Tuesday, November 10, 2015

Dealing with Gov Corruption and Santa Clara County

I appear to have written this in 2010 or 2012.  I am publishing it on November 10, 2015.

Here is a hilarious and useful article on dealing with government shakedowns:


All governments seem to have corrupt members, although differences exist in the degree and type of corruption. Why do governments have such difficulty eliminating corruption? Because government officials are backed by laws; laws confer power; and power tends to corrupt on some level.

Power Should be Limited when Objective Measures of Performance are also Limited

When I was younger, I believed judges and other government officials were uniformly intelligent and moral beings. Unfortunately, experience has taught me otherwise. Courts, police departments, and other government agencies are still subject to the rule of averages--there will be many people who are average, a few who are very good, and a few who are very bad.

Government agencies tend to have more bad employees because it is hard to judge someone who produces nothing tangible. You can judge a salesperson, surgeon, taxi driver or lawyer using many objective metrics--sales, financial well-being, customer satisfaction, number of accidents, etc. But how do you evaluate a police officer, government lawyer, teacher, or judge? It's much more complicated, because there isn't an obvious objective metric. For example, a good teacher could have terrible students, a bad teacher could have wonderful students, Cop A could have fewer complaints than Cop B but Cop B could still be better, etc. Remembering that power tends to corrupt, the general idea is to minimize power where possible, especially when performance is difficult to measure. (Unfortunately--or perhaps fortunately--most Americans haven't had sufficient contact with government officials to truly understand the aforementioned principle.)

Yet another problem with government officials--besides the power and objective evaluation issues--is that they are used to deference. Spending your day-to-day life being deferred to must have some effect on people. From what I've seen, receiving constant compliments and deference results in a gradual and permanent aversion to people who fail to genuflect socially. Such a result is not optimal, because the more government officials rely on deference, the more likely it is that kowtowing becomes the pathway to success, not merit. We will revisit this idea later on.

Santa Clara County might be a good example of the "Compliments Over Merit" principle. First, the level of inbreeding--i.e., family relations--is astounding. Several judges are married to each other or other county/city employees. This inbreeding means the entire family unit experiences constant deference and virtually no criticism. Is a societal/class/professional bubble welcome when judges have so much power and deal with diverse parties? After all, so much law turns on credibility. When judges are surrounded by sycophants and non-diverse coworkers, what is the result? When weighing testimony, are judges going to disfavor someone with an accent? Will judges be able to understand that an older Filipino person will probably agree with every single statement offered by them, regardless of actual veracity? Does being surrounded by zero African-American, Pakistani, and Filipino persons in power create a subconscious bias? Is one race or class unintentionally favored over others? We don't really know, because the level of transparency in the court system is essentially non-existent. (When I tried to increase transparency as a County Commissioner, the Presiding Judge apparently shot down my idea, claiming it would take up too much time and resources. My idea would have taken only a few minutes a day to implement.) In any case, it's fair to contend that the Santa Clara County Superior Court has a higher-than-average level of inbreeding in its upper ranks and little racial diversity. Why should we care?

For one thing, Santa Clara County Superior Court has so few minority judges, you have to wonder what it's like to be a minority in a place that resembles an Orange County country club. As of June 8, 2010, in the main civil courthouse, only two out of the seventeen judges were non-white (another three are Jewish). Also, of the seventeen main civil judges, only four are female. You might think such non-diversity is shameful in a county that is around 40% immigrant and presumably at least 48% female, but it turns out that the white male Irish-American judges--all of them--are the hardest-working, most predictable judges (I'm not saying they are the best judges, but they are consistent, work hard, and follow the law, which means a lawyer can tell his/her client whether it is cost-effective to do x or y). Moreover, the Caucasian/white judges are, by and large, quite good. The following judge is retired, so I will mention him by name--Judge Alden E. Danner, for example, went out of his way to assist me when I submitted an accommodation request for my hearing impairment. He didn't have to do anything for me, and if you believe new age liberals, you wouldn't think that a conservative white male would be overly helpful to someone like me, but Judge Danner was instrumental in my ability to practice law.

In contrast, the two most pompous and unprepared judges I've encountered happen to be non-white males. I have struggled to discover the reasons behind this phenomenon, and I think I've finally figured it out: basically, affirmative action has failed because affirmative action allows the majority to elevate minorities based on charisma or some other social factor, not merit. Meanwhile, the majority race--lacking an approved legal path to elevate members based on factors external to merit--elevates their own members using merit and intelligence, creating a gap in quality between racial minorities and racial majorities. [Note: I've noticed that local Latino judges tend to be independent and intelligent. There's one particularly cool, smart judge I've nicknamed, "The Messiah." I attribute this phenomenon to the fact that Latinos have sizable numbers and political representation in San Jose and Santa Clara County. As such, they may be racial minorities, but not necessarily powerless minorities, which creates a welcome exception to everything I'm writing in this post.]

