The Fatal Conceit

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October 27, 2009

Op-Ed Columnist

By DAVID BROOKS

Humans are overconfident creatures. Ninety-four percent of college professors believe they are above average teachers, and 90 percent of drivers believe they are above average behind the wheel. Researchers Paul J.H. Schoemaker and J. Edward Russo gave computer executives quizzes on their industry. Afterward, the executives estimated that they had gotten 5 percent of the answers wrong. In fact, they had gotten 80 percent of the answers wrong.

Fortunately, for those who study the human comedy, the epicenter of overconfidence moves from year to year. Up until recently, people in the financial world bathed in the warm glow of their own self-approval. Hubris in that world always takes the same form: The geniuses there come to believe that they have mastered risk. The future is an algorithm and they’ve cracked the code.

Over the past year, the bonfire of overconfidence has shifted to Washington. Since the masters of finance have been exposed as idiots, the masters of government have concluded (somewhat illogically) that they must be really smart.

Overconfidence in government also has a characteristic form: that of highly rational Olympians who attempt to stand above problems and solve them in a finely tuned and impartial manner. In moments of government overconfidence, officials come to see society not as a dynamic and complex organism, but as a machine, which can be rebuilt. In such moments, governance and engineering merge into one.

Examples of this overconfidence abound. But let us pick just one: the effort to cap financial compensation.

Back in the days of Wall Street overconfidence, the financial titans believed that they deserved to give each other G.D.P.-level pay packages, even though there is no evidence that such packages improve performance. Now in disgrace, Wall Street firms are rewriting their rules, but the Obama administration has decided it should take control of compensation reform. Nobody seriously believes high pay caused the financial meltdown; it was bubblicious groupthink. But cutting executive pay just polls so well.

Every great action can be done in a spirit of humility or in a spirit of overconfidence. Regulating pay in a spirit of humility would mean rebalancing the power between shareholders and executives, without getting government involved in micromanaging individual pay decisions.

But this is not a moment of humility. Treasury officials are now making individual pay-package decisions across an array of different companies — and they must have really big brains to understand the motivational psychology of all those different people. The Federal Reserve, meanwhile, has decided to police banks and veto pay deals that lead to excessive risk. Those experts must have absolutely gigantic brains if they can define excessive risk years before investments pay off.

The best and the brightest in government are now rewriting existing pay contracts and determining that certain firms will be compelled to pay much less than their competitors. They’re not leveling the playing field, as a humble government would do. They’re making it less level in complicated ways.

Reality, of course, has a way of upending finely crafted plans. The effort to cap golden parachutes in 1989 perversely caused companies to increase their golden parachute packages right up to the legal limit. A 1993 law to cap C.E.O. pay led to greater use of stock options and encouraged riskier behavior.

In advance of the current new pay restrictions, 12 out of the 25 highest-paid executives have already left A.I.G., and 11 out of 25 have left Bank of America. We’ll never know how much future talent was dissuaded from working at these ailing firms.

Citigroup used to have a really high-performing energy unit. But under the new salary regime, the bank wasn’t permitted to pay the chief of that unit what he thought he was worth. Citigroup was forced to sell that profitable unit at bargain-basement prices to Occidental Petroleum.

These rules probably won’t even have a big effect on executive wealth. They’ll just drive compensation into back channels and risk-taking into unseen parts of the market.

Again, the issue is not whether government acts, but whether it acts with an awareness of the limits of its knowledge. Sometimes we seem to have a government with no sense of those limits, no sense that perhaps government officials don’t know how to restructure General Motors, pick the most promising battery technology, re-engineer the health care system from the top, or fine-tune the complex system of executive pay.

Furthermore, when extending federal authority, the Obama folks never seem to ask how Republicans will use this power when they regain the White House. The Democrats trust themselves to set private-sector salaries and use extralegal means to go after malefactors, but would they trust a future Dick Cheney?

I hope they know what they’re doing. Because when a future Cheney comes into office, I’m pretty sure he’ll be coming after columnists’ salaries first.

