Monthly Archives: March 2007

Mount Mutombo

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mutombo.jpgThe Rockets recently endured a 32 game stretch in which their star center, Yao Ming, was out while recovering from a broken leg. Rather than fall apart, the Rockets won 20 of those 32 games.
Most folks simply assumed that the Rockets’ other star player, Tracy McGrady, was the main reason that the Rockets were able to win that many games without Yao, and McGrady certainly played well over most of that stretch. But as this Dave Berri post explains (see also this followup post), the primary reason that the Rockets were able to survive reasonably well during Yao’s absence was the outstanding play of none other than 40 year-old reserve center, Dikembe Mutombo.
What is it about Houston that all these 40 year-old professional athletes are able to continue performing at a high level?

The Buffett Rule

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warren_buffett.jpgIt’s not every day that the NY Times editorial page heaps praise on a businessman, so my eyebrow raised a bit when I read this editorial yesterday elevating Berkshire Hathaway chairman Warren Buffett to folk hero status.

But it wasn’t too long ago that the Times and other mainstream media outlets were questioning whether Buffett had been involved in criminal wrongdoing.

Indeed, there was even speculation that Buffett did some fancy footwork to avoid the same fate as his friend and business associate, former AIG chairman, Maurice “Hank” Greenberg. Buffett avoided an indictment and Greenberg’s fate, but others at Buffett’s company were not so fortunate.

So, do we now have the makings of “the Buffett Rule?”

A folksy and media savvy businessman involved in complicated structured finance transactions is given a pass so long as he serves up a few sacrificial lambs when prosecutors criminalize the deals, regardless of whether the prosecutors fully understand the transactions in the first place.

Meanwhile, a decidedly unfolksy businessman who is involved in the same transactions stands behind his company and subordinates, but is publicly accused of lying and forced to resign to save his company from being prosecuted out of business.

Sounds a bit like the Apple Rule, don’t you think? Or is it more like the Dell Rule?

My, we are getting quite a few rules here. Perhaps we should rethink the reason why we need such rules in the first place.

Levinson and Balkin on the Dred Scott case

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dscott.jpgLongtime University of Texas Law Professor Sandy Levinson has teamed up with Jack Balkin of Balkinization fame to author a new SSRN paper, 13 Ways of Looking at Dred Scott. For a provocative abstract, check the following out:

Dred Scott v. Sanford is a classic case that is relevant to almost every important question of contemporary constitutional theory.
Dred Scott connected race to social status, to citizenship, and to being a part of the American people. One hundred fifty years later these connections still haunt us; and the twin questions of who is truly American and who American belongs to still roil our national debates.
Dred Scott is a case about threats to national security and whether the Constitution is a suicide pact. It concerns whether the Constitution follows the flag and whether constitutional rights obtain in federally held lands overseas. And it asks whether, as Chief Justice Taney famously said of blacks, there are indeed some people who have no rights we Americans are bound to respect.
Dred Scott remains the most salient example in debates over the legitimacy of substantive due process. It subverts our intuitions about the relative merits of originalism and living constitutionalism. It symbolizes the problem of constitutional evil and the question whether responsibility for great injustices lies in the Constitution itself or in the judges who apply it.
Finally, Dred Scott encapsulates the central problems of judicial review in a constitutional democracy. On the one hand, Dred Scott raises perennial questions about the judicial role in cases of profound moral and political disagreement, and about judicial responsibility for the backlash and political upheaval that may result from judicial review. On the other hand, the political context of the Dred Scott decision suggests that the Supreme Court rarely strays far from the wishes of the dominant national political coalition. It raises the unsettling possibility that, given larger social and political forces, what courts do in highly contested cases is far less important than we imagine.

An underappreciated cost of regulation

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Sirius%20Radio.jpgRuss Roberts has a common sense post over at Cafe Hayek explaining why the federal government should not oppose the proposed merger of satellite radio companies XM and Sirius, both of which are enduring blistering competition with each other and a wide variety of other available entertainment options. As usual, even though this isn’t a close call as to whether the merger should be approved, the Federal Communications Commission is already showing some resistance to it.
One thing that Roberts doesn’t mention in his post is that the FCC’s threatened resistance is particularly incongrous because the regulatory agency dictated the playing field in satellite radio by only licensing two companies in the first place. So, instead of allowing a reasonably free market to sort out the winners and losers, the FCC’s regulatory wand made sure that there would only be two companies competing in the market, neither of which is anywhere close to turning a profit. Of course, it didn’t help that XM and Sirius have had to expend considerable funds and management time in opposing attempts by the National Association of Broadcasters and the recording industry to manipulate regulations in their favor and against satellite radio.
Which brings me to my point. Many folks believe that, inasmuch as established businesses generally abhor regulation, that must mean that regulation is good for the consumer. However, the reality is that established businesses typically use a part of their resources to deal with and manipulate regulation to their advantage and against that of new companies that seek to compete against the established businesses. A big, well-established business can absorb the high cost of regulation and pass it along to the consumer. A thinly-leveraged start-up does not have that luxury.

