Wednesday, July 24, 2024

Global Outage Puts Airlines (Temporarily?) Out of Business: Letter to Delta CEO



Mr. Ed Bastian Chief Executive Officer Delta Airlines

Dear Mr. Bastian:

No doubt you've already heard from thousands about the poor customer service Delta and other airlines provided this past weekend just about everywhere due to the global outage, and although unprecedented in scale and scope you and your colleagues should have been better prepared for dealing with its fallout. Also, you must be aware that your industry's increasing reliance on technology instead of labor to provide customer service practically guarantees that future abrupt service interruptions will be even more calamitous next time around.

In our case, because of a missed connection our pre-arranged scheduled tour in Peru had to be canceled, and I consider us among the fortunate who did not leave Las Vegas only to be stranded in another airport. We had an hour flight scheduled to leave Las Vegas for Los Angeles at 9am Friday. That flight was delayed continuously almost hourly until it finally departed at 4pm. With that one delay our planned vacation to Peru instantly vanished.

I contend that the mess (a mob of travelers, confusion everywhere, no personnel available for advice) that transpired at Harry Reid Airport in Las Vegas over the weekend could have been avoided if management had realistically assessed the fallout from the outage and advised customers to make other arrangements instead of coming out and being stranded, in many cases for two days. Airlines and airports do that all the time when hurricanes and other storms threaten travel and I believe this man-made mess is at least comparable to a 100 year storm. Headlines warned of the problem late Thursday, so there was no need to have a capacity crowd at 6:30am Friday checking in for flights. By the time we got to our gate there were already hundreds of stranded travelers. The announcement delaying our flight came 15 minutes after we should've started boarding and the excuse was a pilot was needed. Really? It's difficult to believe that important fact wasn't known before we checked our baggage at 7am.

The mistake to allow travelers to come to the airport was compounded by the lack of personnel and their inability to advise travelers wisely. Management should have encouraged staff to level with customers instead of offering bad information and false expectations about when our travel arrangements could be secured. Our baggage had been checked for our flight to Los Angeles and poor advice throughout the day caused us to remain at the airport until 7pm waiting to retrieve our baggage. We finally returned to the airport Sunday to pick up our bags.

This weekend’s mess also points out the reality that technology cannot completely take the place of adequate and competent staff. The moral of the story is clear: When one wakes up the morning of a flight and there's even a hint of system dysfunction or outage involving airlines, one should cut their losses, avoid the airport, and try to make new travel arrangements from home.

I find it somewhat ironic that one of Delta's corporate ancestors, National Airlines, in 1963 ran a TV commercial asking the question shown in the subject bar of this letter and of course the answer back then was a resounding yes!! (As you are aware National Airlines merged with Pan Am which was subsequently acquired by Delta in 1991.) Friday's poor display by Delta as well as other airlines pursuant to the global outage, proved that declining customer service from airlines is a fact of life we all need to accept.

At the very least, Delta and the airline industry at large needs to plan better for such future contingencies.

Tuesday, March 19, 2024

The Golden Age Of Leisure Travel Has Passed



With each passing year, I am struck by the overall decline in the quality of the leisure travel experience, primarily due to dramatic service cutbacks in both the airline and lodging industries. It's difficult to pinpoint the precise peak of luxury travel but it seems obvious that the ugly and slow death of luxury leisure travel became apparent with the 9/11 calamity and the ensuing travel risks and uncertainties that brought about new safety standards and protocols. It accelerated with The Great Financial Crisis of 2008-9 that brought with it general economic hard times and a spate of bankruptcies that disrupted many industries, including the travel industry. The last gasp of luxury travel came in 2020 with the covid19 debacle that brought most economic activity, including travel of all kinds, to a halt for two years.

I remember the good ole days during the last quarter of the 20th century when you phoned an airline or travel agent, arranged a flight, showed up at the airport within an hour of departure for most trips, visited a human-attended kiosk to check-in and then waited the few remaining minutes for your flight to board. On board, you were greeted by flight attendants who stood ready to answer questions or tend to your specific needs, served you a drink and a snack, even a meal if the flight was 3 hours or more, offered you other goodies as needed, and created an environment conducive to a comfortable nap, music or movie entertainment and more. Upon arrival at your hotel, you checked in easily and your hotel room was well stocked with goodies and necessities, and everything was in good working order. Every aspect of your trip was a luxury and a welcomed upgrade from your daily life.

