Charles Smith suggests the housing issues in the United States are related to several other concerns and all of this isn’t likely to improve soon.
I don’t know if Smith is correct but why aren’t more people talking about the possible long-term consequences of a depressed housing market? Is this unlikely to happen or are people afraid that this actually might happen?
One analyst suggests that Apple without Steve Jobs will decline because as sociologist Max Weber suggested, organizations change after their charismatic leader is gone:
Weber described three essential business categories: Legal/bureaucratic, traditional, and charismatic, with the latter companies typically helmed by individuals with the “gift of grace.”…
“Followers and disciples have absolute trust in the leader, fed by that leader’s access to nearly magical powers. Charismatic authority repudiates the past, and is in this sense a specifically revolutionary force.”According to Colony, Apple chose a “proven and competent executive” – Tim Cook – to succeed Jobs. Nevertheless, the analyst believes the new CEO’s “legal/bureaucratic approach” will prove to be a mismatch for an organization that feeds off the gift of grace…
“Apple’s momentum will carry it for 24-48 months. But without the arrival of a new charismatic leader it will move from being a great company to being a good company, with a commensurate step down in revenue growth and product innovation,” the analyst predicted.
I guess we can wait and see if Weber’s ideas apply to this situation. Weber described this transition after the loss of a charismatic leader as a process of routinization where the group bureaucratizes this charisma.
A few things make this process more messy:
1. At one point, Steve Jobs didn’t have this “magic” either such as before he was inventing things or when he stepped down from Apple. This suggests that context matters: certain ideas are produced or take off based on a variety of other circumstances.
2. Judging by the recent stock price, investors don’t seem too worried about Apple’s future. At what point will they and other start publicly suggesting that the loss of Jobs is a really big hurdle to overcome? Is this an “acceptable” reason for a company to plateau?
3. Shouldn’t one measure of a good leader be the ability to empower others to take over and do well (or even better?) in the future when that leader is gone? If so, perhaps we should be asking whether Jobs was equipping others at Apple to succeed after him or not.
4. Is this an inevitable process for groups that lose a charismatic authority?
Earlier this week, two major financial firms said they would release data on the gender and race of their employees:
There is no requirement that Corporate America disclose its diversity data, but Monday two major companies – Goldman Sachs and MetLife — announced they’d be giving up the long-held secret…
The information is available and has been since 1964, because under the Civil Rights Act of that year, companies with 100 workers or more have had to report the data on race and gender annually to the U.S. Department of Labor. The problem has been, they were not under any requirement to release that data to the public, or even to local governments such as New York…
And there’s a lot of inequality, especially in the higher ranks at companies where the lack of diversity is greatest.
When I saw this, I was disappointed we didn’t get any information willing these companies were to start releasing this data or whether they were feeling enough public or government pressure. And then the article had a quote from the author of a recent sociology article on the topic that was published in a top journal and I wondered if this article made any difference…
Liu’s push for disclosure is a good first step on the road to more diversity, said Emilio J. Castilla, professor at MIT Sloan School of Management and author of an article titled “Bringing Managers Back In: Managerial Influences on Workplace Inequality,” published in the American Sociological Review late last year.
“But this might not be enough,” he stressed. “They’re increasing transparency, showing some percentages, but I’d think about accountability. Are there organizational procedures in place to make sure these efforts result in the outcomes they want?”
I’m probably too hopeful here that an article in a sociology journal was influential but it couldn’t hurt…right?
This is an interesting viewpoint: “Mainstream economic models have been discredited. But why aren’t political scientists and sociologists offering an alternative view?” Here is some of the discussion about how sociology has failed to seize this opportunity:
Perhaps you have more faith in the sociologists. Take a peek at the website for the British Sociological Association. Scroll through thepress-released research, and you will not come across anything that deals with the banking crash. Instead in April 2010, amid the biggest sociological event in decades, the BSA put out a notice titled: “Older bodybuilders can change young people’s view of the over-60s, research says.”
Or why not do the experiment I tried this weekend: go to three of the main academic journals in sociology, where the most noteworthy research is collected, and search the abstracts for the terms “finance” or “economy” or “markets” since the start of the last decade.
