The Atlantic

“A Racist … A Con Man … A Cheat.” Those were the words etched in the chyron as Michael Cohen testified. Yet that litany somehow fails to do justice to Cohen’s moral portrait of Donald Trump.

At the beginning of this presidency, the great fear was “normalization.” The shock of Donald Trump’s election, this theory held, would eventually dissipate. Once he sat behind the big desk, surrounded by oil paintings and heavy curtains, he would be bathed in the incantatory power of his office. The nation would absorb the shock of his misogyny, racism, venality, and dangerous vainglory, and then move on. Perhaps the fact that normalization has slipped from discourse is evidence that there was something to this fear.

Cohen, unabashedly self-servingly, describes his own time with Trump as a microcosm of this same experience. In his telling, Trump’s morality drags down everyone surrounding him, so that a “good person” like Cohen ends up committing terrible misdeeds. “Lying for Mr. Trump was normalized, and no one around him questioned it.”

Normalization is hard to resist. Knowing that the man who controls the nuclear arsenal and directs the surveillance state is unguided by an ethical framework and has a boundless capacity for petty cruelty can make it hard to shut one’s eyes at night. So despite the wildness of Trump’s tweets and the harshness of his policies, the mind inevitably suppresses what it knows about his character so that it isn’t overwhelmed by anxiety.

Nothing in today’s testimony brings the nation directly closer to the impeachment of the president. But Cohen’s testimony provided one of those interludes of clarity that violently dislodges the tendency toward normalization. When a congresswoman asked Cohen, “What do you think [the president] can do to you?,” he replied, “A lot,” and added, “I have fear.” Once again, it’s hard not to feel a little like Cohen.

What I found most profitable in his testimony were the little details about Trump he captures—the casual ease with which the president disparaged the intelligence of his own son or those who served in Vietnam. Trump, Cohen claims, gave the order to pay firms to rig internet straw polls on the Drudge Report and CNBC on the eve of the presidential contest. This is not the behavior of someone with a deep faith in democracy.

Or take Cohen’s description of Trump’s racist remarks. While there’s little surprise in the revelation, it’s bracing to hear Trump’s language. Driving through a neighborhood in Chicago, he allegedly told Cohen “that black people would never vote for him because they were too stupid.” In Trump’s moral universe, it’s fair to judge an entire race for not showing him sufficient political love. These anecdotes capture the president’s dangerously precarious ego and a vanity that knows no bounds.

Vanity seems to be at the core of the Russia scandal, at least as far as we can now describe it with any confidence. When the founders of the republic wrote about corruption, they worried that a leader would confuse his own interests with the nation’s. That’s precisely how Cohen describes Trump’s view of Moscow.

According to Cohen, Trump had no expectation of victory in the presidential race. Instead, he treated his campaign as a giant infomercial aimed at the Russians, whose cooperation he needed for Trump Tower Moscow to proceed. He spent months fawning over Vladimir Putin, publicly apologizing for the abuses of his regime and begging for improved relations, as he tried to firm up the deal. In other words, the current trajectory of American foreign policy began as an effort to make a fortune. These were real financial interests that the president lied about, blatantly and constantly. Whatever else we discover through Robert Mueller’s investigation, that’s a historic scandal in itself.

In attempting to tear down Cohen, his Republican questioners set a litmus test that their primary client will never be able to survive. They said that the nation shouldn’t waste its time on a man with a demonstrable pattern of lying; they said that we should never pay any heed to someone so intent on profiting from publicity. As they fulminated, I revised the chyron in my head: A Racist … A Con Man … A Cheat … A President.

Institutional Investor

In 1990, Harvard Business School professor Michael Jensen co-wrote an article making the then-bold claim that CEO compensation should be tied to stock price performance. The point, Jensen and his co-author argued, was to better align incentives and ensure that corporations were able to attract “the best and brightest individuals to careers in corporate management.”

In short: Pay up, or lose out.

At the time, Jensen was little known outside academic circles. But — perhaps unsurprisingly — his advocacy for a new model of CEO pay quickly made him a well-known name in business academia and corporate boardrooms, sought after for advice and affirmation. Soon, “aligning incentives” exploded across corporate America.

