FORSE IN RUSSIA CI SONO PROBLEMI PIU' URGENTI DELLA GEORGIA.....

Sfogliando l'Economist mi hanno incuriosito alcune cifre riguardo la demografia russa e lo stato (del tutto pietoso) del suo sistema sanitario. Alcuni, come il demografo Murray Feshbach, propendono per proiezioni abbastanza estreme. Altri sono piu' cauti. Nondimeno, i dati relativi agli scorsi 15 anni sembrano parlare abbastanza chiaro e le cifre sulla crescente diffusione di HIV/AIDS, epatite e tubercolosi fanno in effetti una certa impressione (per l'OMS, tra il 45% ed il 55% delle prostitute di San Pietroburgo ha l'HIV. Dunque, watch out se siete nei paraggi!!)
Potrebbe essere interessante contrastare il caso russo con quello della Thailandia (che dalla prima meta' degli anni novanta in poi ha fatto della lotta all'AIDS un primario obiettivo, con estese campagne di prevenzione/informazione) e quello del Sud-Africa, ove sempre l'OMS ritiene che il 30% almeno delle donne gravide rechi il virus dell'HIV. Il Sud-Africa e' spesso citato come un paese che ha vissuto a lungo in uno stato di public denial del fenomeno (vedi la tardiva, malcerta confessione da parte di Mandela circa la morte del figlio a causa del virus), in tal modo ritardando ogni possibile misura correttiva. Per molti, la Russia assomiglia oggi piu' al Sud Africa che alla Thailandia. Naturalmente, molte di queste cifre si prestano a manipolazioni allegre, sptutto allorquando la Russia (ri)diventa bersaglio politico. Per esempio, nel 2007 pur continuando il trend di crescita negativa della popolazione, il decremento netto in Russia e' stato molto al di sotto della media dei precedenti 15 anni, situandosi attorno alle 280,000 unita' (fonte: Max Planck Institute for Demographic Research, che e' in linea con i dati rilasciati dall'istituto russo di statistica e diffusi dal New York Times nell'aprile scorso. Inoltre: life expectancy maschile sotto i 60 anni e fertility rate a circa 1.35, ben sotto il replacement rate). Tuttavia, per l'Economist (la mia speculation e' che spesso le cifre vengono usate per fomentare l'ardore politico/retorico e nulla piu') sono invece state 800,000. Cio' non toglie che forse ci sarebbero temi piu' urgenti da affrontare per il well-being dei cittadini russi che non le enclavi caucasiche. In ogni caso, ecco un abstract sul tema:


Wilson Center Senior Scholar Murray Feshbach paints a dismal picture of health and population trends in Russia, even by his conservative estimates. By 2050, he predicts, Russia will lose at least a third of its current population. Disease, environmental hazards, and a decline in healthy newborns underlie this staggering statistic.

In Russia, deaths far outnumber births. Meanwhile, only a third of Russian babies are born healthy and last year's child health census showed that some 50 to 60 percent of all Russian children suffer from a chronic illness. Current mortality rates reflect the very high share of deaths between ages 20 and 49, potentially the most productive population segment. Such a population decline has a devastating impact on the labor force, military recruitment, and family formation.

By 2050, said Feshbach, Russia's current population of 144 million could fall to 101 million or as low as 77 million if factoring in the AIDS epidemic. Russia and Ukraine have the fastest growing rates of new HIV/AIDS cases in the world, reported Feshbach in his 2003 study, Russia's Health and Demographic Crises: Policy Implications and Consequences, published by the Chemical and Biological Arms Control Institute. If current trends continue, by 2020, 5-14 million Russians will be living with HIV and 250,000-650,000 will die from AIDS annually.

Other sexually transmitted diseases (STDs) are propagating, as well, particularly syphilis. Initially spread through drug use and prostitution, STDs now are proliferating by heterosexual transmission. Another disease on the rise is tuberculosis (TB). In 2001, 781 Americans died from TB while Russia, with half America's population, had nearly 30,000 TB deaths. The same year, 18,000 Americans died from AIDS. Yet by 2010, at least four times that number will die from AIDS in Russia. Unfortunately, Russian government statistics remain optimistic, rather than realistic, diverting attention and funding from research and treatment.

Feshbach, an economist and demographer, has visited Moscow 53 times throughout his career. He worked in the Foreign Demographic Analysis Division of the U.S. Census Bureau for 25 years and later taught courses at Georgetown University on demography, health, and the environment in the Soviet Union for more than 20 years. Feshbach was a Wilson Center fellow during 1978-1979, after which he co-authored a 1980 report depicting the Soviet health crisis, exposing rising infant mortality and the negative impact of understated official statistics.

Economist Vladimir Treml of Duke University, in his 1999 book Censorship, Access, and Influence, wrote, "Several of my colleagues and I visiting Moscow in the early 1980s heard Soviet demographers and economists saying 'Feshbach saved thousands of infant lives in the Soviet Union,' implying that the Davis/Feshbach study was made available to high Soviet authorities, who directed certain (apparently beneficial) changes in public health policies."

Today, Feshbach continues his lifelong work to study the trends and impact of Russia's health and demographic crises. He is an investigator for a USAID project to track and analyze HIV/AIDS, TB, and other diseases in Russia and their impact on Russia's social transition.

Feshbach said, "I think the reason the Russians haven't paid attention [to this crisis], is that not enough people have died yet to capture their appropriate concern."

ROCKY MOUNTAIN INSTITUTE AND TED.COM

http://www.rmi.org/
http://www.ted.com/index.php/talks

Weight and Size Aren't the Same Thing

There was a time when light cars and small cars were believed to be one in the same. The reality is, it is size – not weight – that helps protect drivers from impact during a crash. It's also true that lightweight cars are less damaging to the environment because heavier cars burn more fuel and, therefore emit more carbon.

