September 23, 2017

G.M. Workers Strike in Canada as Mexico Jobs Raise Tension

The Equinox is in an increasingly popular market segment where it competes against two vehicles also built in Ontario: the Toyota RAV4 and the Honda CRV. According to Automotive News, the Equinox’s year-over-year sales through August were up 17 percent in the United States and 40 percent in Canada. American G.M. dealers have enough Equinoxes in stock to cover 53 days of sales compared with an average of 82 days for all other Chevrolet models, according to the trade publication.

The company spent 800 million Canadian dollars (about $660 million) on new facilities and tooling at Ingersoll for the current version of the Equinox.

The factory is owned by General Motors, but it was originally used in a joint venture with Suzuki. That means its workers are not covered by the union agreement that Unifor reached with G.M. last year for its other Canadian plants.

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Tensions over different work rules in Ingersoll gave the factory a reputation for labor militancy during the joint-venture years.

As a priority in the G.M. negotiations, as in talks with automakers last year, Unifor has sought a commitment to continue and expand production in Canada.

In July, Unifor, Canada’s largest private-sector union, held what it called a town-hall meeting in Ingersoll demanding that the current renegotiation of the North American Free Trade Agreement lead to greater job protection for Canadian factory workers. Industrial production in Canada, and Ontario in particular, has shifted toward both the United States and Mexico under Nafta, in addition to the general global shifts toward other countries, particularly China.

Mr. Dias, echoing President Trump to some extent, blames Mexican wages and employment standards for the lost jobs in Canada.

“Look, Canada and the U.S. agree that the problem isn’t us — especially in the auto sector,” Mr. Dias said last month in an interview with The Windsor Star, the newspaper in an auto town that has lost all its G.M. plants. “The problem is Mexico.”

He added: “The whole argument that opening up markets is somehow going to benefit working-class people — Nafta has shown that isn’t true.”

Follow Ian Austen on Twitter: @ianrausten

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Article source: https://www.nytimes.com/2017/09/18/business/general-motors-strike-canada.html?partner=rss&emc=rss

Bump in U.S. Incomes Doesn’t Erase 50 Years of Pain

“Over the past five decades, Middle America has been stagnant in terms of its economic growth,” said Mark Rank, a professor of social work at Washington University in St. Louis. In 1973, the inflation-adjusted median income of men working full time was $54,030. In 2016, it was $51,640 — roughly $2,400 lower. A big chunk of that group — white working-class men — formed a critical core of support for Mr. Trump, who spoke to their economic anxieties and promised changes in trade, immigration and tax policies as a solution.

As in an Agatha Christie mystery, the potential culprits behind the long-term trends are many — global competition, technological advances, trade imbalances, a mismatch of skills, the tax system, housing prices, factory shutdowns, excessive regulation, Wall Street pressure, the erosion of labor unions and more. Most of the suspects, if not all, are likely to have played some role.

Widening Generation Gap

The median income a man would earn over his career peaked with those who entered the work force in 1967 and has declined 19 percent since then. Those with lower incomes have fared even worse while those at the very top have increased.

Annualized lifetime income of men

Adjusted for inflation

$140

thousand

95th percentile

+4%

120

Change

from 1967

100

80

75th

–10%

60

Median

–19%

40

25th

–24%

20

5th

–27%

0

1957

1967

1975

1983

Year men entered the work force (at age 25)

Data through 2013

But the forces undermining the middle class may reach back farther than many economists have thought. The latest evidence comes from a group of researchers at universities and the Social Security Administration who have been tracking the earnings of hundreds of millions of individuals over their careers.

Starting with 1957, the team looked at actual earnings during the prime working years — the ages of 25 to 55. For a while, it saw a clear pattern: Younger men could expect to make more over their lives than older ones. Every year the starting rewards were higher and kept growing. So men who turned 25 in, say, 1960 would end up with a higher median cumulative income by 55 than men who had turned 25 in 1959. And the ’59ers would, in turn, do better over three decades than those who had turned 25 in 1958.

But that steady progress stopped in the late 1960s. Then, instead of increasing, lifetime earnings for men made an about-face and began to decline. They have been dropping pretty much ever since. The result was that a 25-year-old man who entered the work force in 1967 and worked for the next three decades earned as much as $250,000 more, after taking inflation into account, than a man who had the same type of career but was 15 years younger.

“That’s enough to buy a medium-size house in the United States,” said Fatih Guvenen, an economist at the University of Minnesota and a co-author of the study. “That is what you are missing from one generation to the next generation.”

And the trend appears to be continuing. “Every new cohort made less in median lifetime income than the previous one,” Mr. Guvenen said.

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The result is widening lifetime inequality as well. That’s because nearly all of the financial gains have been funneled to those at the top of the income scale. For four out of five men, there was no real growth.

“And it all starts at age 25,” Mr. Guvenen said. The decline in lifetime earnings is largely a result of lower incomes at younger ages rather than at older ages, he said, and “that was very surprising to us.”

Most younger men ended up with less because they started out earning less than their counterparts in previous years, and saw little growth in their early years. They entered the work force with lower wages and never caught up.

Photo
A check cashing store in New York. Since the 1950s, lifetime income has not changed for three-quarters of working Americans. Credit Spencer Platt/Getty Images

According to one conservative measure of inflation, in 1967, the median income at age 25 was $33,300; in 1983, it was $29,000. Twenty-five-year-olds did better during the 1990s, but then the slide returned. In 2011, the median income for 25-year-old men was less than $25,000 — pretty much the same as it was in 1959.

The picture for women looks different because so many more of them started at a disadvantage: Few worked full time in the 1950s, and those who did earned below-average wages. As more women entered the work force over the decades, their lifetime earnings rose. But more recently, as the share of women working has leveled off, their lifetime income gains, too, have slowed.