Comb through the results for articles dealing with the financial crisis in even the most tangential sense. I found nine in the American Sociological Review, three in Sociology (“the UK’s premier sociology journal”), and one in the British Journal of Sociology. Look at those numbers, and remember that the BSA has 2,500 members – yet this is the best they could do…
It wasn’t always like this. One way of characterising what has happened in America and Britain over the past three decades is that people at the top have skimmed off increasing amounts of the money made by their corporations and societies. That’s a phenomenon well covered by earlier generations of sociologists, whether it’s Marx with his study of primitive accumulation, or the American C Wright Mills and his classic The Power Elite, or France’s Pierre Bourdieu…
Nor is there much encouragement to engage with public life. Because that’s what’s really missing from the other social sciences. When an entire discipline does what the sociologists did at their conference last week and devotes as much time to discussing the holistic massage industry (“using a Foucauldian lens”) as to analysing financiers, they’re never going to challenge the dominance of mainstream economics. And it’s hard to believe they really want to.
Ouch.
I can imagine some sociologists might argue that the world is much bigger than markets and economics. They would not be wrong. At this same time, this critique could be viewed as a call to action: does sociology offer a compelling alternative way to view the world? How can we account for both economic and social life?
I will say that there does appear to be growing interest in economic sociology. This may not be reflected in these particular journals but more sociologists are looking at the social and cultural dimensions of economics. As noted, this was a key concern of a number of foundational sociologists, observers who noticed that industrialization was changing the social world. I wonder how many sociologists would view studying the economic realm as something “dirty” (too many ties to capitalism, too messy, too close to economics, etc.) or “uninteresting” (not what really motivates them to research, teach, and engage in public life).
Over at the Atlantic, George Mason University economist Tyler Cowen explains why excellent restaurants consistently appear in the “cultural wasteland” of suburbs:
Low-rent restaurants can experiment at relatively low risk. If a food idea does not work out, the proprietor is not left with an expensive lease. As a result, a strip-mall restaurant is more likely to try daring ideas than is a restaurant in, say, a large shopping mall. The people with the best, most creative, most innovative cooking ideas are not always the people with the most money. Many of them end up in dumpier locales, where they gradually improve real-estate values…..
I love exploring the suburbs for first-rate ethnic food. Many people consider suburbs a cultural wasteland, but I am very happy searching for food in Orange County, California; the area near San Jose; Northern Virginia, near D.C.; Somerville, Massachusetts; and so on….It is especially common to see good ethnic restaurants grouped with mid-level or junky retail outlets. When it comes to a restaurant run by immigrants, look around at the street scene. Do you see something ugly? Poor construction? Broken plastic signage? A five-and-dime store? Maybe an abandoned car? If so, crack a quiet smile, walk through the door, and order. Welcome to the glamorous world of good food.
Cowen’s argument about restaurants reminds me of another Atlantic piece celebrating “low road” buildings which Brian previously discussed. It’s not surprising that great work–and great food–often happens in low rent locales like “junky” suburban strip malls and office parks given their lower (financial) barriers to entry and lower operating expenses that free up more cash to flow each month into improving their tenants’ business.
Still, it strikes me that the financial health of restaurants is more location-dependent than for many of the business populating “low road” office parks. Whereas many office-based business are not dependent on high volumes of foot traffic for survival, restaurants almost invariably are. (Unless, of course, that particular restaurant focuses primarily on a delivery and/or catering business model.) A less prestigious restaurant location is a good value for the owner (and likely to survive long term) only if the drop-off in foot traffic/customers due to the “bad” location is more than outweighed by lower rent.
While many might hope for economic progress during 2012, some are suggesting that another wave of foreclosures will hit during 2012:
In 2011, the “robo-signing” scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.
Five major banks eventually struck that settlement with 49 U.S. states in February. Signs are growing the pace of foreclosures is picking up again, something housing experts predict will again weigh on home prices before any sustained recovery can occur…
Online foreclosure marketplace RealtyTrac estimated that while foreclosures dropped slightly nationwide in February from January and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa (64 percent), Chicago (43 percent) and Miami (53 percent).
One big difference to the early years of the housing crisis, which was dominated by Americans saddled with the most toxic subprime products — with high interest rates where banks asked for no money down or no proof of income — is that today it’s mostly Americans with ordinary mortgages whose ability to meet payment have been hit by the hard economic times…
Is this the final wave?
