Sunday, June 19, 2011

Ignorance And The Business Model

A teacher within our district went public with a letter she sent to the union president, imploring the union to negotiate the elimination of all layoffs by taking more furlough days (like up in LA) and opening the health benefits package negotiation. The union board of directors voted against that idea and the union representatives from each school, myself included, also voted against that idea. For not doing this, she charges the union prioritizes "senior, not junior, members".

The letter displays a significant amount of ignorance. It is sad because it shows a teacher who does not do her homework, and it is upsetting because her public letter weakens the position of all members. When the letter was read on conservative radio, it was endorsed with a "you go, girl" along with no real follow-up - as if that says it all.

This has brought out all sorts of people with half-baked ideas and tangential comments. The most prominent: apply a more business-like model.

First a bit of history:
  • In 2003, the teachers agreed to a pay freeze during a time of economic prosperity. The District refused to open the contract, nor pass on funds for cost-of-living-adjustment to its teachers (ie not abide by the language of the contract) in which the union had to sue for.
  • In 2006, the teachers finally got their raise. At the end of 2008, the average salary increase per year during the 2000 decade was less than 1%.  Tell teachers to do their part and sacrifice is to ignore the sacrifices made during a time when the economy was booming.
I agree with you, R.  Teachers shouldn't have to sacrifice.  But what's the alternative?  The Board followed through with laying off workers, proving that there's financial issues.   The teachers look greedy in not compromising to maintain the quality of education.  Remember, the kids are the real losers here.
If you want to tick off a teacher, utter "sacrifice for the kids".  There's a reason why a person becomes a teacher and it isn't for the lavish pay.  They chose a career in teaching for the kids.  As already established, they already sacrifice. 

The District does have a pile cash on hand, but it does not want to spend it on teachers. In a recent proposal of reopening the contract and revisiting benefits, the District did not propose a guarantee of recalling those layoffs for the extra money it would gain.  Also consider:  healthcare was restructured a year ago (to the chagrin of many at my site), resulting in millions in savings.  According to contract, that money is supposed to go to teachers. The District has yet to abide by that.


Angry teacher, I sympathize with your situation. You care about your job and the ones you serve. But if you had bothered to do your homework, you would not have addressed your letter to the union. You would have addressed it to the Board and District. No thank you for helping to galvanize the ignorant opposition and hurting all teachers this year next.

R, you have it all wrong!  We should be applying the business model for layoffs!  Instead of using seniority as the basis for layoffs, the union should acquiesce to using student test scores as the foundation for dumping the least effective teachers.
I agree that indiscriminately choosing the least tenured teachers for layoffs isn't the best system, but the alternatives are very subjective. Test scores are a decent indicator of student acumen, but a poor metric for teacher effectiveness (students take those tests, not teachers).  However, people who rail against the seniority system and call for a more business-oriented solution fail to recognize the existing connection between seniority and business:  when a business contracts, they don't layoff the senior people first. They don't get a new CEO and senior committee. They dump the peons. Like it or not, that's the way the corporate world works.  Does it makes sense to do that?  Consider this: If a hospital cuts its staff, would you feel more confident going there if you knew they kept the inexperienced, but "energetic", doctors instead of the more experienced?  The fact is - businesses use the seniority system, too, because it equates "less experienced" with "less skilled".  When proponents of the business model criticize the system of seniority as the basis for layoffs, they exhibit a high degree of hypocrisy.
But R, many business owners take a cut and are willing to take even less than their employees in order to keep the business running effectively.

Fair point. There are many business owners that fit this description. When leadership is that dedicated to a business, the employees will follow. However, I'm not hearing talk of a paycut from District brass or Board. Back in 2003, our bosses got pay increases while the peons carried the load. In 2008, the superintendent (Terry Grier) simultaneously called for teacher paycuts while accepting bonuses. The lightbeam is cast only on teachers and classified personnel - each and every time. So this point is not applicable to this situation.  In addition, you must consider that a business owner is in the business of making money.  There's a monetary reason for keeping on workers and reducing one's own salary.  In education, having teachers is a social need, so that must be weighed against the idea of indiscriminate cost cutting. 

Stock Market Thoughts
Pandora (P) IPO'd this week and almost everyone who bought it after day one lost money. P is a competitor to Sirius/XM (SIRI) but it has thin profit margins. I just don't see the growth. ... Research In Motion (RIMM) is no longer in motion. After lowering guidance a month ago, RIMM announced earnings this week and still came in below expectations. It's still going down, and I don't think it's a compelling value play yet. ... The price of oil is falling, it's probably related to the end of QE2. Because of politics, don't expect a QE3 unless the economy goes into the tank. So by the looks of things, oil has probably topped. ... Gold (GLD) is still in an uptrend though. QE or no QE, it speaks to the perception of the yellow metal as safety. ... Sketchers (SKX) is no longer seeing ginormous profits from its Shape-Ups line of shoes. These shoes supposedly are little more demanding on your calves, thus giving you an exercise as you walk. Of course, if you're out of shape, you'll have sore calves the next day. In any case, this wasn't the money generator SKX had hoped. The Kim Kardashian commercial is already a distant memory. And the profit potential is too. ... Microsoft (MSFT) looks like it's putting in a nice base. Technically speaking, it looks like it has bottomed. Fundamentally, that's another matter. MSFT continues to struggle with evolution and it must find a way to move beyond Windows. IBM used tohave the same problem two decades ago and remade itself, going beyond PCs and into servicing and software. MSFT is constantly trying to react, and has significant myopia when looking forward. That starts at the top. I know Steve Ballmer was there when Bill Gates was, but it is time for him to move on. Surprised shareholders haven't demanded it yet.