October 28, 2009

Op-Ed Columnist

Don’t Build Up

By THOMAS L. FRIEDMAN

It is crunch time on Afghanistan, so here’s my vote: We need to be thinking about how to reduce our footprint and our goals there in a responsible way, not dig in deeper. We simply do not have the Afghan partners, the NATO allies, the domestic support, the financial resources or the national interests to justify an enlarged and prolonged nation-building effort in Afghanistan.

I base this conclusion on three principles. First, when I think back on all the moments of progress in that part of the world — all the times when a key player in the Middle East actually did something that put a smile on my face — all of them have one thing in common: America had nothing to do with it.

America helped build out what they started, but the breakthrough didn’t start with us. We can fan the flames, but the parties themselves have to light the fires of moderation. And whenever we try to do it for them, whenever we want it more than they do, we fail and they languish.

The Camp David peace treaty was not initiated by Jimmy Carter. Rather, the Egyptian president, Anwar Sadat, went to Jerusalem in 1977 after Israel’s Moshe Dayan held secret talks in Morocco with Sadat aide Hassan Tuhami. Both countries decided that they wanted a separate peace — outside of the Geneva comprehensive framework pushed by Mr. Carter.

The Oslo peace accords started in Oslo — in secret 1992-93 talks between the P.L.O. representative, Ahmed Qurei, and the Israeli professor Yair Hirschfeld. Israelis and Palestinians alone hammered out a broad deal and unveiled it to the Americans in the summer of 1993, much to Washington’s surprise.

The U.S. surge in Iraq was militarily successful because it was preceded by an Iraqi uprising sparked by a Sunni tribal leader, Sheik Abdul Sattar Abu Risha, who, using his own forces, set out to evict the pro-Al Qaeda thugs who had taken over Sunni towns and were imposing a fundamentalist lifestyle. The U.S. surge gave that movement vital assistance to grow. But the spark was lit by the Iraqis.

The Cedar Revolution in Lebanon, the Israeli withdrawals from Gaza and Lebanon, the Green Revolution in Iran and the Pakistani decision to finally fight their own Taliban in Waziristan — because those Taliban were threatening the Pakistani middle class — were all examples of moderate, silent majorities acting on their own.

The message: “People do not change when we tell them they should,” said the Johns Hopkins University foreign policy expert Michael Mandelbaum. “They change when they tell themselves they must.”

And when the moderate silent majorities take ownership of their own futures, we win. When they won’t, when we want them to compromise more than they do, we lose. The locals sense they have us over a barrel, so they exploit our naïve goodwill and presence to loot their countries and to defeat their internal foes.

That’s how I see Afghanistan today. I see no moderate spark. I see our secretary of state pleading with President Hamid Karzai to re-do an election that he blatantly stole. I also see us begging Israelis to stop building more crazy settlements or Palestinians to come to negotiations. It is time to stop subsidizing their nonsense. Let them all start paying retail for their extremism, not wholesale. Then you’ll see movement.

What if we shrink our presence in Afghanistan? Won’t Al Qaeda return, the Taliban be energized and Pakistan collapse? Maybe. Maybe not. This gets to my second principle: In the Middle East, all politics — everything that matters — happens the morning after the morning after. Be patient. Yes, the morning after we shrink down in Afghanistan, the Taliban will celebrate, Pakistan will quake and bin Laden will issue an exultant video.

And the morning after the morning after, the Taliban factions will start fighting each other, the Pakistani Army will have to destroy their Taliban, or be destroyed by them, Afghanistan’s warlords will carve up the country, and, if bin Laden comes out of his cave, he’ll get zapped by a drone.

My last guiding principle: We are the world. A strong, healthy and self-confident America is what holds the world together and on a decent path. A weak America would be a disaster for us and the world. China, Russia and Al Qaeda all love the idea of America doing a long, slow bleed in Afghanistan. I don’t.

The U.S. military has given its assessment. It said that stabilizing Afghanistan and removing it as a threat requires rebuilding that whole country. Unfortunately, that is a 20-year project at best, and we can’t afford it. So our political leadership needs to insist on a strategy that will get the most security for less money and less presence. We simply don’t have the surplus we had when we started the war on terrorism after 9/11 — and we desperately need nation-building at home. We have to be smarter. Let’s finish Iraq, because a decent outcome there really could positively impact the whole Arab-Muslim world, and limit our exposure elsewhere. Iraq matters.

