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Thursday, April 29, 2010

Latest Knitting Project: Toddler Truck Sweater

While not often blogged about, knitting is one of the 4 pillars of this blog (health care, MBA's, climbing being the other pillars). That's probably because I no longer knit as quickly as I used to but for those readers who tune in for the knitting stories, here's the latest project.

Berroco offered this pattern for a toddler truck sweater using their Berroco cool yarn. Berroco Cool yarn is considered baby yarn which means you can easily wash it and dry it when someone vomits on it.

Unlike Sirdar patterns which I consider to be the 11th plague that was almost inflicted on the Egyptians, this pattern was very straight forward and easy to follow. The challenging part is the truck pattern and weaving in all of the different colors. Knitting with a second color is not difficult as you just use the second color for the designated stitches and follow in the back. Managing all of those different strands of colors and weaving them in within a kitchener needle is the hard part. I consolidated a few colors in the pattern so it was easier to manage.

I also knit 2 sizes larger than needed in anticipation of not finishing it during the winter that I started it. I haven't forced it over its recipient's head yet but it should at last through next winter.

Monday, April 26, 2010

Don't Let your MBA Suck the Soul Out of you Hobbies

The latest issue of my Wharton alumni magazine arrived a week ago. As usual, I looked at the class news sections to see who wrote about their new job using nonsensical corporate buzz, investor relations pitch, and rationalizations. For example, "I am starting my own long-term, early stage mezzanine fund with a focus on transforming legacy systems in emerging economies to dynamic, nimble, green-based cloud systems. I work 18 hours a day and drink my own urine because I don't have time to drink and go to the bathroom but I wouldn't trade this experience for anything!"

After that enjoyable perusal, I saw an article about Lei Wang's attempt to become the 10th person in the galaxy to climb the highest peak on each continent and ski both Poles. Wang's background makes the story even more incredible. I also knew Wang, was a classmate of hers, and saw Luna in concert with her (another example of her sense of adventure). I like her but hate her climbing philosophy. I hate the sin but love the sinner or in more modern parlance, I won't hate the playa, just the game. I ain't no playa hata but I am going to criticize her quotes in the article. This does not mean I am critical of Wang herself and everything that she has done.

This is part of the larger issue of MBA's who take the fun out of any hobby. They are not content to have a leisure activity but need to be the best at the leisure activity and establish metrics to dominate that leisure activity. These metrics are pursued with the intensity of a quarterly earning reports where it is not enough to meet analyst expectations. No, the ideal MBA will attempt to kill themselves with exertion to meet those metrics or even better, or achieve the holy grail of exceeding them. An MBA will not just take up knitting and maybe make a scarf and hat or two. An MBA must knit a wardrobe for a small village while starting a side knitting business that will be taken public.

Wang is guilty of this (but I'm not being a playa hata it's for illustrative purposes of a larger problem). I had previously read she wanted to initially accomplish her goal by the 2008 Beijing Summer Olympics. That's because MBA's don't just like to accomplish incredible goals in their lifetimes but they like to finish them early. The Wharton magazine article talks about Wang battling hypothermia, food poisoning, and fire breathing dragons with big swords in an effort to summit. This is actually a bigger issue of climbers making bad decisions to reach the summit rather than try another day. Or, the desire for MBA's to push their bodies to the absolute limits for their hobbies. There is no distinction in effort between jobs, relationships, or hobbies. If an MBA became a monk, they would pray and chant harder than anyone else in order to achieve enlightenment by year end in order to achieve first mover advantage in their cloister.

I've been climbing for about the same time as Wang. Last summer, I backpacked to the beautiful Lake of the Angels in the Olympic Penninsula to climb Mt Stone, a modest 6,612 foot peak. I tweaked my ham string during the hike and decided not to climb. Instead I enjoyed the lake, goats, and hiked to the top of a ridge to enjoy the views. The mountain will always be there, I'll have the vacation days, and I can climb it when I wouldn't risk my safety. I preferred to climb the 10,778 foot Mt Baker for a glacier experience rather than the 14,411 foot Mt Rainier. The reason is that the glacier travel experience on Baker is similar to Rainier without having to gain 5,000 feet of elevation for the approach. The "prestige" of climbing Rainier is not worth it for me. I take climbing classes, I take opportunities to improve my skills, and I enjoy climbing as a hobby. It's not about achievement for me.