Who is Houston’s most successful
professional football player?

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Larry%20Izzo.jpgIn terms of championship rings, it isn’t even a close call — the Patriots’ long-time linebacker and special teams ace, Larry Izzo, who has played on all three of the Patriots Super Bowl winners and who the team recently signed to another contract.
Izzo is pure Houston, having played collegiately at Rice from 1992-95 after starring in Texas high school football at The Woodlands, where he continues to live during the off-seaon. Izzo is an example of the specialized type of player that has become common in the NFL, which has limited rosters that place a premium on good special team players. Izzo is one of the best special teamers and has led the Patriots in special teams tackles in five of his six seasons in New England. Izzo has now completed 11 seasons in the NFL (he played his first five seasons in Miami).
Izzo’s career is of special interest to me because he put on one of the best single-game performances of any football player that I’ve ever seen while playing in a big game for The Woodlands High School against Westfield High School in 1991. Former Texas A&M coach Emory Bellard was coaching Westfield, which was loaded. The Woodlands had a pretty good team, too, but not as good as Westfield. Playing both ways at fullback and linebacker, as well as on most special teams, Izzo dominated the game, running and tackling with equal ferocity. He literally willed The Woodlands team to a close win in a game that Westfield would have won handily had Izzo not played.
Izzo is not among the most physically gifted football players that I’ve ever seen, but he is one of best football players that I’ve ever seen.

The magic of innovation and markets

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feeddemon-product.gifFeedDemon is a highly-popular RSS aggregator that I have used for several years. Nick Bradbury developed FeedDemon, and he passes along the interesting story of how development of this elegant product came about:

I used to rely on email, but it’s almost useless to me now.
Funny thing is, if it weren’t for spam, I might not have created FeedDemon. As I’ve mentioned before, after spam and anti-spam filters made it impossible for me to communicate with customers by email, I dumped email and started using my blog and its RSS feed to communicate instead.
And that led to the creation of FeedDemon, which I’m having a blast working on. So I actually benefited from spam. Go figure.

The Roy O trade that didn’t occur

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Roy%20Oswalt%20030707.jpgAs the Stros were languishing below .500 at the halfway point of the 2006 season, rumors were circulating that the Stros were entertaining a trade of their ace starter, Roy Oswalt, among others. The Stros ended up standing pat and then signed Oswalt to a lucrative long-term contract as Stros fans heaved a sign of relief that the best pitcher in the club’s history was remaining in Houston.
Well, according to this recent Mark Hale/NY Post story, once the Stros made it known last summer that they might be willing to move Roy O if the price was right, half a dozen teams became involved in non-stop negotiations and a trade of Roy O and other prominent Stros came much closer to reality than most folks previously thought:

Before last season’s trade deadline a little more than seven months ago, the Mets were trying to procure Oswalt, the Houston ace. They were talking with the Orioles about a follow-up trade to what would have been Baltimore’s acquisition of Oswalt from the Astros. Neither swap ever occurred.
It was a memorable sequence, though, that’s still worth considering now, especially with the Mets facing the Astros today [in spring training] and with starting pitching still their most significant issue. Through conversations with six different MLB team executives with knowledge of the multiple-team trade discussions, here’s a detailed look back at the days and hours leading up to the Oswalt trade disintegration.
Oswalt, one of the finest pitchers in the sport, was set to be a free agent after 2007, and when Houston began to be unsure about whether he would re-sign, the club became willing to hear proposals. To move Oswalt, however, the Astros wanted an established elite hitter.
From a prior inquiry, Omar Minaya already knew that he couldn’t get Oswalt by himself because the Mets didn’t have a hitter to deal. The Astros, though, did like Baltimore shortstop Miguel Tejada, but although the Orioles and Astros spoke, Baltimore required not only Oswalt but third baseman Morgan Ensberg and a prospect. When the two-team talks collapsed, Baltimore VP of baseball operations Jim Duquette determined that the two teams most interested in Oswalt were the Mets and Texas.
Minaya and Texas GM Jon Daniels both got calls from Duquette, and the situation began expanding. When the Mets heard that they could potentially land Oswalt, they were prepared to do anything in their power to do so, and they also internally discussed whether they could get a 72-hour window to sign him. Either way, however, the Mets believed that the fantastic right-hander could be re-signed.
They wouldn’t necessarily have proposed the best package for him, though.
One of the most interesting revelations about the events is that in one of the Texas-Baltimore proposals the principals were Texas third baseman Hank Blalock and pitching prospects John Danks and Thomas Diamond going to Baltimore for Oswalt and Ensberg. There was also another discussion that involved Houston reliever Brad Lidge heading to the Rangers.
As for the Mets’ package, there’s a discrepancy regarding who was involved from the Mets and whether Baltimore requested Mike Pelfrey. Names that were discussed, though, included Lastings Milledge, Aaron Heilman and Brian Bannister, but Minaya never made a final offer to Baltimore.
The trade deadline was at 4 p.m. on Monday, July 31, and at his home in New Jersey on Saturday night, Minaya believed that a trade had a shot, as he and the Orioles were discussing various players. The next morning, the GM flew down to Miami (where the Mets were going to be headed after their weekend series in Atlanta), and the involved teams began nearing a deal that day. The Mets were encouraged that a deal could go down, but later on Sunday, the Astros called Baltimore and told the O’s that Oswalt wasn’t getting dealt. Duquette then called Minaya with the verdict.
As for why it didn’t happen, another discrepancy exists – whether Houston owner Drayton McLane ultimately determined that Oswalt, his favorite Astro, couldn’t be dealt, or whether the swap collapsed because Baltimore was never going to be allowed to make the deal. Eventually, Oswalt re-signed with Houston.

