Isegoria

In The Snowball, Alice Schroeder writes about the Master of Money, Warren Buffet. Michael Lewis (Liar’s Poker, Moneyball, Home Game) reviews the book, which includes some bits about Buffet’s early life:

Born in 1930, the son of an emotionally abusive mother and a father whom he adored but who was unable to absorb the full shock of his wife, Buffett was emotionally problematic. In Schroeder’s telling, the young Warren was sneaky, socially awkward, and generally a wiseass with a cruel streak. As a man he would reserve his harshest criticism for those who lied or cheated or stole, but as a boy he shoplifted pathologically — not because he wanted a particular thing, but simply for the pleasure of stealing. At ease in Omaha, he was unhappy everywhere else, and so he suffered especially when his stockbroker father Howard was elected to the House of Representatives and he became the new kid at middle school in Washington, D.C. He was young for his class. In the most important social departments, he started out well behind his classmates and, as he puts it, “I never caught up, basically.” He had terrible social anxieties and, right up until the time he married, at the age of twenty-one, a special lack of talent with girls.

In spite of all this he was deeply, ferociously competitive. Here is one of the odd things about the man whom Schroeder describes: the plain facts of his young character assemble themselves into something like a portrait of a universal loser — and yet right from the start Buffett himself seems to have been able to believe that the universe was wrong and he was right. What other people thought of him, and how other people measured him, did not prevent him from establishing his sense of himself as someone who might win. In his Washington, D.C. school (before he talked his parents into letting him return to Omaha) Buffett did well in only one class, typing. Here, in his own words, is how he went about it:

I made A’s every semester in typing. We all had these manual typewriters and, of course, you’d slam the carriage back to hear this ding. I was by far the best in the class at typing out of twenty people in the room. When they’d have a speed test, I would just race through the first line so I could slam the carriage back. Everybody else would stop at that point, because they were still on the first word when they would hear my ding! Then they’d panic, and they’d try to go faster, and they’d screw up. So I had a lot of fun in typing class.

The young Buffett’s ambition found a number of conventional if implausible outlets — bodybuilding, for instance; he devoured books with such titles as Big Arms and Big Chest — and one strange one, at least for a little kid: money-making. At a shockingly young age Buffett learned the pleasure of having more money than his friends. To accumulate it he worked paper routes, bought and managed pinball machines, and created a horse-racing tip sheet that he sold at the local track. Upon arriving in Washington he asked his father to use his congressional status to request from the Library of Congress every book it had on horse handicapping. By the time he was sixteen, Buffett had accumulated the equivalent in today’s dollars of $53,000, and hardly saw the point of taking the spot he had been offered at the Wharton School. He knew what he wanted to do for a living — live in Omaha and invest in stocks — but his parents prevailed and off he went to college. He lasted three years before he returned and finished at the University of Nebraska.

One of the patterns that Schroeder teases out of Buffett’s life — not just in his investments but also in his relationships — is his tendency to seek safe harbors. And yet once he has found safety, he isn’t content to remain there. Instead he waits for opportunities to stage surprise attacks on the outside world. Omaha is his fort; the outside world is lucrative but dangerous, and Buffett never enters it without some cost-benefit analysis.

Virginia Heffernan of the New York Times unabashedly praises Aaron Patzer’s online personal-finance software, Mint. Her only complaint is how it makes money:

Significantly, the site also proposes seemingly advantageous ways to switch credit cards or take advantage of various other financial deals. This is where Mint makes its money: it advertises financial-service companies directly to users whose economic circumstances suggest a need for them. If you click on “Ways to Save,” for instance, you’re not given advice on how to darn socks or make stews you can freeze. Instead, logos and promotions for companies like American Express, Starwood and Discover come up. This makes Mint seem somewhat less benevolent. In fact, it’s downright sinister. Unlike other personal-finance guides, Mint does little, if anything, to discourage credit-card use; rather, it encourages users to find “better” cards.

