Friday, October 13, 2017

Bank Failure: The Farmers and Merchants State Bank of Argonia

The FDIC reported the liquidation of The Farmers and Merchants State Bank of Argonia. This was a small bank with two locations in Argonia and Schulte, Kansas.

It did business as Farmers & Merchants State Bank & Insurance Agency. The combination of banking and insurance might seem strange. There was a brief period after 1999 when many in the banking industry thought every bank should also be working in insurance. Most such arrangements were unwound by 2010. I have never seen an example where combining banking and insurance worked well. With so little operationally to connect banking and insurance, each business would have to be a distraction from the other. There are also financial implications. When a community bank makes half of its money from mortgage loans in its local area, concentration of risk is a concern in the first place, and this only gets worse if the bank is also issuing the insurance on those loans. I don’t have any relevant information on the cause of this bank failure, but regardless of the real story, the failure of any “Bank & Insurance Agency” may serve as a further caution to anyone who might be considering that combination of businesses.

This is the first FDIC bank resolution since May 26, which means the United States went for three months without a bank failure. This is what the pace of bank failures looks like in normal times, and it means that banks are doing reasonably well, even if hundreds of banks have not yet recovered financially from the real estate crash of a decade ago.

The Lost Hurricane, or Why Strategists Are Useless Most of the Time

We are approaching the end, we hope, of the worst hurricane season in U.S. history. I am sure most of my readers have been following the stories, so for those who have, please bear with me as I engage in a quick exercise in revisionist history. Pay attention — there will be a quiz at the end.

It is the morning of September 6, 2017, and things look grim. There are hurricane warnings for dozens of islands in the eastern Caribbean. A major hurricane, Irma, has just leveled Barbuda, stripping away most of the trees and damaging almost every building on the small island. From the U.S. point of view, there is reason to worry. This is one of the biggest hurricanes ever seen in the Atlantic Ocean, and it appears to heading almost directly toward the United States’ most important territory, the island of Puerto Rico.

Fortunately, when that hour comes, the hurricane passes by to the north. Puerto Rico is close enough to sustain wind damage and power outages, but the damage is surely nowhere near as bad as it might have been. Emergency managers in Washington hope for the best in Puerto Rico while they cast a worried eye on Florida. Evacuations there are underway as the hurricane appears to heading in that direction.

As news trickles in from Puerto Rico, though, damage is worse than expected. On September 22, aerial photos arrive showing a major dam that has sustained damage from the excessive rainfall. Engineers say the dam could collapse within hours. Evacuations are ordered downstream. The dam stands, and the military is sent in to do what they can to stabilize it and slow the erosion. Elsewhere across the territory, the damage is severe. Hospitals are operating on emergency power if they are open at all. Reports are slow to come in because communications and electricity are out almost everywhere. More supplies are sent, but progress continues to be slow. The U.S. President reluctantly agrees to visit Puerto Rico to see how the recovery efforts are going. The visit is delayed until October 3, and as the President hands out paper towels and tries to cheer up residents, he is puzzled by the disaster scenes he sees. The hurricane on September 6 had delivered only hours of tropical storm-force winds. What had happened? Puerto Rico must be badly managed indeed. By October 12, with electricity restored to only one tenth of Puerto Rico, the President is losing patience. Puerto Rico, he insists, was already a disaster already before the hurricane arrived. Federal disaster workers cannot stay there indefinitely, he says.

Those of you who have already spotted the error in preceding paragraph, please consider: there are also a great many people who will not see anything wrong in this narrative. People who think this way — for my purposes here, I will call them strategic thinkers or strategists — are in positions of power everywhere in the world. As long as this point of view carries so much weight, it is important for all of us to understand it and its strengths and limitations.

It is not even really about the often-cited differences between the “big picture” and “details.” If it looks like I have perhaps falsified the details of my narrative, I assure you that I have not. You could look up and verify each detail one by one, but that would not help.

For those who still don’t know where the problem is, I must not keep you in suspense any longer. The problem with the narrative above is that I failed to mention the most important thing that happened in the whole sequence of events. On September 20, 2017, Hurricane Maria crossed Puerto Rico. The entire island was in hurricane-force winds for the entire day. In the areas with the worst damage, most of the trees were brought down and those still standing had only a few leaves. Elsewhere, there were places where most trees stood, though most of the leaves were ripped away. One-day rainfall from Hurricane Maria ranged from 10 to 40 inches across Puerto Rico.

When you know about Hurricane Maria, the narrative based only on Hurricane Irma no longer makes any sense at all. But this also means the White House response to Puerto Rico no longer makes any sense. Maria must have failed to register on the television screens at the White House, which continued to respond to the crisis in Puerto Rico as if this second hurricane had never occurred. The White House response to Puerto Rico is proportional to the disaster if you know about Hurricane Irma and its near-miss. The White House response to Puerto Rico becomes nonsensical only after you add in the effects of Hurricane Maria, something that, I feel comfortable saying, the White House somehow failed to do.

Whoops! Needless to say, this is a pretty big mistake, but it’s important to see that it is not just a dumb mistake. Such mistakes occur every day in some form when people look at the world through the “strategic” lens. To those who stick to this point of view, numbers are details that don’t matter. One hurricane, two hurricanes — who cares how many hurricanes there were? The same point of view also may confuse hurricanes with earthquakes. It’s a form of confusion that most of us have difficulty imagining, but consider: both are natural disasters that may have effects in a short time period across a wide area.

You really don’t ever want strategists running anything because the results are regularly this embarrassing. Americans are going hungry because the White House lost track of the biggest hurricane in U.S. history? Yes, that is actually happening, literally today, right this minute, and it’s no wonder if those who are hungry are angry about the situation and those who are more distant from the problem are embarrassed.

I like to imagine that strategists make such big mistakes because they are comfortable dealing in abstractions but uncomfortable dealing in observations. This also tells you why strategists are useless most of the time. We get most of our results by observing what is going on in the world and reacting accordingly. Adding a layer of abstraction, most of the time, just muddies the waters. The recovery in Puerto Rico is being conducted by local workers and officials who go from building to building, finding the survivors and dead bodies, identifying the hazards, seeing what’s working and what’s broken. To have these workers criticized from a distance by someone who says that “Puerto Rico” (as if the territory were a person) could have built more hurricane-resistant buildings and avoided much of the current work is not only counterproductive but embarrassing.

Alas, these mistakes of context occur daily when a strategist is in charge. You ideally don’t want a pure strategist running anything that creates real-world consequences, yet Washington and much of the world are run by strategists. Many large businesses hire only strategic thinkers as executives. The world is regularly embarrassed by Trump’s out-of-context declarations. Equally embarrassing situations occur when the head of Hewlett-Packard or Uber threatens journalists, when Amazon issues a statement implying that authors deserve to starve, or when a Microsoft executive explains why fixing bugs is a waste of the company’s time. In practice, strategists are in charge in many places, and if we cannot replace them, we are left to find ways to work around them.

It is important to have strategic thinkers because they help us make some of the big leaps that a more concrete and prosaic thinker would never even think of. I want to be careful not to overstate this point, because equally big advances can emerge under the leadership of people who aren’t given to the strategic mindset. Thomas Edison, Henry Ford, and Franklin D. Roosevelt are prominent historical examples, and currently, Tesla, Apple, and Ikea are companies moving the world without leaning on strategic thinking. On the other side of a big advance, an initiative based on strategic thinking can flame out when it runs into a problem that the strategists can’t think their way around, as seen currently at Chipotle Mexican Grill and Uber, and you can doubtless think of dozens of other examples. We want to have strategists, but when they decide on something harmful, we need to be able to set their decisions aside and do something sensible instead.

In the case of Puerto Rico, the President is saying in essence that if Mr. Rico is starving it’s his own stupid fault. There are legitimate questions about Donald Trump’s brain function in recent weeks, but this conclusion has nothing to do with Trump’s mental decline. This is an everyday example of a strategic thinker led astray by his own strategic mindset. What we need to do is set Trump’s conclusion aside and say instead that these are our people and with an entire agricultural season wiped out, we are going to make sure that they have food.

For those in a position to choose leaders, it is important to look past the appeal of the great leap forward that strategic thinkers promise and see the inevitable blunders. With strategists in charge, breakthroughs and flameouts are all but guaranteed — except that after the first flameout, there might be nothing left. In politics, strategic thinkers are usually advisers, not executives, and that is the way it should be in business too.

Thursday, October 12, 2017

It’s Not Just Weinstein and It’s Not Just Hollywood

The Whole Corporate System Is Rotten With Predatory Worker Exploitation, and It’s Going to Get Worse

The Harvey Weinstein story is one that is hard to miss. The movie mogul was revealed to be a sexual predator with a decades-long pattern of workplace sexual harassment in a New York Times story. Weinstein responded with a confusing combination of apology and blustery denial, but at the same time, he also went into hiding. The day that followed was a parade of resignations from his corporate board and among his legal advisers. Then what was left of the board of directors at Weinstein’s company let him know that he was fired. Other journalists had already been working on the same story, and a New Yorker story along with others in other publications gave the situation a darker color. Weinstein’s habits of sexual predation, intimidation, and character assassination were far more pervasive and violent than the New York Times story would lead one to believe. Extrapolating, it is hard to imagine that this one man had not ruined the careers or lives of hundreds of the women who had worked for him. Rumors today say that Weinstein has left the country. Supposedly he is on his way to a residential treatment program, but one has to wonder whether, if criminal indictments follow, he will ever return to the United States. Meanwhile, Weinstein’s credits are being scrubbed from movies he nominally worked on. At the Weinstein Co., the board of directors has said that it will at least change the company name, but the company is said not to be functioning in any meaningful sense at this point and it is reasonable to guess that the office will close down and the company will liquidate. Today the news came that the company’s book imprint, at least, is no more.