The results were staggering. According to data from the Stanford Graduate School of Business, average CEO compensation at the largest firms rose from $1.8 million per year in the 1980s — roughly in line with the previous 45 years — to $4.1 million in the 1990s. By the early 2000s, it had risen to $9.2 million. And those numbers are after adjusting for inflation. The majority of that growth came in the form of options and stock grants, just as Jensen had recommended.

But what if Jensen was wrong?

What if CEOs don’t play much of a role in driving stock price performance, and the “aligned incentives” of equity incentive pay don’t change behavior in any way that benefits shareholders?

What if the “best and brightest” — those executives with the most dazzling CVs and track records — don’t perform any better than less credentialed executives?

And what if Jensen’s philosophy produced better outcomes for CEOs and business school graduates — including those from his own school — but not better outcomes for investors or society at large?

Over the past year, we set out to answer these questions. We created a database of approximately 8,500 CEOs and their characteristics, each individually mapped to their respective companies for the duration of their tenure, and pulled company fundamentals from Compustat, stock returns from the University of Chicago's Center for Research in Security Prices (CRSP), CEO tenure and education from BoardEx, and long-form CEO biographies from Capital IQ. We then ran a battery of tests on the new data set, looking for correlation, persistence, and predictive power. We wanted to answer two sets of questions:

Do CEO characteristics predict stock price performance? Do CEOs with MBAs perform better than CEOs without MBAs? Do CEOs with MBAs from the best MBA programs outperform other CEOs? Do CEOs who worked at top consulting firms and investment banks outperform other CEOs? More broadly, are the “best and brightest” better at running companies?

Is CEO performance persistent? If someone was a successful CEO of one company and took over as CEO of a different company, does his or her performance at the first company predict performance at the second company? If a CEO does a good job for three years, does that predict stock price performance over the subsequent three years? More broadly, are some CEOs better than others at driving share price performance?

This research has important implications for investing. There is broad consensus among investors that one should seek out “well-managed” companies. And what better way to assess the quality of management than to examine the chief executive’s resume and record?

This approach makes intuitive sense. Surely it is better to invest in the star CEO who has a record of stunning returns than a schmuck who has underperformed the S&P. Better still if the star was forged in the crucible of Harvard Business School. There is a big market for books about these genius CEOs and how they achieved their success — and what lessons corporate executives and investors should take away from the histories of “great men.”

The siren songs of credentialism and tales of corporate "great men" are seductive. It is the pedagogy by which most college students learn and explain history. But if the data shows that CEO performance isn’t persistent, or if the resume characteristics we commonly associate with quality don’t, in fact, predict performance, are investors making a mistake in spending so much time on management quality?

Do MBAs Make Better CEOs?

In the 1980s, Jensen noticed a big shift in the career choices of Harvard MBAs. In the late 1970s, about 55 percent of graduates chose careers in corporate management, but by the late 1980s, only 30 percent were making this choice.

Jensen was concerned that this meant America’s “best and brightest” leaders were not going to be running America’s largest companies — and that corporate America needed to increase CEO compensation to lure more Harvard MBAs into corporate management careers.

A central premise of business education is that leadership and management can be taught in the classroom. Harvard Business School says its mission is “to educate leaders who make a difference in the world,” where a difference is defined as creating “real value for society.” And so, Jensen’s logic makes sense: Harvard attracts the very best students and, presumably, is good at educating them to be better business leaders, so corporate America should want more Harvard graduates running companies — and this logic should extend to MBA programs beyond just Harvard.

But regression results suggest a different result entirely. We tagged CEOs by the MBA programs they attended, formed monthly portfolios of companies broken down by the business school each CEO attended, and compared the returns of these portfolios to the broader market.

We found no statistically significant alphas — despite testing every possible school with a reasonable sample size. MBA programs simply do not produce CEOs who are better at running companies, if performance is measured by stock price return.

We ran similar regressions controlling for industry and found that — even after controlling for industry — elite MBAs did not produce positive statistically significant alpha. Elite MBAs did perform relatively well as CEOs in healthcare and consumer staples, but relatively poorly in energy and materials businesses, though those results were not statistically significant. Our study is not the only one to come to this conclusion. A study by economists at the University of Hawaii asked similar questions and found that firm performance is not predicted by the educational background of the CEOs.