Those days are likely gone forever. Covid19 decimated the global economy and with a leisure industry facing extinction it took measures to recover its losses by expanding its market by first lowering prices to boost revenues and then by relentlessly cutting costs to maintain profitable operations. Those measures have given way to cutting corners in both services and infrastructure. Last summer gave us the most egregious example of the dramatic decline in service when 20% of all domestic flights were either canceled or delayed, mainly due to lack of personnel to operate airports and airlines, and, to a lesser extent, because airports and airlines had equipment deficiencies and failures. Even now that there has been a "recovery," the new "normal" service and routine still leaves a lot to be desired.

Smart technology and smart phones are enabling airlines to adopt business models that enable them to cut their workforces and utilize untrained, incompetent, and non-English-speaking employees, all of which require travelers to use their phones to do the various tasks that were formerly done by airline employees. The result is long check-in lines and a lot of confusion and made worse by a lack of personnel or decent signage to help travelers navigate what have evolved into non-standard airport and airline protocols.

After checking in with airlines, since 9/11 travelers must submit to TSA check-ins, which are time consuming and arguably don't need to be as cumbersome to assure traveler safety; TSA pre-check-ins are a joke as they are often unavailable. Lines are long and the process is sometimes confusing, even reminiscent of old Soviet Union food lines and once again exacerbated by ineffective signage and personnel unavailable to answer questions. While it's not clear those lines are making air travel safer, it is clear that requiring travelers to disrobe and juggle their clothing and luggage is, at best, time consuming and stressful and, at worst, creates the potential for travelers to misplace important personal items and travel documents.

These days airports and airlines are showing their age with wear and tear and poor maintenance becoming more common place; equipment malfunctions and out-of-order signs are becoming more apparent in airports and airlines. Out of order lavatories in airports and airlines are no longer rare occurrences. Where is the maintenance crew? Where are the inspectors? Hello, is anybody paying attention?

The airlines latest strategy to "unbundle" every flight feature (seats, baggage, food) is ostensibly to allow travelers to choose and pay only for the features that suit them, but has anybody figured out whether at the end of the day travelers end up paying less for their flights? Also, unbundling is also creating unintended consequences, the most obvious example being that most airlines punish travelers who have the foresight to pay for their checked luggage in advance by allowing those who bring carry-ons aboard flights the opportunity to check their luggage for free!! Obviously, that policy is sending a counterproductive message encouraging careless travelers a cost incentive to do the wrong thing! One fact is certain, all that "unbundling" makes the process of reserving flights much more complicated and time consuming.

Contrary to good health practices, airports and airlines seem engaged in a conspiracy to more or less force travelers to eat and drink junk food and to pay outlandish prices to do so, assuming travelers have time after submitting to those long, protracted check-ins. Travelers must arrive at airports these days three hours before flight departures if they plan on eating at the airport. Many airlines and airports offer very limited choices to purchase food and drink. I recently had a 12 hour trip with one layover that didn't allow me to purchase any food; luckily I realized that possibility the day I departed and brought food with me.

Food availability aside, the airline industry needs to rethink the whole bottled water fiasco. TSA check-ins require travelers either to fill water bottles at unsanitary restroom water fountains or purchase bottled water for a king's ransom. Airports should make a goodwill concession to travelers and allow them to purchase bottled water at cost, because their procedures are making it impossible for travelers to bring their own from outside, and good health policy should promote keeping travelers properly hydrated!

Seats aboard aircraft are too small and don't provide nearly enough leg room to accommodate the average traveler. People today are twice the size as they were 50 years ago, yet seats and legroom has gotten more stingy than ever. And if travelers are fortunate enough to bring food aboard there's no place to store it during the flight as storage pouches are smaller than ever on new aircraft.

Too small lavatories have undoubtedly contributed to the poor hygiene that most travelers practice on flights; by mid flight, restrooms already compare with the most disgusting you'll ever see in your life.

Cramped seating, lack of food and drink and disgusting lavatories leaves travelers more with the feel of a medieval prison than a comfortable luxurious flight. It seems incongruent that in a post-covid19 world where many folks still wear face masks that such close, unsanitary flying conditions should be acceptable to the general public.