Attorney Gloria Allred expanded the issue of Hollywood sexual predation yesterday with an interview on CNN. Weinstein, she said, is not the only bad guy running things in Hollywood:

Harvey Weinstein is not the beginning and the end of this issue because I have been contacted by many accusers who are accusing other high-profile figures in Hollywood as well.

This shouldn’t be too surprising in the town that invented the term “casting couch.” It also shouldn’t be too surprising in light of the recent news that male actors in Hollywood movies earn roughly twice the amount that female actors earn. It is still unsettling to hear, it is a disappointment to those in Hollywood who might have hoped that the scandal would pass quickly, and it points to an image problem that Hollywood now faces. Suppose you’re someone who has just purchased a movie ticket at your local cinema. Where does the money go, you might ask. People know by now that the cinema itself keeps a vanishingly small share, not enough even to keep the lights on. A well-run cinema literally makes more money from soft drinks than it does from ticket sales. If you pay by credit card, the banks get a share of the money, more than the cinema but still small. Some of the money must go to the starring actors, but that is not as much as we had imagined either. Most writers, technicians, actors, assistants, and musicians in Hollywood work for starvation wages if they are paid at all. So if you buy a movie ticket, is the money going to someone like Weinstein? That unfortunate picture is basically accurate. That is not what you think you are paying for when you see a movie, and it is an image problem that Hollywood now has to solve.

Obviously, the problem extends way beyond Hollywood. Donald Trump hardly counts as a Hollywood figure, but the sexual predation habit he described in such disgusting detail in a television interview so resembles the pattern of Weinstein I have to wonder whether Trump had studied Weinstein’s method and taken notes. In the music business, the timing of the way sexual predators meet their victims is obviously quite different, but otherwise the stories and the effects are much the same.

And it is not just a problem associated with creative work such as films and music. It is when the contracts, roles, and bureaucracy of the corporate world make some people so much more powerful than others that this kind of predatory behavior becomes hard to keep in check. You might think corporations would have a way to enforce policies that ensure that workers can go to work with an assurance of basic dignity and security, but the economic incentives point in the opposite direction. Corporations already in a position of power with respect to their workers work to consolidate that power by further disempowering and degrading their workers in any way they think they can get away with.

I have worked, for example, in the banking sector, and I have watched over the last two decades as the sector has been largely taken over by foreign workers. American banks hire foreigners not because the foreigners are more skilled or local workers are hard to find — in fact, just the opposite is true. It is not even that the foreign workers are paid less. Banks hire foreigners mainly because a worker in a foreign land is in a more vulnerable position, less able to object, report wrongdoing, or go elsewhere when the employer is doing something that everyone can see is wrong.

But a vulnerable position is just what a predator is looking for. It is the fundamental nature of a predator to see who is the most powerless. Weinstein’s victims included temporary workers, unpaid interns, and workers who were new in the industry. These were workers who had to succeed where they were, and Weinstein knew this and took advantage. I have no doubt that unscrupulous managers in banking and every other industry are exploiting workers’ vulnerabilities in whatever ways they can think of — certainly having them work off the clock and on cloak-and-dagger activities that a more confident worker would refuse to participate in, but also at times extending to the kind of brute-force sexual assault we read about in the Weinstein case.

This won’t be fixed as long as corporations hold so much power over workers. This imbalance of power inevitably leads to exploitation, including the sexual exploitation scandal now shaking Hollywood. It is important to recognize that the sexual exploitation of workers can‘t really be corrected without correcting the institutional forces that promote all the other forms of worker exploitation. It is the imbalance of power that has to be corrected. Some of the policy fixes are obvious, like raising the minimum wage and reducing executive pay. Unfortunately, a plurality of policymakers disagree with any such solution. “Pro-business” politicians are looking for ways to create an even worse imbalance of power by taking away protections for whistleblowers and unions and creating loopholes so that corporations can effectively ignore labor laws. Even the immigration crackdown can be seen as a way to create a vulnerable pool of workers who can more easily be exploited.

The consensus of social media is that a cultural fix is called for. Men must be persuaded to be less predatory in their approach to sex. I don’t disagree with this approach. If even one sexual predator can be persuaded to change his ways, that is a good thing. At the same time, neglecting the influence of the environment is naive. To be blunt about it, corporations and sexual predators are made for each other. As long as corporations exist in their present form, sexual predators will be drawn to them. To solve the problem in a meaningful sense, the nature of the corporation has to change.

I have no illusion that this is about to happen. Currently in Washington the White House and House of Representatives are not about to take up any measure that would be beneficial to workers. Things are slightly better in some other countries and slightly worse in others. As long as laws define corporations and employment in terms that encourage exploitation, there is no realistic prospect of a solution to the plague of sexual predators in the corporate environment. I am afraid this is a problem that will get worse and will persist for a very long time, changing only after the global political climate has shifted.

Friday, September 29, 2017

This Week in Bank Failures, Raccoon Edition

A Royal Bank of Canada branch in Toronto had to close a month ago when a raccoon family was discovered living in the ceiling. [ ] Now the bank says the branch will stay closed for another month. Workers had to build scaffolding to reach the damaged ceiling and, after examining it, found that the damage the raccoons had caused was more extensive than originally thought. The branch will reopen after the raccoon damage has been repaired.

It is likely that the raccoon invasion went undetected for quite some time. Raccoons are nocturnal by nature and would have been sleeping during banking hours when people were in the bank office.

Tuesday, September 26, 2017

After Puerto Rico Disaster, We Know So Little

I’ve been waiting to hear how Puerto Rico fared in a storm that had the potential to be the worst natural disaster in U.S. history. After a week, the mere fact that we have not yet heard from half of the island is a likely indication that things have gone badly.

Weather measures looked grim in the first place. Hurricane conditions covered the entire territory for hours and lasted a whole day. Estimated rainfall totals were possibly as low as 6 inches on the southwest coast, though that is already enough for severe flooding, to 40 inches at higher elevations in the interior. You don’t get that kind of rain along with hurricane-force winds without destroying structures of every kind, and the most prominent casualty has been the Guajataca Lake dam. There is damage to the dam and more prominent damage to its spillway, and though it continues to function approximately as intended, damage has progressed far enough that engineers are telling everyone to stay away.

The Guajataca stories are emblematic of the difficulty in getting accurate information about the state of Puerto Rico. News photos have been few and undated and have not focused on the damage. Early reports were wildly inaccurate, some incorrectly stating that the dam had collapsed and misspelling the name of the river, dam, and lake as “Guatajaca,” others falsely claiming that no dam failure had taken place, and still others incorrectly placing the threat near the major city of San Juan. The faltering dam threatens two towns with populations of 70,000, but what part of that number had to evacuate? Some have said as few as 320, others, all 70,000, and it appears the lower number is closer than the higher number, but we don’t really know.

Looking at the state of the Guajataca Dam is frustrating enough to remind even a philosopher about how little we really know. Experts from the Army Corps of Engineers went to see the dam but even they are not able to add much new information. When a dam is made from compacted earth, the key question is how far into the soil the water has reached, and how much is seeping or flowing through the dam near the top. I don’t know of any direct way to measure the strength of soil buried deep underground, and the challenge is that much harder when it is not safe to walk onto the top of the dam.

The broken dam is not the biggest question now after affected residents have had time to evacuate. How about the question of how many have died? That is a question that obviously can’t be answered when roads are blocked and 100 villages remain isolated, unable to communicate with the outside world. Normally in such a situation, helicopters could land and evacuate the most gravely ill people to hospitals, but even a measure as obvious as that is difficult right now. There aren’t many helicopters, and even if there were dozens available, there isn’t enough fuel on the island. Then, where do you take sick and injured people? With the electrical grid destroyed and fuel running low, hospitals are barely functioning. If the lights and medical equipment at a hospital go out, a very present possibility, the death toll could add up quickly.

One reason the United States does not know how to handle the situation is that a disaster of this size and shape has never occurred in the history of the country. When New Orleans was submerged, Baton Rouge was only moderately damaged. It could serve as a base of operations for the relief of New Orleans. Here the United States faces a disaster five times as large, and there is no undamaged town in Puerto Rico that can serve as a starting point for recovery.

I don’t know what the first steps have to be, but it is obvious that some of the most basic components of economic functioning have to be put in place before even the planners at FEMA can relate to the situation in a constructive way. This list would include ports, roads, water, food, motor fuel, and banks. Even this short list would be obviously beyond the capacity of local authorities anywhere. The largest airport has reopened, at least, and if tourists are stranded in the airport waiting for fares to fall below $2,000 a seat so they can get home, that tells us that the airport is functioning and some supplies are arriving.

With so much at stake, hundreds of people on Twitter wonder why there is no aircraft carrier on the way to help. Or maybe there is. There is so little we really know, but it is clear enough that the crisis in Puerto Rico will get worse before it gets better.

Thursday, September 21, 2017

Disaster and Disruption

It is hard not to think about disasters this morning. At the top of the news I can read about one of the most damaging hurricanes in U.S. history. Frantic search and rescue efforts are underway after an earthquake brought down large buildings in central and southern Mexico. I know of several other disasters across North America, perhaps not to be found in the headlines today, but nevertheless in the early stages of cleanup.

It is important to stay informed, but it is hard to read disaster news and not cross over into simple worry. I can tell I have made that transition if I sift through ten more minutes of news imagining I will find a new update when everything I see just repeats information I have seen already. This is time wasted.

