Tuesday, July 11, 2006

Competitive Enterprise Institute

Today's fatwa goes out against the Competitive Enterprise Institute. This isn't your typical liberal rant about how the CEI is being paid by large corporations to put out pre-determined research, policy studies, etc. etc. This rant is about how lame they are at doing it. And how lame corporate public affairs executives are for hiring such a lame-ass operation. The problem, as I see it, stems precisely from these public affairs executives. (No, not from the companies themselves, or their evil capitalist overlords, getting paid billions off the sweat of sweatshop workers.) Evil capitalists overlords don't get to be evil capitalist overlords by being stupid. Well, not all of them, anyway.

However, they are overworked and they tend to delegate. (Delegating is one of those leadership skills they teach you in business school.) When a public relations problem comes along, they tend to delegate finding a solution. They don't do this, of course, if they've been burned on this before or if the public relations problem has become central to their very existence--which is why you see tobacco companies led by lawyers. But the truth for most companies is that most public relations problems are nuisances. Major companies make billions of dollars each year, managing thousands or tens of thousands of workers, and coordinating with hundreds of suppliers and major customers. They have regulators from dozens of countries to deal with. And they have shareholders. You don't keep your shareholders happy, you don't keep your job.

So, you delegate the job to one of your less-senior vice presidents. (The more senior guys—like the guys in charge of finance or operations—wouldn’t touch this job with a 10-foot pole and a full biohazard suit). And this vice president has no idea how to deal with a bunch of hippies complaining about your environmental policies, or a bunch of airhead celebrities upset about the Vietnamese 8-year olds assembling your products. So this vice president hires a public relations or government affairs “expert.”

Who are these folks? They tend to be people with experience in lobbying or running public relations campaigns. They got this experience set by working as Congressional staffers, and from there they may have gone on to a PR firm (which is not to be confused with an advertising firm), or maybe they became writers for specialty news magazines with rather circumscribed circulations. In short, your executive has gone out and hired someone with absolutely no understanding of what your company does, or, really, any real-world experience at all. (Having worked in Washington, I can attest that DC experience, while often fun and interesting, has very little connection to anything anyone else in the rest of the country does or has an interest in.) For an example, check out these bios: here, here, and here. Would it hurt to hire a real scientist, economist or a lawyer who has actually practiced at some time in his or her life?

What’s worse, these "experts" report to someone who doesn’t really have the ear of the company’s senior management. The result is a near-Soviet style of organization. The top wants the problem to go away and gives a general order, but doesn’t have the time to really understand the issue. The middle isn’t in a position to question what those orders mean or whether there is any flexibility on the goals. (Also, the middle guy gets in real trouble if he doesn’t produce results). And the PR guy brought in has no understanding of what the company does or any experience in how large organizations operate.

The “coalitions” that inevitably follow are even worse. (See, for example, the now-defunct Global Climate Coalition, the also-defunct Tobacco Institute, or the not-yet-defunct Chlorine Chemistry Council.) Corporate budgets for most PR problems are meager, and the risk of “free-riding” by smaller companies facing the same problem is always real. Consequently, the larger corporations with a PR issue have an incentive to form a lobbying or public relations coalition with other companies to pool resources and messages, and try to forestall any free-riding. The problem, however, is that the functionaries of these coalitions are now even further removed from the actual realities of how these companies operate. The message is created by flacks reporting to committees, and the message is inflexible. Responsibility for the message is diffuse—a particular member of the coalition might think the direction being taken by the coalition is stupid, counter-productive and embarrassing, but what to do? They are not the experts. If they were, they wouldn’t have hired these jokers to begin with, right? (When they do figure out what jokers these guys are, the coalitions tend to evaporate, as did the Global Climate Coalition).

The resulting messages can, indeed, be embarrassing: like the message that tobacco smoke isn’t linked to cancer, pushed by the Tobacco Institute long after its individual members recognized that this was an absurd claim likely to get them in even more trouble. Or the message that global climate change isn’t happening, now being pushed by CEI, even after though most oil companies have already figured out that this tack just isn't going to play.

Now, theoretically, if you are a corporation, you might want someone out there saying the types of things you are just too embarrassed to say yourself. And CEI is just this kind of ready-to-order think-tank. But it is so completely transparent about this that I find it insulting that any company would waste its shareholders' money on them! At least McKinsey & Co. has some bright MBAs to peddle their snake-oil.

While CEI proclaims itself pro-market and pro-liberty, unlike other think tanks, such as Cato, these are not libertarian true believers. Unlike the American Enterprise Institute, CEI is not populated by functional experts (even if of only one ideological stripe). It is not even in the camp of the Heritage Foundation, which basically floats policies and “market-tests” ideological justifications for Republican policies. Rather, these are hacks. CEI is not pro-market, it is pro-company. And, in particular, pro- those companies and (more commonly, coalitions) that happen to be paying them. If you are one of these industry coalitions, you can’t turn to Cato, AEI or even Heritage for help. The first is too unpredictable because of their ideological consistency; they might say something nasty about something you actually like, such as corporate subsidies. The second is too cerebral and also too ideologically pure. They will say something you don't understand, and, even if you did, you might not want to hear it. And Heritage is about helping Republicans, not helping corporations—and those two goals don’t always overlap.

So you turn to CEI.

What bothers me isn’t the mercenary aspects of CEI. Hell, I like mercenaries. It’s the incompetence that gets me. It’s the complete lack of real expertise of its experts. And the lack of understanding of the "markets" they claim to like so much. The results are absurd positions, such as opposing Hank Paulson as Treasury Secretary because he likes to give money to the Nature Conservancy, or running an ad saying, "Carbon dioxide. They call it pollution. We call it life."

CEI gives a bad name to those of us who actually are pro-market.

1 comment:

ryan said...

A professor of mine, Dr. Rinear, once said to me, "You know, Ryan, it's intellectual snobs like you ... that warm my heart." I think you two might have gotten on well.