Future MBA's, remember this when you first experience the powerful force of hundreds of MBA's together in a small building. Placing all those type A personalities in one room violates a law of physics since energy gets created in greater quantities than the mass that produces it. Or something like that. Channel that competitive spirit into appropriate places like your job, career, or philanthropy. If you like to jog, you don't have to run an iron man marathon. If you like to write, you don't need to publish a best seller in 5 languages. If you like to snort cocaine, you don't need to inhale a small Colombian jungle.
Don't let the MBA competitive spirit consume your soul by taking over your hobbies.
And Lei, congratulations, on your climbs.

Monday, April 19, 2010

Has Misery made Health Insurance and the Financial Services Strange Bed Fellows

There's nothing like a good mixed metaphor in a blog title. As a health insurance trench worker, I have experienced the misery of the scolding by the media coverage during health reform legislation. That experience has made it tempting to be gleeful about the misery that the financial services is experiencing as Congress debates an industry overhaul. However, that experience should make health insurance and the financial services strange bed fellows. Or just strange as both industries are experiencing social critiques while new legislation being pursued that will reshape their future.

During the coverage of the health insurance industry, the statistics used were often exceptions rather than really tell the story of the industry. Articles claim that health insurance companies spent 30% of the cost of health insurance on administration and profit. What is missing is that this represents the individual line of business which has higher administrative costs. Senator Rockerfeller commissioned this report which provides great analysis of how much carriers spend on medical care by different lines of business and how it varies by state. While it is used to show that carriers are not meeting the new requirements of spending at least 80% on medical care for individual insurance, the other side is that they are only 5% off this threshold. Considering that the cost of insurance is increasing 10% every year, the 5% reduction does not really address affordability. For employer group business, this report does show that they generally are meeting thresholds or are a few percent off.

Finally, keep in mind that this report is for national carriers. Local insurance plans tend to lower administrative costs and spend more on medical care. The actual story is much more complicated than the easy characterization.

The high increase in health insurance rates like Anthem's infamous 39% increase in California as well as the rhetoric has led to the Massachusetts insurance regulators' refusal to allow rate increases. Massachusett's plan was to blame the insurance companies for the double digit rate increase rather than their own regulations around community rating or the fact that prestigious hospital systems demands have grown to rock star proportions. The elite Massachusetts hospital systems reimbursement demands are fairly comparable to the rock star who demands a peeled M&M's in a bowl by every toilet they use.

In general, the focus has been knocking 2 or 3 percent off the 15% of the health care dollar (insurance administration and margin) rather than addressing the 85% of the health care dollar (actual medical costs). The insurance reforms being put in place are long overdue and will make health care more humane but they are not following the big money.

This mischaracterization of the cost structures and real cost drivers of the health insurance industry has caused me to wonder if the characterization of the financial services industry and banks are really fair and balanced. This is despite listening to This American Life's story about the hedge fund Magnatar, which made me forget my MBA diploma in favor of a pitch fork and torch for some populist rage. In this story, Magnatar (named after a black hole which is something else that sucks), made a lot of money by exacerbating the collapse of the mortgage industry even worse. Currently, Goldman Sachs, who are kind of the peeled M&M eating rock stars of banking world, are being sued by the SEC for their role in similar schemes as Magnatar. Finally, I really can't think of a reason not to reinstate the Glass-Stegall Act which placed additional regulation on banking. Keeping investment and commercial banking separate sounds like a very logical idea. Combining them has been a very costly experiment.

All of this should even get the most stoned and M&M bloated rock star angry. However, I could find similar material on health insurance companies and disprove it with my industry knowledge. The financial service industry has countered that these reforms will reduce consumer and business access to credit by making the cost of capital more expensive. These risky financial products that were dubbed Weapons of Mass Destruction allowed banks to lend more and increase credit because of the lack of impact on their capital requirements or balance sheet. However, these new reforms will unlikely change the bonus system or bank's fee structure. Consumers who want to borrow more money than they can afford to buy power boats will still find a way to do so.