The result is that, since the 1950s, three-quarters of working Americans have seen no change in lifetime income. Health and retirement benefits have made up some of the lost ground, but far from all of it.

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The recent progress reported by the Census Bureau doesn’t conflict with this story. As the bureau explained, the income gains came mostly because more people were working full time. Roughly 2.2 million more adults had full-time jobs in 2016 than in 2015.

To Mr. Guvenen, the research indicates that the political debates in Washington centered on earnings and employment have been too narrow. Given the early roots of lifetime income disparities, he said, more attention should be paid to what is going on even before people start entering the work force.

“Our findings suggest that both the stagnation of median lifetime income for men, and the increase in lifetime income inequality for men and women, can be traced to changes that newer cohorts have experienced before age 25,” the research team concluded.

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That would mean looking at policies directly related to the family and education.

Certainly the kinds of jobs and salaries that high school graduates used to be able to command have dived. “That’s the single most important reason we’re having so much trouble,” said Ron Haskins, a senior fellow at the Brookings Institution. “You have to have better skills and more knowledge to make $60,000 to $80,000 a year now than in the past.”

The shrinking rewards of a high school education help explain not only the stress that Americans in the work force are feeling, but also why a larger proportion of men have dropped out altogether during their prime working ages. Work doesn’t pay off the way it used to.

That’s a problem produced not just by the labor market, but also by the educational system, Mr. Haskins said. “We have a lot of people who are very difficult to educate and tend to drop out,” he said. Minorities are especially vulnerable. Without changing that dynamic, he said, it is going to be difficult to halt the hollowing out of the middle class.

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Article source: https://www.nytimes.com/2017/09/16/business/economy/bump-in-us-incomes-doesnt-erase-50-years-of-pain.html?partner=rss&emc=rss

Douglas Dowd, 97, Antiwar Activist and Critic of Capitalism Is Dead

Beginning in the mid-1960s, Professor Dowd struggled to unify the fractious antiwar movement behind marathon campus teach-ins and debates, civil disobedience and nonviolent public protests. (He told The Boston Globe in 1970 that leftist bomb-throwers were serious, committed and desperate people who had “given up the idea that a movement can get anyplace without violence.”)

He repeatedly reminded students that universities were not isolated havens but “an integral and functioning part of an American socio-economic-military system,” and he argued that some radical groups had failed because they never ventured beyond the college gates to confront the real world.

“You can’t fight imperialism on campus, you can’t fight racism on campus,” Professor Dowd said. “You can only fight their manifestations.”

The role of the university, he wrote in an Op-Ed article in The New York Times in 1971, is to become a place where “re-examination, uncertainty, change and conflict become an integral part of what is studied.”

He mentored budding academicians and dissidents, including Daniel Ellsberg, the military analyst who delivered to The Times a secret government history of the Vietnam War, which became known as the Pentagon Papers after it was published in 1971.

Photo
Douglas Dowd in 1960. Credit Cornell University Library Division of Rare and Manuscript Collections

“As I could say also of Noam Chomsky and Howard Zinn,” Mr. Ellsberg wrote in 2004, “there’s no one in my life from whom I’ve learned more than my friend and mentor Douglas Dowd.”

Bruce Dancis, Professor Dowd’s friend and former student and the author of “Resister: A Story of Protest and Prison During the Vietnam War” (2013), recalled in an interview: “Doug opened up new ideas of looking at the world, of not accepting the established order as the way things had to remain. He was dealing with people half his age, and we must have made plenty of mistakes that made him cringe, but he was never condescending.”

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Douglas Fitzgerald Dowd was born in San Francisco on Dec. 7, 1919, to Mervyn Dowd, a lawyer, and the former Sybil Seid.

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He graduated with a bachelor’s degree in economics from the University of California, Berkeley, in 1949 and later earned a doctorate there.

In addition to his wife, he is survived by two children, Jeff and Jenny Dowd, from his marriage to Zirel Druskin, which ended in divorce; and two grandchildren.

He joined the Cornell faculty in 1953 and taught there through 1970, serving as chairman of the economics department. He also taught at San Jose State University, the University of California, at Berkeley and at Santa Cruz, and, in Italy, the University of Modena and the Johns Hopkins University School of Advanced International Studies Bologna Center.

He ventured into electoral politics briefly in 1968 when he reluctantly agreed to be nominated in New York for vice president,as Eldridge Cleaver’s running mate, by the Peace and Freedom Party, a loose coalition of radical leftists and Black Panthers. He agreed to join the ticket, he said, only to thwart the nomination of Jerry Rubin, the Yippie leader whom Professor Dowd considered a publicity hound prone to violence. (Because of several election law twists, though, he and Mr. Cleaver never made it onto the ballot.)

In 1970, Professor Dowd, as co-chairman of the New Mobilization Committee to End the War in Vietnam, joined Professor Chomsky (like Professor Zinn, a historian and social critic) and other antiwar spokesmen on a visit to North Vietnam.

Later that year, the House Internal Security Committee identified Professor Dowd as one of 65 “radical and/or revolutionary” campus speakers.

In his “U.S. Capitalist Development Since 1776: Of, by and for Which People?” (1993), Professor Dowd wrote that capitalism requires expansion and exploitation. He suggested that the Cold War was less a necessary response to contain communism than a strategy to spread capitalism.

“Well before World War I, the philosopher William James, apprehensive of what lay ahead, said, ‘We must find the moral equivalent of war’ to give unity and direction to our society,” Professor Dowd wrote. “Now we must find the moral equivalent of cold war.”

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Article source: https://www.nytimes.com/2017/09/13/us/politics/douglas-dowd-97-antiwar-activist-and-critic-of-capitalism-is-dead.html?partner=rss&emc=rss

The Shkreli Syndrome: Youthful Trouble, Tech Success, Then a Fall

In light of the recent troubles of Mr. Shkreli and other scandal-ridden entrepreneurs like Travis Kalanick, the former Uber chief executive, and Parker Conrad, a founder and ousted chief executive of the multibillion-dollar human resources software firm Zenefits, the question is whether youthful rule-breaking might have foreshadowed not only their rise, but also their fall.