In recent years hotel services have deteriorated measurably. Nearly all the hotels I have visited in recent years have had some deficiency involving plumbing (such as clogged sinks and leaking showers), electrical (no lights, no TV service, no working phone) or mechanical (doors and windows that don't close properly); some don't have adequate towels, toiletries or clocks, and none offer information packets about the hotel or its neighborhood; the onus once again falls to travelers to do their own research using their phones and the internet. These are name brand lodging companies in major cities and near airports, not mom-and-pop motels along the side of a road.

Today's leisure traveler cannot expect a luxury experience but can expect to take more time, and endure more inconvenience and aggravation than ever. I guess the good news is that it's cheaper than ever to go on vacation, but it's less obvious you're really getting your money's worth.

Friday, March 15, 2024

Puerto Rico Offers A Foreign Feel Without Leaving the USA



Puerto Rico, which means rich port, is a Caribbean island and unincorporated territory of the United States with not only famous beaches but also mountains, waterfalls and a tropical rain forest.

I have been curious about this little island since childhood as I recall many folks from my New York City neighborhood routinely shuttling back and forth there. More recently, as a resident of South Florida, preoccupied with hurricanes, I have wondered about Puerto Rico's plight in the aftermath of hurricane Maria in 2017. Now, after nearly five years in the Nevada desert metropolis of Las Vegas, and the urge to get back to the Atlantic Ocean, it was high time to visit Puerto Rico.

Puerto Rico is actually an archipelago consisting of four islands and appears as two distinct landscapes, one to the north, a lush green area reaching the Atlantic and the other to the south, a tropical desert reaching the Caribbean. An East-West mountain range bisects the two areas. San Juan was the destination of our trip, which encompasses about 10% of the territory's 3.2 million population; Puerto Rico's second largest city is Ponce, a Caribbean city about a third the size of, and a two hour drive south from, San Juan.

Just west of San Juan is Old San Juan and an opportunity to revisit the history of the early explorers we learned about in elementary school, but this time from a new perspective. Although the history of this land dates back to 400 BC, modern history begins with the 1493 landing of Christopher Columbus and later to a much greater extent with Ponce DeLeon's involvement with the island. The 16th century landmark known as El Morro is the major attraction and consists of a long imposing wall with a fortress at one end and a castle fortress at the other; it is considered the "most iconic fort built by Spain in America." Puerto Rico's strategic location made it a natural port for ships arriving from and departing to Europe; the fort was necessary to secure the Spanish city from pirate vessels and various European enemies seeking provisions and treasure to continue their voyages to and from the new world.

From that long active trading history brought forth a diverse Puerto Rican population, which today exhibits a complex blend of European, indigenous (Taino) and African cultures.

Our Puerto Rican experience seemed unusual as it had the "feel" of a foreign vacation even though we never left the country. Puerto Ricans are naturalized citizens of the USA but don't possess all of US citizen protections under the US constitution, e.g., native Puerto Ricans can be elected president of the US and are able to vote in presidential primaries, but cannot vote in our general elections for president, nor do they have congressional or senatorial representation in Congress. Additionally, native Puerto Ricans pay into and participate in social security and Medicare and pay some federal taxes, but many are exempt from federal income taxes.

The week at the beach and visit of old San Juan was greatly enhanced by our trip to Puerto Rico's leading rum distillery called Ron Del Barrilito, literally "rum in small barrels." Although Puerto Rico's Bacardi is the world's leading rum producer, we learned that its founders' roots are from Cuba. The founder of rum in small barrels was hopeful of elevating rum from its modest historical significance as a common man's or pirate's drink to a more elite status, and did so by aging his rum in white oak barrels previously used for aging European sherry. Here we tasted several rums ranging in age from 3-5 years to 35 years, and ranging in price from $20 to $700. (I found it interesting that the airport duty-free store offered that rum for a 30% higher price than the distillery.) These rums all reminded me of cognac brandy and were quite smooth and pleasant.

The only disappointment on this trip was the local cuisine which left a lot to be desired, especially considering the diverse cultural influences evident there. The locals urged us to try "mofongo," a dish consisting of mashed plantains seasoned with garlic, salt and olive oil. We tried it in a highly recommended (by locals) restaurant and had to return it...and much to our surprise the waiter took it back gladly and commented that he believed most Puerto Ricans don't eat the stuff. Other locals are more positive, so tread carefully when ordering the stuff. For those who read my discussion of my trip to Canada last year, my comments here will remind you of my comment about "poutine", a Canadian dish we had been urged to try at that time.