I think the spitting and sputtering vitriol that has been spent on the health insurance industry, banks, and Duke Blue Devils is due to the fact that we know what we don't like in a health insurance or financial system but we don't know what we do like. Well, with the Blue Devils, we actually know what we want their underdog opponent to win and Duke to lose in the 2nd round of the NCAA basketball tournament every year. But we do hate this team as much as we hate those other industries.

Regulations and the popular media are looking to punish these two industries rather than advocate for and build a new system because we don't know and can't agree on what a new health and financial system should be. With health care, we want care to be affordable enough that everyone can access it but aren't ready to get really serious about the decisions to create such a system. We can't expect everyone to be able to access as much innovative and invasive care as they want for a cost less than 20% of the US GDP.

With financial services, we believe in access to easy credit is essential to the American dream to pay for college, start a business, buy a house, and start a cocaine habit with really premium cocaine. Access to credit has become a key platform in civil rights issues. However, we haven't come up with a better way to determine credit worthiness and sound lending that is not too conservative. These last 5 years was an interesting experiment but should we be surprised that people with a bad credit history make bad financial decisions? Should we be surprised by the results when banks can figure out a way to get paid for giving bad loans and pass the risk on to someone else?

With health care, balancing access, quality, and cost is the iron triangle. A common joke tells people that they can have 2 out of 3 of those. With financial services, the balance of risk and return while greasing the financial wheels is the holy grail. These are tough challenging problems and there is too much with anger with companies to really come up with tough answers. Hopefully, we will realize that the current reform has some good ideas but is mostly a catharsis. After our anger has passed and we can all sing folk songs together, we'll be able to address these tough questions.

Friday, April 16, 2010

Why do Guys Give Bad Interview?

It's like watching Wile E. Coyote use explosives or Shaquille O'Neal shoot free throws. It may look like this time it's actually going to work, but it never does.

As you might have guessed, I watched a guy give interview today. I used to interview a lot of high school seniors for my undergraduate alma mater. It doesn't seem to matter whether the guy is a hormonal 18 year old or hormonal 30 year old. Guys do not interview well.

Not interviewing well mainly entails talking for too long without really saying anything that wasn't covered in their first sentence. For example they will usually answer the question with the first sentence, then describe the entire project in too much detail, give a hypothetical example of something they might have done, get into a hypothetical argument with themselves about the hypothetical example and than repeat the first sentence again. Most interview questions can be answered with 6-10 sentences but guys usually need that much time to cover their project plan.

Guys also can only seem to handle concrete questions that cover the trajectory of "What did you do." When I ask a guy why he likes something or what the favorite part of his job is, he seems to get completely stumped. I almost see panic in their eyes when a sentence starts with "Why". Actually, I have a similar reaction when most women ask me why I did something so maybe that's a conditioned response.

Finally, they are terrible about asking any questions at the end of an interview. Actually, this seems to becoming a lost art for women too. The interviewers all know that every candidate has probably googled the entire company history and probably knows more about the organization than the interviewer. However, the questions at the end of the interview are used to show that you actually want to work at the company or show off this research. Ask about career paths or the person's favorite part of their job to show that you are actually interested in the company. Ask about the latest company tweet to show off this research.

I don't have a good answer for this behavior. There just seems to be something dangerous about asking a guy to spend an hour talking about himself with limited structure. Sometimes, I think that some guys are one slightly informal remark away from describing their weekend bachelor party plans at an interview.

I think that as a result, male interview performance gets discounted. Expectations plummet to the same level that we have for character development and plot in a Kevin Smith movie (which have become elaborate vehicles for penis jokes). I actually do the same thing with my office dress. My baseline dress is slow that when I tuck in my shirt and wear real shoes, I get more compliments than the guy who coordinates his belt and shoes every day.

If poor male interviewing was at crisis levels, I think that we would see even lower employment levels for men and the onslaught of career coaches would have identified this market opportunity. There would be advertisements everywhere about how men are as incapable of interviewing as they are at dressing themselves. Since that hasn't happened, I can only wonder if the recruiting market is more efficient than I suspected and has incorporated low expectations into their interview evaluation.