Photo
Martin Shkreli leaving federal court in Brooklyn last month as a jury deliberated in his fraud case. Credit Louis Lanzano for The New York Times

It is perhaps not surprising that longtime rebels like Mr. Kalanick — who has boasted of being among the first peer-to-peer file-sharing “pirates” when he was in his early 20s — would be inclined toward entrepreneurship. It is a calling that, in the often repeated narrative of the economist Joseph Schumpeter, rewards those who upend the established order.

“As the brain matures, I think the energy in terms of breaking rules is focused toward ‘I can do that better’ as opposed to ‘I’m going to take a pair of sneakers,’ ” said Professor Levine, who published a peer-reviewed paper on the topic with Professor Rubinstein in a top journal this year. Both men are experts on entrepreneurship, and Professor Rubinstein also studies human capital.

The problem is that the psychological forces that drive teenagers to break rules may not be so easily channeled later on.

Laurence Steinberg, a Temple University professor and an expert on the psychological development of adolescents, cited a phenomenon known as “moral disengagement,” in which people rationalize behavior at odds with their own principles. A teenager who steals a pair of sneakers, for example, may tell himself that the manufacturer was overcharging consumers.

Studies have shown that such moral disengagement frequently enables wrongdoing, and that it can survive into adulthood. According to Professor Steinberg, entrepreneurs who are prone to moral disengagement may continue to break actual rules, not just metaphorical ones.

“You think the regulations are uncalled-for,” he said. “Even though you might be breaking them, you’re really not doing a bad thing, because they were bad regulations.”

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Such behavior is often encouraged in Silicon Valley. For years, many technology investors applauded Uber’s practice of operating without the approval of local regulators, and then exploiting the company’s popularity among riders to bring about changes to the rules.

Photo
Travis Kalanick, the former chief executive of Uber, at an event marking the company’s fifth anniversary in 2015. Credit Robert Galbraith/Reuters

Or consider the early days of the financial technology and payments company Square, which used a credit card account one of its founders set up for one business to handle payments for other businesses that lacked such accounts.

The practice sometimes ran afoul of credit card company rules, but Square pressed ahead, demonstrating that small businesses would pay for a service that made it cheap and easy to accept credit card payments. “If you don’t do it, you can’t test whether people even like the concept,” said Greg Kidd, who was an adviser to the company. Mr. Kidd noted that Square soon raised $10 million from enthusiastic investors.

While such rule-breaking may be legitimate in certain circumstances — the major credit card companies eventually altered the restrictions on the use of business credit card accounts, allowing Square to get off the ground — the financial rewards for operating this way can reinforce a tendency toward shiftiness.

There are two factors that make it even more tempting to fudge ethical questions: the relative lack of oversight at start-ups, and the enormous risk of failure.

“Entrepreneurial businesses are often in crises, due to high levels of environmental uncertainty, the large number of actual or potential competitors, and the significant amounts of financial capital needed to compete,” said a 2015 article in The Journal of Business Ethics. “Moral disengagement can cognitively pave the way and increase the likelihood that these dilemmas will be resolved unethically.”

In effect, entrepreneurship takes people who, as a group, are prone to breaking actual rules and putting them in a setting that constantly encourages them to do so.

Mr. Shkreli, who is to be sentenced in January for defrauding investors in two hedge funds he managed — and had his bail revoked on Wednesday after offering a bounty for a strand of Hillary Clinton’s hair — has played down his wrongdoing.

Photo
Parker Conrad, founder and ousted chief executive of the multibillion-dollar human resources software firm Zenefits. Credit Jim Wilson/The New York Times

“He did it, and it worked, and they got paid,” one of his lawyers said in court, arguing that Mr. Shkreli made his hedge fund investors whole partly by using stock from his pharmaceutical company. Professor Steinberg called it a clear example of moral disengagement. (The lawyer, Benjamin Brafman, said that Mr. Shkreli never intended to defraud anyone.)

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Mr. Conrad, who was ousted as chief executive of Zenefits last year after it was disclosed that he had created a tool to help insurance brokers evade state training requirements, was not averse to rule-breaking as a younger man. He was asked to leave Harvard for a year after rarely showing up to class and earning terrible grades. He eventually returned and graduated.

(An investigation commissioned by the Zenefits board concluded that the requirements the tool helped brokers evade were not substantive.)

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Mr. Conrad’s flaws as a manager may have been evident at Zenefits, whose motto was “Ready, Fire, Aim,” long before his downfall. Not least by Mr. Conrad himself, who confessed in a 2014 interview that his sluggish approach to hiring senior executives meant “balls are getting dropped.” Investors lined up to give the company money anyway.

Of course, youthful wrongdoing is hardly destiny when it comes to adult rule-breaking, as Professor Levine, the economist, pointed out. While he was at Harvard, the Facebook founder Mark Zuckerberg was summoned before an administrative board over allegations that he had hacked into university websites. But he appears to have matured over time, even retiring the “move fast and break things” motto in 2014.

These days, many venture capitalists spend as much time assessing what kind of troublemaker an entrepreneur may be as they do assessing a business’s revolutionary potential.

“We do want them to be rule-breakers,” said David Golden, who helps run the venture capital arm of Revolution, the investment firm of the AOL co-founder Steve Case. “We don’t want them to be felons.”

Photo
Mark Zuckerberg, founder of Facebook, meeting with software developers and entrepreneurs in Nigeria last year. He once defined the company’s ethos as “move fast and break things,” but later retired the slogan. Credit Andrew Esiebo for The New York Times

Mr. Golden admitted, however, that such judgments can be flawed. He cited a software company that Revolution agreed to finance in 2014, only to discover that the founder had misrepresented certain companies as customers. (The firm did not go through with the investment, he said.)

