that CEOs in general make 100 times as much as the workers, that CEO’s of S&P 500 firms make almost 300 times as much, and that CEOs at the Dow-Jones companies make 550 times as much.

If you wonder how such a large gap could develop, the proximate, or most immediate, factor involves the way in which CEOs now are able to rig things so that the board of directors, which they help select — and which includes some fellow CEOs on whose boards they sit — gives them the pay they want. The trick is in hiring outside experts, called "compensation consultants," who give the process a thin veneer of economic respectability.

The process has been explained in detail by a retired CEO of DuPont, Edgar S. Woolard, Jr., who is now chair of the New York Stock Exchange’s executive compensation committee. His experience suggests that he knows whereof he speaks, and he speaks because he’s concerned that corporate leaders are losing respect in the public mind. He says that the business page chatter about CEO salaries being set by the competition for their services in the executive labor market is "bull." As to the claim that CEOs deserve ever higher salaries because they "create wealth," he describes that rationale as a "joke," says the New York Times (Morgenson, 2005, Section 3, p. 1).

Here’s how it works, according to Woolard:

The compensation committee [of the board of directors] talks to an outside consultant who has surveys you could drive a truck through and pay anything you want to pay, to be perfectly honest. The outside consultant talks to the human resources vice president, who talks to the CEO. The CEO says what he’d like to receive. It gets to the human resources person who tells the outside consultant. And it pretty well works out that the CEO gets what he’s implied he thinks he deserves, so he will be respected by his peers. (Morgenson, 2005.)

The board of directors buys into what the CEO asks for because the outside consultant is an "expert" on such matters. Furthermore, handing out only modest salary increases might give the wrong impression about how highly the board values the CEO. And if someone on the board should object, there are the three or four CEOs from other companies who will make sure it happens. It is a process with a built-in escalator.

As for why the consultants go along with this scam, they know which side their bread is buttered on. They realize the CEO has a big say-so on whether or not they are hired again. So they suggest a package of salaries, stock options and other goodies that they think will please the CEO, and they, too, get rich in the process. And certainly the top executives just below the CEO don’t mind hearing about the boss’s raise. They know it will mean pay increases for them, too. (For an excellent detailed article on the main consulting firm that helps CEOs and other corporate executives raise their pay, check out the New York Times article entitled "America’s Corporate Pay Pal", which supports everything Woolard of DuPont claims and adds new information.)

There’s a much deeper power story that underlies the self-dealing and mutual back-scratching by CEOs now carried out through interlocking directorates and seemingly independent outside consultants. It probably involves several factors. At the least, on the worker side, it reflects an increasing lack of power following the all-out attack on unions in the 1960s and 1970s, which is explained in detail by the best expert on recent American labor history, James Gross (1995), a labor and industrial relations professor at Cornell. That decline in union power made possible and was increased by both outsourcing at home and the movement of production to developing countries, which were facilitated by the break-up of the New Deal coalition and the rise of the New Right (Domhoff, 1990, Chapter 10). It signals the shift of the United States from a high-wage to a low-wage economy, with professionals protected by the fact that foreign-trained doctors and lawyers aren’t allowed to compete with their American counterparts in the direct way that low-wage foreign-born workers are.

On the other side of the class divide, the rise in CEO pay may reflect the increasing power of chief executives as compared to major owners and stockholders in general, not just their increasing power over workers. CEOs may now be the center of gravity in the corporate community and the power elite, displacing the leaders in wealthy owning families (e.g., the second and third generations of the Walton family, the owners of Wal-Mart). True enough, the CEOs are sometimes ousted by their generally go-along boards of directors, but they are able to make hay and throw their weight around during the time they are king of the mountain. (It’s really not much different than that old children’s game, except it’s played out in profit-oriented bureaucratic hierarchies, with no other sector of society, like government, willing or able to restrain the winners.)

The claims made in the previous paragraph need much further investigation. But they demonstrate the ideas and research directions that are suggested by looking at the wealth and income distributions as indicators of power.