Affirmative Action Results in Cloning Different Colors of the Same Culture

Why does affirmative action tend to work against independent, extremely intelligent minorities? A minority who works hard and shows an independent streak may show up his/her colleagues, which places him/her at a disadvantage when it comes to being hired. Who wants to hire someone who might show him up? In contrast, a minority who sucks up to the majority will be favored by the majority, even if s/he has fewer credentials. Thus, rather than help the best minorities get ahead, affirmative action seems to help undeserving, compliant minorities at the expense of hard-working, independent minorities. If my theory is correct, then affirmative action represents the worst of all possible worlds--it punishes hard-working minorities and elevates undeserving minorities, which causes all racial groups to be resentful.

Of course, there are exceptions to my theory, but even these exceptions prove that when the majority uses affirmative action to hire someone, they opt for a clone, not real diversity. For example, regardless of how you view him, Clarence Thomas is an example of an independent minority because his views differ from the majority of his own race. At the same time, his views are a clone of the person who nominated him, i.e., President George H. W. Bush. Thus, even when affirmative action results in the hiring of an independent racial minority, such independence tends to have a caveat: conformation to the racial-majority's views and culture.

[By the way, law clerks are a different breed--they have to produce something--accurate legal briefs and decisions--and so the above generalizations don't apply to them. Also, I've noticed that some of the best law clerks in Santa Clara County Superior Court happen to be Asian, which makes it strange to see so few Asian judges here. (As of June 16, 2010, only one of the main civil courthouse judges is Asian).]

To understand why affirmative action might be a terrible idea, we must think about how racial minorities function when they are surrounded by a single racial majority. A minority surrounded by a majority will automatically stand out, so s/he has to be non-threatening to succeed. One way to do that is to make jokes, have a sense of humor, and adapt as much as possible. It shouldn't be surprising then, that several judges may have shimmied their way to the top through charisma and playing the clown with colleagues. These judges tend to believe in kowtowing--that's how they've survived in their own jobs, and they probably believe what's good for the goose is good for the gander. In short, when racial minorities are placed in a non-diverse environment, they favor survival over everything else. As such, they tend to try to avoid a situation where they lose face, because while a majority-race judge will get the benefit of the doubt, it's possible the minority-race judge will not. Thus, to many minority-race judges, anyone who fails to show deference is viewed as a threat. You can almost hear the internal subconscious dialogue: "Who does this person think he is? I had to kowtow (or fit in) for years and conform to get to this position, and now he's challenging me?"

When I've seen lawyers fight for clients--which sometimes means disagreeing with a judge--the majority-race judges tend to take this opposition in stride. One judge--we'll call him the "Scandinavian Stud"--even tries to help out younger, more aggressive lawyers who disagree with him by starting out sentences with, "As you know, I can't give you legal advice, but..." However, two minority judges--both of whom are married to current or former government employees--tend to take any opposition as an insult. A failure to suck up tends to trigger the following subconscious response: "All right, you want to oppose me, I'll show you who's boss..."

I'm not saying some majority-race (i.e., white) judges don't have the same response. In one case, when I made a comment about African-American Oscar Grant, a white pro-police judge immediately got red-faced and combative. (More on this police-judicial connection later, but you can click on this LINK if you're interested in how this connection can affect justice in the court system.) Overall, though, I tend to notice race-minority judges being more prickly and demanding of deference.

Now, why should a subconscious, unintentional, and systemic issue of deference be a problem? Doesn't deference promote workplace harmony? First, all societies and systems do better when some criticism is encouraged. People improve through criticism, not false deference. (Didn't we all read the fable of "The Emperor's New Clothes"?)

Second, the kowtowing system disfavors hard-working minorities. If you're a minority who doesn't want to kowtow to the government or your colleagues, and you care more about working harder than fitting in, then you're out of luck. The majority-race judges are used to minorities who will adapt and fit into their culture, and God help the minority-race person who tries to do things differently.

Third, the whole point of affirmative action (AA) is to increase diversity and make minorities feel comfortable despite their lack of political representation and power. In theory, the majority benefits by showing its tolerance and also by gaining alternative viewpoints and experiences. However, if I am correct--that affirmative action favors charismatic and social minorities over more hard-working and independent minorities--then the aforementioned benefits do not exist, because AA produces under-performing clones of the majority. Under my theory, we could put some black makeup on a few majority-race employees and get the same result as our current AA programs. In short, as long as the majority is choosing who is hired or promoted based on AA, the benefits of AA are dubious.