Cars Have Bulked Up for Specific Reasons

According to the Rocky Mountain Institute, the average 2007 model SUV on average weighs 500 pounds more than in 1990, while compact cars have bulked up, too (about 374 pounds). And it's not because the size of vehicles has increased; instead, it's due to cars having bigger engines, heftier steel construction, and weightier parts. The reality is advancements in materials such as lightweight steel and aluminum have resulted in an ability to manufacture strong, stiff cars that are in line with steel construction without compromising safety (or size).

Lightweighting Doesn't Mean Sacrificing Performance

Redesigning cars to make them more lightweight can be done in many ways, including making changes to the interiors of cars. For example, lighter seats add up to a lighter vehicle. At the end of the day, a lightweight car not only has superior handling, but it also accelerates faster and has the potential to brake quicker, too.

It's Not Just the Body

There are many car parts that can benefit from the use of lightweight materials. These days, more and more new cars are being manufactured with aluminum components, such as engine covers, pumps, and cylinder blocks.

Benefits of Being Light Weight

Using materials that reduce the weight of cars improves the efficiency of engines and gas mileage while decreasing petroleum usage and carbon dioxide emissions.

"IT'S CHEAPER TO SAVE FUEL THAN TO BUY FUEL"

Sono stato di recente a Stoccolma, ad una due giorni di investitori (in primo luogo venture capitalism) in soluzioni energetiche di nuova generazione ed ho approfondito moltissime cose assai notevoli, di cui sapevo poco o nulla. A parte che la Svezia ha in atto il progetto "Fossil-Fuel Free Country within 2020" (guardate cosa succede a Vaxjo
(http://postcarboncities.net/node/261), all'inizio ho incontrato un po' di persone del USGBC (http://postcarboncities.net/node/3287, e devo dire che Schwarzy appare essere particolarmente illuminato, tanto che ha fatto in teleconferenza il messaggio di apertura del convegno), che mi hanno introdotto anche alla business unit di GE Ecomagination (http://ge.ecomagination.com/site/products/echm.html). Aldila' dei vari e molti aspetti, la cosa che piu' mi ha colpito e' stata la geotermia a bassa entalpia (geothermal heat pump). Chiacchierando un po' in giro tra amici e parenti in Italia ho scoperto che nessuno ne sa assolutamente nulla. Tuttavia, ad esempio, dopo che ho raccontato a mio zio di cosa si tratta, egli ha contattato una societa' che in Italia fornisce il dispositivo ed ora ha deciso di installarlo nella sua casa di campagna vicino a Torino. Con l'aggiunta di un pannello solare che provvede i pochi watt necessari per azionare la pompa di calore, in termini di riscaldamento e raffreddamento della casa si liberera' completamente dalla necessita' di bruciare gasolio (nel suo caso)/metano, diminuira' drasticamente l'utilizzo di energia elettrica, ridurra' le emissioni e risparmiera' una montagna di soldi di bollette (da ex Goldman Sachs ha calcolato che la spesa up-front e' significativamente inferiore al valore attuale dei flussi di cassa in uscita per bollette dei prossimi 15 anni). Se si considera che oltre 1/3 del consumo mondiale di combustibili fossili va nel processo di heating/cooling degli edifici, beh direi che nn e' male, sptutto perche' e' gia' economicamente vantaggioso. In Germania ed in Francia, mi dicono, e' gia' relativamente diffuso, ma in Svezia e' in piena espansione. In Italia, la Silas sta collaborando a un paio di condomini a Rimini che recano tale tecnologia

http://casa.quotidiano.net/2008/04/02/4846/geotermia-anche-un-condominio-nel-suo-piccolo.html

http://www.geotherm.it/esempi_impianti_commerciali.htm

http://www.slideshare.net/Andrea.Zanzini/geotermia-a-bassa-entalpia/

E' un esempio di una cosa assai interessante, credo. In ogni caso, me ne son venuto via da quei due giorni con due riflessioni principali:

1) Il dibattito dovrebbe concentrarsi assai meno sull'offerta di petrolio e molto piu' sul lato della domanda, perche' qui sono possibili enormi risparmi e recuperi di efficienza. A parte la quota edifici, il 70% del petrolio negli USA viene usato per il trasporto; di questo, circa la meta' e' utilizzato a livello cittadino per il viaggio di automobili da un punto A ad uno B. Prima di qualsiasi immaginifica soluzione, basta pensare a come il trasporto pubblico intelligente tipo Svezia possa creare massive economie di scala e poi guardare a come funziona, ad esempio, la Toyota Prius e paragonarla al tipico veicolo americano.

2) La legacy energetica dei paesi emergenti nn e' per nulla paragonabile a quella di Usa ed Europa, anzi, nn esiste legacy punto. Molti di essi hanno la possibilita' di diversificare le proprie fonti energetiche ab initio e lo stanno facendo. Infatti , mi ha sorpreso sapere chi e' l'uomo piu' ricco della Cina: tale, Shi Zhengrong, il fondatore della Suntech Power (all'inizio dell'espansione americana il piu' ricco era Rockfeller, un petroliere!!) (http://www.suntech-power.com), e secondo un recente studio di WorldWatch/WorldBank gia' il 10% delle famiglie cinesi utilizza l'energia solare per riscaldare la propria acqua (ovvero in Cina e' installata i 2/3 della capacita' mondiale in tale tecnologia). Le 4 principali associazioni industriali cinesi hanno siglato a inizio 2007 un documento che prevede che il 25% del fabbisogno energetico del paese venga prodotto da fonti rinnovabili entro il 2025. Gli investimenti in fonti alternative (escluso l'idroelettrico) sono stati nel 2006 di 10 miliardi di dollari e di 14 miliardi nel 2007. Inoltre, in termini di semplice efficienza, l'undicesimo piano quinquennale di sviluppo ha un target di riduzione dell'intensita' di energia (l'energia necessaria per produrre uno yuan di reddito nazionale) del 4% annuo.