Further Information
References

AFL-CIO (2010). Executive PayWatch: CEO Pay Database: Compensation by Industry. Retrieved February 8, 2010 from http://www.aflcio.org/corporatewatch/paywatch/ceou/industry.cfm.

Anderson, S., Cavanagh, J., Collins, C., Lapham, M., & Pizzigati, S. (2008). Executive Excess 2008: How Average Taxpayers Subsidize Runaway Pay. Washington, DC: Institute for Policy Studies / United for a Fair Economy.

Anderson, S., Cavanagh, J., Collins, C., Lapham, M., & Pizzigati, S. (2007). Executive Excess 2007: The Staggering Social Cost of U.S. Business Leadership. Washington, DC: Institute for Policy Studies / United for a Fair Economy.

Anderson, S., Benjamin, E., Cavanagh, J., & Collins, C. (2006). Executive Excess 2006: Defense and Oil Executives Cash in on Conflict. Washington, DC: Institute for Policy Studies / United for a Fair Economy.

Anderson, S., Cavanagh, J., Klinger, S., & Stanton, L. (2005). Executive Excess 2005: Defense Contractors Get More Bucks for the Bang. Washington, DC: Institute for Policy Studies / United for a Fair Economy.

Citizens for Tax Justice (2010). State-by-State Estate Tax Figures: Number of Deaths Resulting in Estate Tax Liability Continues to Drop. Retrieved December 13, 2010 from http://www.ctj.org/pdf/estatetax2010.pdf.

Dahl, R. A. (1957). The concept of power. Behavioral Science, 2, 202-210.

Dahl, R. A. (1958). A critique of the ruling elite model. American Political Science Review, 52, 463-469.

Davies, J. B., Sandstrom, S., Shorrocks, A., & Wolff, E. N. (2006). The World Distribution of Household Wealth. Helsinki: World Institute for Development Economics Research.

Domhoff, G. W. (1990). The Power Elite and the State: How Policy Is Made in America. Hawthorne, NY: Aldine de Gruyter.

Gross, J. A. (1995). Broken Promise: The Subversion of U.S. Labor Relations Policy. Philadelphia: Temple University Press.

Johnston, D. C. (2010b). United in Our Delusion. Retrieved October 12, 2010 from http://www.tax.com/taxcom/taxblog.nsf/Permalink/UBEN-8A6TUW?OpenDocument.

Johnston, D. C. (2010a). Tax Rates for Top 400 Earners Fall as Income Soars, IRS Data. Retrieved February 23, 2010 from http://www.tax.com/taxcom/features.nsf/Articles/0DEC0EAA7E4D7A2B852576CD00714692?OpenDocument.

Johnston, D. C. (2009, December 21). Is Our Tax System Helping Us Create Wealth? Tax Notes, pp. 1375-1377.

Johnston, D. C. (2006, November 28). ’04 Income in U.S. Was Below 2000 Level. New York Times, p. C-1.

Keister, L. (2005). Getting Rich: A Study of Wealth Mobility in America. New York: Cambridge University Press.

Kenny, C., Lincoln, T., Collins, C., & Farris, L. (2006). Spending Millions to Save Billions: The Campaign of the Super Wealthy to Kill the Estate Tax. Washington, DC: Public Citizen / United for a Fair Economy.

Kotlikoff, L., & Gokhale, J. (2000). The Baby Boomers’ Mega-Inheritance: Myth or Reality? Cleveland: Federal Reserve Bank of Cleveland.

Lukes, S. (2005). Power: A Radical View (Second ed.). New York: Palgrave.

Madoff, R. D. (2010, July 12). America Builds an Aristocracy. New York Times, p. A-19.

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Norris, F. (2010, July 24). Off the Charts: In ’08 Downturn, Some Managed to Eke Out Millions. New York Times, p. B-3.