Citizens Should Favor Ideological Diversity over Race-Based Diversity

Don't get me wrong--we shouldn't completely disavow AA. If AA leads to useful diversity, not cloning, then it makes sense. As it stands, many judges are elected by special interest groups--thereby reducing ideological diversity--which means residents and voters should seek useful diversity. In Santa Clara County, the county sheriffs and city police have tremendous influence over judicial elections. Remember our recent election? Almost every winning judicial candidate mentioned an endorsement from some public safety officer union. Since most residents are unfamiliar with the local court system and its members, they tend to rely on endorsements when voting, which provides police officers with disproportionate influence over judicial selection. As a result, the state judicial branch--which is supposed to check the executive branch, i.e., the police--no longer has the sufficient diversity to challenge the police. In fact, the public safety unions--the police officers, firefighters, and prison guards--have so much power in Sacramento, they have even affected the independence of the legislative branch. From an ideological perspective, real diversity in government seems to diminish with each passing day. If AA promotes independent thinkers and outsiders--a term that can sometimes be equated with minorities, though not always--then it serves a useful function. If, however, AA produces clones of the majority, it is not helpful to anyone and serves merely to reinforce the existing culture and majority.

You want one obvious example that AA doesn't promote the best minorities? The only African-American federal judge in San Jose, California  [as of 2010] may have lied about his brother being targeted during civil rights strife in the South. Even though the judge's lie was discovered, [as of 2010] he is still on the bench, and until a few weeks ago, he was surrounded by no other local judicial minorities--all of his colleagues in federal and bankruptcy court were part of the racial majority power structure (or look like part of the racial majority or power structure), and all of them are really good judges. (One of them, a white male judge, is probably one of the best judges in the entire country. I refer, of course, to Judge Jeremy Fogel.) Of course, the federal bench has several white judges who do "interesting" things and manage not to be singled out.  Clearly, the "prickliness" factor is not limited to racial minorities, but because racial minorities stand out more, their behavior gets noticed more, which reinforces an awful cycle of "respect ma authoritah!" (You may think I am being hard on racial minorities, but if you read carefully, you will notice I am not being hard on minorities--just affirmative action. All entities have good, average, and bad employees.)

What makes the AA selection process even more problematic is that hired minorities harm other minorities by promoting a culture of deference and the status quo, not true diversity. As such, if the majority gets out of hand due to a lack of cultural knowledge, there is little luck that minority co-workers will be able to rein in the majority. If anything, minority co-workers promoted via affirmative action may lead the charge against independent minorities in an effort to fit in and promote the status quo. As Shelby Steele states, "Such policies have the effect of transforming whites from victimizers into patrons and keeping [minorities] where they have always been--dependent on the largesse of whites." What then, is the use of having racial diversity if it is being achieved in a way that discourages useful diversity?

Are Social and Subconscious Racial Preferences Inevitable?

One judge has commented that lawyers are more social than other professions, implying that lawyers should understand that social activities and connections do not impact decisions and culture in the courthouse. I call shenanigans. When I see a judge hugging a lawyer in Starbucks, I get upset. When I see more experienced lawyers--who lack civility but get respect from the judges based on tenure--I get upset. When I see a judge being Facebook friends with active lawyers who may appear in front of him, it makes me upset. This web of social ties causes some judges to rely on reputation rather than the papers/briefs when it comes to evaluating testimony and deciding whether to overturn a law clerk's draft.

Think about it: social ties and inbreeding lead to gossip, and gossip relies on hearsay, which is usually unreliable and which corrodes the "fairness for all" legal system. Why read the briefs if you know the lawyer from your days in law school? Why bother checking the case citations if most cases settle anyway? Are you really going to contest a lawyer's interpretation of the law if you know he plays poker with a friend?

Social ties are fine for private sector workers who need to sell things and make things, but government employees cannot help but favor people they see on a regular basis. Most government workers don't produce anything tangible or measurable, so their success is measured primarily by reputation. Naturally, then, as in the private sector, someone who smiles and sucks up to them will be favored over someone less social. The solution isn't to blame an introverted lawyer or a non-conformist lawyer, but to work harder to rely on objective data when making decisions about courtroom culture and to increase transparency. Do certain judges rule against minorities more than other judges? Do certain judges favor corporations over individuals? We don't know. No statistics are kept on such issues. Useful transparency doesn't exist in the local court system. (Why do written pleadings even have the name of the lawyer or firm on them? Can't a system be developed to track the papers based on numbers or some other non-identifying status? Most legal opinions at the trial court level are written before lawyers appear at court hearings.)

Diversity can be excellent in terms of production and innovation, but it also creates challenges and leads to volatility. Legal systems ought to ensure that government employees, especially judges, do not attack or disfavor non-conformists, especially when such non-conformists are not part of the majority-race.