Varie:

1) Questi sono gli impianti che si fondano in buona parte sulle ricerche di Rubbia, ovvero il solare nn gia' fotovoltaico, ma termodinamico..... quello che in Italia e' stato cassato a Priolo ed ha portato Rubbia ad emigrare in Spagna.

www.nevadasolarone.net
http://www.abengoasolar.com/sites/solar/en/


2) Siccome il dibattito e' in genere assai confuso, mi pare, ecco un documento della Sekab, azienda svedese che lavora all'etanolo di seconda generazione, ricavato dalla cellulosa e nn piu' dal mais.

http://www.sekab.com/Sve2/Informationssidor/Information%20PDF/Myths_vs_Facts.pdf


In ultimo, in chiave magari piu' futuristica e di curiosita', ecco un'elenco di cose gustose:

http://www.businessweek.com/autos/content/mar2007/bw20070319_949435.htm?campaign_id=rss_topDiscussed

http://www.theaircar.com/

http://www.tatamotors.com/our_world/press_releases.php?ID=281&action=Pull

IN AN UNCERTAIN WORLD

Harvard Commencement Day Address
June 7th, 2001

Robert Rubin
Former Secretary of the Treasury of the United States

I am deeply honored to be your commencement speaker today. A little over forty years ago, I arrived as a freshman at Harvard College, from a public school in Miami Beach, Florida. I remember the first day of orientation, when the incoming freshman class met together at Memorial Hall, and the acting Dean of Freshman said, as an effort at reassurance, that only 2% of the incoming class would fail out. I felt that I was providing enormous protection to the rest of my incoming classmates, because in my mind I was going to fall short so colossally as to fill that whole 2% all by myself.

However, I remained, and my Harvard experience reshaped the intellectual framework through which I viewed everything that came my way, including the decision-making that has been the critical core of my professional life, both on Wall Street and in government. My views on that critical function of decision-making derived from my life's activities and formatively and powerfully from my Harvard experience, will be the primary focus of my remarks today, because I believe that decision-making will be at the core of your lives, too, no matter what you do. The only question will be how well you make those decisions.

Larry Summers, my former colleague at Treasury and your outstanding incoming President, used to say, when we faced tough situations in Washington, that life is about making choices. And I think that is exactly right. Curiously, though, despite this profoundly important reality, most people give very little serious consideration to how they make decisions. Thus, I would add to Larry's comment, that how thoughtfully you make those choices will critically affect how good those choices will be and how effective you will be.

In addition to discussing decision-making, I'll end my remarks by urging that today's graduates spend at least part of their careers in public service, where so many of our society's most complex decisions - affecting the lives of all of us - must be made.

Sophomore year, in Emerson Hall, I took Philosophy I with Professor Rafael Demos. I still remember the first day of class when a relatively short, white haired, elderly Greek man walked onto the stage in the lecture hall and instead of using a podium, turned a wastebasket upside down on a desk, put his notes on top, and started to speak. That unadorned simplicity - in the best sense - permeated his thinking and his teaching. And Philosophy I was only part of a broader Harvard intellectual experience that provided my most important training for subsequent careers in risk arbitrage investment on Wall Street and in economic policy making in government. Professor Demos would lead us through the great philosophical thinkers of the ages, not in the spirit of simply understanding and accepting their views, but rather to use their views as launching points for our own critical thinking, to question how well each thinker's analysis held together and, most importantly, to question how each assertion of truth was proven. And, as I slowly came to realize, the absolute truths that were asserted turned out to be unprovable and, in the final analysis, to be based on belief or assumption. Only later did I learn that many in modern science hold exactly the same view, that is that sophisticated theories can be developed and then proven by experimentation, but that ultimately this whole structure rests on unprovable assumptions.

I also remember that after we had struggled with thinkers whose work was immensely difficult to understand, Professor Demos then assigned another set of thinkers whose work was relatively easy to understand. However, we came to realize that this group lacked the trying but tight rigor and discipline of a Kant or Spinoza, and seemed intellectually loose, and unsatisfying. We then returned to the more difficult philosophers, with a newly developed appreciation for rigorous thinking.

From the guidance of this gentle professor, and from all my other experience at Harvard, I developed in the core of my being the view that there are no provable absolutes, and that, with the absence of provable certainty, all decisions are about probabilities - that is, all decisions are about the respective probabilities, of each of a number of possible outcomes actually occurring. Moreover, recognizing that all decisions are about probabilities rather than certainties should lead us to uncover and engage with the full array of complexities around making the best decisions.

Perhaps most importantly, rejecting the idea of certainties and needing to make the best judgments possible about probabilities, should drive you restlessly and rigorously to analyze and question whatever is before you - and to treat assertions as launching pads for analysis, not as accepted truths - in pursuit of better understanding.

Moreover, judging probabilities is far from the only complexity in decision-making. Often, each alternative possible outcome is not a simple, single effect, but the net effect of tradeoffs between competing considerations. I'm not expecting in these remarks to fully discuss these thoughts, but rather to convey my view as to the intellectual complexity inherent in making good decisions.

To exemplify both probabilities and tradeoffs, when the new administration's economic team opted for deficit reduction to stimulate economic recovery in 1993, we told the President that the likelihood of success was good, but that there were no guarantees, so that he could make a decision on this dramatic change in fiscal policy with full awareness of the economic and political risks. We also said that even if the strategy did work, the result would be a tradeoff between competing considerations - the positive of economic recovery and the negative of being unable to fund some of his desired programs. Again life is about making choices, and that quickly leads you to probabilities and tradeoffs.

With that, let me make one final point about how complex decision-making can be - the point that sometimes all choices are bad, but some are better than others. For example, our administration was greatly criticized for having worked with the International Monetary Fund to extend support to Russia in 1998, when Russia was facing a severe financial and economic crisis. Clearly, there was a substantial risk that additional assistance would not be effective. On the other hand, there was no question that our country had a very substantial national security interest in attempting to help stave off economic crisis in Russia, even if the likelihood of success was relatively low. All choices were probably bad in that case, including doing nothing, but there was still one choice that was least bad. Often, decision-makers faced with a situation where all choices are bad, react by not deciding. That, however, is a decision in itself, and often the wrong decision.

Let me mention one other situation that exemplifies what I've been saying about decision-making.