It is one of the old questions in economics whether disasters add to or take away from economic production. Two small examples suffice to illustrate the question. A window broken in a storm has to be replaced. The materials and labor count as new production. A bridge is underwater and workers cannot get to work today. The work they would have done can never quite be made up. Production is lost. The question is about the relative scale of rebuilding and disruption. Which is the larger effect?

In the disasters I am seeing this week, it is clear that disruption weighs heavily. Based on the photos I have seen from Mexico City, my guess is that less than 1 in 100 buildings will be demolished because of earthquake damage, but the disruption affects everyone in the city. Meanwhile, the worry that I described earlier affects a far larger number of people. Worry draws us away from productive work for varying periods of time, but it affects so many people that it adds up to a lot.

There are counterexamples, cases where rebuilding appears to be a larger effect than the disruption of a disaster, and then you can poke holes in the counterexamples. Business gurus insist that you have to shake things up to make progress, and there is more than a grain of truth in that, but merely shaking things is not a strategy. Totalitarian regimes regularly go to war on the theory that the hardship will be good for their respective nations’ fortunes, but unless an exceptionally clean and short war can be arranged, this strategy ends badly. War becomes merely a tool allowing corrupt leaders to cling to power for a few more years at most.

Recent studies in psychology suggest that productivity is improved and individual and organizational progress is faster when everything goes smoothly. There are times when disruptions help people focus, but stability boosts focus more reliably. To put it bluntly, if you want to be successful, good luck is better than bad luck. This is not so hard to believe. On which day are you more likely to do your best work: a day when the hurricane wind sounds like a freight train outside your window, or a day when the loudest sound you hear is a couple of songbirds?

It is beyond any of us as individuals to prevent hurricanes and earthquakes, but we can act to minimize the disruptions they cause. Sometimes we are in a position to make buildings more sturdy so that they are not so readily affected by shaking, pressure, heat, smoke, and water. All of us, though, are in a position to keep disaster news in its proper context. No matter the scale of a disaster, if it does not affect you or your town directly or nearly so, it is only right to set the news aside for hours at a time. You’ll still get all the news, if you choose, and the delay of a few hours costs you nothing. In the meantime, by not being immersed in the disaster, you can carry on with your own work in relative peace and productivity. Of course, the disaster news is still a distraction that can bother you even when you are not looking at it, but by reducing the extent of the distraction, you give yourself the best chance of completing something of value.

Tuesday, September 19, 2017

Trans Fat Bans Set for 2018

Removing trans fat from food turns out to be simpler than it appeared. That’s because the vast majority of trans fat in food is placed there intentionally in artificial ingredients that consist of pure trans fat. Prohibiting these ingredients, partially hydrogenated oil or PHO, is a simple administrative step and does not require any extra diligence or difficult adjustments at food factories, but it is sufficient to take away close to 99 percent of trans fat from food.

The FDA issued its final determination on PHO on June 15, 2015, and it goes into effect on June 15, 2018. As government rules go, this is an unusually simple one, indicating that PHO is not “generally recognized as safe” (GRAS) and therefore cannot be used in food for humans sold in the United States. Exceptions are made when manufacturers do detailed safety studies that are accepted by FDA. The fine print in the rule is used to make sure that fully hydrogenated oil (FHO) is exempt from the rule while not allowing food factories to sneak PHO into our food by disguising it as FHO.

To food manufacturers, though, the more important rule is the one made by Health Canada, finalized last Friday and set to go into effect on September 15, 2018. On the surface, the Canadian rule is compatible with the U.S. rule, but there are two important differences. First, Canada is adding PHO to its list of food contaminants. Unlike the more roundabout FDA rule, this action directly makes it a crime to sell food containing PHO in Canada. Second, Health Canada is not allowing the long list of exceptions for small amounts of PHO that the FDA says it will allow in the United States. My expectation is that food manufacturers will follow the Canadian rule and stop using partially hydrogenated oil completely in order to be able to sell the same product across North America.

It is difficult to overstate the effect on health that removing trans fats will produce. Trans fats are clinically implicated in blood lipid problems, especially those related to cholesterol. These problems often develop into heart attack and stroke. Separately, trans fat is known to weaken cell walls. This reduces cellular functioning and is believed to reduce metabolism, cause generally poor health, and make a person susceptible to bruising, viral infections, and fungal infections. No one should be subject to this kind of ill health as a result of eating an artificial food ingredient that does not even add any useful quality to the food. The health effects of trans fat are not as severe as those of smoking, heavy metal exposure, or chronic dehydration, but are comparable in seriousness to the effects of a sedentary lifestyle. Health will improve across North America as a result of this change.

Monday, September 18, 2017

Toys ‘R’ Us On the Brink

Attention Toys ‘R’ Us gift card holders: now would be a good time to spend those gift cards.

Toys ‘R’ Us is one of the most popular gift cards in the United States, so there must be a good fraction of a billion dollars of them in consumers’ hands. Usually consumers hold on to the gift cards until they have a reason to buy a specific toy. But Toys ‘R’ Us has been living on the edge since the 2007 recession with more debt than it could realistically repay, and now Wall Street Journal says it is preparing for a possible bankruptcy before Christmas.

It is a complicated situation. Toys ‘R’ Us owes so much it needs an above-average shopping season every single Christmas just to carry on into the next year. This is a game that will almost certainly end as soon as the next recession hits. On the other hand, the current complaint at Toys ‘R’ Us is just a repeat of last year. Its limited credit meant it was unable to fill its shelves the way it wanted to. Yet the limited stock might have saved the retailer from a post-Christmas bankruptcy. The 2016 holiday shopping season was muted by a post-election hangover, but Toys ‘R’ Us did not face a crisis of unsold inventory because it had held back on purchases. That’s a strategy it is being forced into again now, and again, it is probably what the retailer should be doing anyway. What is different this year is that Toys ‘R’ Us has a $400 million debt payment due in May 2018 (with more to follow). My guess is that executives are betting big on shoppers being more exuberant than they realistically will be during the upcoming Christmas shopping season, because how else will they meet that payment? Yet the big gamble increases the chances of a sudden collapse. Though it might not sound very businesslike, the best chance for the troubled retailer to survive financially is for it to continue to limp along as efficiently as it can and hope for a miracle. Sometimes the prospect of bankruptcy gives a troubled business more leverage to negotiate, and with luck, in this case that might allow a debt restructuring just large enough to get by.

However, the potential for a bankruptcy is hanging in the air, and for a shopper holding a gift card, the simple thing is to spend the gift card and take delivery of the merchandise before the bankruptcy filing occurs. That is, make those Christmas, Halloween, or party decoration purchases in advance. Usually a bankruptcy court will allow gift cards up to a specific cutoff date, after which they are worth nothing, but the point is, if you’re still holding a gift card on the bankruptcy date, the fate of the gift card is something for the court to decide. That’s a complexity you avoid by spending the gift card sooner. No one knows whether a bankruptcy filing is on the way or what the date might be until the papers are signed and taken to the courthouse, but the people Wall Street Journal talked to were guessing this would happen within the next few weeks.

Most retail bankruptcies happen in January after a lackluster Christmas season, and that is another possibility here. For a retailer to be planning a bankruptcy before Christmas shows how desperate the situation is. That Toys ‘R’ Us’ financial predicament gets tighter every year is a measure of how thin its operating margins are, usually a sign of a business that is trying to do too much. A bankruptcy restructuring plan can correct for that, for example, by closing most locations and shutting down Babies ‘R’ Us.

One reason for doubt about a toy retailer is that more shoppers are doing their Christmas shopping in August and September, either to avoid the seasonal rush or just to get a chore off their to-do lists. The trend toward earlier shopping provides an efficiency gain for retailers but does not help a retailer counting on throngs of shoppers in December to keep the doors open. Another trend is that more toy purchases are being made online. With that trend, it is likely that the web store will remain after it is all over, whether operated by the current company, a successor, or an unrelated company that purchases the brand and domain in liquidation.

If Toys ‘R’ Us goes into bankruptcy in October, it will likely enter with a restructuring plan that does not represent a large enough change for the court to approve. The plan will be scaled up or otherwise refined during the bankruptcy proceedings, a process that could take weeks or months. In the meantime, specific stores might be approved to close. If the court is not convinced of the prospects of the restructured business, it could order a liquidation at any point. There is a possibility, either way, of Toys ‘R’ Us store-closing sales during the Christmas shopping season. That’s a prospect that should give all other U.S. toy retailers pause. Buyers for all U.S. toy retailers might be spending this week dialing back their inventory purchases for the holiday season.

Update, 24 hours later: Toys ‘R’ Us filed its bankruptcy papers Monday night. A public statement indicated that a bankruptcy filing for its Canadian subsidiary only would follow. Based on public statements, Toys ‘R’ Us is expected to remain in bankruptcy beyond the end of 2017. It was not immediately known whether stores would be able to fully stock toys for the holiday season or how many stores would be expected to close before and after Christmas. Statements are consistent with an incomplete restructuring plan that would carry a significant risk of bankruptcy liquidation, though any such move would more likely be decided in 2018. A court decision covering operational issues such as gift cards, payroll, and emergency funding is expected Tuesday.

Friday, September 15, 2017

Speculation on Equifax

I’ve been watching with interest as Equifax unravels. Last week it announced the largest-ever leak of highly confidential personal data. The leak is so large that, for most of us, there is no point in checking to see whether your own data was involved in the leak. Just ask yourself if you have ever, in the United States, applied for a credit card or held a checking account that had overdraft protection. If so, it is more likely than not that your personal information, including Social Security and driver’s license numbers, were part of the leak. The leak is so large that there is now talk about doing away with the use of Social Security numbers for identifying taxpayers and financial accounts. That never happened before except in a very hypothetical way.