Norton, M. I., & Ariely, D. (2010, forthcoming). Building a better America – one wealth quintile at a time. Perspectives on Psychological Science.

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This document’s URL: http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

The Mesh: Why the future of business is sharing, by Lisa Gansky

In Uncategorized on January 9, 2011 at 2:02 pm
January 3rd, 2011
· Book Review, Talents, Innovators

By Marylene Delbourg-Delphis @mddelphis

The Mesh

The Mesh, an old word meaning the “opening between the threads of a net” got its technology flavor with the concept of mesh networking generally defined as “a type of networking wherein each node in the network may act as an independent router.” For Lisa Gansky, in her book The Mesh, Why the future of business is sharing, “the Mesh is the new way of doing business.” It is made possible by the increasingly sophisticated understanding of consumers’ behavior patterns, as well as multiple technologies that matured over the last fifteen years, ranging from RFID, broadband management, GPS-enabled mobile web devices, to social media networks or data processing.

Described in chapter 1, “Getting to know the Mesh,” the Zipcar experience provides a foundational example from which Gansky presents the “Mesh business” that has fleshed out over the last ten years. It is defined through five main attributes:

  • Shareability: Products or services can be shared within a community (whatever it is);
  • Advanced Web and mobile networks, and information infrastructures: They allow real-time tracking of what is shared;
  • Immediate availability: Users can access the shared goods wherever they are physically;
  • Evangelization through social networking: Happy users spread the word about their experience;
  • Global service networks: Any Mesh service can come with a network of ancillary services through partnerships.

Gansky ends up adopting/adapting the technology definition of mesh networks: “A mesh describes a type of network that allows any node to link in any direction with any other node in the system.”

The advantages and the meaning of the Mesh economy are spelled out throughout the following eight chapters for both the users and the providers of Mesh services. The on-demand availability of physical goods creates a new type of cooperative and trust-based environment as well as, ultimately, a cultural shift that points toward the new aspects of our liberal economy. This includes:

Usage-based consumption models: Why not take advantage of shareable goods when they are easily available? How many cars do we really need in a family? Do we need to buy new clothes all the time? Why not swap children’s clothing and toys through ThredUp, for example? The Mesh economy provides us access to many goods while sparing us from the constraints and superfluous expenses of ownership, as well as the depreciative process of accumulating things. The throwaway economy is disappearing quickly.

Global anti-waste approaches:  While many anti-waste measures in our life are still primarily corrective, the Mesh is designed to structurally reduce the amount of garbage in the first place. Continued participation in the Mesh requires goods that hold up to repeated uses, i.e. that are durable and reparable. On the production side, this entails demand-driven and tightly integrated distributed supply chains that also provision “reverse supply chains,” as the goal is not only to sell products, but also to repair them or recycle and “upcycle” parts.

Marketplace-driven overhead reduction principles: Remember the noise ten years ago about how Internet was removing the middleman and how we were entering the disintermediation age (strikingly enough, a word that was coined in the sixties and originally referred to the ability for consumers to invest directly in securities)? This is actually happening. Tellingly, to defend itself in 2008, Prosper, a p2p financial company, had to argue that that it was not a bank, but a marketplace, which the SEC’s investigators admitted. Great news. Structures do not build the economy, consumers do… and they do so precisely in a marketplace where they expect transparency.

My summary: The Mesh, a consumer-driven free economy: Mesh businesses address people and send them recommendations and/or advertizing messages based on their personal behavioral patterns: that’s why they are winning at a fast pace. While traditional liberalism mandates the right to undertake from the entrepreneur’s standpoint and is predicated on mechanisms pushing products to consumers, the Mesh liberalism factors in the consumers’ pull and their ability to transform any company into a service company delivering services to which they may or may not subscribe, depending on the quality of the offering and assistance they get.