I often remember an experience early in my own Wall Street career, when I was investing our firm's capital in arbitrage and a friendly competitor at another firm explained his massive investment in what he viewed as a sure thing.

I agreed that it looked certain, but on the theory that there are no certainties but only probabilities, I made a very large investment, but still at a level where the loss was affordable if the entirely unexpected happened. And, it did. The investment failed: we took a large loss, and he took a loss beyond reason - and lost his job.

I doubt if Kant or Spinoza viewed themselves as offering the best and more important preparation for risk arbitrage or for intervention in the dollar/yen foreign exchange market or for the many other activities of a finance minister. But, in my view, they did. Looking back on all my years in the private and public sectors, in the most important issues, certainties were almost always illusory and misleading, as were the simple answers or opinions that often were the response to the complicated issues in both political discourse and the private sector. Reality is complex, and recognizing complexity and engaging with complexity was the path to best decision-making.

This, as you leave Harvard to undertake a vast variety of pursuits, I believe that nothing will be as important to you - no experience or professional training - as the ways of thinking and the restless pursuit of understanding you have had the opportunity to develop at this great institution.

An important corollary to recognizing that decisions are about probabilities is that decisions should not be judged by outcomes but by the quality of the decision-making, though outcomes are certainly one useful input in that evaluation.. Any individual decisions can be badly thought through, and yet be successful, or exceedingly well thought through, but be unsuccessful, because the recognized possibility of failure in fact occurs. But over time, more thoughtful decision-making will lead to better overall results, and more thoughtful decision-making can be encouraged by evaluating decisions on how well they were made rather than on outcome. In managing trading rooms, I always focused on evaluating and promoting traders not on their results alone, but also and very importantly, on the thinking that underlay their decisions. Unfortunately, this approach is not widely taken, much to the detriment of decision-making in both the private and public sectors.

In Washington, for example, there is very little tolerance for decisions that don't turn out to be successful, creating a tendency to counter productive risk aversion. In 1995, for example, our administration decided to assist Mexico financially in attempting recovery from an economic crisis, and the program succeeded. Then, three years later, we made a conceptually similar decision with regard to Russia and the effort did not succeed. I believe that the decision on Mexico would have been right even if the program had failed, and that the decision on Russia was right even though it did fail. In both cases, we knew that there were no guarantees of success - and in fact, real chances of failure. But we also felt that the chances of success were good enough, and the consequences of not engaging were a severe enough threat to American economic and national security interests, that involvement was the right decision. We were praised for the Mexican program, and criticized for the Russian program, in both cases because of the outcomes. I think both those reactions were based on looking at the wrong things. And that has real consequences. In the Mexican case, especially, President Clinton made the decision well knowing that failure could cause him great political damage, and that the judgment and evaluation of the decision in the media and the political universe would be based solely on the outcome. Fortunately, President Clinton was willing to take that risk, but too often this environment deters optimal decisions where there is a risk of failure.

And that leads me to the thoughts on public service I mentioned at the beginning of my remarks.

When I began in the new administration, a distinguished former cabinet member told me that I would now live off my previously accumulated intellectual capital, because I would be too busy to add to it.

I found just the opposite - that my time in government was an intense learning experience about how our government and our political processes worked and about a vast array of policy issues. I also found that the decisions that had to be made were often amongst the most complex faced anywhere in our society. Public service was a powerful challenge in using all the intellectual qualities that Harvard had sought to develop, towards the objective of furthering the public good.

I believe strongly in a market based, private sector driven economy. But there are a host of critically important functions that markets by their nature cannot or will not perform optimally, from education, programs for the inner city, law enforcement defense, and environmental protection or defense and foreign policy, and this array of functions becomes greater and more challenging in a world of increasing global interdependence.

Thus we must attract to government a critical mass of people with the intellectual drive, the restless quest for understanding, and the effectiveness at decision-making that we have been discussing this afternoon. There was a terrible period during my time in government when radio talk shows and even important elective officials regularly derogated public service and public servants. The atmosphere around government has substantially improved in the last few years, but simply reducing the level of disparagement is not enough. The people I worked with in government were as capable and committed as any I had worked with anywhere. But, to continue to attract the outstanding people to public service that the issues and functions require, I believe we all have the obligation - especially those who have received the benefits conferred by our great universities to reject the denigration of public service and to help re-establish an environment of honor and respect for public service and public servants.

None of this, let me quickly add, has anything to do with the perfectly proper debate about what the role of government should be in our society. This debate is as old as our republic, and the role of government has fluctuated substantially over the course of our history. However, what should not be a matter of debate - no matter what one views may be as to the appropriate role of government - is the respect that we accord public service and public servants.

Beyond urging that all of us contribute to re-establishing that environment of respect, I would also urge that those of you graduating today consider spending at least some time - and hopefully, for some of you, a whole career - in public service.

Public service, at whatever level of seniority, can provide immense challenge to all of your capabilities, as you help make and execute decisions in the most complex of circumstances, to further the well-being of the nation and even the world. And, you can get a very special insight into many of our society's most important policy issues, and a very special insight into how our society works - for example, how policy, politics, and media interact to affect what happens.

Government service, whether for a few years or for a career, can provide enormous challenge and intellectual growth, and the satisfaction of working to directly further the public good.

With that, let me conclude by thanking you for the opportunity to share views that I have thought a great deal about over the years. Important issues are complicated, and many of the most complicated are involved in the immense challenges requiring effective governance in our country and throughout the world.

You have been prepared by an outstanding institution - Harvard - to deal with this complexity in whatever you do and to contribute greatly to that governance.

Thus, you have an extraordinary opportunity to develop lives that work for you and to serve your country and all of human kind. That is a wonderful prospect.

And so, I congratulate each of you graduating today on all that you have accomplished and on this momentous occasion in your lives; I wish each of you the best in the years and decades ahead; and I hope you will cherish and advance in the world the great intellectual traditions that Harvard represents as so many of your predecessors have before you. Thank you.