To eliminate subjectivity, some people have tried to quantify an optimal willingness to break rules. Before he started his venture capital fund, Switch Ventures, Paul Arnold collected data on roughly 12,000 start-ups with the goal of identifying the profiles of entrepreneurs that were most strongly associated with success.

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Mr. Arnold’s most striking finding involved start-ups where at least one founder had worked at the consulting firm McKinsey Company.

He studied nearly 1,000 such companies and discovered that start-up founders who left McKinsey after about three to four years tended to be extremely successful, but that those who stayed a lot longer were close to average. He concluded that the first group had the platonically ideal capacity for rule-breaking: They were sufficiently fluent in rule-following to hold a job at McKinsey but “didn’t like the strictures and kind of resisted it.”

But even Mr. Arnold, whose intuition on these questions was honed not just by statistics but by life experience — he was a two-time high-school dropout who was often in trouble for things like smoking marijuana before eventually finding his way to law school — admitted that he might have missed the warning signs with Mr. Kalanick.

While he was chief executive of Uber, the company developed a tool to evade regulators, had dozens of employees allege sexual harassment or discrimination, and was accused by a rival of stealing intellectual property.

“The Uber story is that the initial rule-breaking was innovation,” Mr. Arnold said. “But it was a slippery slope. They broke the next one and the next one, and were doing less and less ethical things.”

“I don’t know,” he confessed. “It’s a tricky topic.”

Lauren Herstik contributed reporting, and Doris Burke contributed research.

Follow Noam Scheiber on Twitter: @noamscheiber

A version of this article appears in print on September 15, 2017, on Page B1 of the New York edition with the headline: Young Rebels Who Rise, Then Fall.

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Article source: https://www.nytimes.com/2017/09/14/business/entrepreneur-young-trouble.html?partner=rss&emc=rss

Young Troublemakers Who Rise (and Fall) as Entrepreneurs

In light of the recent troubles of Mr. Shkreli and other scandal-ridden entrepreneurs like Travis Kalanick, the former Uber chief executive, and Parker Conrad, a founder and ousted chief executive of the multibillion-dollar human resources software firm Zenefits, the question is whether youthful rule-breaking might have foreshadowed not only their rise, but also their fall.

Photo
Martin Shkreli leaving federal court in Brooklyn last month as a jury deliberated in his fraud case. Credit Louis Lanzano for The New York Times

It is perhaps not surprising that longtime rebels like Mr. Kalanick — who has boasted of being among the first peer-to-peer file-sharing “pirates” when he was in his early 20s — would be inclined toward entrepreneurship. It is a calling that, in the often repeated narrative of the economist Joseph Schumpeter, rewards those who upend the established order.

“As the brain matures, I think the energy in terms of breaking rules is focused toward ‘I can do that better’ as opposed to ‘I’m going to take a pair of sneakers,’” said Professor Levine, who published a peer-reviewed paper on the topic with Professor Rubinstein in a top journal this year. Both men are experts on entrepreneurship, and Professor Rubinstein also studies human capital.

The problem is that the psychological forces that drive teenagers to break rules may not be so easily channeled later on.

Laurence Steinberg, a Temple University professor and an expert on the psychological development of adolescents, cited a phenomenon known as “moral disengagement,” in which people rationalize behavior at odds with their own principles. A teenager who steals a pair of sneakers, for example, may tell himself that the manufacturer was overcharging consumers.

Studies have shown that such moral disengagement frequently enables wrongdoing, and that it can survive into adulthood. According to Professor Steinberg, entrepreneurs who are prone to moral disengagement may continue to break actual rules, not just metaphorical ones.

“You think the regulations are uncalled-for,” he said. “Even though you might be breaking them, you’re really not doing a bad thing, because they were bad regulations.”

Advertisement

Continue reading the main story

Such behavior is often encouraged in Silicon Valley. For years, many technology investors applauded Uber’s practice of operating without the approval of local regulators, and then exploiting the company’s popularity among riders to bring about changes to the rules.

Photo
Travis Kalanick, the former chief executive of Uber, at an event marking the company’s fifth anniversary in 2015. Credit Robert Galbraith/Reuters

Or consider the early days of the financial technology and payments company Square, which used a credit card account one of its founders set up for one business to handle payments for other businesses that lacked such accounts.

The practice sometimes ran afoul of credit card company rules, but Square pressed ahead, demonstrating that small businesses would pay for a service that made it cheap and easy to accept credit card payments. “If you don’t do it, you can’t test whether people even like the concept,” said Greg Kidd, who was an adviser to the company. Mr. Kidd noted that Square soon raised $10 million from enthusiastic investors.

While such rule-breaking may be legitimate in certain circumstances — the major credit card companies eventually altered the restrictions on the use of business credit card accounts, allowing Square to get off the ground — the financial rewards for operating this way can reinforce a tendency toward shiftiness.

There are two factors that make it even more tempting to fudge ethical questions: the relative lack of oversight at start-ups, and the enormous risk of failure.

“Entrepreneurial businesses are often in crises, due to high levels of environmental uncertainty, the large number of actual or potential competitors, and the significant amounts of financial capital needed to compete,” said a 2015 article in The Journal of Business Ethics. “Moral disengagement can cognitively pave the way and increase the likelihood that these dilemmas will be resolved unethically.”

In effect, entrepreneurship takes people who, as a group, are prone to breaking actual rules and putting them in a setting that constantly encourages them to do so.

Mr. Shkreli, who is to be sentenced in January for defrauding investors in two hedge funds he managed — and had his bail revoked on Wednesday after offering a bounty for a strand of Hillary Clinton’s hair — has played down his wrongdoing.