Readers, what are your opinions of the male ability to interview and my assessment?

Sunday, April 11, 2010

How I Learned to Stop Loving Health Reform and Start Worrying Again

In my last health care post, I was pretty excited about health reform. Our current health insurance has not working for some time and reform offered some initial improvements. Also, I thought that I would haven't to worry about any of the changes until 2014. However, there are some seemingly minor changes that need to be implemented by October 2010 that have me worried. They hit me out of nowhere like the feeling you get when you see your ex-girlfriend for the first time in a while and see that she got even hotter since you dated. Like that ex-girlfriend, I'm no longer loving health reform and there's no quickie involved.

One would think that a 2,400 page document would provide pretty extensive instructions. However, it's really a lot of broad principles. Other agencies like Health and Human Services will have to provide specific guidance to health plans for the implementation. These principles are primarily for the small employer group and individual insurance markets. These are the most dysfunctional insurance markets and in greatest need of change so they are well targeted. Health plans will have to decide how to implement these very gray shades of principles. Now, there are some black and white principles, like children under 18 will no longer be denied health insurance which I think makes us a somewhat more humane country. Adults will have to wait until 2014 for this option primarily because they're not as cute as children.

Some of the grayer shades is that health plans can no longer apply a lifetime or annual maximum benefit to different classes of "essential" benefits. These essential benefits include hospitalization, surgery, doctor visits, drugs, lab work, preventive services, maternity, and mental health. That pretty much covers 99% of what an average health plan covers. However, health plans generally place benefit limits on durable medical equipment (like crutches or wheel chairs), ambulance rides, or the mysterious and hard to pronounce temporalmandibular jaw disorder (TMJ). It's unclear what will be considered essential and what will not. That answer will probably be determined by how strong the TMJ lobby is.

Another shade of gray is that preventive services must be free or health plans must cover them in full. As one can guess, there is no clear list of preventive services. A measles vaccines is probably obviously a preventive service but what about a travel vaccines for purple fever in Mongolia? Health plans could argue that the easiest way to prevent catching purple fever is not go to Mongolia so it's not as clear. Most health plans cover preventive services for $10 or $20 so I would question if these services really need to be free in order to be more effective. Great in theory but that means individuals and small businesses will be paying more upfront in the form of higher prices so they can pay less when they use the services.

The game theory for health plans is to not be the only plan covering TMJ or Mongolian purple fever vaccines in full. If that happens, that health plan will get more people who want to use those services, incur higher costs, and need to charge more for their plans. This will drive out people with perfectly health jaws and no interest in traveling to Mongolia and is known in the industry as "adverse risk selection" or "death spiral." Some readers might be completely unsympathetic to the insurance companies in their efforts to figure out how to figure out ways to do the minimum required or exploit loopholes. Or they're thinking about their friend who's life was changed by Mongolian purple fever and how their insurance company who wouldn't cover it.

These reforms make insurance more straight forward and move it to a product where someone can just say, "I'll take 2 insurances please." The purchaser will know that preventive services are covered, loopholes closed, and they will be covered. Insurance companies will learn to compete based on service, smarter provider contracting that pays on quality of care, and value adds like gym discounts and magazine subscriptions.

The primary drawback is that insurance will get even more expensive. Other bloggers have put forth such dire predictions of the cost of insurance that it's getting hard to take these claims seriously. However, prices will be greater than than the price increases that are incurred from higher medical costs. This could easily result in annual insurance price increases of 15% (compared to today's 9%). None of these reforms will make insurance any cheaper nor address affordability. With limited ability to make adjustments with benefit designs and the insurance plans will become more commodities, and the price will continue to rise. Consumers will realize that the cost of medical care, doctor visits, drugs, hospitals, and other services were the main driver behind the rising cost of insurance. Profits, CEO salaries, and administration were a very small factor in the annual 9% premium increase. As a result, our country (meaning politicians) will have to make hard decisions about health care costs and providers will have to change their practices.