If it is primarily “hardworking, everyday Americans” who bear the brunt of the 2012 foreclosures, will the coverage of foreclosures and the proposed remedies change? In previous years, it has been easy for some to suggest that those who made and accepted subprime mortgages deserved what they had coming as they extended their credit and debt too far. If this year’s foreclosures are now occurring to people who didn’t overextend themselves yet still fell prey to the economic crisis, will the narrative change?
The Chicago Tribune has a story about “super-commuters” who make the trip between Chicago and St. Louis. While the story seems more intent on putting a face on this growing phenomenon (although the numbers are still relatively low), there is a very interesting quote from a researcher about how we should view jobs and regional economies:
Regardless, said Mitchell Moss, the NYU professor who authored the study, the trend speaks to both the increased flexibility of modern-day workers — “the office” can be almost anyplace — and the challenges facing two-income families in a weak job market: Why uproot your family when your spouse can’t get a job in the new city?
The trend illustrates how the economies of places like St. Louis are increasingly hitched to their neighbors.
“It tells you that there is an inter-regional economic relationship, which is growing between places like St. Louis and Chicago,” Moss said. “A region’s workforce is not defined by its immediate suburbs.”
I’ve written several times about the need for more regional cooperation in the Chicago region between city and suburbs (see this post regarding Mayor Daley and this post about Mayor Emanuel). With limited cooperation, communities can end up fighting over corporations and jobs, whether tax money from a particular municipality should be spent elsewhere, and how best to address regional-level issues like transportation or affordable housing.
What exactly would it mean for Chicago and St. Louis to cooperate? One area could be transportation: I assume both Chicago and St. Louis were on-board for plans to construct a high-speed rail line between the cities. Environmental issues could be another area. For example, both cities rely on interconnected water sources and shipping so common issues could arise (but remember there is a regional fight about Asian carp). But what about business issues? Could they set aside their separate issues to encourage economic development that might benefit both cities? Are there really economic opportunities they could both benefit from in spite of the distance between them?
From the how-can-I-best-annoy-my-neighbors department, WebUrbanist explains how you can trade your home’s exterior for mortgage payments:
Looking to make a little extra money, and instigate an all-out war with your neighbors? A company called ‘Brainiacs from Mars‘ has the perfect solution. They’ll paint your house in the brightest, most annoying colors imaginable and plaster it with logos in the ‘Billboard Home Initiative’, which is aimed at homeowners dealing with the threat of foreclosure.
I guess homeowners facing eviction now have a new way to not go quietly. Though I wonder if pulling a stunt like this would actually accelerate the foreclosure process. With so many homeowners behind on their mortgage payments and the huge backlog of foreclosure cases in some areas, it strikes me that purposely turning one’s home into a garish billboard might move actually one to the very top of a bank’s priority list for eviction.
“Financial journalist and author” Jean Chatzky discusses her rules about money and hints that buying a McMansion and working with money in general is complicated by emotions:
Have money rules changed with the recession?
I don’t know that the money rules have changed, but I think the recession has made people realize the importance of some of the money rules. For example, Money Rule #26 is “Just because someone will lend it to you, doesn’t mean you should borrow it.” I think it’s the lesson of the housing crisis. We over-borrowed. We took out bigger mortgages than we could truly afford because the banks were willing to give it to us. Every unfurnished McMansion proves that point. For everybody who’s ever felt house-poor or student-loan poor or credit-card poor, the recession has hammered that home.
Why do people tend to overcomplicate money?
It’s really emotional. If I had a bottle of champagne and I opened it with a group of friends, there would be this feeling that we should divvy it up fairly. But if I said, “I have some extra money,” people start making value judgments. There’s morality involved with how we divvy up the money.
Combined with that is the fact that we’re not taught about money as kids or in the schools. There’s not room for it in the curriculum. Getting financial literacy into every school in the country is a very important thing to do, but it’s an uphill battle. The combination of those two things makes many of us feel insecure when it comes to making the right decisions about our money, whether we’re spending it, saving it, or investing it.
Her rules seem meant to limit the emotional side of money. If you have rules to follow, you can sidestep the emotional aspects. While the rules may be helpful, this is a good reminder that economic activity is often emotional. We often talk as if humans make decisions purely for economic reasons when the real story is much more complicated. Stock trading and investing in stocks, purchasing consumer goods, and saving money are laden with emotions.