Whew!

Why I like golf

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Mark%20Wilson.jpgMark Wilson is a 32 year-old journeyman PGA Tour player who won last weekend’s Honda Classic. The victory was the first in 111 starts for Wilson, who has been to the pressure-packed PGA Tour qualifying tournament an excruciating eleven times in attempting to obtain or maintain his playing privileges on the PGA Tour. However, this Randall Mell column explains why Wilson’s victory was particularly noteworthy:

Gather the children around.
They should know about Mark Wilson, because he did more than win the Honda Classic in Monday’s playoff at PGA National. In the Machiavellian world of sports, where the ends increasingly justify the means, where it seems as if winning is all that matters, he broke ranks spectacularly.
That was the real story here.
In a time when we routinely worship achievement at the expense of character and integrity, he reminded us why golf’s so admirably different.
He showed a commitment to doing the right thing no matter what the cost.
And a commitment to being relentlessly honest even though it made winning so much harder.
Wilson claimed his first PGA Tour victory despite calling a two-shot penalty on himself Friday, when even in golf, where respect for the rules is so integral to the game, other players might have overlooked this type of violation. It fell in such a gray area that even the rules official Wilson consulted in the second round paused uncertainly.
“If I were sitting here, and had not called it on myself, every time I looked at that trophy, it would be tarnished,” Wilson said after defeating Jose Coceres, Boo Weekley and Camilo Villegas in the four-way playoff.
Wilson, 32, penalized himself two shots in Friday’s second round after his caddie gave advice on club selection to a fellow competitor at the fifth tee.
News of the self-imposed penalty didn’t leak out until the Golf Channel reported it Saturday night, after the third round. Wilson would have shot 64 on Friday, the low round of the tournament, and he would have been one shot behind the leaders instead of three back. But while other players would have been quick to blame a caddie ó it happens all the time ó Wilson kept it to himself. He never raised the issue until pressed by media. [. . .]
At the fifth hole Friday, Wilson hit his tee shot with an 18-degree hybrid. Villegas was up next at the 217-yard par three. Villegas asked his caddie, Matty Bednarski, what club he thought Wilson had hit. Bednarski said he thought it was a two- or three-iron hybrid.
“Oh, it’s an 18-degree [hybrid],” Wilson’s caddie, Chris Jones, told them.
That response violated Rule 8-1 of the Rules of Golf, which prohibits a player or his caddie from giving advice to anyone but each other, or a partner in match play. It’s such a gray area because the rules actually permit competing players or caddies to go up and look in a fellow competitor’s bag to see what club is being used.
“I played out that hole and immediately called an official over to see what he thought,” said Wilson, who grew up in suburban Milwaukee and lives in suburban Chicago. “He wasn’t sure at first if that was necessarily advice, but within 60 seconds, he made the decision.
“It’s an important rule to me. The Rules of Golf are there to be fair to everyone. It’s a tough rule. There’s a lot of camaraderie among caddies and players.”
Jones, 30, who has been Wilson’s caddie since last season, said he was shaken when Wilson pointed out the violation.
“I heard Camilo and his caddie talking, and I just blurted it out,” Jones said. “I was getting too comfortable and too friendly.”
Wilson immediately confronted Jones.
“I felt so low and sick to my stomach,” Jones said.
Two holes later, Wilson could see Jones was suffering, so he put his arm around him to make sure Jones knew he was forgiven.
“After the round, I broke down and couldn’t hold it in,” Jones said. “If we would have lost this tournament, it would have really killed me. I felt so bad about what I had done to him, our team, his wife and family.”