It is not just the data that Equifax holds on most U.S. consumers that is at issue. Credit card accounts of the much smaller number of Equifax customers have also been compromised. Other data of significance was included in the leak, too much to list here. Equifax’s public response to the crisis has been marked by the company’s indifference to and suspicion of consumers in a moment when its entire future depends on the goodwill of the public.

Nevertheless, the consensus among financial analysts is that nothing will happen to Equifax. Indeed, the company’s stock value has fallen by only a third. I believe in this case analysts have fallen into the trap of not believing in consequences. I would argue that it makes sense to look at the possibility that there are no consequences in the Equifax case but also at the possibility that there are consequences.

What happens to Equifax depends to a great extent on the facts of the situation, and those are mostly secret at this point. One of the biggest questions is the extent to which Equifax leaked data that it was not legally entitled to hold in the first place. If this is extensive or pervasive, then there is no reason to imagine that the company can continue to operate. Its liabilities in this scenario do not depend on showing a degree of negligence, since the harm would have been caused by intentional actions of the company.

It is useful to consider Equifax’s position as a private investigating business. This is not like the leak at Home Depot or Target, where the company’s customers were the victims of the leak. Consumers are not customers in this case. For the most part, consumers do not directly give Equifax permission to collect and hold their data. So what separates Equifax from the criminal enterprises that obtained the same data? Only subtle legal distinctions make Equifax a legitimate business while others who collect the same data on you are criminals. This separation is based on fine points of the law that only a lawyer would be able to explain. But Equifax is not run by lawyers, so we don’t know how well they were following the laws involved. Not perfectly, it is safe to say, but under the circumstances it is reasonable to ask whether the company had controls in place to ensure that it followed the law in general. Conceivably it did not, and in that scenario, Equifax actually is the “hacker” in this case and is not entitled to any sympathy for having been victimized by another hacker.

In between, of course, there is the question of whether Equifax made commercially reasonable efforts to protect the data it held. This question, it turns out, is also vital to the future of the company. In particular, it is important to know whether Equifax lived up to the standards of care for highly confidential data in the banking industry. Why? If Equifax is not as secure as a bank is supposed to be, then it could effectively be shut down by banking regulators. It doesn’t appear that the Fed or the O.C.C. have the authority to take action directly against Equifax, but it hardly matters. If regulators issue guidance to banks that says that sharing data with Equifax is not consistent with banks’ obligation to keep data secure, banks will be obliged to stop sending Equifax any new data. A bank that violated any such guidance would risk regulatory fines and would face legal liability of its own for any subsequent data leaks. No reputable bank would take on those risks. Similar indirect actions could come from Visa or Mastercard that would prohibit credit card issuers from sharing credit card account data with Equifax. Equifax could not operate in its current form after even one such action against it. It would instantly lose most of its legitimate sources of data and most of its revenue. In all likelihood, it would close its doors for good at the end of the next day.

Even if Equifax were found to have done nothing worse than ordinary negligence, the legal liabilities could sink the company. The financial damage caused to U.S. consumers by the first leak alone is probably between $50 billion and $150 billion — an average of a few hundred dollars per consumer. The company’s total stock market value is only $11 billion. The entire company is not worth enough to pay for the damage. The company would have to dodge liability almost completely to survive financially in the end. I’m not saying that couldn’t happen, but if a horse named Equifax presented that kind of long odds you would not want to bet on it. Imagine just paying the lawyers to defend a company against lawsuits brought by more than 150 million people. A company could claim vindication in such a case and still go under from legal fees and reputational loss.

I must conclude with a reminder that the facts in the case remain secret and that this is all just speculation. The actual facts could be better or worse for the company than they appear at this point. At the same time, when people say that nothing will happen to Equifax, remember that that is a speculative position too.

Monday, September 11, 2017

The Post-Consequence World

Hurricane Harvey was a record-breaker, the rainiest hurricane ever, and now Irma is another, one of the largest hurricanes ever and the most persistent ever recorded in its class. Despite this, the weather deniers have been out trying to debunk both weather events. During the weekend, a right-wing extremist radio host told his audience Hurricane Irma was a fake, before deciding he had better evacuate. Then one of the prominent voices of the killer faction of the Republican Party posted false reports claiming that the storm had not reached the Miami metropolitan area. When Harvey was in the Gulf of Mexico, a larger chorus of voices tried to explain why the storm would be a non-event by the time it reached the shoreline. The common threads here are a disdain for science and its quality of careful observation, and a lack of concern for accountability.

The disdain for science comes with obvious perils, but it hard to make the same claim about accountability. Those who operate under the theory that they can say anything at all regardless of facts or consequences have amply proved that they are able to continue to operate in that fashion for years, simply because the core of American culture no longer quite believes in the idea of consequences.

Consequences do in fact exist, though, and economically, one would expect that believing in consequences would eventually provide a distinct competitive advantage. If there are two parties and one considers consequences while the other acts as if consequences do not exist, you would expect the former to bury the latter eventually. The huge example is the Soviet Union, which collapsed economically in the end mainly because ordinary industrial work and matters of national policy were addressed as if there were no underlying reality to either. Now, though, Russia is on a path to repeat this failure, and the disbelief in consequences has become a global trend affecting countries from Argentina to Bulgaria and businesses from retailers to software companies.

How can this be? There are problems in getting good information, of course, and there are lags, often lasting many years, between an action and a definitive outcome. In between, effects are subject to interpretation, like the smoker who sees the medical image of masses in a blackened lung and says, “That isn’t really cancer.” Making this pattern more likely, we have all been conned. We see someone proceeding with strong confidence and say, “Well, they must know something,” even though from everything we know they are doing exactly the wrong things. We collectively face more time pressure and distractions than ever. It’s no wonder if accountability slips through our fingers.

The lack of belief in consequences now extends to the most reputable business journalism. A business that recently leaked sensitive information about more than half of Americans, most of them not its customers, now faces liabilities that are ten times the total value of the business. Reputable analysts bemoan the errors and deceit but still conclude that nothing will happen to the company or its officers.

If we cannot expect the world to return quickly to a belief in consequences, we must at least be alert to the effects of living in a post-consequence world. We regularly face large amounts of propaganda and other persistent false information. Institutions that seem permanent will vanish with little or no warning. People will present patterns of behavior that would be perilous to imitate. We must expect these things to happen.

One of the defenses against the illusions of a post-consequence world is a sense of proportion. Simply understanding the relative sizes of things can point us toward the possibilities ahead. If we hear that the largest city in Texas got a year’s worth of rain in three days, we should be able to think, “That’s big.” Unfortunately, proportion is not an innate human skill, but requires practice.

Proportion helps us spot where things are out of balance in a big way. In a world were most people aren’t looking for consequences, those are the first places to look.

Sunday, August 20, 2017

Shamanic Techniques for a Solar Eclipse

On Monday, a rare total solar eclipse will briefly darken much of the United States. A solar eclipse can be a frightening experience, but the only real danger is that someone may suffer eye damage by looking directly at the sun. A major event like an eclipse is a good opportunity to get in touch with nature, and one thing you’ll discover quickly is that human nature protects us by providing an inhibition against looking directly at the sun. This inhibition is so powerful and so useful I would argue that you should heed this inhibition even if you have eclipse-quality sunglasses or the appropriate grade of welder’s glass (obviously, not ordinary sunglasses or tinted glass) to look through. Using your will power or curiosity to overpower inhibitions is generally a bad business and the inner struggle involved can detract from the experience of an eclipse. Instead, look at the sun only indirectly. Far better than looking through a glass is looking at the sun in a very dark reflective surface. For example, if you are improvising, that would not be the windshield of a car, because that would be too bright, but perhaps the glossy paint of a car might provide a dark enough reflection. Be guided by inhibition; if the reflection seems too bright, don’t look at it. I would rather you see the eclipse on television than try to look at the sun directly.

Fortunately, there is no need to look at the sun at all to experience an eclipse. All you will see anyway is the crescent shape of the sun with the moon covering part of it, a geometric shape you have seen in photographs already. If you are in the zone of totality you can then briefly see the sun virtually disappear. That is a moment astronomers wouldn’t miss, a valuable chance to see the sun’s corona separate from the solar disk. The rest of us, though, learn more by looking at our own world as it goes dark.

The first change you notice is the shadows. By the time the moon has blocked 5 percent of the sun, you can see the change in the shape of every shadow. This is the freakiest thing about an eclipse. Even if you haven’t given a shadow a second glance all year, you’ll look at a shadow, any shadow, and say, “Wow, that looks weird.”

Everything is obviously darker by the time the sun is 10 percent covered. This is the otherworldly part of a solar eclipse. We know how bright the sun should be, and if it is a little dimmer, it is alarming or at least unsettling. When the moon is blocking one third of the sun, you see a quality of sunlight that is more like what you would see on Mars than on Earth. When the sun is mostly covered, you are free to imagine that you are on Ganymede. In fact, take this moment to imagine a world, not one that exists, but one that you might create. What kind of world would you like to see? The eclipse is a powerful time to imagine this. A prepared shaman can set aside all practical knowledge of cosmology long enough to experience the total eclipse as the death and rebirth of the entire universe. In this view, your ideas of what kind of world you want to see when the world comes back help shape the new world that is born, so hold those thoughts of the world of your choosing in your attention for a few moments. People around you might be meditating, chanting, or drumming to strengthen their thoughts of the new world.

You can easily find live commentary online or on broadcast media to explain the significance of the stages of the eclipse, but if you want a non-commercial point of view all you need to do is listen to the birds around you, especially songbirds. Birds do not know what a solar eclipse is — they have not lived long enough to remember a previous one — so they discuss it among themselves, and you are free to listen in. Even if you had your eyes closed the whole time, you would know what was happening just from what the birds are telling you.