Yes, shrinking down in Afghanistan will create new threats, but expanding there will, too. I’d rather deal with the new threats with a stronger America.

Fox wars

The 'post-partisan' president makes an enemies list

By Charles Krauthammer
Friday, October 23, 2009

Rahm Emanuel once sent a dead fish to a live pollster. Now he's put a horse's head in Roger Ailes's bed.

Not very subtle. And not very smart. Ailes doesn't scare easily.

The White House has declared war on Fox News. White House communications director Anita Dunn said that Fox is "opinion journalism masquerading as news." Patting rival networks on the head for their authenticity (read: docility), senior adviser David Axelrod declared Fox "not really a news station." And Chief of Staff Emanuel told (warned?) the other networks not to "be led [by] and following Fox."

Meaning? If Fox runs a story critical of the administration -- from exposing "green jobs" czar Van Jones as a loony 9/11 "truther" to exhaustively examining the mathematical chicanery and hidden loopholes in proposed health-care legislation -- the other news organizations should think twice before following the lead.

The signal to corporations is equally clear: You might have dealings with a federal behemoth that not only disburses more than $3 trillion every year but is extending its reach ever deeper into private industry -- finance, autos, soon health care and energy. Think twice before you run an ad on Fox.

At first, there was little reaction from other media. Then on Thursday, the administration tried to make them complicit in an actual boycott of Fox. The Treasury Department made available Ken Feinberg, the executive pay czar, for interviews with the White House "pool" news organizations -- except Fox. The other networks admirably refused, saying they would not interview Feinberg unless Fox was permitted to as well. The administration backed down.

This was an important defeat because there's a principle at stake here. While government can and should debate and criticize opposition voices, the current White House goes beyond that. It wants to delegitimize any significant dissent. The objective is no secret. White House aides openly told Politico that they're engaged in a deliberate campaign to marginalize and ostracize recalcitrants, from Fox to health insurers to the U.S. Chamber of Commerce.

There's nothing illegal about such search-and-destroy tactics. Nor unconstitutional. But our politics are defined not just by limits of legality or constitutionality. We have norms, Madisonian norms.

Madison argued that the safety of a great republic, its defense against tyranny, requires the contest between factions or interests. His insight was to understand "the greater security afforded by a greater variety of parties." They would help guarantee liberty by checking and balancing and restraining each other -- and an otherwise imperious government.

Factions should compete, but they should also recognize the legitimacy of other factions and, indeed, their necessity for a vigorous self-regulating democracy. Seeking to deliberately undermine, delegitimize and destroy is not Madisonian. It is Nixonian.

But didn't Teddy Roosevelt try to destroy the trusts? Of course, but what he took down was monopoly power that was extinguishing smaller independent competing interests. Fox News is no monopoly. It is a singular minority in a sea of liberal media. ABC, NBC, CBS, PBS, NPR, CNN, MSNBC vs. Fox. The lineup is so unbalanced as to be comical -- and that doesn't even include the other commanding heights of the culture that are firmly, flagrantly liberal: Hollywood, the foundations, the universities, the elite newspapers.

Fox and its viewers (numbering more than those of CNN and MSNBC combined) need no defense. Defend Fox compared to whom? To CNN -- which recently unleashed its fact-checkers on a "Saturday Night Live" skit mildly critical of President Obama, but did no checking of a grotesquely racist remark that CNN falsely attributed to Rush Limbaugh?

Defend Fox from whom? Fox's flagship 6 o'clock evening news out of Washington (hosted by Bret Baier, formerly by Brit Hume) is, to my mind, the best hour of news on television. (Definitive evidence: My mother watches it even on the odd night when I'm not on.) Defend Fox from the likes of Anita Dunn? She's been attacked for extolling Mao's political philosophy in a speech at a high school graduation. But the critics miss the surpassing stupidity of her larger point: She was invoking Mao as support and authority for her impassioned plea for individuality and trusting one's own choices. Mao as champion of individuality? Mao, the greatest imposer of mass uniformity in modern history, creator of a slave society of a near-billion worker bees wearing Mao suits and waving the Little Red Book?

The White House communications director cannot be trusted to address high schoolers without uttering inanities. She and her cohorts are now to instruct the country on truth and objectivity?

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