The perceived quality of each institution appeared to have no correlation with stock price returns. Northwestern led with an alpha of 0.58 percent per month. Stanford eked out a barely positive alpha of 0.03 percent per month. Harvard and Wharton had negative alphas of -0.15 percent and -0.19 percent, respectively, per month. While these rankings likely occurred by sheer chance, they do nothing to support Jensen’s thesis.

Lastly, we looked at how CEOs who had previously worked at investment banks and elite consulting firms performed. If Jensen’s core thesis were true, we would expect CEOs with these elite credentials to outperform the market.

We thus formed monthly portfolios for bankers and consultants. As we did with MBAs, we then ran industry-controlled Fama-French three-factor regressions. The result: Neither bankers nor consultants produced statistically significant alphas. We also back-tested portfolios designed to favor ex-bankers and consultants and found no significant edge (though consultants had a statistically insignificant edge on bankers).

This suggests that the “best and brightest” do not have a statistically significant edge when it comes to managing public companies. An elite pedigree — the type of pedigree favored by headhunters and corporate boards — is not predictive of superior management. One of the central rationales for Jensen’s campaign (increasing CEO pay by tying it to share price performance) appears, in retrospect, to have little empirical support. These credentials, however, are significantly overrepresented in the CEO biography database. The elite credentials thus benefit the individual, but there is little evidence that these credentials benefit shareholders.

It’s unclear precisely why the evidence suggests that highly credentialed CEOs from our most elite MBA programs and their funnel careers, like banking and consulting, appear to add no measurable value to shareholders. However, we found wisdom in a saying of the oldest living CEO, a 100-year-old billionaire from Singapore who still goes to work every day to mentor his son in leading the firm. His son, Teo Siong Seng, said, “My father taught me one thing: In Chinese, it’s ‘yi de fu ren’ — that means you want people to obey you not because of your authority, not because of your power, or because you are fierce, but more because of your integrity, your quality, that people actually respect you and listen to you.”

Bloomberg shows that “there is no education data available” for the 100-year-old CEO, Chang Yun Chung, so we cannot vet his educational credentials — but we suspect he did not obtain an MBA.

Financial Times Theresa May’s aim is to convert fear of a no-deal Brexit into acceptance of her bad deal, which would leave the UK at the EU’s mercy. In the end, the rhetoric about “taking back control” has come down to a choice between suicide and vassalage. This march of folly needs to be stopped, for the UK’s sake and Europe’s. The only politically acceptable way to do this is via another referendum. That is risky. But it would be better than sure disaster.

Let us count the ways in which what is now happening is quite insane.

In just over a month, the UK might suddenly exit from the EU. But the government and business are unprepared for such a departure: to take one example, the government is still fighting over what farm tariffs to impose. Such a no-deal Brexit would damage the UK — and the EU. If a no-deal exit did happen, negotiations would need to restart at once, but in a far more poisonous and, for the UK, more unfavourable context.

Even if the prime minister’s deal were ratified, a new set of negotiations would have to start over the future relationship. The UK is unprepared for such negotiations. These new negotiations would also inevitably end up with an unsatisfactory outcome, because the UK has never confronted the trade-offs between access and control inherent in all trade negotiations. Finally, this entire mess would make only the EU’s enemies — Russian president Vladimir Putin, above all — happy.

Britain has, in brief, launched itself on a perilous voyage towards an unknown destination under a captain as obsessed with delivering her version of Brexit as Ahab was with Moby-Dick. Has a mature democracy ever inflicted such needless damage on itself?

Why has the UK done so? The simple answer is the marriage of the widespread dissatisfaction of the British people to copious Brexit illusions.

One illusion was that the meaning of Brexit was obvious. In practice, it could cover anything from a high degree of integration to very little. The decision to leave did not determine the destination. Another illusion was that Brexit could mean unbridled sovereignty. In practice, the deeper is a trading relationship, the more it must compromise with its trading partners on the exercise of national sovereignty. If the UK negotiates trade deals with the US, China or India, it will also be forced to accept many limitations on its sovereignty.