A solar eclipse is like a touch of night as far as the weather is concerned. You might notice the breezes changing direction the way they do at nightfall. The experience of an eclipse can help you notice how strongly the human sense of time is tied to the regularity of the cycle of days. Day and night is such an ingrained assumption that you might catch yourself afterward thinking of the things that happened before the eclipse as “yesterday.” I remember this happening to me in a previous solar eclipse that darkened the world where I was by only about one fourth. The lesson here is that day and night are not intrinsic parts of the nature of time, but rather are part of our world, an effect of our natural surroundings.

Treat the eclipse as an appointment with nature. Be guided by inhibition and do not look directly at the sun. Notice the shadows and the breezes. Listen to the birds. Imagine a new world. Happy eclipsing!

Wednesday, August 16, 2017

Hauling Lee Away on a Flatbed Truck

Maryland had mused for years about what to do with its Confederate statues. Surely they didn’t quite belong in a state that believed in equality, had long since abolished slavery, and could claim only the weakest historical ties to the Confederate side in the Civil War. Then last weekend a Nazi army descended on Charlottesville in the neighboring state of Virginia, beating and killing local people, threatening to destroy the town, and doing enough harm to ultimately affect everyone in the local area. It was a Confederate monument that drew the Nazis and their allies to Charlottesville. The Nazis intended to argue against its proposed removal, and though they had their say, they made their point a self-defeating way.

Overnight, every town that had a Confederate monument wished it did not. Would the Nazis strike their town next? Would they carry through on their threats to burn the town down this time? In this context, Maryland’s Confederate statues became a clear and present danger, an imminent threat to public safety. How many people might the Nazis kill if they came to Baltimore? With the Nazi groups heavily armed, it was easy to imagine a pitched battle with hundreds of people dying, but even one or two deaths would be too many. Officials collected the necessary approvals. Last night, cranes picked up the statues and loaded them on flatbed trucks. By 5 a.m. the four Confederate monuments in Baltimore had been taken away. Officially, their whereabouts are unknown. It does not seem likely that they can be safely stored anywhere, so one hopes they can be melted down and converted to something constructive.

The outcome might seem paradoxical. The Nazis are arguing against the removal of Confederate statues, but the brutal violence with which they state their case makes the removal of most of the remaining Confederate statues almost inevitable. To a governor or public safety commissioner, the compelling point is that with no statue, there is no flash point that could trigger a Nazi invasion. The strategy of removing the statues will not stop in Baltimore or Maryland. At the same time that Maryland was at work on its Confederate statues, the governor of North Carolina was recording a speech calling for the removal and relocation of the much larger number of Confederate statues owned by that state. I imagine North Carolina will quickly approve the removal of the statues, but if not, that action will follow soon enough there and elsewhere. A state does not have to see Nazi flags and torches again and again before it is compelled to move. Each removal of a Confederate statue increases the pressure on those that remain, so that within a few years, thousands of Confederate statues could be melted down or hidden away out of public view.

The result makes sense if you look at the situation through the lens of game theory, the mathematical modeling of making decisions when one’s decisions affect the decisions other actors. Nazis overestimate their popular support, so they calculate that their arguments will rally a large number of people to their cause, when the actual number is quite small. They may also underestimate the fear and loathing they engender, so that they don’t plan on the degree of effort others may make to avoid them. These mistaken assumptions make a highly irrational strategy on the part of the Nazi movement appear rational to them.

Taking down statues that are symbols of repression can have a larger impact than you would expect on the psyche of a community. The most prominent historical example of this is the rapid demolition, after the collapse of the Soviet Union, of the Lenin statues that had littered Russia. With the statues down, there was no chance that the Soviet system could make a comeback. Last night’s work removing statues that symbolized slavery has similarly lifted a weight from Baltimore’s shoulders. It will not be surprising if this turns out to be a similar turning point in the story of the city.

Update: Also see Washington Post story

Update: Congress too is getting in on the trend:

Monday, August 14, 2017

Diesel Scandal Takes Down Motor Fuel Category

The diesel emissions scandal has had a bigger impact on transportation policy than I would have guessed. As industry analysts had told us early on, it was more than just Volkswagen cheating emissions tests. In the time since the scandal broke, the global warming problem has become more dire. 

It now looks like the phase-out of diesel will take all liquid motor fuels with it. Norway is moving quickly and has set 2025 for its transition to electric cars. The United Kingdom and France have made plans to phase out fuel-burning light road vehicles after 2040. Volvo said that by 2019 — two years from now — a fuel-burning car will be a luxury item. Volvo will be selling hybrid and electric models side by side starting in 2019, but will no longer make fuel-only drives. Today the government in Germany conceded that a phase-out of fuel-burning cars is inevitable and will probably happen sooner than 2040 in practice.

In the meantime in the United States, Tesla started shipping its mass-market electric car, for which it has taken more than half a million advance orders. For everyone who has ordered a Tesla, there are 200 drivers who, like me, are looking on with a degree of envy. Tomorrow I will put another another $33 in my car’s fuel tank. A few lucky drivers won’t be doing that. I might be too cautious to buy an electric car at this point, but I have trouble imagining the logic of buying a new fuel-burning car at this point. Most of us will become electric-car drivers as part of the vehicle replacement cycle, but the transition will certainly come sooner than the 20-year life span of a current new car. In practical terms, the whole auto industry could stop making new fuel-only cars at the end of the 2018 model year and the existing stock of vehicles would serve.

Norway with its 2025 target and California with an ambitious clean-air plan might be ahead of the curve, but the United Kingdom, France, and Germany are only following the trends with their 2040 cut-over. We tolerate fuel-burning cars now out of a sense of practicality. The battery of an electric car costs more than the engine of a fuel-burning car. When this comparison approaches parity, fuel-burning cars could fall out of favor in a period of less than a model year. Automakers and dealers need to plan for this decline so that when it hits, they aren’t stuck with an overhang of obsolete inventory.

It’s easy to see the transition to electric for the smallest vehicles, harder for the largest ones. Cargo transportation and air travel make more efficient use of motor fuel. Ships have longer useful lives, are harder to overhaul, and have nowhere to plug in on most days. Upgrading all our cars is perhaps a large enough challenge to take on right now. With what we learn from the transition in cars, we will surely be able to make a better plan for buses and trucks, and then we can go on from there.

Sunday, July 9, 2017

Sears and Kmart Seek Smaller Stores

The announcement that Kmart and Sears will be closing another 43 stores was no big surprise — more retail stores have closed in the United States this year than any year ever — but hidden in the details there was another trend that might surprise some. The company as it shrinks is planning on not just fewer stores, but also smaller stores. Many stores, that is, will be shrinking in place. I saw that happen a few years ago when a mall Sears store was reduced to one floor. That location has since closed completely, but Sears indicates that we can expect to see more stores that keep the same main entrances but have less space inside. Stores are simply too large and complicated for shoppers to figure out. After a century of ever-increasing retail space, are we ready for smaller, more focused stores? My guess is that we are.

Monday, July 3, 2017

In Search of the New Hot Dog

If what I am seeing in advertising is any indication, hot dogs have completed the transition to a one-day-a-year food for most of the people who eat them. Brands that haven’t advertised all year have been in saturation mode for the past six days in an attempt to get their share of this year’s hot dog market. It is a surprisingly fast transition in cultural terms. I can easily remember when I ate hot dogs regularly, sometimes five days in a row until the package was empty. A sharp price increase broke that pattern for me, and many other consumers were dissuaded by a series of manufacturing scandals. I no longer buy hot dogs at all, and I haven’t seen one since last summer. Hot dogs have become a gimmick. No one would consider them a practical thing to eat, but they symbolize the Independence Day holiday more than any other food item. Hot dog manufacturers in the recent advertising emphasize that hot dogs have been improved this year. I feel certain the improvements are greatly exaggerated, but regardless of any number of minor changes, hot dogs are not the easiest form of food to handle safely. Given that, there is a serious problem with eating them so infrequently. Eaters are relatively likely to find that they can’t stomach a couple of hot dogs this time around. The bad experiences make people vow to eat even fewer hot dogs, and that, in turn, makes stomach distress even more likely next time around. What is needed to save the hot dog from this downward spiral is a new kind of hot dog, one that turns the tradition on its head. The traditional hot dog was made from the worst scraps of meat — a mix of brains, skin, and internal organs that was too awful to be used in any other way. This was cheapened still more a quarter of a century ago by mixing in such extras as soy protein isolate, gum, concentrated wood smoke, and chemicals. What’s needed now is a hot dog that is designed first and foremost not to make anyone sick — made with no meat at all, no soy, no chemicals or wheat gluten. I’m not sure exactly what it would be made of, but it is surely not too much to ask. The physical form of a hot dog is so nondescript — just a tube shape filled with goop hardened by cooking until it is just barely solid — and the flavor so nonspecific, there must be fifty ways to make them that don’t lean on high-risk ingredients at all. An exact flavor match is not necessary — indeed, the new hot dogs will need to look, smell, and taste different enough that the people who got sick on the hot dogs of 2017 can be persuaded to try again in a future year. Such is the ritual importance of the hot dog on the 4th of July and so great is the risk of annually eating the current output of the hot dog factories that this hot dog redesign is almost inevitable.

Thursday, June 29, 2017

Staples Goes Private

Staples has agreed to a $7 billion buyout. The paper-and-toner retail giant will be privately owned after shareholders approve and the deal closes. The buyout is not bad news in itself for the retailer, but the deal is a measure of the troubles at Staples and across the office-supply sector. Down the road, private ownership could pave the way for a rapid shutdown, bankruptcy, or more rapid store closings if the new owners cannot find a profitable niche for the company in a post-paper world.