Beyond mofongo, as best as I can tell Puerto Rican cuisine consists of a few other dishes made of plantains, such as pasteles which are typically made with tarot root and plantains and take the form of tamales. Not surprisingly, rice and beans is a universal favorite, and was decent everywhere I tried it. Other favorites include tembleque, a coconut pudding and coquito, a beverage made of rum, coconut and vanilla, but, oddly enough, didn't appear on the menus of the local restaurants we tried.

Puerto Rico offers a great place to escape your American routine without leaving the country, where dollars are used and there's no need for passports. The week we spent in Puerto Rico was a welcomed respite from winter where this time of year daily sunshine produces air and ocean temperatures in excess of 80 degrees.

Tuesday, July 25, 2023

Eastern Canada: Cities Spawned by the St Lawrence River

This was my first visit to eastern Canada and I approached it with many preconceptions most of which were either confirmed or contradicted after 10 days exploring the region.

Canada, which means village or settlement in Iroquois, is the second largest nation by land area in the world but has a small population less than 40 million, slightly less than California. My trip focused on four (4) major cities: Toronto, Ottawa, Quebec City and Montreal that formed and grew because of their strategic location between the Great Lakes and the Atlantic Ocean, connected by the St Lawrence River.

Toronto and Ottawa lie within the Province of Ontario and Quebec City and Montreal within the Province of Quebec. Those provinces account for 60 percent of Canada’s population. The four cities we visited account for more than a quarter of Canada’s population, which is not too surprising as 85 percent of Canada's population lives within 100 miles of the USA, and those four cities are within a few hours drive of New York State, Vermont and Maine.

I never realized that major parts of eastern Canada extend further south than many of the northern borders of Midwestern states, most notably Michigan, Wisconsin, and Minnesota and other Mountain and Western States.

I always thought Canada was a sleepy, slow growing nation with a homogenous population but upon arriving in Toronto I discovered that was not the case as it was quickly revealed Canada is a melting pot with a diverse population base of indigenous people (which they call “First Nation”) but dominated by English and French speakers coming from Europe and many other areas including Asia and India.

English and French are both official languages of the entire nation and most provinces, but Quebec Province’s official language is French only and neighboring New Brunswick is the only officially bilingual province in Canada.

There's a palpable tension between the English- and French-speaking populations that dates back hundreds of years, even to the point that the province of Quebec has attempted to secede from Canada twice in the past 40 years. French Canada is trying to maintain its place in the rich history of Canada, especially as having a key role in its founding; it is trying to keep the French language actively spoken in an increasingly English- speaking nation. Besides declaring the official language of Quebec to be French, Quebec has adopted strict laws to ascertain that public, traffic and business signs accentuate French over English. By the 1980s, French nationalism grew when it became apparent that Toronto would become Canada’s most dominant city, eclipsing Montreal which had held that place for hundreds of years. (I often wondered why Canada’s one Major League Baseball team was in Montreal during the early 1970s and was advised it was probably because Montreal was its most important city in those days. In 1977, the Toronto Blue Jays were founded around the same time Toronto took Montreal’s place as the nation’s most populous city.)

Along side the permanent struggle between the English and French for domain, Modern Canada has also undertaken an effort to recognize that “First Nation” people have played an important role in Canada’s history and development.

In addition to those cultural dynamics, Canada’s physical growth and development becomes apparent as one approaches Toronto and Montreal, evidenced by the many skyscrapers and new construction. Toronto boasts more high-rise condominiums, and more cranes, than just about any other city in the world.

Toronto’s metropolitan population of 6.4 million and robust growing skyline is a world class modern city made possible by Lake Ontario. Its size and stature and the prevalence of modern architecture makes for easy comparisons with some of our major modern cities, for example, Houston or Los Angeles. The word comes from the Mohawk language and means "where the trees are standing in water". We visited the CN Tower, one of the world’s tallest, and got a bird’s eye view of the entire city. Sports buffs will note that the National Hockey League Hall of Fame is in Toronto.

Ottawa is the nation's capital of 1.5 million and is a charming, quaint reminder of the rich history of Canada dating back hundreds of years. The name is Algonquin meaning “to trade”. In our tour of many Federal buildings, we passed the Prime Minister’s home at 24 Sussex Drive, Canada’s 10 Downing Street if you will.