Netflix slayed the “movie dragon,” because consumers are the ones who make or break companies (more so than ever). They are free social animals, choosing with whom they interact and to whom they want to listen, and are moving away from business institutions that do not hear their conversations. In many respects, the world of the Mesh is the expression of a consumer-driven free economy as well as the market incarnation of Rousseau’s social contract “by which every person, while uniting himself with all, shall obey only himself and remain as free as before.

A very interesting book, which also includes an extensive “Mesh directory.”

Thanks to Seth Godin for attracting my attention to this book!

The Distribution of Wealth in America

In Uncategorized on January 9, 2011 at 1:57 pm

 

There is very little data about the distribution of wealth in America.  There is one source, the Survey of Consumer Finances, sponsored by the Federal Reserve Board,  that does provide data from 1983.

These data suggest that wealth is concentrated in the hands of a small number of families. The wealthiest 1 percent of families owns roughly 34.3%  of the nation’s net worth, the top 10% of families owns over 71%, and the bottom 40% of the population owns way less than 1%.


Changes in the Concentration of Wealth

What is happening to the concentration of wealth in America?
Are we experiencing increasing equality, increasing inequality, or not much change?

As with the case of income, the evidence suggests an increase in inequality over time.


The Distribution of Wealth and Income

The distribution of wealth is much more unequal than the distribution of income, especially when focussing on the bottom 60% of all households.  The bottom 60% of households possess only 4% of the nation’s wealth while it earns 26.8% of all income.


Can you think of any reason for the much greater inequality in wealth than in income?

What do we tax more in the US:  wealth (assets) or income?

Think of all kinds of "income" taxes that exist — federal, state, and (in some cases) local.  Think of the very few kinds of assets that are taxed:  property taxes, in some states taxes on the value of cars.   If you own considerable assets do you have a reason to keep them in forms that will not be taxed?


Which is a Better Measure of Societal Inequality:  Wealth or Income?

Looking at the distribution of wealth and looking at the distribution of income gives the researcher two quite different views of the amount of inequality in American society.   Which economic measure — wealth or income — should be emphasized?

Alan Greenspan, chairman of the Federal Reserve Bank, make the case for wealth:
"Ultimately, we are interested in the question of relative standards of living and economic well-being. We  need to examine trends in the distribution of wealth, which, more fundamentally than earnings or income, represents a measure of the ability of households to consume."

Those who argue for the greater importance of income make the case that for wealth to actually have a significant impact on one’s standard of living it has to be translated into higher income.


*For those interested in reading a very good study of wealth distribution in the US, please see Edward N. Wolff’s  "Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze," June, 2007.  (Download the full text pdf file.)