Our current legal system in Santa Clara County is flawed for many reasons, including a culture that crushes non-conformity. When a non-conformist understands the legal system is flawed, the natural response is to avoid the system--not to suck up to it. Also, when one judge physically intimidates a lawyer, and another judge lies to his face--and both of these judges allow unfair speculation to run rampant and allow their colleagues to unfairly suffer collective punishment--more social ties aren't the answer. Lawyers and residents should be able to rely on judges being fair and impartial, regardless of social ties. Oftentimes, the best people to expose cracks within the system are part of the system and cannot openly speak out; consequently, government entities should implement self-correcting measures before problems affect an entity's or person's reputation. As we all know, courts rely on their reputation to maximize compliance with judicial orders and judgments.

If Santa Clara County Superior Court fails to recognize its lack of useful, consumer-based transparency; its inbreeding problems; and its absence of independent minorities, the court's reputation will suffer. Once lost, a reputation is difficult to regain. One can only hope that the Presiding Judge and her colleagues understand such concepts.

Friday, June 22, 2012

Google 2012 Annual Meeting, Facestuffing Edition

Welcome!  Above is a pic of the dessert served at Google's 2012 annual shareholder meeting.  (Thank you, Larry, Sergey, and Eric!)  I've attended many Bay Area shareholder meetings (see right hand side of blog, about a third of the way down), and I used to blog in detail about Google's annual shareholder meetings.  The company now uploads them on YouTube, so a blog post seems redundant; however, if you're interested in some older reviews, here is one from 2009 and another review from 2010.  I miss the more informal earlier meetings, when it was just Sergey Brin and Larry Page on two stool chairs answering questions.  Of course, back then, fewer shareholders attended.  

One tidbit you may not pick up from the video--almost everyone who attended is a senior citizen or retired.  (The meeting usually starts around 2:00PM, which means almost no one can attend except for retirees.)  This year, the meeting was fairly uneventful.  Neither Larry Page nor Sergey Brin attended.  We had one shareholder who liked the fact that Google stood up to China, said he used to be in the Air Force, and ended his spiel saying how he would deal with China: "Bomb them."  He didn't look like he was joking.  I asked the executives to better fine-tune the captioning features on YouTube videos.  I've noticed that except for a few Khan Academy videos, the captioning feature is almost worthless.  Most of the words are not consistently transcribed, and over the past two years, the captioning feature hasn't improved much.  I asked Mr. Schmidt to imagine a world where he had a grandchild who was deaf, and the grandchild would one day come to him and say, (paraphrase) "I love the internet, but I can't fully engage with it.  Was there something you could have done back in 2011, 2012, and 2013 to fix this?" I said I hoped he would be able to give his grandchild a satisfactory answer.   

Anyway, if you're interested in more shareholder reviews, scroll about a third of the way down the right hand side of this blog.  You will see plenty of firsthand accounts of various shareholder meetings, including Berkshire HathawayDisneyElectronic Arts, Apple, Starbucks, and more.  The rest of the blog discusses diverse topics, including economics, politics, law, Indialittle-known filmsand even Mark Twain.  

Saturday, November 5, 2011

Justice Ginsburg

California Lawyer (November 2011) has an excellent interview with Justice Ruth Ginsburg.  Below is my favorite part: 

Q. I'd like you to talk a little bit about the cases that I've spent my life studying, the key gender cases that began in the 1970s, which you litigated and wrote amici briefs for. The 14th Amendment, which guarantees equal protection under the law, had been settled interpretation for, I think, 104 years. What made you think that you could get the courts to overrule more than a century of precedent?

A: The times. The Court is a reactive institution. It's never in the forefront of social change. When you think of Brown v. Board of Education, it was not only that Thurgood Marshall was a brilliant lawyer. It was the tenor of the times. We had just fought a war against an odious form of racism, and yet our troops through most of World War II were separated by race. Apartheid in America really had to go. Similarly, by 1970 the women's movement was revived, not just in the United States but all over the world. As a great legal scholar once said, the Court should never react to the weather of the day, but inevitably it will react to the climate of the era, and the climate was right for that change.

Perhaps, at least in a peaceful society, all good things come to those who wait?  I've sometimes wondered whether the Supreme Court's decision upholding Muhammad Ali's conscientious objector status would be the same if the case had arrived at the Court a few years earlier. In one article I read--it was from Men's Journal (Nov 2011)--the author wrote that the Supreme Court was set against Ali until a law clerk gave them a copy of Haley's Autobiography of Malcolm X. After reading the book, the Court allegedly had a change of heart. True or not, the anecdote demonstrates that the law, so long as it relies on interpretation by men and women, necessarily intersects with their bias.