Quebec City is more than 90 percent French, as is the entire province with the same name, and Old Quebec was one of the original European settlements, a small walled city that is still evident today. A major attraction there is the Château Frontenac, which is operated today as a Fairmont Hotel, overlooking the St Lawrence River. With fewer than one million persons, Quebec City was the smallest city we visited and the name comes from the Algonquin word for “narrow passage or strait,” as the St Lawrence appears to narrow at that point.

Montréal was named by Jacques Cartier, the first European explorer to map the St Lawrence gulf and river, and comes from French meaning “mount royal” which is attributed to its most obvious natural mountainous feature. On top of the mountain is St Joseph’s Oratory, a rather impressive structure that offers great views of the city below. Although today much smaller than Toronto with a metropolitan population of more than four million, it was the first European settlement dating back to 1642 and was up until recent decades the most important city in Canada. As such, the city has blend of new and old architecture that reminds me of New York City.

We visited the sites of the Expo 67, Canada’s World’s Fair from 1967, as well as the Olympic stadium built for the 1976 games, the former giving the Montreal Expos its name and the latter being the venue in which the first Expo games were played. Another ‘fun fact” about French Canada (Quebec Province) is that it produces 80 percent of the world's maple syrup.

In addition to these cities our tour included Niagara Falls, the old city of Kingston and a cruise among the thousand islands in the St Lawrence River (which actually number 1,863 and for which the salad dressing is named).

Ever since my first visit to Canada, which was to Vancouver and Calgary in 1997, I expected the food in Canada to be better than the US generally and because of the presence of French cuisine in this year’s tour, let’s say my expectations for outstanding food were very high. BUT THIS IS NOT FRANCE NOR IS THIS FRENCH CUSINE!! I will admit that the coffee, bread and pastry was better there than here in the USA, but it falls far short of the standard I became accustomed to in Paris, France.

As I recall in France, portions were small, recipes were delicate, execution was perfect and the taste was superb, but that's generally not true in Canada, even in Quebec and Montreal, where they take pride in offering “poutine” ( a dish of French fries, gravy and cheese curd) and “beaver tails” (deep fried dough smothered in sugar and other sweet toppings). Unfortunately, I had the misfortune of ordering dessert crepes in Old Quebec City, from a long standing highly recommended place only to be served crepes that were so heavy and tough that they were served with steak knives to eat them! Traditional French cooking is clearly a distant memory in modern day Quebec and Montreal.

In all it was a great trip, the sights were great, the group we traveled with was engaged and fun, the weather for the most part cooperated, and our tour director was absolutely superb in every respect. Travel is about new experiences and I’m happy to say there were many, including the opportunity to use an umbrella for the first time in ten years and getting drenched by Niagara Falls!

A word about our bus tour. This bus tour was directed by EF (Education First) Go Ahead Tours and was led by a terrific tour guide, very knowledgeable, attentive and eager to assist us in our specific needs and aspirations. We had a cooperative and like-minded group of 27 and generally found this to be the most efficient, time and cost effective way to explore unfamiliar territory easily. It would have taken us months of research and planning to accomplish what we did over our ten day tour. However, the obvious disadvantage of group tours is that individuals have less flexibility and time to fulfill their own needs. So, unless you have a specific set of sights and/or goals you want to accomplish, a group format may be right for you!

About vacation travel in a post Covid world: the golden age of leisure travel is officially dead and is probably another casualty of Covid. Slowly but surely there has been a ubiquitous decline in travel infrastructure. Airports are unkempt, facilities broken, airline delays and cancelations are rampant, hotels are in a state of neglect and disrepair, and most of the travel personnel you look to for service, assistance or counsel are either few and far between or incompetent.

It took us effectively two days to travel to Toronto from Las Vegas, first due to a 9 hour last minute “delay” (which was a cancelation in my judgment) and included a 5 hour layover in Philadelphia in order to take a one hour flight to Toronto. The return trip took nearly a day and included our pilot warning us that we might need to land in Ontario, California because of a non existent “weather” condition in Las Vegas. He later admitted that airports/airlines are running with skeleton crews, with not enough personnel to get the job done! Just about everyone I know that has traveled in the past few months has faced a similar fate, and this is peak season! My advice is to plan your recreational travel accordingly!