Vi posto una breve presentazione fatta dall'autore stesso, Phil Rosenzweig (nessuna parentela, preciso, neppure intellettuale, con il noto filosofo delle stelle e delle redenzioni), al suo libro The Halo Effect. Superficialmente, potrebbe apparire uno studio buono per manager ed affini, ma, in realta', ha portata ed implicazioni ben piu' larghe e credo possa essere lettura davvero importante anche per chi, ad esempio, si occupa di storia o di politica. Personalmente, unitamente ad almeno un paio di altri testi affini (In an Uncertain World di Robert Rubin e How We Know What Isnt' So di Thomas Gilovich), esso ha radicalmente cambiato il mio modo di guardare a certi accadimenti ed il mio eventuale approccio nel giudicarli, rivelandomi come insostenibilmente ingenua la prospettiva che avevo in precedenza. Soprattutto, credo, mi ha insegnato a guardare in termini probabilistici ("degree of belief") ad ogni decisione. La distinzione chiave e' quella tra processo e risultato. Con le parole di Rubin: "Individual decisions can be badly thought through, and yet be successful, or exceedingly well thought through, but be unsuccessful, because the recognized possibility of failure in fact occurs. But over time, more thoughtful decision-making will lead to better overall results, and more thoughtful decision-making can be encouraged by evaluating decisions on how well they were made rather than on outcome". E se vi guardate intorno, noterete che quasi nessuno tiene in conto questo fondamentale aspetto, stia egli commentando i risultati di un'azienda, il ruolo storico di qualche personaggio oppure l'esito di una partita di calcio. Per citare David Sklansky, in The Theory of Poker, "Any time you make a bet with the best of it, where the odds are in your favor, you have earned something on that bet, whether you actually win or lose the bet. By the same token, when you make a bet with the worst of it, where the odds are not in your favor, you have lost something, whether you actually win or lose the bet".

A brief overview

The Halo Effect is an unusual business book: it offers a sharp critique of current management thinking, exposing many of the errors and mistaken ideas that pervade the business world, and suggests a more accurate way to think about company performance. I've tried to make it lively, informal, provocative, and accessible to a wide audience.

The main arguments of the book can be summarized in three points:

• Much of our thinking about company performance is shaped by the Halo Effect, which is tendency to make specific evaluations based on a general impression. When a company is growing and profitable, we tend to infer that it has a brilliant strategy, a visionary CEO, motivated people, and a vibrant culture. When performance falters, we’re quick to say the strategy was misguided, the CEO became arrogant, the people were complacent, and the culture stodgy. Using examples like Cisco, ABB, IBM, Lego, and more, I show how the Halo Effect is pervasive in the business world. At first, all of this may seem like harmless journalistic hyperbole, but when researchers gather data that are contaminated by the Halo Effect—including not only press accounts but interviews with managers—the findings are suspect. That is the principal flaw in the research of Jim Collins’s Good to Great, Collins and Porras’s Built to Last, and many other studies going back to Peters and Waterman’s In Search of Excellence. They claim to have identified the drivers of company performance, but have mainly shown the way that high performers are described. My book is the first to show why, for all their claims of voluminous data and rigorous analysis, their research is fundamentally flawed—and why their conclusions about the drivers of company performance are unfounded.

• Reliance on contaminated data leads to other errors, the most important of which is the widespread notion—explicit in Jim Collins’s work as well as that of many other management gurus—that companies can achieve success by following a formula. This is erroneous for a simple but profound reason: in business, performance is inherently relative, not absolute. I provide a very striking example about Kmart: on many objective dimensions (e.g., inventory management, procurement, logistics, automated reordering, etc.) Kmart improved during the 1990s. Why then did profits and market share continue to decline? Because on those very same measures, Wal-Mart and Target improved even more rapidly. Kmart’s failure was a relative failure, not an absolute one.

• Since performance is relative, not absolute, it follows that companies succeed when they do things differently than rivals, which means making choices under conditions of uncertainty, which in turn involves taking risks—and which may end in failure. The Halo Effect shifts our thinking about performance from one that looks for a formula for success, toward one that sees the world in terms of probabilities. Strategic leadership is about making choices, under uncertainty, that have the best chance to raise the probabilities of success, while never imagining that success can be predictably achieved. Even good decisions may lead to unfavorable outcomes, but that doesn’t mean the decision was wrong. The Halo Effect is not just an exercise in debunking flawed thinking—it seeks to improve the way that managers understand company performance and make strategic decisions.

Why I wrote The Halo Effect

I wrote The Halo Effect because during 25 years in and around the business world, I've seen so much nonsense—unsupported claims by famous gurus and self-described "thought leaders," sweeping assertions based on poor data, and simplistic stories that claim to be rigorous research. Worse, most people—including many very smart managers, consultants, and journalists— can't tell the difference between good and bad research. The Halo Effect is an attempt to raise the level of discussion in the business world, and to sharpen our skills of critical thinking about management.

"At a price, you can originate and sell anything", Settembre 2006

Nightmare Mortgages
They promise the American Dream: A home of your own -- with ultra-low rates and payments anyone can afford. Now, the trap has sprung

For cash-strapped homeowners, it was a pitch they couldn't refuse: Refinance your mortgage at a bargain rate and cut your payments in half. New home buyers, stretching to afford something in a super-heated market, didn't even need to produce documentation, much less a down payment.

Those who took the bait are in for a nasty surprise. While many Americans have started to worry about falling home prices, borrowers who jumped into so-called option ARM loans have another, more urgent problem: payments that are about to skyrocket.

The option adjustable rate mortgage (ARM) might be the riskiest and most complicated home loan product ever created. With its temptingly low minimum payments, the option ARM brought a whole new group of buyers into the housing market, extending the boom longer than it could have otherwise lasted, especially in the hottest markets. Suddenly, almost anyone could afford a home -- or so they thought. The option ARM's low payments are only temporary. And the less a borrower chooses to pay now, the more is tacked onto the balance.