A further illusion is that it would be easy for the UK to trade on the terms laid down by the World Trade Organization. In practice, a no-deal exit would worsen the terms of access to markets that account for about two-thirds of total UK trade. Yet another illusion is that the WTO covers most of the things the UK cares about. Alas, it does not. What it fails to cover includes road haulage, aviation, data, energy, product testing, including of medicines, fisheries, much of financial services and investment.

It was a dangerous illusion to suppose that it would be simple to strike a trade deal with the EU, because we started from full convergence. The opposite is true. The UK is leaving in order to diverge. Such divergence is precisely what EU rules exist to prevent. The EU would never allow a country the right both to benefit from EU rules and to diverge from them, at its discretion.

A really big illusion was that if the UK were tough with the EU, the latter would come swiftly to terms. But, as Ivan Rogers, former UK permanent representative to the EU, argues, the EU would not — partly because preservation of the EU is, naturally, the EU’s dominant priority, and partly because the EU is sure the UK would be back the day after that no-deal Brexit. It is surely right on that.

So right now, parliament faces a choice between the impossible — no deal — and the horrible — the prime minister’s deal. If accepted, the latter would be followed by years of painful trade negotiations, with, at present, no agreed destination. At the end, the UK would be worse off than under membership of the EU. Its people would be as divided and dissatisfaction would remain as entrenched as they are today. Is there a better way than this? Yes. It is to ask, once again, whether the people want to leave, now that the reality is clearer. There should be a second vote.

Some will argue that this would be undemocratic. Not so. Democracy is not one person, one vote, once. If democracy means anything, it is the right to change a country’s mind, especially given the low and dishonest referendum campaign. It is nearly three years since that vote. Much has happened since then, in both the negotiations and the world. As Ngaire Woods of the Blavatnik School of Government has noted, since 2016 Donald Trump has been assaulting the EU and the WTO, western relations with China have become more problematic and the extent of Mr Putin’s assault on our politics have become more obvious. This is not a time for Europe to inflict the wound of Brexit on itself.

If, as seems plausible, parliament cannot stomach the vassalage of the prime minister’s deal, then the sane options are to ask for a lengthy extension of departure or, better, to withdraw the Article 50 application altogether. Both would give the time needed to discuss how to organise such a referendum. Mrs May’s suggestion of a direct vote on no deal might get us there.

It is now clear that the UK has no consensus on Brexit, but only division and confusion. In order to get her bad deal through, the prime minister has been reduced to threatening parliament with something worse. That is mad. If a country finds itself doing something sure to damage itself, its neighbours and the fragile cause of liberal democracy on its continent, it needs to think again. Now is the last chance to halt the journey to ruin. It is parliament’s duty to do so.

Sean Carroll

I talked a bit on Twitter last night about the Past Hypothesis and the low entropy of the early universe. Responses reminded me that there are still some significant misconceptions about the universe (and the state of our knowledge thereof) lurking out there. So I’ve decided to quickly list, in Tweet-length form, some true facts about cosmology that might serve as a useful corrective. I’m also putting the list on Twitter itself, and you can see comments there as well.

The Big Bang model is simply the idea that our universe expanded and cooled from a hot, dense, earlier state. We have overwhelming evidence that it is true.

The Big Bang event is not a point in space, but a moment in time: a singularity of infinite density and curvature. It is completely hypothetical, and probably not even strictly true. (It’s a classical prediction, ignoring quantum mechanics.)

People sometimes also use “the Big Bang” as shorthand for “the hot, dense state approximately 14 billion years ago.” I do that all the time. That’s fine, as long as it’s clear what you’re referring to.

The Big Bang might have been the beginning of the universe. Or it might not have been; there could have been space and time before the Big Bang. We don’t really know.

Even if the BB was the beginning, the universe didn’t “pop into existence.” You can’t “pop” before time itself exists. It’s better to simply say “the Big Bang was the first moment of time.” (If it was, which we don’t know for sure.)

The Borde-Guth-Vilenkin theorem says that, under some assumptions, spacetime had a singularity in the past. But it only refers to classical spacetime, so says nothing definitive about the real world.

The universe did not come into existence “because the quantum vacuum is unstable.” It’s not clear that this particular “Why?” question has any answer, but that’s not it.