Which is not a bad outcome either and I'll go back to loving health reform. Change is easy as long as someone else is doing it first. People are going to get hurt and it's going to look like this health care reform wasn't such a great idea. However, people are getting hurt today and at least this will put us farther down the path of making hard decisions and addressing health care reform.

Monday, April 5, 2010

New addition to the non-traditional MBA Reading List

My non-traditional MBA reading list has one been of my more popular posts on this blog. It's even more popular than my post about how I was a sperm donor which surprises me but reassures me about the general state of my blog readership. Since I consider myself to be market driven and responsive to my readership, this post will be an addition to the book list. Readers, please remember my humble gesture the next time that you have to endure a post about animal husbandry or colonoscopies.

My non-traditional MBA booklist is for future MBA's who were like myself. These are folks who are still surprised that they enrolled in an MBA program, may have worked in very non-business fields like non-profits, education, or the arts, or think of animal husbandry when they hear about the stock market. These books are intended to be clear to the novice but yet informative enough to allow the reader to a hold a conversation with the most cynical banker. Additionally, they are entertaining enough so they don't feel like homework. Benjamin Graham's book on value investing is not on this list. Andrew Sorkin's Too Big to Fail does make this list.

Too Big to Fail tells the tail of the economic melt down from the viewpoint of all of the players on Wall Street. It gives a both a beautiful and frighteningly clear picture of what the players were thinking or not thinking. The fates of Bear Sterns, Lehman Brothers, Merrill Lynch, Goldman Sachs, Morgan Stanley, Bank of America, JP Morgan, AIG, Wachovia, and Henry Paulson and the Treasury Department are all woven together in a way that provides a systematic view of how companies with hundreds of years of history changed in a matter of weeks. Sorkin writes clearly enough that the novice can understand (avoiding the biggest problem with House of Cards which was written in some banker dialect) but drops enough f bombs to demonstrate that he really did know the industry.

The highlights or what I learned was:

The financial industry did have some idea that the financial crisis was coming: The fact that years of easy credit and leveraging would come to a catastrophic end was not a surprise to the Treasury Department or Wall Street firms. Well, it probably was a surprise to Bear Sterns who appeared to have made a strategic decision to never be strategic but rather be as opportunistic as possible. For everyone else, the crash itself was as surprising as another celebrity sex video tape. The severity, swiftness, and lack of ability to contain the spread was the surprise. I found this to be reassuring that the US financial experts at least did see the crash coming but I don't think anyone could have predicted its severity.

When the going gets tough, the tough make deals: Henry Paulson or at least some investment banker was probably the best person to be Treasury Secretary during this time period. A more policy oriented secretary would not have been able to unleash the flood of mergers and other deals that Paulson helped trigger. This probably mitigated the financial crash significantly. Paulson was careful enough so that there was no documentation of him orchestrating Bank of America's purchase of Merrill Lynch or any other mergers. However, the frenzy of the Treasury Department's brokering and deal making got so extensive that even technocrat Tim Geithner was screaming for deals as loudly as any seasoned banker. Investment bank CEO's starting calling Geithner "Eharmony" because of all his attempted matchmaking.

A whole new view of Wall Street CEO's: Despite my MBA, I've never thought that highly of Wall Street CEO's. Mainly because I think that they had to sell their soul and humanity to out elbow other contenders. However, I did start to view some CEO's in a more favorable light after reading this book. JP Morgan's Jamie Dimon was pushed to buy almost every single player in the list above and had both the business acumen and intestinal fortitude to repeatedly tell Paulson and company no. If Lehman Brother's Dick Fuld was in that position he probably would have bought every single firm just because it would make his penis feel wonderful.

A combination of Too Big To Fail, When Genius Failed (about a bank on bank Wall Street bail out involving the hedge fund, Long Term Capital Management), and Barbarians at the Gate (about investment banking in the 80's and corporate raiders) will give a reader a very complete chronology of Wall Street over the last 30 years. Add American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century for a little populism and you'll be able to score some points in your argument with even the most cynical investment banker.