The bill is coming due. Many of the option ARMs taken out in 2004 and 2005 are resetting at much higher payment schedules -- often to the astonishment of people who thought the low installments were fixed for at least five years. And because home prices have leveled off, borrowers can't count on rising equity to bail them out. What's more, steep penalties prevent them from refinancing. The most diligent home buyers asked enough questions to know that option ARMs can be fraught with risk. But others, caught up in real estate mania, ignored or failed to appreciate the risk.

There was plenty more going on behind the scenes they didn't know about, either: that their broker was paid more to sell option ARMs than other mortgages; that their lender is allowed to claim the full monthly payment as revenue on its books even when borrowers choose to pay much less; that the loan's interest rates and up-front fees might not have been set by their bank but rather by a hedge fund; and that they'll soon be confronted with the choice of coughing up higher payments or coughing up their home. The option ARM is "like the neutron bomb," says George McCarthy, a housing economist at New York's Ford Foundation. "It's going to kill all the people but leave the houses standing."

Because banks don't have to report how many option ARMs they underwrite, few choose to do so. But the best available estimates show that option ARMs have soared in popularity. They accounted for as little as 0.5% of all mortgages written in 2003, but that shot up to at least 12.3% through the first five months of this year, according to FirstAmerican LoanPerformance, an industry tracker. And while they made up at least 40% of mortgages in Salinas, Calif., and 26% in Naples, Fla., they're not just found in overheated coastal markets: Through Mar. 31 of this year, at least 51% of mortgages in West Virginia and 26% in Wyoming were option ARMs. Stock and bond analysts estimate that as many as 1.3 million borrowers took out as much as $389 billion in option ARMs in 2004 and 2005. And it's not letting up. Despite the housing slump, option ARMs totaling $77.2 billion were written in the second quarter of this year, according to investment bank Keefe, Bruyette & Woods Inc.

The First Wave
After prolonging the boom, these exotic mortgages could worsen the bust. They also betray such a lack of due diligence on the part of lenders and borrowers that it raises questions of what other problems may be lurking. And most of the pain will be borne by ordinary people, not the lenders, brokers, or financiers who created the problem.

Gordon Burger is among the first wave of option ARM casualties. The 42-year-old police officer from a suburb of Sacramento, Calif., is stuck in a new mortgage that's making him poorer by the month. Burger, a solid earner with clean credit, has bought and sold several houses in the past. In February he got a flyer from a broker advertising an interest rate of 2.2%. It was an unbeatable opportunity, he thought. If he refinanced the mortgage on his $500,000 home into an option ARM, he could save $14,000 in interest payments over three years. Burger quickly pulled the trigger, switching out of his 5.1% fixed-rate loan. "The payment schedule looked like what we talked about, so I just started signing away," says Burger. He didn't read the fine print.

After two months Burger noticed that the minimum payment of $1,697 was actually adding $1,000 to his balance every month. "I'm not making any ground on this house; it's a loss every month," he says. He says he was told by his lender, Minneapolis-based Homecoming Financial, a unit of Residential Capital, the nation's fifth-largest mortgage shop, that he'd have to pay more than $10,000 in prepayment penalties to refinance out of the loan. If he's unhappy, he should take it up with his broker, the bank said. "They know they're selling crap, and they're doing it in a way that's very deceiving," he says. "Unfortunately, I got sucked into it." In a written statement, Residential said it couldn't comment on Burger's loan but that "each mortgage is designed to meet the specific financial needs of a consumer."

The loans certainly meet the needs of banks. Option ARMs offer several payment choices each month. Among Burger's alternatives were one for $2,524, about what a standard fixed-rate mortgage would be on the new amount, and the $1,697 he pays. Why would his bank make the minimum so low? Thanks to a perfectly legal accounting practice, no matter how little Burger pays each month, the bank gets to record the full amount.

Option ARMs were created in 1981 and for years were marketed to well-heeled home buyers who wanted the option of making low payments most months and then paying off a big chunk all at once. For them, option ARMs offered flexibility.

So how did these unusual loans get into the hands of so many ordinary folks? The sequence of events was orderly and even rational, at least within a flawed system. In the early years of the housing boom, falling interest rates made safe fixed-rate loans attractive to borrowers. As home prices soared, banks pushed adjustable-rate loans with lower initial payments. When those got too pricey, banks hawked loans that required only interest payments for the first few years. And then they flogged option ARMs -- not as financial-planning tools for the wealthy but as affordability tools for the masses. Banks tapped an army of unregulated mortgage brokers to do what needed to be done to keep the money flowing, even if it meant putting dangerous loans in the hands of people who couldn't handle or didn't understand the risk. And Wall Street greased the skids by taking on much of the new risk banks were creating.

Now the signs of excess are crystal clear. Up to 80% of all option ARM borrowers make only the minimum payment each month, according to Fitch Ratings. The rest of the money gets added to the balance of the mortgage, a situation known as negative amortization. And once balances grow to a certain amount, the loans automatically reset at far higher payments. Most of these borrowers aren't paying down their loans; they're underpaying them up.

Yet the banking system has insulated itself reasonably well from the thousands of personal catastrophes to come. For one thing, banks can sell some of their option ARMs off to Wall Street, where they're packaged with other, better loans and re-sold in chunks to investors. Some $182 billion of the option ARMs written in 2004 and 2005 and an additional $83 billion this year have been sold, repackaged, rated by debt-rating agencies, and marketed to investors as mortgage-backed securities, says Bear, Stearns & Co. (BSC )Banks also sell an unknown amount of them directly to hedge funds and other big investors with appetites for risk.

The rest of the option ARMs remain on lenders' books, where for now they're generating huge phantom profits for some lenders. That's because, according to generally accepted accounting principles, or GAAP, banks can count as revenue the highest amount of an option ARM payment -- the so-called fully amortized amount -- even when borrowers make only the minimum payment. In other words, banks can claim future revenue now, inflating earnings per share.