Sunday, June 25, 2017

Italy Liquidates 2 Veneto Banks

Authorities in Italy have spent the weekend working out how to liquidate the two insolvent banks in Veneto that observers have been worrying about all year. The failed banks are Banca Popolare di Vicenza and Veneto Banca. Though not affiliated, the two banks are being liquidated together because they are facing the same regional economic problems and are in about the same financial condition.

“Good” assets — which are not quite so good as that term usually implies — are being transferred today to Intesa Sanpaolo. Having committed to liquidate the two Veneto banks while protecting depositors and keeping branches open, the government had few good options. A proposal by a hedge fund consortium was widely reported earlier in the month but rightly ignored. The hedge funds were seeking a controlling interest in the two banks but were willing to cover only a tenth of the capital shortfall. Such a plan would have postponed today’s liquidation by a few months at best, and it ran the risk of degenerating into litigation and chaos. Intesa Sanpaolo will apparently act as the government’s agent in managing and liquidating some of the assets it is not purchasing.

In retrospect, it would have been better if the two banks had been wound down five years ago. As it is, the bank liquidation will cost taxpayers an estimated €17 billion, of which €5 billion is being paid today. It was only two years ago, though, that auditors discovered problems in the loan portfolios and misselling of bonds, and not until last Friday that the European Central Bank referred the two banks for liquidation. Government lawyers then spent the weekend drafting a decree for the liquidation and transfer.

Ultimately not all of the branches will be able to stay open, but Italian regulators would prefer to have them close more quietly at another time rather than during such a visible crisis. Intesa is chipping in an estimated €60 million to protect bondholders, funds that would have been legally difficult for the government to provide. The fate of bondholders was an important political consideration because the banks fraudulently sold bonds to thousands of retail depositors, telling them that the bonds were certificates of deposit.

Tuesday, June 20, 2017

At Subway, Kiosks Over Ingredients

Embattled fast-food giant Subway had a plan to reverse its five-year decline by boosting the quality of its ingredients. Food quality has declined since the chain’s peak in the 1990s while the market has been moving in the opposite direction, and regular customers have been going elsewhere in search of a healthier lunch. As of a year ago, the plan at Subway was for the rollout of new ingredients to start this summer.

Well, forget it. Subway faces other problems that include the death of its founder and the jailing of its spokesmodel, and executives decided better food was more than the restaurant chain could take on right now. Instead, Subway’s major initiative this year will be in-store kiosks where customers can tap out orders on a touch-screen, copying the success of this approach at Panera. Subway is also rolling out a mobile app that provides the same functionality. You’ll get the same dull fare, but faster than before.

Maybe it’s the right move. The digital ordering platform should cut in-store operating costs, eventually providing the financial wiggle room needed to address the bigger issue of food quality.

Tuesday, June 13, 2017

After EU Bank Deals, Overconfidence

Santander bought out the failing Banco Popular, one of the largest banks in Spain and Portugal. Santander will spend €5-7 billion to recapitalize the bank, but that budget is in line with many of its other expansion deals. A few days later, officials agreed on the outline of a scheme to rescue Monte dei Paschi. The deal protects retail investors who were sold bonds thinking they were getting certificates of deposit. That was the Italian government’s top priority, so the deal may be seen as a success even if the bank goes on to fail in the next recession, a prospect that seems almost as likely as not. 

With these deals, there is more than a sense of relief about European banks. Europe and observers have become overconfident about the banking system. While it’s good that stockholders and bondholders took the biggest loss in the Banco Popular resolution, more work needs to be done to untangle the banking system so that the sudden closing of one of the banking giants doesn’t pose such a hazard to all the other banks around.

Tuesday, June 6, 2017

How Bad Could It Get?

I do realize that many voters voted for Donald Trump as a joke or with the intention of blowing up the system or destroying the Republican Party. It was a calculated risk, but I am not sure everyone’s calculations took into account the magnitude of what could go wrong. The Trump presidency might be unprecedented in U.S. political history, but to get an idea of what can happen when a country is run by a corrupt fossil-fuel administration, one need only look at the current examples of Syria, Venezuela, and especially Brazil.

Brazil removed its president a year ago for illegal budget manipulations leading into the last presidential election. It was a curious move, as she was replaced by the seemingly even more corrupt vice president. New evidence has emerged about both, so that now it is hard to be so sure which way the comparison points, but there is little room for doubt that Brazil’s current president is in the middle of a coordinated bribery ring on a scale that would shock even Brazilians. He too will likely be removed from office by impeachment, if courts do not annul the last election result first. Hundreds of political figures in Brazil appear to have been involved in an expanding list of illicit schemes that drained public funds, distorted the political process beyond recognition, and moved billions of dollars out of the country to offshore accounts, helping to push the country into an economic depression. As terrible as the situation has become, it is important to remember that it was oil money that originally funded this systemic corruption.

Oil and coal money both are involved in political corruption in the United States, and in some ways the U.S. situation looks more gloomy than that of Brazil. Brazil is making a major effort to root out corruption even as the United States moves in the opposite direction. Corruption will not ruin the U.S. economy in a year, probably not in two years, but history tells us that no national economy can stand up under the weight of large-scale systemic corruption for very long.

So how bad could it get? Historically, every empire crumbles, and usually in little more than one lifetime. Some observers are already looking at the events of last week and worrying that this could be the United States’ time.

Sunday, June 4, 2017

The White House Is Still Standing, But There Is No One Home

The state of international politics can be summed up by looking at the most prominent statements of the last week from the leaders of countries, as measured by U.S. news coverage, with the key lines listed here by country. You can’t help noticing that one of these is not like the others.

  • Canada: Canada is unwavering in our commitment to fight climate change and support clean economic growth.
  • France: If we do nothing, our children will know a world of migrations, of wars, of shortage. A dangerous world.
  • United Kingdom: While we have made significant progress in recent years there is, to be frank, far too much tolerance of extremism in our country.
  • United States: Despite the constant negative press covfefe

“Covfefe” might be thought to be an attempt by a man’s fingers to tap out “coverage” on a touch screen while his brain, in a half-asleep stupor, is screaming “coffee!!” but the White House added fuel by insisting the next morning that the tweet was complete as posted. What happened? Everyone who tweets live, tweets in error sometimes, but this is not a case of an isolated misstatement. Trump’s only significant policy statement of the week, a Rose Garden announcement on climate policy, was nonsense of a different kind. It might have been stated in known Earth-language words, but there was no logic or sense to be found behind the words. Maybe, one might think, the message was just badly formed or badly delivered on this occasion, but follow-up comments from White House and diplomatic officials contradicted each other as widely as one could imagine possible, as if senior officials had not been briefed at all and were left to just make stuff up. It leaves little leeway to imagine that the White House, in fact, has a climate policy. This came just a week after, at a major summit meeting, Trump barely participated and seemed not to quite understand where he was.

This state of incoherence is a hole in the world, which had fallen into the habit of looking to the United States for leadership. The late Zbigniew Brzezinski noticed this predicament before most of us and had commented on it a month ago:

Sophisticated US leadership is the sine qua non of a stable world order. However, we lack the former while the latter is getting worse.

Brzezinski made a career of world order, but obviously, there is more at risk than that. In U.S. politics, this could be the end of the Republican Party. Everywhere, if global energy policy cannot be reformed, the land that half of the world’s human population lives on could be converted to ocean in one or two lifetimes. In the world order, the status of the United States has been knocked down a peg in each of the last two weeks, and it could easily fall much farther in the weeks to come.

The White House staff has tried to find ways to make its mercurial leader less of a daily threat. World leaders now seem to realize they must do the same when it comes to the challenges facing the world. Trump’s call to renegotiate has fallen to the ground, barely noticed. One can hardly negotiate with a man who cannot state a position. The White House is still standing, but there is no one home. What do we do now? Of course, the answers are there to be found. I am sure what we will find is that there is a great deal of work for all of us to do.

Tuesday, May 30, 2017

Three Mile Island Closes in 2019

In a symbolic blow to the U.S. nuclear sector, the Three Mile Island nuclear plant announced today that it is preparing to close in 2019. The announcement comes after the plant’s electric-power auction failed for the third year in a row. The plant is unable to pre-sell its electric production because of the high cost of the electricity, compounded by doubts about the future viability of the plant. Three Mile Island has been losing money for the last eight years and for most of its history, and not just because of its 1979 disaster.

The plant’s owner, Exelon, is asking for billions of dollars in state subsidies to keep the plant open. The state, though, is Pennsylvania, and in Pennsylvania, that kind of request is more of a talking point than a serious proposal. The state has chronic money problems, with a budget so tight you can’t ask for an extra $2 billion without saying what university or hospital you want to close to make up the difference. It is a state where the coal industry is on its last legs and could be killed off all at once with such a large subsidy for a competing power source. Many officials and voters remember when the state capital was unofficially evacuated for the partial meltdown the plant suffered in 1979, a nuclear accident that made it, for a few years, the most notorious power plant in the world. In lawmakers’ minds, throwing money at the nuclear plant just downstream might be funding a future disaster. Political costs aside, nuclear subsidies are bad policy too, as they hasten depletion of a starkly limited resource, uranium, while boosting the costs and risks associated with electric power generation.

Almost lost in the details of today’s announcement was the closure of another Exelon nuclear plant, the Quad Cities plant. That closure, though announced today, is probably four years away and is not so certain; there is a slight chance that a government subsidy could keep the Quad Cities plant going through one more fuel cycle.