Wednesday, May 3, 2023

Dr Reisman's "Fantastic Voyage" Through the Human Body



Dr. Jonathan Reisman’s 2021 213-page book, The Unseen Body, tells the story of the human body from the perspective of both a layman before he attended medical school and later as a practicing physician. It offers commentary on the medical profession in general and the practical aspects of being a physician, including his belief that physicians choose their specialties based on the “bodily fluids they find least revolting.”

Although copious in its presentation of “fun medical facts” it is also a unique compendium of observations comparing humans with animals, and relating human physiology with the workings of the natural environment--All done in an entertaining, easy-to-read format.

Fifteen aspects of the human anatomy are discussed, not just organs (Heart, Brain, etc) but also the less often considered bodily fluids (Blood, Urine, etc) and other topics like Fat and the Throat; the former he says should be considered a disease, not the result of human weakness or failure; the latter being the “stupidest design” of human anatomy. As you might surmise, Unseen Body has less to do with clinical medical facts than it does with the emotional practicalities of diagnosing diseases and conditions. The Doctor does this through patient histories, gleaned from a variety of global settings, such as frostbite in Russia, diarrhea in India and altitude sickness in Nepal.

Dr Reisman’s down-to-earth self-assessment of his role as a medical professional sees it in much the same way as a plumber attempting to achieve balance and keep healthy processes flowing in his patients. He gives readers the inside skinny on things we have all wondered about at times. For example, he says “syndrome” is code for the medical profession’s ignorance about why the human body acts in certain ways, and adds that while blood work gets most of the credit for helping diagnose patients, the other bodily fluids like urine and mucus also deserve a lot of the credit. He goes on to say that even though mucus may be a nuisance in our daily lives, it’s a vital part of the body’s protection from disease and is actually the mortar that keeps our cells in place throughout our bodies.

Unseen Body should appeal to layman and medical professionals alike. The author provides many useful and unique insights garnered from significant experience offering medical care around the globe.

Friday, August 19, 2022

Economic Growth Is Not Always Progress

Inflation and economic growth, measured by gross domestic product (GDP), have recently been headline news and have sparked serious debate among pundits, politicians and the citizenry-at-large. What do these stats mean for upcoming elections and for the average person’s daily life? Is it fair to compare China’s with the US? Is it fair to compare past GDP to today’s?
David Pilling’s 2018 book titled “Growth Delusion” explores these questions and many others and adds a healthy dose of skepticism along the way, especially when he points out that inflation effects reported GDP numbers, and vice versa.

Mr. Pilling makes a compelling case that GDP is an imperfect measure of economic growth that fails miserably to accurately indicate the welfare of a nation, with one exception: if “you’re poor, economic growth can be transformative” and effective in raising living standards out of poverty. However, he adds that GDP does not take into account, for example, income inequality, existing resource endowments and their depletion, and good and bad externalities. The author traces the history of GDP’s creation to the early twentieth century and explains that even at its inception, its creator saw flaws in the data used to compile it and in its tenuous ability to reveal the health of an economy.

The author also suggests that, even today, the GDP metric is fraught with pitfalls in comparing economic growth across nations, especially in emerging economies, and comparing those statistics over time. For example, some nations include illegal activities in the calculation, while others have huge underground economies which go unmeasured and unreported in GDP stats; others, such as China and Kenya, for example, deliberately underreport GDP growth, so as to keep subsidies coming from richer nations and certain global development institutions.

Mr. Pilling explains that technological changes that have transformed nations away from manufacturing and into service economies and the financialization of economies have further distorted and confused GDP meaning over the past half century. Through a series of specific anecdotes from developed and emerging nations the author demonstrates the many challenges inherent in devising this single metric of a nation’s economic health.

The author concludes that due to its shortcomings, and our inability to reduce all living standard factors to dollars and cents, the GDP metric needs to be supplemented with other types of stats and indexes; he highlights the many attempts to measure living standards by various researchers in recent years who have identified other factors that weigh in assessing human progress, prosperity and happiness.

Although rather comprehensive and detailed in its approach, the book’s analysis is an easy read and most accessible to readers with limited background in economic statistics and macroeconomic analysis. The book is an excellent introduction to this complicated and very detailed subject and should appeal to not only macroeconomists, but also to business executives and investors that rely on GDP statistics and forecasts in their decision-making.