If the universe did have an earliest moment, it doesn’t violate conservation of energy. When you take gravity into account, the total energy of any closed universe is exactly zero.

The energy of non-gravitational “stuff” (particles, fields, etc.) is not conserved as the universe expands. You can try to balance the books by including gravity, but it’s not straightforward.

The universe isn’t expanding “into” anything, as far as we know. General relativity describes the intrinsic geometry of spacetime, which can get bigger without anything outside.

Inflation, the idea that the universe underwent super-accelerated expansion at early times, may or may not be correct; we don’t know. I’d give it a 50% chance, lower than many cosmologists but higher than some.

The early universe had a low entropy. It looks like a thermal gas, but that’s only high-entropy if we ignore gravity. A truly high-entropy Big Bang would have been extremely lumpy, not smooth.

Dark matter exists. Anisotropies in the cosmic microwave background establish beyond reasonable doubt the existence of a gravitational pull in a direction other than where ordinary matter is located.

We haven’t directly detected dark matter yet, but most of our efforts have been focused on Weakly Interacting Massive Particles. There are many other candidates we don’t yet have the technology to look for. Patience.

Dark energy may not exist; it’s conceivable that the acceleration of the universe is caused by modified gravity instead. But the dark-energy idea is simpler and a more natural fit to the data.

Dark energy is not a new force; it’s a new substance. The force causing the universe to accelerate is gravity.

We have a perfectly good, and likely correct, idea of what dark energy might be: vacuum energy, a.k.a. the cosmological constant. An energy inherent in space itself. But we’re not sure.

We don’t know why the vacuum energy is much smaller than naive estimates would predict. That’s a real puzzle.

Neither dark matter nor dark energy are anything like the nineteenth-century idea of the aether.

Washington Post

The Russian company that gave the world the iconic AK-47 assault rifle has unveiled a suicide drone that may similarly revolutionize war by making sophisticated drone warfare technology widely and cheaply available.

The Kalashnikov Group put a model of its miniature exploding drone on display this week at a major defense exhibition in Abu Dhabi, the capital of the United Arab Emirates, where the world’s arms companies gather every two years to show off and market their latest wares.

The tiny item was dwarfed by the tanks, armored vehicles and fighter jets that were also on display. But it has as much potential to change the face of war as its older cousin, the AK-47, widely referred to simply as the Kalashnikov.

With its low price, high efficiency and ease of use, the Kalashnikov rifle became the weapon of choice for revolutionaries and insurgents around the world, empowering disgruntled citizens against their governments in Latin America, Africa and Asia. It remains a potent tool to this day: The Pentagon purchases secondhand Kalashnikov rifles for its allies in Syria and Afghanistan, rather than give them more expensive American-made guns.

The Kalashnikov drone — officially named the KUB-UAV — will likewise be simple to operate, effective and cheap, its manufacturers claim — and just as revolutionary. It will mark “a step toward a completely new form of combat,” said Sergey Chemezov, chairman of Russia’s state-owned Rostec arms manufacturer, which owns a controlling stake in Kalashnikov, according to Kalashnikov’s news statement on the launch.

The KUB is four feet wide, can fly for 30 minutes at a speed of 80 mph and carries six pounds of explosives, the news release says. That makes it roughly the size of a coffee table that can be guided to explode on a target 40 miles away — the equivalent of a “small, slow and presumably inexpensive cruise missile,” according to a report by the National Interest website.

Whoever buys one will have the ability to steer a bomb with a high degree of accuracy unparalleled except by some of the U.S. military’s smartest bombs, said Nicholas Grossman, a professor of international relations at the University of Illinois and author of the book “Drones and Terrorism.”

“I think of it as democratizing smart bombs,” he said “It means disseminating smart bombs more widely. This would shrink the gap between the most advanced militaries and the smaller ones.”

Suicide drones are not new. The Islamic State pioneered the art of attaching explosives to commercially available drones and detonating them on advancing troops and enemy bases during the battles for the cities of Mosul and Raqqa in Iraq and Syria.

Russian troops in Syria were targeted by the biggest-ever suicide drone assault in Syria last year, when a swarm of more than a dozen crudely assembled devices incorporating explosives and GPS guidance systems descended onto Russia’s Hmeimim air base in Syria.