For many industries, so-called accrual accounting, which lets companies book sales when they contract for them rather than when they receive the cash, makes sense. The revenues will eventually come. But accrual accounting doesn't apply well to option ARMs, since it's more difficult to know if unpaid interest will ever cross a banker's desk. "This is basically an IOU that may never get paid," says Robert Lacoursiere, an analyst at Banc of America Securities. James Grant of Grant's Interest Rate Observer recently wrote that negative-amortization accounting is "frankly a fraudulent gambit. But what it lacks in morality, it compensates for in ingenuity." The Financial Accounting Standards Board, which is responsible for keeping GAAP up to date, stands by its standard but told BusinessWeek in a written statement that it is "concerned that the disclosures associated with these types of loans [are] not providing enough transparency relative to their associated risks."

Camouflaged Losses
Risks or not, the accounting treatment is boosting reported profits sharply. At Santa Monica (Calif.)-based FirstFed Financial Corp. (FED ), "deferred interest" -- what an outsider might call phantom income -- made up 67% of second-quarter pretax profits. FirstFed did not respond to requests for comment. At Oakland (Calif.)-based Golden West Financial Corp. (GDW ), which has been selling option ARMs for two decades, deferred interest made up about 59.6% of the bank's earnings in the first half of 2006. "It's not the loan that's the problem," says Herbert M. Sandler, CEO of World Savings Bank, parent of Golden West. "The problem is with the quality of the underwriting."

In the middle of one of the hottest U.S. markets, Coral Gables (Fla.)-based BankUnited Financial Corp. (BKUNA ) posted a $14.8 million loss for the quarter ended June, 2005. Yet it reported record profits of $23.8 million for the quarter ended in June of this year -- $20.9 million of which was earned in deferred interest. Some 92% of its new loans were option ARMs. Humberto L. Lopez, chief financial officer, insists the bank underwrites carefully. "The option ARMs have gotten a bit of a raised eyebrow because we generate and book noncash earnings. But...it's our money, and we do feel comfortable we'll get it back."

Even the loans that blow up can be hidden with fancy bookkeeping. David Hendler of New York-based CreditSights, a bond research shop, predicts that banks in coming quarters will increasingly move weak loans into so-called held-for-sale accounts. There the loans will sit, sequestered from the rest of the portfolio, until they're sold to collection agencies or to investors. In the latter case, a transaction on an ailing loan registers on the books as a trading loss, gets mixed up with other trading activities and -- presto! -- it vanishes from shareholders' sight. "There are a lot of ways to camouflage the actual experience," says Hendler.

There's no way to camouflage what Harold, a former computer technician who asked BusinessWeek not to publish his last name, is about to face. He's disabled and has one source of income: the $1,600 per month he receives in Social Security disability payments. In September, 2005, Harold refinanced out of a fixed-rate mortgage and into an option ARM for his $150,000 home in Chicago. The minimum monthly payment for the first year is $899, which he can afford. The interest-only payment is $1,329, which he can't. The fully amortized payment is $1,454, which his lender, Washington Mutual (WM ), gets to count on its books. WaMu, no fly-by-night operation, said it couldn't comment on Harold's case, citing confidentiality issues. A spokesman says the bank "accounts for its option ARM product in accordance with generally accepted accounting principles." WaMu has about $12 billion in loans negatively amortizing right now, up from $2.5 billion in 2005, estimates CreditSights' Hendler. In a written statement, WaMu said "borrowers who request an adjustable loan with payment options should understand those options and potential adjustments throughout the life of the loan. We make detailed disclosures to customers that are designed to develop a more informed consumer of mortgage products and ensure that our customers are comfortable with the loan products they select."

Hard Sell
To get the deals done, banks have turned increasingly to unregulated mortgage brokers, who now account for 80% of all mortgage originations, double what it was 10 years ago, according to the National Association of Mortgage Brokers. In 2004 banks began offering fatter sales commissions on option ARMs to encourage brokers to push them, says Gail McKenzie, assistant U.S. attorney in Atlanta, who is investigating mortgage brokers for improper practices.

The problem, of course, is that many brokers care more about commissions than customers. They use aggressive sales tactics, harping on the minimum payment on an option ARM and neglecting to mention the future implications. Some even imply verbally that temporary teaser rates of 1% to 2% are permanent, even though the fine print says otherwise. It's easy to confuse borrowers with option ARM numbers. A recent Federal Reserve study showed that one in four homeowners is mystified by basic adjustable-rate loans. Add multiple payment options into the mix, and the mortgage game can be utterly baffling.

Billy and Carolyn Shaw are among the growing ranks of borrowers who have taken out loans they say they didn't understand. The retired couple from the Salinas (Calif.) area needed to tap about $50,000 in equity from their $385,000 home to cover mounting expenses. Billy, 66, a retired mechanic, has diabetes. Carolyn, 61, has been caring for her grandchildren, 10-year-old twins, since her daughter's death in 2000. The Shaws have a fixed income of $3,000 a month that will fall by about $1,000 in November after Billy's disability benefits run out. Their new loan's minimum payment of about $1,413 is manageable so far, but the fully amortized amount of about $3,329 is out of the question. In a little over a year, they've added some $8,500 to their loan balance and now face a big reset if they continue to pay only the minimum. "We didn't totally understand what was taking place," says Carolyn. "You have to pay attention. We didn't, and we're really stuck here." The Shaws' lender, Golden West, says it routinely calls customers to ask them if they are happy and understand their mortgage loan.

Then there's the illegal stuff. Mortgage fraud is one of the fastest-growing white-collar crimes in the nation, costing $1 billion in 2005, double the year before. A slower housing market could foster more wrongdoing. "With a tighter market, you are going to find there is more incentive to manipulate," says Tim Irvin of Irvin Investigations & Research Services in Spring, Texas. "Brokers are having a harder time getting business, so they're getting creative."

Concerns like these haven't curbed Wall Street's hunger for option ARMS. "At a price, you can originate or sell anything," says Thomas F. Marano, global head of mortgage and asset-backed securities at Bear Stearns. Hedge funds have been particularly active, buying risky loans directly from banks and cutting out the bundlers in the middle. Kathleen C. Engel, an associate professor of law at Cleveland-Marshall College of Law at Cleveland State University, says Wall Street and hedge fund money has helped to finance widespread lending abuses, particularly among the most vulnerable borrowers.

