Sunday, March 15, 2009

"The best and the brightest"

AIG has gotten more than $170 billion in bailout money from the Treasury and the Federal Reserve. And now AIG has paid about $165 million in bonuses to the executives who brought the company to its knees.

A more politically foolish use of 0.1 percent of available cash can scarcely be imagined.

AIG chairman Edward G. Liddy's defense of these bonuses may be even more outlandish:
Edward LiddyWe cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury.
Raw intelligence is vastly overrated; elite educational credentials, even more so. But eclipsing these exercises in overpaying is the longstanding assumption that the very best talent in our society responds, in strictly Pavlovian fashion, to overwhelming sums of cash.

And even if you disagree with everything I've written so far, surely you would endorse this recommendation: It is time to retire the phrase, the best and the brightest, in all senses except the ironic, even sarcastic, sense in which that phrase was originally intended.

The Best and the Brightest was the title of a 1972 exposé by David Halberstam of foreign policy miscalculations by the Kennedy and Johnson administrations. For much of the next two decades, American geopolitics, crafted by none less than "the best and the brightest," wreaked havoc throughout Indochina:

VietCong execution
Napalm in Vietnam
Self-immolation
Killing fields
It will take years, decades, perhaps lifetimes to shake American business culture of the fallacy that outrageous salaries are what valuable talent truly demands and deserves. In the meanwhile, I'll settle for a split second of humility regarding the true origins of the best and the brightest.

11 Comments:

Blogger Jennifer Martin said...

Agreed. Liddy's comment is quite misplaced. Right now, even bankers want stable employment. It is the stable employment in uncertain times that is more likely to gain AIG employee loyalty. Additionally, Liddy's inference that government restrictions on compensation can only be described as arbitrary is also misleading, as in the case of AIG, there is plenty of good reason for government oversight. With all the banking talent that has been laid-off of late, I would hope that AIG could find more talent if the company stabalizes.

3/15/2009 11:31 PM  
Blogger Patrick S. O'Donnell said...

Re: The Best and the Brightest was the title of a 1972 exposé by David Halberstam of foreign policy miscalculations by the Kennedy and Johnson administrations. For much of the next two decades, American geopolitics, crafted by none less than "the best and the brightest," wreaked havoc throughout Indochina:---

Not a little off topic, but it was these events in my youth that decisively shaped the substance and contours of many of the (especially moral) values that remain dear to me. In addition to Halberstam, younger readers of this blog may not know of but would surely benefit from Richard J. Barnett's (http://en.wikipedia.org/wiki/Richard_Barnet) The Roots of War (1972), which I found even more compelling than Halberstam's deserevedly classic work.

The first two photographs here, together with one of a Buddhist monk committing self-immolation while in a meditative posture and presumably higher (meditative) state of consciousness (the latter suggested by the fact that, as Halberstam wrote, 'As he burned he never moved a muscle, never uttered a sound, his outward composure in sharp contrast to the wailing people around him.'), bring back myriad and strong emotional memories for me.

And with regard to: "It is time to retire the phrase, the best and the brightest, in all senses except the ironic, even sarcastic, sense in which that phrase was originally intended."---

Numerous passages from the Daodejing could be invoked on behalf of this suggestion.

3/16/2009 12:51 AM  
Blogger Jim Chen said...

Thanks for your comment, Patrick. I've added the picture of the monk's self-immolation, which rightfully completes the trio of the Vietnam War's most violent images.

3/16/2009 1:35 AM  
Blogger Pro said...

AIG = Allowing Irreversible Greed.
AIG = All in Greed.
AIG = Arn't I Greedy.
AIG = A$#holes, in general.

This is sick. Why in the world are we helping these companies that keep sending millions to people who do not know how to run a company? They cry yet get paid millions on the "average joes" taxes. Furthermore, I fear this is just the tip of the iceberg. Look what Enterprise rent-a-car did to get bailout funds:

http://www.butasforme.com/2009/02/25/alert-enterprise-rent-a-car-may-have-fired-employees-as-fake-evidence-when-lobbing-for-bailout-money/

Not to make excuses for these people, but the bailouts are making crooks out of everyone that touches the money.