Acidity vs Alkalinity

In Uncategorized on January 7, 2011 at 7:23 pm

FYI Only
Acidifying Foods (Avoid)
Alcohol including wine.
Dairy except organic unpasteurized milk and Cottage cheese.
Grains except millet.
Meat including fish except for white meat chicken and eggs.
Nuts except for almonds and chestnuts.
Oils including olive oil.
Natural and artificial Sweeteners except Stevia
Alkalizing Foods (Good)
Fruits except Cranberries.
Vegetables except potatoes
White meat chicken and eggs.
Spices including salt and all herbs.
PH Range and Significance:
7.0 to 7.5+ is healthy
6.0 to 6.5 could develop disease
4.5 to 5.5 disease may be present
Alphabetical Listing (alk = alkalizing, acid = acidifying) Red = strong acidifying Blue = strong alkalizing
Alfalfa- alk
Alkaline Antioxidant- alk
Almond Milk – acid
Almonds- alk
Amaranth – acid
Apple- alk
Apple Cider Vinegar- alk
Apricot- alk
Asparagus – alk
Avocado- alk
Avocado Oil – acid
Banana (ripe) – alk
Banchi Tea- alk
Barley – acid
Barley Grass- alk
Beans – acid
Bee Pollen- alk
Beef – acid
Beer – acid
Beets- alk
Berries (not cranberry)- alk
Black Beans – acid
Brazil Nuts – acid
Broccoli- alk
Brussel- alk
Buckwheat – acid
Butter – acid
Cabbage- alk
Cakes – acid
Canola Oil – acid
Cantaloupe- alk
Carrot- alk
Cashews – acid
Cauliflower- alk
Celery- alk
Chard- alk
Cheese – acid
Chemicals – acid
Cherries – alk
Chestnuts – alk
Chick Peas – acid
Chicken Breast- alk
Chili Pepper- alk
Chlorella – alk
Cinnamon – alk
Clams – acid
Coffee – acid
Collard Greens – alk
Corn – acid
Corn Oil – acid
Cottage cheese – alk
Cranberries – acid
Cucumber – alk
Currants – alk
Curry – alk
Daikon – alk
Dandelions – alk
Dates – alk
Drugs (most) – acid
Dulce – alk
Edible Flowers – alk
Eggplant – alk
Eggs – alk
Figs – alk
Fish – acid
Flax Oil – acid
Flax Seeds – alk
Flour except millet flour – acid
Fruit Juice unsweetened – alk
Garlic – alk
Ginger – alk
Ginseng Tea – alk
Grapefruit – alk
Grapes – alk
Green Juices – alk
Green Peas – acid
Green Tea – alk
Greens – alk
Hard Liquor – acid
Hemp Seed – acid
Herbal Tea – alk
Herbs – alk
Honeydew – alk
Kale – alk
Kamut – acid
Kidney Beans – acid
Kohlrabi – alk
Kombu – alk
Kombucha – alk
Lamb – acid
Lard – acid
Lecithin Granules – alk
Lemon – alk
Lentils – acid
Lettuce – alk
Lima Beans – acid
Lime – alk
Lobster – acid
Macaroni – acid
Maitake – alk
Melon – alk
Milk – acid
Milk organic unpasteurized – alk
Millet – alk
Mineral Water – alk
Miso – alk
Mushrooms – alk
Mussels – acid
Mustard – alk
Nectarine – alk
Noodles – acid
Nori – alk
Oats – acid
Oil – acid
Olive Oil – acid
Onions – alk
Orange – alk
Oyster – acid
Parsnips (high glycemic) – alk
Peach – alk
Peanuts – acid
Pear – alk
Peas – alk
Pecans – acid
Peppers – alk
Pineapple – alk
Pinto Beans – acid
Pork – acid
Potatoes – acid
Powder – alk
Probiotic Cultures – alk
Pumpkin – alk
Pumpkin – alk
Quinoi – acid
Rabbit – acid
Red Beans – acid
Reishi – alk
Rice – acid
Rice Milk – acid
Rutabaga – alk
Rye – acid
Safflower Oil – acid
Salmon – acid
Salt – alk
Scallops – acid
Sea Veggies – alk
Seeds – alk
Sesame Oil – acid
Shitake – alk
Shrimp – acid
Soy Beans – acid
Soy Milk – acid
Spaghetti – acid
Spelt – acid
Spirulina – alk
Sprouted seeds – alk
Sprouts – alk
Squash Seeds – alk
Squashes – alk
Stevia – alk
Sunflower oil – acid
Sunflower seeds – alk
Tahini – acid
Tamari – alk
Tangerine – alk
Tea (black) – acid
Tempeh fermented – alk
Tofu – alk
Tomato – alk
Tropical Fruits – alk
Tuna – acid
Turkey – acid
Umeboshi – alk
Vegetables Juices – alk
Vinegar Distilled – acid