Pros Go Unscathed
Why are hedge funds willing to buy risky loans directly? Because they can demand terms that help insulate them from losses. And banks, knowing what the hedge funds want in advance, simply take it out of the hides of borrowers, many of whom qualify for lower rates based on their credit histories. "Even if the loan goes bad, [the hedge funds are] still making money hand over fist," says Engel.

Eventually, some of it will go sour. But the Wall Street pros who buy option ARMs are in the business of managing risk, and no one expects widespread losses. They've taken on billons in iffy option ARMs, but the loans are no shakier than the billions in emerging market debt or derivatives they buy and sell all the time. Blowups are factored into the investing decision.

Banks that hold lots of option ARMs on their books will surely be hit by loan defaults in coming years. "It's certainly reasonable to expect to see some excesses wrung out," says Brad A. Morrice, president and CEO of New Century Financial Corp. But even here the damage will likely be limited. Banks use insurance and other financial instruments to protect their portfolios, and they hold real assets -- homes -- as collateral. Christopher L. Cagan, director of research and analytics at First American Real Estate Solutions, a researcher and unit of title insurer First American, forecasts total defaults of $300 billion across all types of loans, not just option ARMs, over the next five years -- less than 1% of total homeowner equity. (In comparison, JPMorgan Chase & Co. alone has a mortgage portfolio of $182.8 billion.) Cagan estimates that banks will end up losing only $100 billion of it all told.

Most of the pain will be born by ordinary people. And it's already happening. More than a fifth of option ARM loans in 2004 and 2005 are upside down -- meaning borrowers' homes are worth less than their debt. If home prices fall 10%, that number would double. "The number of houses for sale is tripling in some markets, so people are not going to get out of their debt," says the Ford Foundation's McCarthy. "A lot are going to walk."

Jennifer and Eric Hinz of Somerset, Wis., are feeling the squeeze. They refinanced out of a 5.25% fixed-rate, 30-year loan in June, 2005, and into an option ARM with a 1% teaser rate from Indymac Bank. The $1,483 payment for their original mortgage dropped to as low as $747 with the new option ARM. They say they had no idea when they signed up, however, that the low payment adds $600 in deferred interest to their balance every month. Worse, they thought the 1% would last three years, but they're already paying 7.68%. "What reasonable human being would ever knowingly give up a 5.25% fixed-rate for what we're getting now?" says Eric, 36, who works in commercial construction. Refinancing is out because they can't afford the $15,000 or so in fees. "I'm paying more, and the interest is just going up and up and up," says Jennifer, 34, a stay-at-home mom. "I feel like we got totally screwed." They say their mortgage broker has stopped returning their phone calls. Indymac declined to comment on the loan's specifics.

Stories like these can be found across the socioeconomic spectrum, says Allen J. Fishbein, director of Housing & Credit Policy for the Consumer Federation of America. In a May focus group, the CFA found that option ARM customers at all income levels said the loans were the only way they could afford their homes. While many recognized that their mortgages could increase, "they professed complete surprise that they could increase as much as they could," says Fishbein. That lack of diligence will cost them over time.

Not that all option ARM holders go in blindly. While the loans are marketed aggressively, plenty of holders know exactly what they're getting into. Jon and Meghan Bachman of Portland, Ore., consider them wealth-building tools. "We want to own a bunch of houses," says Meghan. "We're hoping for early retirement."

So far they have stayed out of the fire. The couple, who are in their 30s, bought their first home, a 100-year-old farm house in Portland, Ore., in October, 2005, with a no-money-down loan for $200,000 from GreenPoint Mortgage, a unit of NorthFork Bancorporation Inc. By May, the value of the house had soared to $275,000. Rather than sit tight as their grandparents might have, the Bachmans, with an annual household income of $70,000, took out a home equity loan to put a $30,000 downpayment on an investment property in an up-and-coming neighborhood nearby. They pay a minimum of just $825 on their new $191,000 mortgage, and rent the house out for $100 more than that. Sooner or later, the payment will rise. Then they'll have to raise the rent to stay in the black. If the still-strong Portland housing market tanks, they could find themselves in deep trouble. It's a risk they say they're willing to take.

Public policy has yet to catch up with the new complexities of the lending industry. Comptroller of the Currency John C. Dugan, the banking industry's main regulator, wants banks to clean up their act. A source inside the federal Office of the Comptroller says Dugan intends to raise lending standards, as he did last year on credit cards, where super-low minimum payments made it improbable that cardholders would ever pay down debts. New guidelines are expected this fall.

Fair-housing pundits suggest that mortgage lenders follow the lead of the securities industry and require that mortgage borrowers be not only eligible for a product but also suitable -- meaning the loan won't impose hardship. Says Consumer Federation of America's Fishbein: Buyers have to have a "reasonable prospect of being able to handle the payments, not at the initial rate, but [assuming] the worst-case scenario."

So far, banks have shown little desire to raise their standards. In February, Golden West announced it would raise its minimum option ARM payment to 2.6% of the loan. In March, Golden West's Sandler wrote a nine-page letter to the Office of Thrift Supervision decrying the lax lending standards he was seeing. "Foolish lenders who eventually stumble under the weight of their missteps will bring down innocent borrowers with them and leave the rest of us to clean up the mess," he wrote. But on May 7, Golden West announced it was selling out to Charlotte (N.C.)-based Wachovia Corp. (WB ). By June it had dropped its option ARM rate back down to 1.50%. Sandler says the rates were changed according to the bank's interest rate outlook.

Analyst Frederick Cannon of Keefe Bruyette & Woods says most banks don't apologize for their option ARM businesses. "Almost without exception everyone says [the option ARM] is a great loan, it's plenty regulated, and don't bug us," he says. In an April letter to regulators, Cindy Manzettie, chief credit officer for Fifth Third Bank in Cincinnati, said it's not the "lender's responsibility to help the consumer determine the appropriate payment option each month.... Paternalistic regulations that underestimate the intelligence of the American public do not work."