In any case, regarding the efficacy of the Constitution against government tyranny--whether slavery, Jim Crow, Japanese internment camps, Abu Ghraib, etc.--I'll leave you with this Lysander Spooner quote: "But whether the Constitution really be one thing, or another, this much is certain--that it has either authorized such a government as we have had, or has been powerless to prevent it." [Updated on 3/25/12]

Bonus: see also "When Mass Murder and Theft of All Human Rights Were 'Legal': The Nazi Judiciary and Judges," by Hon. Richard D. Fybel, California Litigation, Vol. 25, No. 2, 2012, page 15-21.  He discusses Nazi Germany and the judicial branch's politically-convenient prostration before Hitler.

Update on 6/7/14: The Trials of Muhammad Ali (2013) includes an interview with a Supreme Court law clerk who worked on Ali's conscientious objector case. The Supreme Court almost dismissed the case but sent it back for review because a new wiretap issue arose (the government admitted to spying on conversations between MLK and Ali). Then, when the case returned to the Supreme Court after three and a half years, the preliminary vote was against Ali 5 to 3 until Thomas G. Krattenmaker, Justice Harlan's law clerk, argued--many times to Harlan--that the Nation of Islam should be treated the same as Jehovah's Witnesses who believed that only God may compel the followers to war and no one else. After reading the Autobiography of Malcolm X (1965) and Message to the Blackman in America (1965), he convinced Justice Harlan, who switched his vote, making it 4 to 4.  However, a deadlocked 4-4 vote would have put Ali in jail for 5 years and generated no substantive written opinion explaining the Court's rationale.  Then Justice Potter found precedent to rule in a narrow way that applied only to Ali based on denial of due process, which permitted the government to continue with its draft while allowing only Ali to file for C.O. status (rather than every single Nation of Islam member or prospective member). The revised opinion resulted in a unanimous 8 to 0 decision (Justice Thurgood Marshall recused himself because the NAACP Legal Fund was involved). The Court ruled Ali was denied due process because the government argued that he was insincere in his religious beliefs at the Draft Board yet later told the Supreme Court it believed Ali was sincere. And just like that, history was made. Without Krattenmaker, Harlan, and Potter, Ali goes to jail, never reclaims the title, and never raises the torch at the '96 Olympics.

BonusInterview with California Supreme Court Justice Stanley Mosk (1998):

LaBerge: [H]ow do you think both you and just the court in general can influence social policy, or vice versa, does social policy influence the decisions?

Mosk: Well, theoretically, we should be governed solely by the law and not by individual concepts of rights and duties.  But inevitably, individual rights do enter into opinions that may be written.  Whether that's good or bad, effective or ineffective, is always debatable.  [pp. 84]

Mosk: I have a certain sympathy for individuals in our society.  Our society has grown so large and impersonal that I think we sometimes have the tendency to overlook an individual's rights and obligations. [pp. 85]  

Saturday, October 22, 2011

Movie Quotes

Adam's Rib (1949): "Lawyers should never marry other lawyers. This is called inbreeding, from which comes idiot children and more lawyers."

"What is marriage? Tell me that. It's a contract. It's the law. Are you going to outsmart that, the way you've outsmarted other laws?" (Spencer Tracy to Katherine Hepburn)

"Assault lies dormant within us all. It requires only circumstance to set it in violent motion." (Hepburn's closing argument)

The Art of the Steal (2009): "One man's conspiracy is another man's political consensus."

Cape Fear (1962): "You can't arrest a man for what he might do. And thank heaven for that."

[Bonus: "There is no such crime as a crime of thought; there are only crimes of action." -- Clarence Darrow]

Citizen Kane: (1941): Woman: "I don't know many people." Kane: "I know too many people. I guess we're both lonely."

Dial M for Murder (1954): "[P]eople don't commit murder on credit."

Eat Man Drink Woman (1994): "Eat, drink, man, woman. Basic human desires. Can't avoid them. All my life, every day, that's all I've ever done. It pisses me off. Is that all there is to life?"

Equinox Flower (1958) (not a good movie, but I liked these lines): "Then everyone's inconsistent. Everyone but God. Life is absurd. We're not all perfect. As a scholar said, 'The sum total of inconsistencies is life.'"

The Field (1990):
McCabe: "There's a law stronger than the common law."
Priest: "What's that?"
McCabe: "The law of the land."

Gilmore Girls (2001): Luke, on marriage: "It's a bureaucratic civil ceremony and a pretty pointless one...It's not biologically natural for people to mate for life. Animals don't mate for life. Well, ducks do, but who the hell cares what ducks do? I mean, people grow and evolve their whole lives. The chances that you'll grow and evolve at the same rate as someone else are too slim to take. The minute you say, 'I do,' you're sticking yourself in a tiny little box for the rest of your life. But hey, at least you had a party first, right?" (Season 2, "Red Light on Wedding Night")

Gloomy Sunday (1999):
Schnefke: "But we must be careful not to stray too far outside the law."
Hans: "Of course.  But the beauty and vibrancy of the law lies in its flexible boundaries."
[Two Nazis in Hungary around 1939 discussing their future, indirectly demonstrating that the law, regardless of its substance or intent, usually favors those in power.]