Photo
Parker Conrad, founder and ousted chief executive of the multibillion-dollar human resources software firm Zenefits. Credit Jim Wilson/The New York Times

“He did it, and it worked, and they got paid,” one of his lawyers said in court, arguing that Mr. Shkreli made his hedge fund investors whole partly by using stock from his pharmaceutical company. Professor Steinberg called it a clear example of moral disengagement. (The lawyer, Benjamin Brafman, said that Mr. Shkreli never intended to defraud anyone.)

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Continue reading the main story

Mr. Conrad, who was ousted as chief executive of Zenefits last year after it was disclosed that he had created a tool to help insurance brokers evade state training requirements, was not averse to rule-breaking as a younger man. He was asked to leave Harvard for a year after rarely showing up to class and earning terrible grades. He eventually returned and graduated.

(An investigation commissioned by the Zenefits board concluded that the requirements the tool helped brokers evade were not substantive.)

Newsletter Sign Up

Continue reading the main story

Mr. Conrad’s flaws as a manager may have been evident at Zenefits, whose motto was “Ready, Fire, Aim,” long before his downfall. Not least by Mr. Conrad himself, who confessed in a 2014 interview that his sluggish approach to hiring senior executives meant “balls are getting dropped.” Investors lined up to give the company money anyway.

Of course, youthful wrongdoing is hardly destiny when it comes to adult rule-breaking, as Professor Levine, the economist, pointed out. While he was at Harvard, the Facebook founder Mark Zuckerberg was summoned before an administrative board over allegations that he had hacked into university websites. But he appears to have matured over time, even retiring the “move fast and break things” motto in 2014.

These days, many venture capitalists spend as much time assessing what kind of troublemaker an entrepreneur may be as they do assessing a business’s revolutionary potential.

“We do want them to be rule-breakers,” said David Golden, who helps run the venture capital arm of Revolution, the investment firm of the AOL co-founder Steve Case. “We don’t want them to be felons.”

Photo
Mark Zuckerberg, founder of Facebook, meeting with software developers and entrepreneurs in Nigeria last year. He once defined the company’s ethos as “move fast and break things,” but later retired the slogan. Credit Andrew Esiebo for The New York Times

Mr. Golden admitted, however, that such judgments can be flawed. He cited a software company that Revolution agreed to finance in 2014, only to discover that the founder had misrepresented certain companies as customers.

To eliminate subjectivity, some people have tried to quantify an optimal willingness to break rules. Before he started his venture capital fund, Switch Ventures, Paul Arnold collected data on roughly 12,000 start-ups with the goal of identifying the profiles of entrepreneurs that were most strongly associated with success.

Advertisement

Continue reading the main story

Mr. Arnold’s most striking finding involved start-ups where at least one founder had worked at the consulting firm McKinsey Company.

He studied nearly 1,000 such companies and discovered that start-up founders who left McKinsey after about three to four years tended to be extremely successful, but that those who stayed a lot longer were close to average. He concluded that the first group had the platonically ideal capacity for rule-breaking: They were sufficiently fluent in rule-following to hold a job at McKinsey but “didn’t like the strictures and kind of resisted it.”

But even Mr. Arnold, whose intuition on these questions was honed not just by statistics but by life experience — he was a two-time high-school dropout who was often in trouble for things like smoking marijuana before eventually finding his way to law school — admitted that he might have missed the warning signs with Mr. Kalanick.

While he was chief executive of Uber, the company developed a tool to evade regulators, had dozens of employees allege sexual harassment or discrimination, and was accused by a rival of stealing intellectual property.

“The Uber story is that the initial rule-breaking was innovation,” Mr. Arnold said. “But it was a slippery slope. They broke the next one and the next one, and were doing less and less ethical things.”

“I don’t know,” he confessed. “It’s a tricky topic.”

Lauren Herstik contributed reporting, and Doris Burke contributed research.

Follow Noam Scheiber on Twitter: @noamscheiber

Continue reading the main story

Article source: https://www.nytimes.com/2017/09/14/business/entrepreneur-young-trouble.html?partner=rss&emc=rss

After Irma, a Grim Sense of Déjà Vu in St. Augustine

St. Augustine changed hands between the Spanish, the British and the Americans over its long history and, in the late 1800s, Henry M. Flagler, a founder of Standard Oil, began to open hotels. One of those hotels turned into Flagler College, and St. Augustine has become an idyllic city of colleges, museums and tourism.

But on Wednesday, some of the hotels were draining themselves of floodwater and piling mattresses outside. The Lightner Museum, a downtown gem, was closed because it had flooded, and an apparently unmoored sailboat called the Celebration, its mast snapped, was floating in the middle of the river.

Irma’s destruction has left residents and business owners here with a grim sense of déjà vu, especially in the Davis Shores neighborhood, a development across the river, where Leo Guenther looked at the debris piled in front of his house — bathroom cabinets, interior doors, and two twin mattresses — and shook his head.

“All that stuff,” he said, “is new since Hurricane Matthew.”

The shock of a double whammy has extended elsewhere in St. Johns County, where, on Wednesday, inland rivers were still flooding and, north of St. Augustine, and parts of oceanside homes made more vulnerable by Hurricane Matthew had tumbled onto the sand.

“This was our chance to get our beach house,” said Theresa Forrester, a retired postal worker who in June had bought a waterfront home in Ponte Vedra Beach that had lost part of its retaining wall to Hurricane Matthew. She and her partner, Larry Edwards, planned to rehabilitate it. But she said the permit to fix the wall had not come in time, and so Irma had chewed up the houses’s garage and workshop and spit the pieces out onto the sand — and ripped off siding and roof shingles to boot.

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Article source: https://www.nytimes.com/2017/09/13/us/st-augustine-irma-flood.html?partner=rss&emc=rss

Douglas Dowd, 97, Antiwar Activist and Critic of Capitalism, Is Dead

Beginning in the mid-1960s, Professor Dowd struggled to unify the fractious antiwar movement behind marathon campus teach-ins and debates, civil disobedience and nonviolent public protests. (He told The Boston Globe in 1970 that leftist bomb-throwers were serious, committed and desperate people who had “given up the idea that a movement can get anyplace without violence.”)