So what emotions lead to purchasing a McMansion? I haven’t seen an academic study that addresses this. However, critics of McMansions have made a number of arguments about why people buy McMansions: they want to impress other people, they have little sense of style or design, they have money to burn, they don’t realize they can get by with less space, they are unaware of how others might negatively view their home, and they are obsessed with getting a deal without thinking about quality. Critics generally argue that McMansions are attempts at displaying a particular status to others and this causes the buyer to overlook some concerns to which they should pay attention.
I’m guessing that McMansion purchasers wouldn’t give the reasons that critics suggest. At the same time, purchasing a home, usually the biggest purchase of someone’s life, is full of emotions. Buying a dwelling is one thing but when you add up a mortgage plus the idealization of a home in the American Dream and it becomes much more than that.
Elie Mystal at Above the Law has this take on a recent story involving credibility, statistics, and the legal profession:
This week, the law schools at Columbia, NYU, and Fordham have come under fire for their allegedly inflated employment statistics. A story in the New York Post specifically called out the top New York-area law schools for shady reporting of graduate outcomes when it comes to graduates employed by the schools….
I want to take a step back and look at what we’re really fighting about here: some of the best law schools in New York City have put out a statistic about how many graduates get jobs, and the New York Post and a bunch of other people immediately called “bulls**t.” Think about that. Even if the law schools can somehow convince people that, technically, their published information isn’t riddled with lies, we’re living in a world where such data can be assumed to be false absent a long and detailed explanation and discussion from the law schools. When somebody notices a discrepancy between a school’s numbers and what’s in the newspaper, we assume the school was full of crap, not that the newspaper got it wrong.
I suppose this isn’t very flattering to either newspapers or law schools. Perhaps Americans now trust journalists more than lawyers (or at least legal educators)?
Commenting a few months ago on a scandal within academic sociology, Brian suggested several approaches to dealing with uncertain statistics:
This reminds me of Joel Best’s recommendations regarding dealing with statistics. One common option is to simply trust all statistics. Numbers look authoritative, often come from experts, and they can be overwhelming. Just accepting them can be easy. At the other pole is the common option of saying that all statistics are simply interpretation and are manipulated so we can’t trust any of them. No numbers are trustworthy. Neither approaches are good options but they are relatively easy options. The better route to go when dealing with scientific studies is to have the basic skills necessary to understand whether they are good studies or not and how the process of science works [emphasis added].
Brian’s point is a good one. Unfortunately, it’s not possible to implement his “third way” here because the root problem is the lack of raw information rather than the inability to duplicate experimental/study results. The question is not, in the theoretical abstract: how many law students will get jobs when the economy is in condition X? The question is rather: as a matter of historical fact, how many 2010 law school graduates (or 2011, or 2009, or whatever) actually had jobs by date Y?
Elie faults the American Bar Association, which oversees and accredits law schools, for the current disaster of unreliable data:
The ABA is supposed to represent lawyers and law schools to the public. It’s supposed to relegate them so that the public can trust that moral and ethical standards are being upheld and enforced. And on that scale, the ABA has been an unmitigated failure. It’s done a disservice to all law schools. Nobody can trust any law school because the ABA has failed to impose effective oversight over all of them.
That’s tragic. A society is supposed to be proud of its institutions of higher learning, but the ABA has robbed us of that pride in our nation’s law schools. We no longer get to feel like our justice system is populated by people trained to the highest ethical standards, because we can’t even trust our law schools to tell us the truth about how many people got hired.
If the numbers published by law schools under the oversight of the ABA are unreliable, it goes without saying that it’s very difficult to derive these numbers through other means, especially in a form that allows for legitimate comparisons between schools and over time. There are workarounds, of course, like journalistic attempts to compile and/or verify employment statistics independently of the law schools. But those are obviously imperfect solutions, as The Economist recently noted in its analysis of the (surprisingly analogous) problem of Argentinan inflation statistics:
Since 2007 Argentina’s government has published inflation figures that almost nobody believes. These show prices as having risen by between 5% and 11% a year. Independent economists, provincial statistical offices and surveys of inflation expectations have all put the rate at more than double the official number (see article). The government has often granted unions pay rises of that order….
We [The Economist] hope that we can soon revert to an official consumer-price index for Argentina. That would require INDEC to be run by independent statisticians working unhindered. Until then, readers are better served by a credible unofficial figure than a bogus official one.
Unfortunately, for the foreseeable future, I think we’re going to need to start seeing a lot more credible unofficial figures out there, both for Argentinian inflation and for law school placement statistics.
Legally Sociable 