Read the entire article. Wilson won $990,000 for his victory and will have the opportunity to play in The Masters in early April if he can remain among the top 10 money-winners this season until then. More importantly, the win gained him fully exempt status on the PGA Tour through 2009, so he gets a well-deserved reprieve from going back to the PGA Tour qualifying tournament for almost three years. Couldn’t have happened to a nicer guy.

The politics of destruction

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Ken-Lay-R_jpg_250x1000_q85.jpgIn this International Herald Tribune article, Michael Oxley — the “Oxley” of the Sarbanes-Oxley corporate governance statute — confirms the vacuous nature of the politicians who passed that destructive law and encouraged the destruction of Arthur Andersen and various Enron executives:

Presiding over a recent dinner in Paris for more than 200 accountants, Oxley — the former Republican congressman from Ohio and co-author of the Sarbanes-Oxley corporate governance law — was asked during the question period whether he realized he had helped create one of the most crushing financial burdens ever imposed on business.
Was Oxley aware, his questioners asked, that the law that he and Senator Paul Sarbanes, a Maryland Democrat, rushed onto the books five years ago after the collapse of Enron and WorldCom had contributed to a sharp decline in listings on U.S. stock exchanges? And, knowing what he knows now about the cost and effects of the law, would Oxley — who retired in January after 25 years in Congress — have done it any differently?
“Absolutely,” Oxley answered. “Frankly, I would have written it differently, and he would have written it differently,” he added, referring to Sarbanes. “But it was not normal times.” [. . .]
“Everybody felt like Rome was burning,” Oxley, 62, recalled during an interview after the dinner in Paris. “People felt like they were getting cheated. It was unlike anything I had ever seen in Congress in 25 years in terms of the heat from the body politic. And all the members were feeling it.”
Until that moment, a bill to tighten corporate controls had been languishing in the Congress for years, held back by lobbying by big business. But suddenly, the impetus was there, and the firestorm led Oxley, then head of the House committee that oversees America’s financial services industry, to quickly push forward a solution based on that measure to calm the hysteria of voters.[ . . .]
in the summer of 2002, with pressure also mounting from the administration of President George W. Bush, there was no question that the bill needed to be pushed through, however imperfect.
“The president called Paul and I down to the White House almost immediately after the Senate passed its bill, 97 to 0” on July 15, Oxley recalled.
“I remember it was in the Cabinet Room and you could see the pressure he was under because the Democrats were pressing his relationship with ‘Kenny boy'” — a reference to Kenneth Lay, the chief executive of Enron, who had sought help from the administration to avoid a bankruptcy filing in the weeks before the giant energy trading company collapsed.
“The president basically said, ‘Get this wrapped up,'” Oxley said. The House and Senate quickly agreed on a new draft, and Bush signed the bill into law on July 30. [. . .]
A month later, Arthur Andersen, the accounting firm that had been convicted of obstructing the government’s investigation into the collapse of Enron, declared bankruptcy after 89 years in business, crushed by Enron-related liabilities.
The Andersen prosecution was “a White House decision,” Oxley said. “They had to really look tough and so they decided at the highest levels they were just going to give the death penalty to Arthur Andersen.”
“I think at the end of the day virtually anyone would agree it was a terrible decision, because you eliminated a major accounting firm,” he added, “and you just sent a chill through the accounting industry.”

Read the entire article. Yet another example of the legislative overreaction to a perceived problem being far worse than the problem itself.

Rich Kinder’s Enron lesson

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rich_kinder%20030707.jpgThe following blurb from Houston-based Kinder Morgan’s recent 10K certainly indicates that chairman and CEO Rich Kinder learned a thing or two from his experience at Enron, particularly in the area of public relations:

Unlike many companies, we have no executive perquisites and, with respect to our United States-based executives, we have no supplemental executive retirement, non-qualified supplemental defined benefit/contribution, deferred compensation or split dollar life insurance programs. We have no executive company cars or executive car allowances nor do we offer or pay for financial planning services. Additionally, we do not own any corporate aircraft and we do not pay for executives to fly first class. We are currently below competitive levels for comparable companies in this area of our compensation package, however, we have no current plans to change our policy of not offering such executive benefits or perquisite programs.

Hat tip footnoted.