He repeatedly reminded students that universities were not isolated havens but “an integral and functioning part of an American socio-economic-military system,” and he argued that some radical groups had failed because they never ventured beyond the college gates to confront the real world.

“You can’t fight imperialism on campus, you can’t fight racism on campus,” Professor Dowd said. “You can only fight their manifestations.”

The role of the university, he wrote in an Op-Ed article in The New York Times in 1971, is to become a place where “re-examination, uncertainty, change and conflict become an integral part of what is studied.”

He mentored budding academicians and dissidents, including Daniel Ellsberg, the military analyst who delivered to The Times a secret government history of the Vietnam War, which became known as the Pentagon Papers after it was published in 1971.

Photo
Douglas Dowd in 1960. Credit Cornell University Library Division of Rare and Manuscript Collections

“As I could say also of Noam Chomsky and Howard Zinn,” Mr. Ellsberg wrote in 2004, “there’s no one in my life from whom I’ve learned more than my friend and mentor Douglas Dowd.”

Bruce Dancis, Professor Dowd’s friend and former student and the author of “Resister: A Story of Protest and Prison During the Vietnam War” (2013), recalled in an interview: “Doug opened up new ideas of looking at the world, of not accepting the established order as the way things had to remain. He was dealing with people half his age, and we must have made plenty of mistakes that made him cringe, but he was never condescending.”

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Douglas Fitzgerald Dowd was born in San Francisco on Dec. 7, 1919, to Mervyn Dowd, a lawyer, and the former Sybil Seid.

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He graduated with a bachelor’s degree in economics from the University of California, Berkeley, in 1949 and later earned a doctorate there.

In addition to his wife, he is survived by two children, Jeff and Jenny Dowd, from his marriage to Zirel Druskin, which ended in divorce; and two grandchildren.

He joined the Cornell faculty in 1953 and taught there through 1970, serving as chairman of the economics department. He also taught at San Jose State University, the University of California, at Berkeley and at Santa Cruz, and, in Italy, the University of Modena and the Johns Hopkins University School of Advanced International Studies Bologna Center.

He ventured into electoral politics briefly in 1968 when he reluctantly agreed to be nominated in New York for vice president,as Eldridge Cleaver’s running mate, by the Peace and Freedom Party, a loose coalition of radical leftists and Black Panthers. He agreed to join the ticket, he said, only to thwart the nomination of Jerry Rubin, the Yippie leader whom Professor Dowd considered a publicity hound prone to violence. (Because of several election law twists, though, he and Mr. Cleaver never made it onto the ballot.)

In 1970, Professor Dowd, as co-chairman of the New Mobilization Committee to End the War in Vietnam, joined Professor Chomsky (like Professor Zinn, a historian and social critic) and other antiwar spokesmen on a visit to North Vietnam.

Later that year, the House Internal Security Committee identified Professor Dowd as one of 65 “radical and/or revolutionary” campus speakers.

In his “U.S. Capitalist Development Since 1776: Of, by and for Which People?” (1993), Professor Dowd wrote that capitalism requires expansion and exploitation. He suggested that the Cold War was less a necessary response to contain communism than a strategy to spread capitalism.

“Well before World War I, the philosopher William James, apprehensive of what lay ahead, said, ‘We must find the moral equivalent of war’ to give unity and direction to our society,” Professor Dowd wrote. “Now we must find the moral equivalent of cold war.”

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Article source: https://www.nytimes.com/2017/09/13/us/politics/douglas-dowd-97-antiwar-activist-and-critic-of-capitalism-is-dead.html?partner=rss&emc=rss

Median U.S. Household Income Up for 2nd Straight Year

Mr. Trump campaigned on a pledge to lift the nation’s fortunes and to repair what he described in his inaugural address as “this American carnage.” He has called for cuts to federal taxes and spending, broad reductions in regulation and limits on foreign trade.

The focus for now is on tax cuts. “Our painful tax system has become a massive barrier to America’s economic comeback,” Mr. Trump said last week in North Dakota. He dined Tuesday night with senators from both parties, seeking to build bipartisan support.

But some Democrats said the Census Bureau’s new figures reinforced their determination to resist.

“We need to be building on the success of the past eight years, not abandoning the progress we have made as a country and the American people who worked so hard to get us there,” said Representative John Yarmuth, a Kentucky Democrat who is the ranking member of the House Budget Committee.

The Federal Reserve is also closely watching the health of the economy as it debates how soon to resume hiking its benchmark interest rate.

Household incomes are outpacing wage growth because millions of Americans have returned to the work force, a vivid illustration of the old maxim that a job is the best antipoverty program. The economy added roughly 2.2 million jobs last year and an additional 1.4 million in the first eight months of this year.

The Census Bureau report is the second in a row to find strong income growth. A year ago, the bureau reported that the median income in 2015 had risen by 5.2 percent, the largest jump since record keeping began in 1967. The 2016 gains described on Tuesday pushed the median to the highest level on record, topping the previous peak in 1999.

But Census Bureau officials cautioned that those figures were not directly comparable because of a change in its methodology in 2013 that has tended to increase measured incomes.

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The Economic Policy Institute, a liberal research organization based in Washington, estimated that without the change in methodology, median household income in 2016 was still 2.4 percent lower than in 1999 — and 1.6 percent below the level reached in 2007, before the recession began.

The Census Bureau report also pointed out continuing challenges, including income inequality. The average household income for the poorest fifth of households fell by $571 over the decade that ended last year, adjusting for inflation. Over the same period, the average income for the wealthiest fifth of households rose by $13,479, adjusting for inflation.

