AMF, several years ago, was ripe for a hostile takeover. The company had (a) many self-sustaining and viable operating divisions (AMF bowling, Rossignol skis, etc.), (b) serious financial problems (never a single quarter of positive operating profit), (c) Taj-Mahal-like corporate headquarters, and (d) a corporate staff of 293. The division presidents stated that the large corporate staff burdened them with constant information requests, report requirements, etc., adding to their costs. So we executed a hostile takeover (day 1 of new AMF): on day 2 the corporate staff was reduced from 293 to 3! The divisions flourished; to my knowledge all or most have done well...........Hmmm, let's see if I can draw any current parallels to the State of California.
The University of California has (a) many self-sustaining and viable operating entities (UCLA, UC San Diego, Univ. of California, etc.), (b) serious financial problems (giant deficits; huge tuition increases), and (c&d) a costly headquarters (Oakland) with a staff of about 1000. Each campus is a city or corporation unto itself and totally capable of operating independently; this corporate overlay not only is costly itself, but also adds requirements and costs to each campus. Some simple arithmetic. If each of these headquarters employees costs $175k/year (that's probably light), then their total elimination would result in a savings of $175M per year--$788 per student per year; a meaningful amount in the light of the recent hike of about $1000 per student. But the Board of Regents saw fit to hire a new President (Mark Yudof) who sees his mission as building further this byzantine overhead, top heavy, structure.
Once again Tom, ever the sage, offers a salient, concise argument of tremendous importance to the world around us--all with tremendous aplomb. In an period where issues themselves now carry tremendous political intonation--I wish not to enter in the political fray. However, this same principle, in a way, seems to apply readily to the current debate over healthcare. While it would be quite an accomplishment--worthwhile in my view--to provide health insurance for all those who desire it (not everyone does), are added layers of bureacracy necessarily the solution? Perhaps some markets are so complex that some degree of bureacracy is required? I do not pretend to know the answer. However, I agree with Tom's initial assessment, and applying it a step further might infer that an effective option may be to remove the current barriers to care: allowing insurers to cross state lines promoting competition (a seeming no-brainer to those outside of Washington), alleviating the crushing burden imposed by trial lawyers through tort reform, and perhaps using existing agencies (e.g., Medicaid/Medi-Cal) to increase the rate of coverage. This may be potentially more effective than creating a complex, new bureacratic structure that will be virtually impossible to disentangle once created.
Please note, I personally disavow 'politics', per se, and therefore do not wish to make a 'political' argument. Rather, I welcome the opportunity to apply Tom's principles based approach to analyze the problems of the day. [Disclaimer: In adopting this approach, I do not imply that Tom would, or even should necessarily, agree with my basic inferences....but the exercise is interesting nonetheless!!].
Posted by: Nicholas Vakkur | November 30, 2009 at 01:15 AM