3/16/2009 3:58 AM  
Blogger eric said...

Even more staggering than Liddy's arrogance is the unstated, and unsurpassably moronic, premise that the managers who ran AIG so far into the ground that it required a government bailout are the sort of "talent" that anyone would want to retain at any price.

3/16/2009 8:02 AM  
Blogger Nancy Rapoport said...

Bravo, Jim, for another particularly well-crafted, on-point response to this farce of a bailout!

3/16/2009 10:08 AM  
Blogger Michael said...

My recollection regarding "the best and the brightest" was use of the term to justify raising civil service salaries. the counterpoint at the time, and still valid today, is that we did not need "the best and the brightest" but having "merely competent" would do quite nicely. Competence would be a welcome infusion to AIG

3/16/2009 11:07 AM  
Blogger Ani Onomous said...

Not to rain on the parade here, but the point was made more broadly in the NYT here (http://www.nytimes.com/2008/12/07/opinion/07rich.html?ref=opinion). Also, re. "I'll settle for a split second of humility regarding the true origins of the best and the brightest," a plea for further humility: the phrase probably preceded Halberstam, and prior uses were both genuine and mocking. Wikpedia has an entry about this.

Personally, I find the use of those famous and horrific photos from Indochina gratuitous and cheapening, but reasonable minds may differ.

3/16/2009 12:46 PM  
Blogger Jim Chen said...

Thanks, Ani, for the Frank Rich link. Questions of style aside, the point remains: Why do we systematically overvalue and overpay for raw talent? I'd settle for understanding what makes anyone assume that we need to shell out megabucks in a buyer's market for all sorts of labor.

3/16/2009 3:00 PM  
Blogger Ani Onomous said...

Dean Chen:

Thanks, as always, for your reply. Let's indeed put to one side the issue of the photos' appropriateness, and the supposed need to limit use of "best and brightest" to Halberstam's received usage, although I really don't think those are the "true origins" (I agree that Liddy was tone deaf to use it -- given how the best and brightest have led AIG thus far, if nothing else).

You ask: "Why do we systematically overvalue and overpay for raw talent? I'd settle for understanding what makes anyone assume that we need to shell out megabucks in a buyer's market for all sorts of labor."

I think this continues to riff on the wrong chords. Liddy's unironic use of "best and brightest" did not mean, so far as can be determined, to emphasize only IQ and degree status or "raw talent"; I think it's pretty obvious that he meant the best and most capable, however that might be determined. His point was that if AIG looks like it will break its contractual commitments whenever Treasury scowls, it will hurt AIG's capacity to retain and recruit the best folks -- even those who are not yet there, and who may have demonstrated prowess in other companies -- regardless, that is, of how their talent is measured. I think that probably IS true at the margins; moreover, I think it probably IS true that the company will have more legal hassles if it voluntarily and unilaterally modifies its compensation scheme for past years (future years are expressly being treated differently, so this is mainly a retroactivity issue). Even if new hires are begging for jobs there, anyone with competing opportunities will be mindful of the fact that their agreed compensation and bonus policies are written in disappearing ink.

That does not mean I agree with him on balance (I don't even know whether he is right to maintain that this would upset 2008 expectations). Moreover, it is a very different thing if the government compels him to change the bonus policy, as opposed to hinting that it would be kinda nice. The ball is in Obama's court.

Shorter version: however objectionable Liddy's comment, it has little to do with the assessment of talent or any other (previous) MoneyLaw theme.

3/16/2009 4:02 PM  
Blogger Alex Zumbulyadis said...

On overvaluing and overpaying "top talent", a major issue may be an inability, or perhaps unwillingness, to determine the marginal value of said "talent."

That could relate to the need for firms to stake out a presence in premium services markets, and basically committing to overvaluation as a marketing cost.

That commitment may even be so strong as to prevent even asking the question "could second-best do this job for less?"

Another possibility is that "talent" is impossible to separate from context. How much of the value of a "star" comes from synergy with their firm and its own assets and goodwill? A change in metrics would be required to attempt to isolate performance from context, but my guess is that it is much harder to do that for a bank than to change the measure of a slugger from RBI to OPS.

3/16/2009 7:20 PM  

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