Closings of aging nuclear plants have more symbolic than practical significance at this point. Three Mile Island, for example, was already set to close in 2034. if it closes 15 years early, well, that happens sometimes. The bigger problem facing the nuclear sector is the Westinghouse Electric Company bankruptcy two months ago. If the world’s leading nuclear power equipment company shuts down, it is hard to be sure that it will be possible to build or repair a nuclear plant in the future.

Saturday, May 27, 2017

Bank Failure: Fayette County Bank

Illinois state regulators closed Fayette County Bank last night. The bank had been losing money and had been effectively insolvent for some time. It had $34 million in deposits and assets only 1 percent larger as of March 31, but those numbers would be somewhat smaller as of the bank closing yesterday. The bank was faced with deposit flight in recent weeks as depositors lost confidence in its financial condition, and it looks like the decline in the balance sheet prompted regulators to act. United Fidelity Bank is taking over all the deposits and purchasing around 80 percent of the assets. The one operating location is now a branch of United Fidelity Bank.

There are more zombie banks, so the pace of bank failures will pick up if repressive federal economic policies create a new recession. The FDIC has liquidated six banks so far this year.

Wednesday, May 24, 2017

Fyre Festival and Missing Management

If you were to pick a management case study from this month’s news, it would be the Fyre Festival. The management maxim, “Keep your eyes on the prize,” applies to the planned music festival in the Bahamas that collapsed hours before it was supposed to have started. With any kind of festival, the measure of success is whether the people who attend have an experience they can enjoy. Set against that standard, a festival has to fail spectacularly to be remembered as a humanitarian crisis.

Those who arrived early, though, described essentially that. It was a chaotic scene of neglect. Attendees were, for the most part, left to fend for themselves. There was no food beyond what people had carried in with them. The tents they had paid to stay in did not exist. There was so little there, it was hard to be sure they had arrived in the right place, even though they had. The night before the music schedule was supposed to have started, there were hungry people trying to sleep in the rain or walking back to the airport in the dark. Bad as it was, the scene could have been much worse except that some of the promised transportation links also were not working, so that thousands of music fans trying to reach the festival were stranded in Florida.

Though there was reason to worry, within two days we got the report that everyone got out safely. But “no one died” is hardly a recommendation, and the festival is ruined as a brand and almost surely in financial terms as well. It is hard to think of a state of business failure more resounding than the current state of Fyre Festival:

  • It is barred from holding any future event anywhere in the country.
  • Managers have fled the country and gone into hiding. The business cannot be reached by phone, email, mail, or any other means.
  • Suppliers and employees are owed millions of dollars.
  • It faces an estimated $100 million in liabilities, with six U.S. lawsuits filed already.
  • The Department of Labor is investigating not just the business itself, but its contacts in the government.
  • In the U.S., where the festival was most heavily promoted, the FBI is conducting a wire fraud investigation.

Fyre Festival did some things right, particularly in its late notes to performers and participants on the way to the event, apologizing and advising them to stand by. But a few days later, it inexplicably made its situation worse by saying the event would be rescheduled. By that time it was already clear from a distance that a relaunch would be impossible to do.

Bringing thousands of people to a place without food is a risky thing to do, but a festival without food is more than dangerous, it is a contradiction. If it is true that the festival was selling tickets without making any provision for food, the FBI will have a case for fraud. But it could also be that there were plans for food and accommodations and that it was several of the festival’s suppliers, not the festival itself, who took the money and ran. This speculation doesn’t shed much light on the situation as it unfolded, though more facts will come out and it is possible a coherent narrative will come together eventually. What seems clear, though, is that there was simply not enough management paying attention to the essential components of the customer experience. In any customer-facing business operation, if customers arrive and report that no one is in charge, it is a sign of a fundamental failure.

Missing management is a failing that nearly half of all businesses on this scale are guilty of. I can easily think of several examples of businesses that I saw fail locally in this way. They never became a humanitarian crisis because they never faced a launch on the same scale as a music festival, but the slower time scale makes their failures all the more inexplicable. How hard is it to go stand where the customer stands and look around? In an era when venture capitalists can spin up a business idea and try it out on a large scale without ever being prompted to stop and think it through, I am afraid this kind of management failure will become more common, not less. The old Roman phrase “buyer beware” might have to be revised to say “customer beware,” as we are obliged to be responsible for our own personal safety when trying to do business with businesses like these.

Monday, May 8, 2017

Trouble in MOOCland

The MOOC experiment is not going well.

I know I wrote glowing reports about the potential of large-scale online courses a few years ago, but there were problems with the format all along, and far from being solved, the problems are getting worse.

It’s understandable if I was enthused about a medium that looked like it could deliver specialized education to the whole world on any level from high school to graduate school for less than the price of a book. It turns out that online courses are more expensive to deliver than books, and not just slightly more expensive, but many times more expensive. The promise originally was that the MOOC format would be, to borrow a phrase from another industry, too cheap to meter. But the full-featured MOOCs today have costs so high you can compare the tuition to the traditional approach of a classroom education. At the two biggest names in the MOOC medium, Coursera and Udemy, a student pays almost as much as they might pay for a college course, but without the college credit. What is there for an economist to get excited about? Take away the cost savings and online courses are a novelty scarcely more exciting than, well, nuclear power.

The minimal cost savings of MOOCs could be forgiven if they got the job done, but they don’t. The failure rate of online courses is a continuing embarrassment. Routinely more than 90 percent of students who enroll in any given online course fail or drop out. In many cases failing and dropping out amount to the same thing, especially when required assignments are all but impossible to complete. A mechanically graded test may be graded at random because of a software error so that it is only by luck that a student scores over 20 percent. I have seen test questions that contained words and concepts that hadn’t been mentioned in the course itself, so that I was left sifting through Wikipedia to find the most likely answer. In a programming course I took one of the programming assignments due in one week took more than a week to run — I was fortunate to be able to divide it between two computers, but what happened to the students who had only one? With most MOOCs having a failure rate above 90 percent, and with no instructor actively present while the MOOC is going on, such problems can easily go undetected.

But it not just that MOOCs are in a weak competitive position. The predominant emotion surrounding the MOOC medium is disappointment. I remember how disappointed I was when I signed up for an online course in which the content had no earthly connection to the course description that the catalog had provided. If I was disappointed while not actually paying any fees, imagine how disappointed today’s MOOC customers are to find out after they have paid fees ranging from $79 to $999 that the online course they have enrolled in will not teach them about the subject they were promised. Yet this must happen every day; course titles are routinely misleading, catalog descriptions are now only a few words long, and providers no longer make it possible for students to preview course content or even see a meaningful outline before enrolling.

Some of the disappointment is the result of the small amount of content delivered in today’s MOOCs. A “course” nominally runs for four weeks and may be the equivalent of one chapter in a textbook or three weeks in a college course. At Coursera the first “specializations” covered a substantial amount of ground, bigger than a minor field of study in college but smaller than a graduate program. But that, it turned out, was too expensive to deliver. A “specialization” has been drastically scaled back so that it involves a time commitment of roughly 140 hours. That and the amount of content presented make a “specialization” the equivalent of a single undergraduate course — or arguably a little less. I worry, though, that students may be misled by the five-course format of a “specialization.” You could easily imagine that you are paying for the equivalent of a semester of college. Just imagine how you will feel afterward when you add up how much you have paid and how little you have learned. Meanwhile, the specialization certificate I earned a few years ago with 10 courses and 500 hours of study is no longer so impressive. People who know what a Coursera specialization means now can’t easily imagine what one used to be.

Online course platforms are so expensive to operate that the instructors and content providers are not meaningfully paid if they are paid at all. Some Udemy courses, I am told, have no pedagogy at all, but are little more than books repackaged to make them look like courses. You literally could just buy the book and read it and spend a lot less time and money.

The fundamental challenge in an online course is to find a way to distinguish between those who are actually learning the material and those who are just going through the motions. This is a problem for which no one seems to have good answers. The problem with mechanically graded tests is that the students who do best at them are the ones who have stolen the answers in one way or another. It is a little too easy for a criminal to do when the test is posted online. Recognizing this problem, Coursera has gone all in with anonymous peer assessment. Other students in the course, people who know no more than you about the subject, will grade your work. When you are the student being graded, this is an excruciating experience. You have surely had a chance to see the quality of anonymous Internet commentary on YouTube and Twitter. Imagine that these same people — they are anonymous strangers chosen at random from the Internet, so as far as you are concerned, they might as well be the same people — will decide whether the essay you spent three hours writing is a success or a failure. Did I mention that some of them are 12-year old boys with an axe to grind? As uncomfortable as you might feel having your college professor go over your essay, having it graded by John from the Internet is much, much worse. Yet Coursera requires anonymous peer assessment as part of every course it offers. It is a powerful deterrent to students who know what anonymous peer assessment implies and a heartbreaker to those who do not know what they are getting into. It is a fundamental flaw in Coursera’s business model and is a problem that the company has yet to take a serious look at. But at least Coursera is trying to assess students. I am less familiar with Udemy’s practices but I am led to believe they have next to nothing that would reassure a student that they are in fact learning the material they are studying. Not knowing how well you are learning might seem like a problem, but I will gladly take that after having faced the experience of being graded by anonymous strangers.

Most of these problems can be solved eventually, but there does not seem to be a solution to the cost problem. If Coursera, Udemy, and their competitors look like they are ripping off their customers, it is certainly not that the companies are making a healthy profit. Perhaps the platform for presenting online courses is, like the nuclear reactor before it, simply far more expensive than anyone ever imagined. Whatever the explanation, the enthusiasm for MOOCs depended on their scalability and low cost. Now that we know that both advantages existed only in our imaginations, it may be time to acknowledge that the more traditional learning media are in fact more cost-effective.