The Jane Austen Book Club (2007): "He looks at me like he's the spoon, and I'm the dish of ice cream."

Juno (2007), from the protagonist, a pregnant high school student: "Oh, I'm a legend. The tale of the cautionary whale, you know?"

Kind Hearts and Coronets (1949) (a very fun dark comedy): "I must admit, he exhibits the most extraordinary capacity I've ever encountered for middle age in a young man of 24."

The Last Kiss (2006) (overall, not a great movie, except for these lines): "Stop talking about love. Every a**hole in the world says he loves somebody. It means nothing. What you feel only matters to you. It's what you do to the people you say you love--that's what matters. [Indeed] It's the only thing that counts."

Lilies of the Field (1963): "To me, it [the chapel] is insurance. To me, life is here on this Earth. I cannot see further, so I cannot believe further. But if they are right about the hereafter, I have my insurance, seƱor."

The Lion in Winter (1968) (a must-see film): "He came from the North to Paris with a mind like Aristotle's and a form like mortal sin. We shattered the Commandments on the spot."

A Man for All Seasons (1966):
Roper: So, now you give the Devil the benefit of law!
Thomas More: Yes! What would you do? Cut a great road through the law to get after the Devil?
Roper: Yes, I'd cut down every law in England to do that!
Thomas More: Oh? And when the last law was down, and the Devil turned 'round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man's laws, not God's! And if you cut them down, and you're just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I'd give the Devil benefit of law, for my own safety's sake!

Mario's Story (2007): "[E]ventually good triumphs, but before it triumphs, a lot of people have to suffer."

Miller's Crossing (1990): "All in all, not a bad guy...if looks, brains, and personality don't count."

My Favorite Year (1982): ‎"Comedy? You can't write comedy in California. It's not depressing enough!"

Nashville (1975): "Congress is run by lawyers. A lawyer is trained for two things, and two things only: to clarify and to confuse. He does whichever is to his client's advantage."

Night of the Hunter (1955): "Open the door, you spawn of the devil's own strumpet!"

One Day (2011): "She lit up with you...She made you decent. And then in return, you made her so happy."

Public Enemy (1931): "You're a spoiled boy, Tommy.  You want things, and you're not content until you get them.  Well, maybe I'm spoiled, too."

Quai des Orfevres (1947): "Maurice is my flame. He may not burn bright, but he lights my way."

Revolutionary Road (2008): "No one forgets the truth, Frank. They just get better at lying."

Sabrina (1954):
Linus Larrabee: What’s money got to do with it? If making money were all there were to business, it'd hardly be worthwhile going to the office. Money is a by-product.
David: What’s the main objective? Power?
Linus: Agh! That’s become a dirty word.
Davis: Well then, what’s the urge? You’re going into plastics now. What will that prove?
Linus: Prove? Nothing much. A new product has been found, something of use to the world. So, a new industry moves into an undeveloped area. Factories go up, machines are brought in, a harbor is dug and you’re in business. It’s purely coincidental of course that people who've never seen a dime before suddenly have a dollar. And barefooted kids wear shoes and have their teeth fixed and their faces washed. What’s wrong with a kind of an urge that gives people libraries, hospitals, baseball diamonds and movies on a Saturday night?

The Shop Around the Corner (1940):
Pirovitch: I'm sure she'll be beautiful.
Alfred Kralik: Well, not too beautiful.  What chance does a fellow like me--
Pirovitch: What do you want?  A homely girl?
Alfred Kralik: No, no.  You knock on wood for me.  Just a lovely, average girl.  That's--that's all I want.

Slumdog Millionaire (2008): "Money and women: the reasons to make most mistakes in life."

Starting Out in the Evening (2007): "I find very few men of my age interesting. They're like chewing gum--ten minutes of flavor followed by bland repetition."

