Lee Camp says, "Evil people have plans"; Ian Welsh offers the example of "burning down the house" or the society to rack up short-term profits

"Bad people have plans! They always have a fucking plan! Good people don't have plans, or missions, or agendas. They just stumble through life, thinking, 'We'll all treat each other right if given the chance.' Evil people have dry-erase boards, and PowerPoint presentations, and iPad apps, to keep track of just how evil's coming along . . . Good people don't have PowerPoints. Good people have doughnuts, and word jumbles."

-- Lee Camp

"If you tell me I have to double the profit of Hermès, I will do it tomorrow. But then you'd have no Hermès left in five years."

-- Hermès CEO Patrick Thomas, quoted by Ian Welsh in
his blogpost "Burning down your house to generate heat"

"Whenever greed becomes a primary motivator, and an acceptable primary motivator in a society, the society burns itself down."

-- Ian Welsh, in the above-linked blogpost

by Ken

I thought of transcribing more of this latest "Moment of Clarity" from Lee Camp, but while Lee is both amazingly funny and amazingly wise when transcribed, the written transcript doesn't have the same impact as when, for example, he talks about the Koch brothers' shenanigans in Wisconsin, and how, step by step, those shenanigans were designed to lead to the Koch brothers being able to stifle political opposition and buy up more and more of American. "Now that's what I call a fucking plan!" And what were "non-evil people" thinking during this time? "Man, do I like ravioli! Especially in cream sauce. If I work an extra hour at the shop, I bet I can buy two cans of ravioli instead of just the uno."

For the record, though, here's where he winds up:

Bad people have plans. We don't have plans. I don't have a plan. You don't have a plan. Your plan was: "I'm going to watch Internet videos." Meanwhile, Halliburton's plan was to cause a military coup in the sovereign country of Eritrea, a place neither you nor I ever knew existed, but they knew, because they also have maps. They have dry-erase boards and fucking maps. I'm just saying, the good people on this planet are never going to get the upper hand until we get some fucking office supplies up in here.

Which leads me this extraordinarily important blogpost by our friend Ian Welsh, which I've been wanting to write about for days now. It introduces us to an example if ever there was one of bad people having plans. He introduces us to the concept of a company, or indeed a society, burning the house down to make profits.

Ian begins by drawing on his experience "some years ago" working for a large insurance company where he wound up witnessing what he describes here as "the first cashing out moment" -- "a transfer from the past and future to the present" with the result: "Going forward every future policy holder would pay more money for their policies in order that the current generation could take out value."

I was originally hired to help deal with a class action suit, but soon found myself working on something different, demutualizing the company. Mutual insurance companies are owned by their customers, not by shareholders. This has a number of advantages, but it means you don’t have shares, and thus buying out other companies requires cash, and you yourself can’t be bought. You also can’t give stock options to your executives (not a small matter, these days).

Mutual companies also have one big social benefit: they provide insurance cheaper, because they don’t have to pay dividends or stock options and they return profits beyond those expected to the policy owners. (Stock options supposedly don’t have a price, but they do in effect, both because of the rampant use of company profits for buybacks and because of how they change company behavior.)

Demutualization requires a vote by the shareholders. There was never any question that it would pass, however, since it amounted to cashing out a lot of money. For big policy owners the take could be in the millions, for smaller ones ten to twenty thousand wasn’t uncommon.

This part is important, so pay attention: this was the first cashing out moment, and what it was was a transfer from the past and future to the present. Going forward every future policy holder would pay more money for their policies in order that the current generation could take out value.

The company's shares were initially priced at $18 and over a two-year period rose to around $40. The CEO, having bought $5 million worth of shares, "did very well" --

But the real change was driven by what is called "'market’ discipline". Suddenly we needed to make 15% profits every year.

Insurance isn’t a business where you should be making that sort of profit. Virtually no business is, but insurance in particular should be stodgy and boring and conservative, because its job is to be there when the customer takes their losses.

To friends who asked about the company back then, he described it as "being run reasonably well, considering," but --

"They're burning down the house to make the profits."

What do I mean by that? They were pushing out senior junior employees. In the pension department, for example, almost all of the senior customer service reps were gone within two years. Why? Because the new regime expected insane numbers from them. Those numbers could only be produced by, well, lying to management.

Meanwhile, every month the sales numbers were being manipulated more and more, with sales which hadn’t actually completed being moved forward as if they had been. Jobs were taylorized and de-skilled, so that employees had no real knowledge of the process, this in a company with the highest average face amount (amount covered, like a million dollars or 10 million) in the industry.

Products were designed overly fine, so that if customers missed a single payment by even a week, they would likely go into default, but those losses wouldn’t show up for years, since it would take time for the defaults to occur.

And the company went out and bought a big, moribund insurer, with an extraordinarily sick corporate culture and then struggled to make it work.

Bottom line: that company couldn’t make 15% without cutting corners which shouldn’t be cut. You can provide worse customer service to multi-million dollar clients for a few years, but eventually your rep catches up with you.

And sure enough, he writes, "it came home to roost, and [clients] stopped sending us as much new business." And when "the shit hit the fan in 2008 . . . all the corners they had cut came back to haunt them."

When you have a good company, product or service, you can always cash it out. You just cut corners for years, and cruise on your reputation. And for years, it works, until it doesn’t.

Which brings him to the current example of the still-family-controlled Hermès company resisting being bought out by a conglomerate, the context of the quote I pulled out above from CEO Patrick Thomas, which I think is worth hearing again:

"If you tell me I have to double the profit of Hermès, I will do it tomorrow. But then you'd have no Hermès left in five years."

There’s a man who gets it.

Here’s the rule, whenever greed becomes a primary motivator, and an acceptable primary motivator in a society, the society burns itself down. It extracts money by destroying actual long term value. This has been going on in the West, with its most extreme forms in the US, for over 30 years.

But as a society, what you get is money while destroying actual value. The society as a whole is poorer than it would have been otherwise.

An actual capitalist society (which we do not live in) makes cashing out very difficult. You don’t want people creating money by destroying value, and you don’t want viable ongoing concerns arbitrarily destroyed or weakened. Whenever a company is bought out by borrowing the money, then making that company take on a loan to pay back the original loan and then another loan to pay the buyers even more money, money has been extracted while value has been destroyed (layoffs and other cost cutting inevitably follow).

As a society, allowing this sort of behaviour is death. You must make sure that people do better by adding value than by destroying it. Forceful short term extraction of money destroys value. The only profits that most people should see are long term profits. Want to get rich? Great. Either create something genuinely new under the sun (and no, Facebook is not something genuinely new, it is merely the winner in a market someone was going to win) or stick it out for a good twenty to forty years, taking your legitimate profit each year.

When you make it possible for people to get rich by destroying jobs that actually create value, by destroying companies which are actually viable, you are destroying your own society’s prosperity.

This last stretch contains a lot to take in -- at least it did for me -- but I don't see how the point could be made either more clearly or more concisely. That's why I didn't either abridge it or go in and attempt any "highlighting." As an explanation of how we have straitjacketed our economy, with future prospects looking almost unimaginably grim, it's all a highlight, or not a highlight, but . . . well, you know what I mean.

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