Thursday, August 11, 2022

Did Jack "Welch" on America?


David Gelles' recent, easy to read 231 page book about Jack Welch, "The Man Who Broke Capitalism,” about the former CEO of General Electric, is a must read for anyone interested in what went wrong with American Capitalism at the turn of this century. Mr. Welch was until recently considered the best American CEO of the 20th Century, and this book chronicles how he, during his 20 year tenure as CEO, made GE the most valuable company in the world, but along the way planted the seeds of ruin that became apparent not long after his retirement.

In addition, with Mr. Welch’s apparent success and celebrity, he unwittingly "single-handedly ushered in a new cutthroat era of American Capitalism that persists today." His obsession with "downsizing” (he eliminated 10% of GE employees ever year), “deal-making” (he acquired dozens of major companies through mergers and acquisitions), and “financialization” (he made GE a bank and used its cash for dividends and stock buybacks, rather than research and development or employee wages), allowed Mr Welch to drive profits and GE's stock price to ever increasing heights. Obsessed with his own success he eventually engaged in unethical and illegal business and accounting practices that would have driven this once AAA-rated company to extinction, but for the generous assistance it received from our government during the 2008 financial crisis.

The book highlights not only Mr. Welch’s career, but those of the many executives he trained who would go on to become CEOs of other world class corporations, such as 3M, Boeing, Home Depot, Chrysler, Allied Signal, and Honeywell. Many of the stories will be familiar to readers who have followed corporate America for the past 20 years, although the book offers many details about the events that most readers will find new and interesting.

As worthwhile a read as it is, the book veers off course a bit toward the end when it injects some partisan politics and begins to suggest remedies to our “broke” capitalist system. It compares the persona and the politics of Mr. Welch with that of former President Trump, suggesting that both men are cut from the same cloth as Republicans and suggesting that Mr. Trump's elevation to the Presidency was facilitated by his relationship with Mr. Welch.

The last chapter in the book, titled Beyond Welchism, tries to prescribe some ways to “fix” capitalism by specifically changing the practices of large corporations so that they are more beneficial to society at large. Unfortunately, the chapter is vague and unconvincing, referring to "studies" that claim to support the author’s ideas, but leaves readers with generalities. For example, he claims that "studies" have shown that increasing minimum wages make employees more productive and happier, but ignores other studies that show that raising minimum wages cause companies to reduce their workforces, thereby hurting the segments of the workforce they’re attempting to lift out of poverty or to a higher standard of living.

He mentions the need to "strengthen anti-trust policies" but offers no commentary on monopolistic and, by the way, liberal leaning companies like Facebook and Google, and other high tech companies that virtually control their markets. These companies also sell products that enable companies to employ fewer workers. Although the author comments on Jeff Bezos and Amazon, and depicts Amazon as possessing the worst anti labor relations imaginable, he omits the fact that Mr.Bezos is the owner of the liberal leaning Washington Post newspaper.

He talks about the need to raise taxes on the rich, especially on capital gains, but makes no mention of the most egregious tax policy in existence, that of treating carried interest income of uber rich hedge fund managers as capital gains instead of ordinary income, a policy that the Democrats failed to outlaw when they controlled congress back in 2009 (and failed again just this week).

He talks about the middle class fallout from the 2008 financial crisis, how the middle class lost their jobs while the corporate fat cats made millions, but again, fails to mention that the Democrat controlled congress in 2009 failed to hold many, if any, of those fat cats accountable with fines or jail time.

My point is that there’s probably enough blame on both sides of the political aisle for the failures of capitalism. Mr. Gelles seems to suggest that our government should try to “fix” our corporations, which is ridiculous when we realize that Congress “broke” our government decades ago and that government grows more dysfunctional each year.

Capitalism in its purest form, which does not exist today (and probably never did), needs an environment of unfettered economic freedom and fair competition in order to exist, and a profit motive to propel it forward. Interjecting more government and more regulations will only worsen the problem.

Mr. Gelles' book is essential reading for anyone interested in the back stories of many of the most important business headline stories of the past two decades, and I believe the book would be even better had it avoided bringing politics into the discussion. Moreover, instead of offering prescriptions for the future, this reader would have preferred, for example, that the author compare today’s failures with the practices that made those corporations great back in the first half of the 20th century.