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Racial disparities also have increased. The bureau reported that the median income for African-American households has fallen by 1.6 percent since 1999. The adjusted numbers provided by the Economic Policy Institute pegged the drop at 7.5 percent.

The annual report is based on a survey of 95,000 households.

“Just as in 2015, 2016 is going on record as another year of massive income inequality,” said Mary Coleman, senior vice president at Economic Mobility Pathways, a Boston nonprofit group that focuses on female and family poverty. “There was no meaningful reduction in income inequality.”

The good news is that income inequality, by some measures, is no longer increasing.

The details of the report help to explain the reasons. Household incomes increased because more people were working, and the gains in employment have been concentrated among workers with less education, driving income gains on the lower rungs of the economic ladder.

“Households are doing better because more people are working and more people are working full time,” said Jed Kolko, chief economist at the jobs site Indeed.com.

But the increases in household income also reflected investment gains. The share of income that came from sources other than wages increased markedly last year, to 21.8 percent, from 21.1 percent in 2015. That kind of income flows mostly to households on the upper rungs of the ladder.

Income inequality is at a very high level by historical standards. Some economists see evidence that the uneven distribution of income and wealth is an impediment to economic growth.

It also means the lives of Americans are increasingly different, depending on their economic fortunes. For example, mortality rates are climbing for middle-aged white Americans with no more than a high school education, a trend that the Fed chairwoman, Janet L. Yellen, described this year as “very shocking.”

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The Fed has curtailed its efforts to stimulate economic growth, concluding that monetary policy has done what it can. The Fed is expected to announce next week, after a meeting of its policy-making committee, that it will begin to reduce its bond holdings, a final legacy of its stimulus campaign.

While the distribution of income didn’t change last year, the rising tide lifted more people from poverty. The Census Bureau reported that 12.7 percent of households lived in poverty in 2016, representing a total of 40.6 million people. That was down from 13.5 percent of households and 43.1 million people in 2015. But the rate remains slightly higher than the 12.5 percent rate in 2007, before the recession, and significantly higher than the 11.3 percent rate in 2000.

“The challenge for policy makers now is to build on the last few years’ progress and not worsen poverty and inequality,” said Robert Greenstein of the Center on Budget and Policy Priorities, a liberal think tank.

The data also showed that the ranks of those with health insurance coverage continued to grow last year. Only 8.8 percent of the population lacked insurance for the full year, down from 9.1 percent in 2015.

Montana and Louisiana expanded their Medicaid programs in 2016, joining 29 other states in accepting increased federal financing under the Affordable Care Act. Private coverage also increased as companies hired more workers and offered better benefits.

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Article source: https://www.nytimes.com/2017/09/12/business/economy/income-rebound-recession.html?partner=rss&emc=rss

Democrats Vow to Fight Republican Tax Provisions that Aid Rich

“We are not going to allow the death tax or the inheritance tax or the whatever-you-want-to-call-it to crush the American Dream,” Mr. Trump said.

Democrats scoff at that language, saying the tax hits only the wealthiest Americans. Estates are taxed at a rate of 40 percent, but the first $5.49 million of an inheritance is exempt from any taxation. Couples can leave their heirs as much as $11 million, none of it taxed, meaning only a few thousand wealthy estates face the tax a year.

On Tuesday, Mr. Schumer cited new data from the liberal-leaning Center on Budget And Policy Priorities that projected a repeal of the estate tax would benefit 5,400 of the wealthiest Americans.

“This is a totally absurd proposal,” said Senator Bernie Sanders, independent of Vermont. “At the end of the day that is what the Republican agenda is about.”

It remains unclear how wedded the White House is to killing the estate tax. In a meeting with Senate Democrats this year Gary D. Cohn, Mr. Trump’s top economic adviser, suggested that only rich people who plan poorly bear the burden of the tax.

“Only morons pay the estate tax,” Mr. Cohn said.

The red lines from Democrats are becoming increasingly stark. Mr. Schumer also said that a repeal of the deduction for state and local taxes and any changes to the mortgage interest deduction would also be non-starters with Democrats.

Still feeling the sting from its failed effort to repeal the Affordable Care Act without the help of Democrats, the White House is trying to keep hope of bipartisanship alive.

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But the Trump administration is not counting on their support. Steven Mnuchin, the Treasury secretary, said on Tuesday that Republicans would use a parliamentary tool called reconciliation to bypass a filibuster in the Senate if Democrats refuse to get on board.

“If we can’t get 60 votes, we’re prepared to use reconciliation to get it done,” Mr. Mnuchin said at a CNBC conference.

But after months of deliberations, Republicans have yet to agree on their own plan.

On Tuesday, Mr. Mnuchin said that Mr. Trump and House Speaker Paul D. Ryan are not yet in accord on the corporate tax rate. The president wants it to be slashed from 35 percent to 15 percent, while Mr. Ryan and most tax experts think that getting it to the mid-20 percent range is most likely.

Mr. Mnuchin appeared to acknowledge that the administration was likely to lose that battle.

“I don’t know if we will be able to achieve that, given the budget issues,” he said of the 15 percent rate.

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Also, the special tax treatment of fees reaped by hedge fund managers and private equity executives remains unresolved. Those fees, known as “carried interest,” are taxed as capital gains, not as income.

Another apparent division emerged when Mr. Mnuchin offered insight into how the administration would apply a lower tax rate to “pass through” businesses — small businesses, partnerships and other companies that now pay personal income tax rates instead of the corporate tax rate. Tax experts worry that a lower rate for such businesses would become a giant loophole as wealthy individuals reclassified themselves as small businesses.

“Services companies that are pass-throughs will not get the benefit of the rate,” Mr. Mnuchin explained. “If you earn money that’s clearly income, if you are an accountant firm and that’s clearly income, you’ll be taxed at income rates. You won’t be taxed at pass-through rates.”

Taxation of such firms is one of the most sensitive tax policy debates, and Mr. Mnuchin might have gotten ahead of himself.