Bottom Line For Next Week:
The market is still weak. Sure it bounced, but the bounce isn't very convincing as THE bottom (vs. A bottom). "Caution" is the word.

Current Positions:
ABV,
One share: BAC, AAPL, BIDU, LULU, PLG, SLW, KSU
95% cash.

Stuff That May Only Interest Me
A Miami headscratcher: after Miami lost its basketball championship bid, an ad underneath the article describing the details of the Miami loss read "Congratulations Miami!" with pictures of shirts and baseball caps proclaiming Miami as the champions of basketball. At least "Dewey Beats Truman" was printed prior to an event's outcome. This came after the event along with the actual article. Oops. ... The town of Empire Nevada is set to disappear. Off the 447, it will be sealed off and its zip code will be discontinued. The mining town existed because of a drywall company, USG, that mined gypsum for wallboard - one of the largest drywall companies in the nation. Five months ago, they shut down the plant due to its inability to outlast the decreased demand and the failure of higher prices to bring in increased profits - no more houses means no more drywall. So much for the recovering housing market. ... Last month, 86% of college graduates stated their intention to move back in with their parents. Sad. Says a lot about the incompetence of Washington. ... Now that airlines have hiked up prices, aiports are following suit. More fees to travel. ... The Greeks are rioting because of bank bailouts and imminent loss of their entitlements. I would sympathize with the Greeks loss if it weren't for the fact that the majority of them refuse to pay their income taxes. Sure their unemployment is 16% (pretty bad), but it could be 1% and it wouldn't matter because of the tax dodging culture. ... Some banks in the US have some exposure to Greek banks. Given the amount of time that has passed, those banks should have dumped those Greek bonds by now. Greece's situation is not new. Those US banks should take those losses. If the US government steps in and helps, expect riots here too. ...  Weiner couldn't keep it up - that is, the idea that he can go back to business as usual. He resigned, but he shouldn't have to wait too long before getting back to Capitol Hill. New York reelected Charlie Rangel despite the tax dodging (blasphemous since he wrote the tax laws). Weiner will take a vacation and run for reelection in New York in a couple years - after a Celebrity Apprentice appearance. Or maybe he won't run for office again after having settled on a show on MSNBC following Rachel Maddow. ... The Weiner resignation was met with extreme disrespect by those present. How can people cry about the indecent behavior when they too exhibit vociferous indecency? ... A new study by the CDC indicates that about 25% of high schoolers drink soda everyday. That's actually less than I thought, attributable to other energy drinks. Still, that isn't good, and one should wonder how many of the 25% stop at just one. ... The new Blackberry Playbook is now getting commercial time. Its selling point: it runs flash! Apple has a thing against Adobe, electing to run video through Quicktime instead. Apple's refusal to reach a deal with Adobe on flash for its iPad is rather stupid. Even stupider is that people would buy a Playbook instead of an iPad over flash. If that's your selling point, then it's not going to sell. ... Much ado about a round golf with the president and the House speaker. I don't get into golf with Tiger Woods on the course, and I doubt the Golf Channel covered amateur hour either. ... Accenture reports that doctors are leaving private practices for hospitals and big clinics. Obama's Healthcare package is cited as the reason for this shift and one must ask, "Why the shift?" Is it financial stability? Better access to equipment? Better sway with insurance companies? Private practices are an important alternative for those who cannot afford costly health insurance. ... The President attached some blame for the job lag to improved technology. What makes this reasoning amusing is that this argument has been made in the past and has been proven wrong time and again. One book I'm reading actually predicted that this complaint from politicians would arise when the job market is stagnant. The book was written five decades ago. The only support for the President's argument is that innovation hurts jobs short term. Innovation inevitably leads to less expensive products which in turn makes items that were once largely unattainable suddenly very accessible to the masses. That creates a market which requires increased employment to create supply to meet demand.  ... The party of no-new-taxes (that would be the Republicans) have something in common with Democrats - renaming "taxes" as "fees" or "premiums". The Republicans are opposed to taxing the rich but in the case of Medicare, are interested in having the wealthier pay higher Medicare premiums. Isn't that a "tax on the rich"? And what about the poor? Under Obama's Healthcare, everyone must get health insurance or they go to jail and/or pay a fine - a "tax on the poor". In the last election, John McCain put forth the idea of giving a tax credit for buying health insurance. Nice idea except that taxpayers then foot the bill for that credit - the poor ones actually, since they can't afford health insurance even with the credit. "Tax on the poor." ... Now that the NBA has concluded its season, it will now explore the idea of a lockout - just like the NFL. There is one exception though: the NFL is swimming in money. The NBA has a Major League Baseball issue with haves and have-nots:  some teams are losing money.  The NBA tried to go corporate by chasing more lucrative TV/cable deals and raising prices exponentially at arenas - essentially freezing out fans, especially in smaller markets. The average fan cannot afford to go to a game, nor subscribe to satellite packages that air them. 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