An online service has certain advantages:

By my lights, the best Mint feature is one that lets you compare your own financial freakiness to other people’s. Bar graphs in a beachy palette compare how much you spend at Neiman Marcus or Trader Joe’s, say, with how much money people nationwide — or people just in your state — spend in those franchises. By running my expenses up against those of other household economies, Mint has permitted me raptures of smugness at the thought that, for example, I don’t own a car. It has also chagrined me for days with the realization that I’ve retained so many chump habits from 2006 and am still blowing way too much money at Starbucks.

Of of the secrets to its success is its game-like quality:

Such emotional reactions suggest that the site is, at its core, something other than a mere bookkeeping tool. After only a few weeks, I was regularly on Mint and essentially playing with it, as with a crossword puzzle: analyzing my spending habits, lowering my monthly caps on this or that category and calling my bank to contest Mint-flagged charges. This new diversion was — I noticed — distracting me from other sites, namely eBay and Etsy. That was rich. Where eBay had once turned shopping into a game, Mint had now turned saving into one.

In Shop Class as Soulcraft, Matthew B. Crawford gives the case for working with your hands:

After finishing a Ph.D. in political philosophy at the University of Chicago in 2000, I managed to stay on with a one-year postdoctoral fellowship at the university’s Committee on Social Thought. The academic job market was utterly bleak. In a state of professional panic, I retreated to a makeshift workshop I set up in the basement of a Hyde Park apartment building, where I spent the winter tearing down an old Honda motorcycle and rebuilding it. The physicality of it, and the clear specificity of what the project required of me, was a balm. Stumped by a starter motor that seemed to check out in every way but wouldn’t work, I started asking around at Honda dealerships. Nobody had an answer; finally one service manager told me to call Fred Cousins of Triple O Service. “If anyone can help you, Fred can.”

I called Fred, and he invited me to come to his independent motorcycle-repair shop, tucked discreetly into an unmarked warehouse on Goose Island. He told me to put the motor on a certain bench that was free of clutter. He checked the electrical resistance through the windings, as I had done, to confirm there was no short circuit or broken wire. He spun the shaft that ran through the center of the motor, as I had. No problem: it spun freely. Then he hooked it up to a battery. It moved ever so slightly but wouldn’t spin. He grasped the shaft, delicately, with three fingers, and tried to wiggle it side to side. “Too much free play,” he said. He suggested that the problem was with the bushing (a thick-walled sleeve of metal) that captured the end of the shaft in the end of the cylindrical motor housing. It was worn, so it wasn’t locating the shaft precisely enough. The shaft was free to move too much side to side (perhaps a couple of hundredths of an inch), causing the outer circumference of the rotor to bind on the inner circumference of the motor housing when a current was applied. Fred scrounged around for a Honda motor. He found one with the same bushing, then used a “blind hole bearing puller” to extract it, as well as the one in my motor. Then he gently tapped the new, or rather newer, one into place. The motor worked! Then Fred gave me an impromptu dissertation on the peculiar metallurgy of these Honda starter-motor bushings of the mid-’70s. Here was a scholar.

Over the next six months I spent a lot of time at Fred’s shop, learning, and put in only occasional appearances at the university. This was something of a regression: I worked on cars throughout high school and college, and one of my early jobs was at a Porsche repair shop. Now I was rediscovering the intensely absorbing nature of the work, and it got me thinking about possible livelihoods.

As it happened, in the spring I landed a job as executive director of a policy organization in Washington. This felt like a coup. But certain perversities became apparent as I settled into the job. It sometimes required me to reason backward, from desired conclusion to suitable premise. The organization had taken certain positions, and there were some facts it was more fond of than others. As its figurehead, I was making arguments I didn’t fully buy myself. Further, my boss seemed intent on retraining me according to a certain cognitive style — that of the corporate world, from which he had recently come. This style demanded that I project an image of rationality but not indulge too much in actual reasoning. As I sat in my K Street office, Fred’s life as an independent tradesman gave me an image that I kept coming back to: someone who really knows what he is doing, losing himself in work that is genuinely useful and has a certain integrity to it. He also seemed to be having a lot of fun.