Representative Kevin Brady of Texas, the chairman of the House Ways and Means Committee, said that addressing that potential loophole was still under discussion and no decisions have been made.

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Republicans have been united on repealing the estate tax, however, and Mr. Brady did not appreciate Mr. Schumer closing the door on the idea before legislation has even been introduced.

“Rather than drawing red lines in the sand, finding that common ground is the key to very successful, very pro-growth tax reform,” Mr. Brady said. “I’d urge all people to keep an open mind.”

Even with open minds, the path will not be easy. The White House and Republicans in Congress continue to press to get something passed this year, but many obstacles remain.

For the tax overhaul to move ahead, Congress must adopt a budget resolution with the parliamentary language that would allow tax legislation to clear the Senate with only a simple majority, rather than the 60 votes needed for most bills.

The chairwoman of the House Budget Committee, Representative Diane Black of Tennessee, has been struggling to round up the necessary votes to pass a budget. The hard-line House Freedom Caucus is demanding details about the tax overhaul before its members will vote for a budget resolution.

“Until we get tax reform specifics, there will be no budget,” said Representative Mark Meadows, Republican of North Carolina and the group’s chairman.

That and other issues have pushed consideration of a budget blueprint to late September at the earliest.

In the Senate, the Budget Committee chairman, Michael B. Enzi of Wyoming, is still working toward drafting a budget resolution.

“We need to do it pretty soon,” said Senator John Cornyn of Texas, the No. 2 Senate Republican. “I think the president has cleared the decks” with the deal he struck with Democrats to raise the debt ceiling and keep the government funded into December.

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“But,” he added, “we need to act pretty quickly.”

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Article source: https://www.nytimes.com/2017/09/12/us/politics/trump-tax-code-republicans-votes.html?partner=rss&emc=rss

European Central Bank Signals End of Cheap Money Era is Coming

He began laying the foundation on Thursday for plans to “taper” the stimulus. Although the European Central Bank’s Governing Council left monetary policy unchanged, Mr. Draghi said policy makers had preliminary discussions about the program, and said they would make the “bulk” of the decisions about tapering late next month.

Yet he also left himself plenty of wiggle room in case conditions change. In particular, the central bank will be keeping a close eye on the euro’s growing strength compared to the dollar, which Mr. Draghi said could alter assumptions about how the eurozone economy will perform.

“The recent volatility in the exchange rate represents a source of uncertainty which requires monitoring,” he said at a news conference.

The dollar has declined more than 13 percent against the euro this year, driven largely by tensions with North Korea and dysfunction in Washington.

When the euro rises against the dollar, European exports become more expensive — not only in the United States but also in other countries, like China, whose currencies are linked with the dollar. That typically means that European companies will sell fewer goods abroad, hurting growth and prolonging the need for central bank stimulus.

A robust euro also undercuts the bank’s efforts to jolt inflation back to the official target of 2 percent, a level considered healthy for growth. A strong euro holds down consumer prices by making imported oil and other goods cheaper for eurozone residents. That’s not all bad for people who live in Europe, but low inflation means that Mr. Draghi has to keep printing money longer than he would like.

The eurozone’s annual rate of inflation in August was 1.5 percent, and a substantial increase is nowhere in sight. According to forecasts by the central bank’s staff, inflation will still be below the target in 2019.

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“It became clear at the press conference just how important the euro-dollar exchange rate is to the E.C.B.,” Jörg Krämer, the chief economist at Commerzbank in Frankfurt, said in a note to clients. “If, contrary to our expectations, the euro makes further strong gains, the E.C.B. might slow down its tapering process.”

There’s not much Mr. Draghi can do about the weak dollar, which analysts say reflects pessimism about the ability of President Trump and Congress to agree on legislation that many economists believe would help bolster growth in the United States, such as infrastructure programs or corporate tax reform.

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“Investors no longer trust the American government to push through tax reform and fiscal stimulus,” Alwin Schenk, a portfolio manager at the German bank Sal. Oppenheim, said in a note to clients.

The dollar’s decline is also an expression of the nervousness investors feel about geopolitics, primarily nuclear saber-rattling by North Korea and bellicose rhetoric from Mr. Trump. The euro is seen as a safe haven from turmoil.

In addition, investors have sold dollars and bought euros after becoming more optimistic about the eurozone’s prospects for growth.

Mr. Draghi may have tried to talk the euro down on Thursday by stressing that a stronger currency could alter assumptions about future inflation. But if that was his goal, the jawboning did not work — the euro rose about 1 cent to $1.20 after his remarks.

The European Central Bank is running out of time. It has been printing money for more than two years, using newly created euros to buy government and corporate bonds. It hopes to make it easier for governments to deal with their debts and cheaper for corporations to raise money that they can invest.

The bank has said it will spend 60 billion euros, or $72 billion, a month in eurozone bond markets at least through December, but has not said what it will do after that. Mr. Draghi reiterated Thursday that it would not raise its benchmark interest rate, currently zero, until it has ended the bond purchases. That means rate increases are probably still years away.

There may be another reason the European Central Bank must dial back the stimulus — the supply of bonds may be getting scarce.

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When it announced its quantitative easing program, the bank promised not to buy more than 33 percent of any one bond issue, to avoid distorting the market too much. The limit is also designed to protect against legal challenges by critics who say the bond buying is illegal because the central bank is barred by law from using its printing presses to finance eurozone governments.

Many analysts believe that it is becoming increasingly difficult for the bank to avoid exceeding the limit for German Bunds and other kinds of bonds because it has already bought so many.

Mr. Draghi dismissed those concerns Thursday. “These doubts were present at the very beginning of the program,” he said. “I’m confident we will be able to exploit all the flexibility the program has.”

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Article source: https://www.nytimes.com/2017/09/07/business/european-central-bank-draghi-dollar.html?partner=rss&emc=rss