I must mention the enormous cost advantage enjoyed by those who can learn from web sites and books. After learning a few days ago that it was no longer possible to enroll in single course on Coursera, I decided to compare the cost of the “specialization” to the cost of learning the same material from books. As it happened, this was a very new and specialized subject area, so there are only 18 books on the subject that bookstores are able to tell me about. I could plausibly buy and read all 18 books, and then I would possess a fair approximation of the sum of the world’s knowledge on the subject — a claim no online course could possibly make. I would pay a few dollars less for the 18 books than I would pay for the “specialization.” Besides the purchase price, it would take time to read the books and digest the ideas they presented. Maybe it would 180 hours, but that is only 40 hours longer than I estimate the “specialization” would require, and that’s for a much broader and deeper study of the same subject. Or if that was too much, perhaps I could buy the one textbook that the “specialization’s” curriculum seemed to be borrowed from and read it. My cost savings with this approach: 87 percent. Time saved: 92 percent. The catch: I have to find a way to test myself. Another catch: statistically, books have a high “failure” rate. Less than 10 percent of people who buy a nonfiction book read the whole book. In the book business, we shudder at that statistic and wonder how we can do better. The mystery, though, is why the MOOC format, with all its bells and whistles, does no better than the book format in this regard.

Saturday, May 6, 2017

Bank Failure: Guaranty Bank/BestBank

Last night the O.C.C. closed Milwaukee-based Guaranty Bank. The bank closing ranks as one of the largest single-day branch-closing events ever.

Guaranty Bank had 107 branches embedded in Kroger, Walmart, Pic n Save, Piggly Wiggly, and other supermarkets in five states. The supermarket branches closed at the close of business yesterday and are permanently closed. Half of the supermarket branches were in Wisconsin and nearby areas of Illinois and Minnesota. The others were in Georgia and Michigan and operated under the BestBank name. The ATMs at the closed branches have also been shut down.

Guaranty Bank also operated ten stand-alone branches in Wisconsin and one each in Illinois and Minnesota. First-Citizens Bank & Trust Company is acquiring these 12 separate branches along with the failed bank’s $1 billion in deposits and 90 percent of its assets.

If you were thinking that a network of 107 mini-branches sounds like a large number of locations to operate for a bank with $1 billion in deposits, you would be correct. Narrow operating margins, partly the result of high operating costs, were a major factor in the failure of Guaranty Bank.

Guaranty Bank had been in business for nearly a century after surviving the misfortune of opening shortly before the Great Crash of 1929. It had pursued a growth strategy in recent years, maintaining branches in many locations and seeking out high-visibility advertising opportunities in the hope of building the large customer base that never quite arrived.

All Guaranty Bank accounts have been moved to First-Citizens, but the former Guaranty Bank customers will not be able to bank at other First-Citizens branches for several months. Though customers still have their accounts, with 107 branches closed, most account holders no longer have the support of a branch within driving distance. It is a situation that the FDIC tries to avoid in a bank closing, but there probably wasn’t a viable option to keep a scattered network of 107 mini-branches open. Customers can write checks, but many customers will want to move their accounts to a local bank and will have to go through the time-consuming task of closing old accounts through the mail. Customers will be able to call the bank’s call center for assistance (800-235-4636). A few of the supermarkets involved may be scrambling this morning to arrange to get enough coins and $1 and $5 bills to get through a normal weekend of cash sales.

Saturday, April 29, 2017

Bank Failure: First NBC Bank

In the first large bank failure in years, state regulators in Louisiana closed New Orleans-based First NBC Bank, which also had five branches in Florida. The bank had $5 billion in assets at the end of 2016 but in January sold $1 billion of its assets including nine branches in Louisiana to Whitney Bank, which is based across the state line in Gulfport, Mississippi. Now Whitney Bank is taking over the branches and “transactional” deposits of the failed bank. The deposits Whitney Bank is assuming are essentially the checking and savings accounts based in the bank’s branches, but these are estimated to be $1.6 billion, less than half of the bank’s deposits.

The FDIC will send checks on Monday for certificates of deposit, retirement accounts, and other investment-style deposits, covering an estimated $2 billion in deposits belonging to a large number of investors. I imagine this will be the largest check-writing effort to date at FDIC; it is, at least, unusual for the FDIC to have to write $2 billion in checks to bank depositors after a bank failure. This is also one of the most costly bank failures in U.S. history, with the FDIC estimating the cost to the Deposit Insurance Fund to be nearly $1 billion. That figure must be taken as a rough estimate, as the values of many of the bank’s assets are not known with precision.

The bank was obviously troubled in recent years, during which its record was a series of missed deadlines and regulatory actions. The failed bank had appointed a new CEO in February. Subsequently, the president resigned and the bank reported accounting lapses going back at least two years. The bank’s write-down of previously overstated assets was apparently large enough to prompt regulators to close the bank.

First NBC Bank was founded in 2006, in the aftermath of Hurricane Katrina, and expanded rapidly. The timing would have been bad anywhere in the United States as real estate values dropped, but was especially unlucky in coastal Louisiana as it faced further tropical weather disasters. If the bank’s founder was betting on New Orleans bouncing back after the hurricane damage, that also was a bad guess. Ten years later, only the neighborhoods not affected by flooding have returned to their previous levels of population and economic activity.

Bank regulators are lenient with banks in areas affected by natural disasters but must be more strict with banks that draw most of their deposits from investors. A disaster can hurt the prospects of any business, but history shows that a well-managed business can often recover in time. Investor deposits are worrisome to regulators for two reasons. Banks usually pay higher interest rates on these types of accounts, leaving the bank with a thin profit margin. At the same time, investors can move their money out faster than other depositors. Such a turn of events can deplete what appeared to be a well-capitalized bank in a matter of weeks.

There is a theory in 20th-century management thinking that holds that the easiest time to grow a business is when competitors are cutting back. First NBC Bank is the latest in a series of hundreds of banks, retailers, and other businesses that tried to expand into tough times and ended up shutting down instead, suggesting that the management truism may not be so.

Wednesday, April 26, 2017

Banks Sneak Out of London

The same banks that said “don’t panic” about Britain’s withdrawal from the EU a year ago are now preparing to make adjustments in their location strategy. Deutsche Bank today was said to be preparing to move around 4,000 jobs from London — or possibly almost half of its staff there. The timing is not known, but it seems a good guess that the peak of the banking exodus from London will be reached in 2019. Other banks are planning similar moves. It is not a situation that calls for moving an entire office from London to another city, though there may be some of that, especially as banks move operations to Ireland. It is more that London has lost its magnetic power to centralize international banking operations. Places as far-flung as Cyprus and Singapore are picking up some of the work that previously might have been squeezed into a London tower. Thousands of jobs, of course, will not move anywhere, but will just disappear.

There is no chance that London could retain its past financial glory, just as New York after the evacuations of 2001 has never regained its weight as a center of finance. New York maintains its reputation as a money center largely by associating itself more closely with Jersey City, across the river, than it had to previously. Similarly, London will in all probability remain a deal-making center, but that will not make it a power center the way it is now. Dealmakers will have to depend on — and answer to — providers in other cities who will conduct the transactions signed in London.

Saturday, April 22, 2017

Easter Enough

Last weekend was Easter weekend, and friends in retail tell me that customers acted far more stressed than on a normal holiday weekend. Part of it, I am sure, is that we have gotten used to three-day holiday weekends, so that the two-day weekend many of us had for Easter seemed too short. Part of it, too, must have been the tax deadline, which fell on Easter week for the first time in years. The Internal Revenue Service says that taxpayers were filing later than ever this year, and that is easy for me to believe, as I was later than ever with my own tax filings. With more people working toward deadlines, the stress of the last weekend before tax deadline must have been greater than usual.

Still the fact remains that people were stressed out about Easter. That isn’t in keeping with the meaning of the holiday, which is about the victory of light over darkness or of life over death. Based on that, it should be a happy time. At the same time, the cultural traditions of Easter are not hard to live up to. Despite the profound meaning of the holiday, there is not much to it in practice. It is a holiday observed with brief morning ceremonies, meals featuring boiled eggs, and spring colors. Even these simple details may be seen as optional, as I can attest after seeing how sparsely attended an Easter sunrise service tends to be. Granting that we are no longer a nation of chefs and that eggs annually see their highest prices with the boosted demand on the week before Easter, people still cannot be stressing out about boiled eggs. If Easter weekend is hard to do, it is the result of putting more on the holiday than is really there.

There are two cultural struggles that may weigh on Easter. There is the commercial push since 1950 to turn Easter into a commercial holiday featuring packaged candy, decorative baskets, and baked ham. Separately there is a continuing effort to turn Easter into a family holiday on a level with Thanksgiving and Mother’s Day. The foil-wrapped chocolate eggs are here to stay, I think. The family holiday angle will never get much traction, but it may be a source of angst for those who feel they are supposed to be doing more than they are.

The bigger factor, though, I think, is a sort of holiday inflation in which people try to make this year’s holiday a little bigger than last year. Mathematically, that means holidays like Easter tend to expand exponentially until something breaks. Obviously, that’s not a good strategy for everyone’s peace of mind. There is never enough time to do exponentially more. I think we need to learn to chill out and enjoy holidays again. If Easter is this much of a problem, how will people ever cope with the 4th of July or Valentine’s Day?

The answer is to approach a holiday with a sense of being good enough. If you start out feeling that you are good enough as you are and that the holiday is good enough the way you have seen it in the past, then simply meeting that tradition is good enough. Then there is no need to add extra bells and whistles to make up for whatever the imagined shortcoming of the situation is. Imagine, for example, an Easter on which merely getting a couple of decorated boiled eggs, or the egg-shaped candy substitutes, means you have arrived at the right place. If it is the traditional thing for the holiday, then it is Easter enough.