Wakame – alk
Walnuts – acid
Water – alk
Watercress – alk
Watermelon – alk
Wheat – acid
Wheat Grass – alk
Whey Protein – alk
White Beans – acid
Wild Greens – alk
Wine – acid
Yogurt – alk
Extremely Alkalizing
Lemons, Watermelon
Strongly Alkaline
Asparagus, Cantaloupe, Cayenne, Celery, Dates, Figs, Fruit Juices, Grapes (sweet), Kelp, Kiwifruit, Limes, Mango, Melons, Papaya, Parsley, Passionfruit, Pears (sweet), Pineapple, Raisins, Seaweeds, Seedless Grapes (sweet), Umeboshi Plums, Vegetable Juices, Watercress
Moderately Alkalizing
Alfalfa Sprouts, Apples (sour), Apples (sweet), Apricots, Avocados, Bananas (ripe), Beans (fresh, Beets, Bell Peppers, Broccoli, Cabbage, Carob, Cauliflower, Currants, Dates, Figs (fresh), Garlic, Ginger (fresh), Grapefruit, Grapes (less sweet), Grapes (sour), green), Guavas, Herbs (leafy green), Lettuce (leafy green), Lettuce (pale green), Nectarine, Oranges, Peaches (less sweet), Peaches (sweet), Pears (less sweet), Peas (fresh, Peas (less sweet), Potatoes (with skin), Pumpkin (less sweet), Pumpkin (sweet), Raspberries, Sea Salt (vegetable), Squash, Strawberries, Sweet Corn (fresh), sweet), Turnip, Vinegar (apple cider)
Slightly Alkalizing
Almonds, Artichokes (Jerusalem), Brussel Sprouts, Cherries, Chestnuts (dry, Coconut (fresh), Cow’s Milk and Whey (raw), Cream (fresh, Cucumbers, Eggplant, Eggs, Goat’s Milk and Whey (raw), Honey (raw), Leeks, Margarine, Mushrooms, Neutral Butter (fresh, Oils (except olive), Okra, Olive Oil, Olives (ripe), Onions, Pickles (homemade), Poultry (white meat), Radishes, raw), roasted), Sea Salt, Sesame Seeds (whole), Soy Beans (dry), Soy Cheese, Soy Milk, Spices, Sprouted Grains, Tofu, Tomatoes (less sweet), Tomatoes (sweet), unsalted), Vinegar (sweet brown rice), Yeast (nutritional flakes), Yogurt (plain)
Moderately Acidifying
Adzuki, Bananas (green), Barley (rye), Beans (mung, Dry Coconut, Fructose, garbanzo), Blueberries, Bran, Butter, Cereals (unrefined), Cheeses, Crackers (unrefined rye, Cranberries, Goat’s Milk, Honey (pasteurized), Ketchup, kidney, Maple Syrup (unprocessed), Milk (homogenized), Molasses (un-sulfured and organic), Most Nuts, Mustard, Oats (rye, Olives (pickled), organic), Pasta (whole grain), Pastry (whole grain and honey), pinto, Plums, Popcorn (with salt and/or butter), Potatoes, Prunes, Rice (basmati and brown), rice and wheat), Seeds (pumpkin, Soy Sauce, sunflower), Wheat Bread (sprouted organic)
Extremely Acidifying
Artificial Sweeteners, Beef, Beer, Breads, Brown Sugar, Carbonated Soft Drinks, Cereals (refined), Chocolate, Cigarettes and Tobacco, Coffee, Cream of Wheat (unrefined), Custard (with white sugar), Deer, Drugs, Fish, Flour (white wheat), Fruit Juices with Sugar, Jams, Jellies, Lamb, Liquor, Maple Syrup (processed), Molasses (sulfured), Pasta (white), Pastries and Cakes from White Flour, Pickles (commercial), Pork, Poultry (dark meat), Sugar (white), Table Salt (refined and iodized), Tea (black), White Bread, White Vinegar (processed), Whole Wheat Foods, Wine, Yogurt (sweetened)
Sources
The above lists are a compilation of information taken from two web sites:
The Wolfe Clinic web site at:
http://www.thewolfeclinic.com/index.html
and the Essense-of-Life web site at:
http://www.essense-of-life.com/index.htm
WARNING – an alkalizing diet will deplete your body of potassium. You must take potassium supplements while on this diet. The amount of potassium you need many vary, but athletes who sweat a lot need three or four grams (1000 mg) a day of additional potassium.