10,000 Black Men Named George (2002): "Nobody got anything in this country unless they took it.  Hell, I admire the white man.  He wanted Manhattan Island, gave the Indians a bottle of whiskey, and he took it.  White folks died, suffered, sacrificed.  Took a country and built it up.  Yeah, they brought us here in chains, we know that.  We're still in chains--they're a tad lighter, but they're still chains. And the only way those chains are gonna get broke is if we break 'em.  Ain't nobody else gonna do it for us...We're the same, you and me...I just like money and p*ssy more than you do." -- Milton P. Webster, black Republican (1887-1965), to union organizer and Democratic civil rights leader A. Philip Randolph

To Catch a Thief (1955):
Francie: Money handles most people.
John: Do you honestly believe that?
Francie: I've proved it.
John: You're a singular girl.
Francie: Is that good or bad?
John: Oh, it's good, it's quite good. You know what you want. You go out after it and nothing stops you from getting it.
Francie: You make it sound corny.
Oh no, you're a jackpot of admirable character traits.
Francie: I already knew that.
John: Yes, I will say you do things with dispatch. No wasted preliminaries. Not only did I enjoy that kiss last night, I was awed by the efficiency behind it.
Francie: Well, I'm a great believer of getting down to essentials.

Venus (2006):
"For most men, a woman's body is the most beautiful thing they will ever see."
"What about for women?"
"Her first child."

Wall Street (2010): "Most people, they lose, they whine and quit. Don't run when you lose, don't whine when it hurts. It's like the first grade...Nobody likes a crybaby."

X-Men 2 (2003): 
Storm: Sometimes anger can help you survive.
Nightcrawler: So can faith.

You Can't Take It With You (1938): Lincoln said, "With malice towards none; with charity to all." Nowadays they say, "Think the way I do, or I'll bomb the daylights out of you."

Tuesday, June 28, 2011

Marvell Technology's Annual Shareholder Meeting (2011)

Last year, I attended Marvell Technology Group Ltd.'s (MRVL) annual shareholder meeting and praised President/CEO/Chairman Dr. Sehat Sutardja. Dr. Sutardja is Chinese-Indonesian, one of the most successful entrepreneurs in the world, and seems both calm and dapper at the same time. One doesn't see very many Asian CEOs, even here in Silicon Valley, and I view his success as proof that the American Dream is alive and well. Since last year's shareholder meeting, however, Marvell stock decreased about 14%, even as the NASDAQ increased about 26%. This year, I was looking forward to hearing why the company stumbled. I wasn't expecting epiphanies, but I could not have predicted a lack of direct answers to my questions; the company's VP of Worldwide Legal Affairs essentially cutting me off; and Investor Relations telling me after the meeting that if I published something "incorrect," I would be "liable."

It all began when I walked into the Hyatt Regency Hotel in Santa Clara, California. Like last year, the food was good--granola, yogurt, berries, water, and other healthy options. I appeared to be one of about six people present who were not working for Marvell. Dr. Sutardja handled most of the formal portion of the meeting and sat at a table in the front of the room with the VP of Worldwide Legal Affairs Thomas Savage and CFO Clyde Hosein. There were six shareholder proposals. At no point in time were shareholders given an explicit opportunity to ask questions or make comments about any of them. The polls opened, then closed shortly thereafter, and we were told that all of the proposals passed. (If North Korean government officials were in charge of shareholder elections, I imagine they wouldn't need to deviate much from Marvell's script.)

The lack of comment on the proposals was particularly interesting because several proposals seemed downright Orwellian. Proposal 5 reduces from three years to just one year the time period for a Director's stock/RSUs to fully vest. See pages 63-64, 10K: "[R]emove the requirement that awards of restricted stock, RSUs, and/or performance units/shares granted...shall not be fully vested until a minimum period of 3 years from the date of grant...Section 11(c)(ii) will be amended so that each Annual RSU Award will vest and become exercisable as to one hundred percent (100%) of the shares...on the earlier of the next general annual meeting or the one-year anniversary of the Annual RSU Award grant date." Basically, company Directors get an opportunity to make more money in one year or less, instead of gradually over three years.

Generally speaking, longer vesting periods incentivize longer term outlooks. For example, if you are supervising a company's officers, and you know your shares will fully vest in one year rather than three, you have an incentive to think in terms of one year performance (short term), not three year performance (longer term). The CFO later appeared to defend the shorter vesting period by arguing that the proposal applied only to Marvell's Directors. Presumably, he meant that officers, not Directors, run the day-to-day operations of the company and continued to be incentivized over the longer term. Yet, this change in vesting periods means the Directors are now incentivized differently than the officers of the same company.

Why is any of this Orwellian? Proposal 2 in the same 10K states, "Our primary business objective is to create long-term value for our shareholders." On the same page, Marvell highlights the company's long term focus: "Long-Term Focused: Promote a long-term focus for our named executive officers through incentive compensation." (page 58, 10K) In short, welcome to Newspeak--even as Marvell is changing its compensation policy to incentivize shorter-term performance by its Directors, it claims it cares most about long-term performance.