Thursday, April 1, 2010

In Response to Admissions Crisis, MBA Programs Announce Plans to Become Too Big to Fail

It has not been a good year for MBA programs. It's towards the end of the admissions seasons with another drop in applications and business schools are getting buffeted by the aftershocks of the economic earthquake. Failed management consultants are trying to revive their careers by cranking out paint by numbers anti-MBA articles. Visa problems have cut back the international pool and financial scandals have resulted in the school's reputations taking a beating not seen since the Buffalo Bills last qualified for the Super Bowl.

Business School deans have noticed an impact on their personal lives.

Harvard's dean commented that his daughter burst into tears at the dinner table because her friends made fun of his profession. "She asked me why I couldn't be more like her friend Cindy's dad," the dean complained, "Cindy's dad runs an internet porn site!"

Wharton's dean recanted his experience at his son's career day at his elementery school. "As soon as I mentioned that I worked at a business school, some kids in the front row threw quarters at me and chanted 'Bail Out! Bail Out!' The first question that I got asked was isn't a golden parachute too heavy?"

This has resulted in a crisis of confidence. Applicants were pulling out their applications and submitting them to law and medical even veterianarian programs. This drop in applications can have a severe impact on the MBA program's acceptance rate. If the acceptance rate drops below a certain threshold, this triggers a call for collateral by magazines that produce business school rankings or else schools are dropped a tier in the rankings. For example, if Harvard's acceptance rate increased from 8% to 20%, US News and World Report could require an increase in advertising rates or otherwise Harvard would become a second tier school.

MBA deans denounced the run on their applications and blamed their liberal arts colleagues for spreading rumors. In the jungle of the academic world, these MBA deans have not lost their resourcefulness. When the going gets tough, the tough make deals. Therefore, the deans of Harvard, Wharton, Columbia, Kellogg, Stanford, MIT, Chicago and Tuck announced that they would all merge into one business school that would be called "Too Big To Fail (TBTF)" until Kellogg's Marketing Department could come up with a better name.

"Like all good marketers," commented one Kellogg professor, "we're going to start with a good acronym and figure out a name from there. The main acronym that we're considering is FUBAR." Upon hearing that news, Duke's Fuqua Business School immediately claimed trademark infringement.

TBTF or FUBAR ran into some initial problems during the organization process. They invited the country of Columbia instead of Columbia University to their kick off meeting. "Like half of the people who apply to Columbia don't make the same mistake," fumed the Tuck dean when confronted.

When asked how the merging of the same business schools would correct the MBA business model, MIT's dean commented, "It's about improving efficiency. We've all come to terms with the fact that no one really thinks there is any difference what so ever between our programs. Students generally apply to all eight schools. Companies generally recruit at all eight schools. If you want a top business school, you'll generally be happy with an employee or education from any of these programs. Sure some will claim that Chicago's better for finance or Harvard's better for leadership or they just felt there was a good fit at Tuck. However, there is much difference between tomato and basil pasta sauce or just plain tomato pasta sauce or Prego or Ragu as there is between any of our programs.

The dean continued, "There will also be improved efficiency as no one will have to spend time deciding if Columbia is a better program than Chicago or if Stanford is better for venture capital than Wharton. Look, you say tomato, I say tomato, all eight programs are the same damn school. We should have merged 20 years ago."

When asked about the MIT dean's comment, the Harvard dean sniffed and said, "That's why we generally don't let MIT people interact with the public. Our merger will create significant syngeristic streams by leveraging our enterprise platforms to create added value for all segments of consumers. Shotgun writing the case study!" The Tuck dean whooped and shotgunned a can of Miller High Life in agreement while the Wharton dean rolled his eyes and mock vomited in the Chicago dean's brief case.

Response from the rest of the MBA programs was swift. Darden announced that they will cement their position as the most rigorous and hardest working MBA program by not allowing their students to wear shoes and limit daily calorie consumption to 2,000.

Yale attempted to merge with their law school but in the haze and confusion wound up really merging with their School of Forestry. This turned out to be a surprisingly serendiptious combination as all students went into the woods to find trees to hug. Berkeley's Haas program sent out a letter to Yale requesting a three-some next year.

"A three-some is a common merger term," fumed the Berkeley dean to a room of giggling reporters.
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