Seeing a motorcycle about to leave my shop under its own power, several days after arriving in the back of a pickup truck, I don’t feel tired even though I’ve been standing on a concrete floor all day. Peering into the portal of his helmet, I think I can make out the edges of a grin on the face of a guy who hasn’t ridden his bike in a while. I give him a wave. With one of his hands on the throttle and the other on the clutch, I know he can’t wave back. But I can hear his salute in the exuberant “bwaaAAAAP!” of a crisp throttle, gratuitously revved. That sound pleases me, as I know it does him. It’s a ventriloquist conversation in one mechanical voice, and the gist of it is “Yeah!”

Mechanical work cultivates different intellectual habits, and these habits, Crawford feels, have an ethical dimension:

Good diagnosis requires attentiveness to the machine, almost a conversation with it, rather than assertiveness, as in the position papers produced on K Street. Cognitive psychologists speak of “metacognition,” which is the activity of stepping back and thinking about your own thinking. It is what you do when you stop for a moment in your pursuit of a solution, and wonder whether your understanding of the problem is adequate. The slap of worn-out pistons hitting their cylinders can sound a lot like loose valve tappets, so to be a good mechanic you have to be constantly open to the possibility that you may be mistaken. This is a virtue that is at once cognitive and moral

Mechanical work put Crawford in a state of flow:

I once accidentally dropped a feeler gauge down into the crankcase of a Kawasaki Ninja that was practically brand new, while performing its first scheduled valve adjustment. I escaped a complete tear-down of the motor only through an operation that involved the use of a stethoscope, another pair of trusted hands and the sort of concentration we associate with a bomb squad. When finally I laid my fingers on that feeler gauge, I felt as if I had cheated death. I don’t remember ever feeling so alive as in the hours that followed.

Contrast this with the experience of being a middle manager:

This is a stock figure of ridicule, but the sociologist Robert Jackall spent years inhabiting the world of corporate managers, conducting interviews, and he poignantly describes the “moral maze” they feel trapped in. Like the mechanic, the manager faces the possibility of disaster at any time. But in his case these disasters feel arbitrary; they are typically a result of corporate restructurings, not of physics. A manager has to make many decisions for which he is accountable. Unlike an entrepreneur with his own business, however, his decisions can be reversed at any time by someone higher up the food chain (and there is always someone higher up the food chain). It’s important for your career that these reversals not look like defeats, and more generally you have to spend a lot of time managing what others think of you. Survival depends on a crucial insight: you can’t back down from an argument that you initially made in straightforward language, with moral conviction, without seeming to lose your integrity. So managers learn the art of provisional thinking and feeling, expressed in corporate doublespeak, and cultivate a lack of commitment to their own actions. Nothing is set in concrete the way it is when you are, for example, pouring concrete.

Read the whole thing. Then watch Office Space.

The great thing about Chrysler being in bankruptcy court, Bill Waddell says, is that they have to put a lot of details into the public domain — details that reveal the epitome of waste:

According to the bankruptcy affidavit, Chrysler has 38,500 employees plus another 2,300 contract folks for a total of 40,800. The affidavit also states that 27,600 of those employees are members of a union — the UAW for the most part. I am going to make an assumption here — just about every manufacturing company with which I have worked shoots for a Direct to Indirect Ratio of 4:1, but actually operates at closer to 3:1. Let’s give Chrysler some greatly undeserved benefit of a whole lot of doubt and say that they are a 4:1 outfit, so 80% of those union workers are direct labor — 22,000 people.

So if Chrysler has 40,800 people and only 22,000 of them actually make cars, while the rest are involved in mostly non-value adding other things, that is a problem. But the really startling number in the filing is that Chrysler has 3,200 dealers which employee 140,000 people. 140,000 people working at dealerships and 22,000 people making cars? It takes more than 6 people to sell and service a Chrysler for every 1 needed to build a Chrysler.  How bad is a Chrysler if it takes that many people to convince people to buy one, then to keep it running?

Chrysler sold about 1.5 million cars in the US last year through these 3,200 dealers. The dealers are open 6 days a week, for the most part. That works out to better than 40 people at the average dealer to sell and take care of 1.5 cars sold per day. Plus another 3 or 4 people back at Chrysler to handle the paperwork.

By comparison, Toyota sold one and a half times as many cars in the USA as Chrysler last year through only 1,400 dealers.