When the formal portion of the meeting was over, the company CFO, CEO, and attorney in front of the room failed to ask if anyone had questions. They simply got up and started walking off. I piped up--as I am wont to do when I see something unusual--and said I had some questions. I questioned the company's proposal to shorten the vesting period. The CFO said that viewed together with the other shareholder proposals, it was "logical" to shorten the vesting period. I responded that the proposal incentivized the short term over the long term. That's when I got the answer about the proposal only affecting directors, not officers. The CFO also added that stock compensation was not the primary motivator when deciding a company strategy, and stock prices move based on numerous factors--all of which is true, but why incentivize short term performance at all? Why not make directors hold onto options/RSUs/shares as long as possible before being able to cash out? I pointed out that Marvell's stock price had been abysmal compared to both the S&P 500 and the PHLX Semiconductor Index. Page 38 of Marvell's own 10K shows that while the S&P and SOX showed gains, Marvell's stock price declined by almost 50% during the time period shown. (Later, the Investor Relations contact told me I was "cherry-picking" dates--even after I pointed out I was just citing the company's own materials.)

Given the stock's relatively poor performance, I asked about specific plans for the future. I never got an answer that was satisfactory to me. Someone pointed out all the different markets Marvell was involved in. Good for you, I thought, before saying that mere involvement in different markets is different than being able to actually compete in those markets. I again asked for specific plans to turn around the stock price and asked how the company planned to compete. Dr. Sutardja said that Marvell had started out as a small company and had always managed to compete against larger companies and entities. I still hadn't received an answer that was satisfactory to me about specific plans, but Mr. Thomas Savage then told me I had used up my questions and asked if there were other questions from anyone else. No one else raised their hand, so I politely pointed out that no one had answered my question about the company's specific plans to improve the stock price. At this point, Mr. Savage essentially prevented me from asking further questions in the open format and closed the meeting.

Despite Mr. Savage's actions, Dr. Sutardja was kind enough to talk to me after the meeting. The CFO also chimed in, saying that answering my questions could take three hours, i.e., I was not asking questions that could easily be answered in a short period of time. Dr. Sutardja again reminded me that Marvell started out as a small company and was competing against large companies like Qualcomm (QCOM) and would continue to use "efficient implementation" to differentiate itself. Mr. Savage hovered close by while I was listening to Dr. Sutardja and exited the room with him before I could ask him what he meant by "efficient implementation." As I left the meeting, the VP of Investor Relations made a beeline for me and asked me pointed questions, trying to get an idea of who I was and where I was from ("Who do you work for? Are you with the press?"). I said the company's vague responses to my questions about specific plans did not inspire confidence, and I would be writing about my experience. He told me if I published anything "incorrect," I would be "liable." I asked him if he was threatening me, and he said he wasn't threatening me. I then left the meeting.

Marvell's directors, officers, and employees should realize their failure to provide information about specific turnaround plans is unacceptable when their stock price has drastically underperformed the relevant indices. Telling shareholders that the company has little control over its own stock price is no way to win over anyone. I doubt Marvell wants to hear any of this--but I will defer to George Orwell, especially in light of the company's comment that I may be "liable" for incorrect information: "If liberty means anything at all, it means the right to tell people what they do not want to hear."

Disclosure: I own an insignificant number of Marvell (MRVL) shares, and I do not plan on initiating any new positions within the next 72 hours.

Friday, June 17, 2011

Justice Hugo Black on State Secrets

Justice Hugo Black, concurring opinion, joined by Justice William Douglas, New York Times Co. v. United States (1971) 403 U.S. 713, 717:

The guarding of military and diplomatic secrets at the expense of informed representative government provides no real security for our Republic... [P]aramount among the responsibilities of a free press is the duty to prevent any part of the government from deceiving the people and sending them off to distant lands to die...

More here.

Saturday, April 9, 2011

Steinbeck on the Measure of Man

At the end of some of my letters, I sometimes include the following passage from Steinbeck:

“Where does discontent start? You are warm enough, but you shiver. You are fed, yet hunger gnaws you. You have been loved, but your yearning wanders in new fields. And to prod all these there’s time, the bastard Time. The end of life is now not so terribly far away--you can see it the way you see the finish line when you come into the stretch--and your mind says, “Have I worked enough? Have I eaten enough? Have I loved enough?” All of these, of course, are the foundation for man’s greatest curse, and perhaps his greatest glory. “What has my life meant so far, and what can it mean in the time left to me?” And now we’re coming to the wicked, poisoned dart: “What have I contributed to the great ledger? What am I worth?” And this isn’t vanity or ambition. Men seem to be born with a debt they can never pay no matter how hard they try. It piles up ahead of them. Man owes something to man. If he ignores the debt it poisons him, and if he tries to make payments the debt only increases, and the quality of his gift is the measure of the man. -- John Steinbeck from Sweet Thursday

The last two sentences are pure poetry, aren't they?