The U.S. and Israeli militaries have incorporated suicide drones into their arsenals — but controls on the export of technology mean the devices aren’t shared outside a small circle of close allies.

The KUB drone will be faster and more accurate, and will deliver twice the explosive charge and have a greater range than any of the crude homemade devices that have been patched together by terrorists, according to the Kalashnikov representatives at the exhibition.

And unlike U.S. and Israeli exploding drones, the KUB will be “very cheap,” said one of the Kalashnikov representatives. He declined to name the price and spoke on the condition of anonymity because he was not authorized to communicate with the media.

The target market will be “smaller armies” around the world, he said, meaning the availability of the KUB will bypass controls imposed by the United States and its allies that are designed to keep weaponized drones out of the hands of their foes.

The potential for terrorists to use drone bombs to carry out attacks is one of the biggest worries surrounding the proliferation of the technology, experts say. Two such drones were used in an apparent attempt to assassinate Venezuelan President Nicolás Maduro in August. Recent shutdowns of airports in London, Dublin, New York and Dubai due to mysterious drone incursions demonstrate Western governments’ lack of readiness to address threats posed by drones, Grossman said.

Terrorists are more likely to continue to improvise their own ways of jury-rigging explosive drones using cheaply available commercial devices and their own bombmaking expertise rather than spend on a ready-made version, said Nick Waters, a former British army officer and drone expert.

The spread of kamikaze drones will also intensify efforts to counter them, Grossman pointed out. “This will definitely enhance the capabilities of various state and nonstate actors, but it’s not something that can’t be countered,” he said.

However, he added, “I’m quite nervous of the capabilities being unleashed without knowing where it will lead.”

Washington Post

A relentless focus on maximizing shareholder value has contributed to stagnant middle-class wages in the United States and fueled the rise of a society increasingly divided between haves and have-nots, according to a new working paper published by the Roosevelt Institute, a progressive economic think tank.

“Nearly fifty years of increasing focus on shareholder payments has cost American workers the chance to do well when corporations do well,” the study’s author, Lenore Palladino, said in a statement. “The misguided assumption that corporate prosperity should benefit only shareholders has hurt the ability of employees to bargain for a share of that prosperity — which they help create — and held back a growing economy.”

The paper traces the rise of what Palladino calls “shareholder primacy," which she defines as “a legal and economic framework for corporate governance that claims that the sole purpose of corporate activity is to maximize wealth for shareholders.” As Palladino tells it, in the decades immediately following World War II, managers held considerable decision-making power in the dominant publicly traded companies. Because of their positions in their companies, managers tended to make decisions with an eye toward maintaining good, or at least stable, relations with their employees.

“Firms invested in and depended on a stable labor force,” Palladino writes, “and unions held enough power to secure significant gains for their members.”

That began to change in the 1970s. “As economic growth slowed and inflation rose, shareholders became dissatisfied with low and steady dividends,” Palladino writes. Buoyed by the efforts of such conservative intellectuals as the economist Milton Friedman, who wrote that the responsibility of corporate executives is to “conduct the business in accordance with [business owners’, i.e. shareholders'] desires, which generally will be to make as much money as possible,” shareholders began demanding a greater share of the profits generated by the businesses they invested in. The interests of employees were relegated to a secondary concern.

The fruits of that revolution are on display in the chart at the top of this article, showing how worker compensation became decoupled from worker productivity starting in the 1970s. Before then, productivity and pay had risen in tandem: Employees were producing more output and getting paid accordingly. But afterward pay lagged behind a steep rise in productivity.

What did corporations do with their profits if they were not investing in their workers? Palladino produces data showing much of that money was instead diverted to shareholders via two methods: dividends (payouts of profit on a per-share basis) and stock buybacks, which usually have the effect of boosting stock prices for existing shareholders.

According to Palladino’s data, from 1972 to 2016 the value of these shareholder payouts rose from 1.8 percent of all publicly traded companies’ assets to 3.1 percent. Over that same time, wages’ share of company assets fell by roughly half.

“These shifts are consistent with a story of rising shareholder power and declining employee bargaining power,” Palladino writes.

This relationship is not necessarily causal, of course. Palladino points out that many factors can play a role in wage stagnation, “including globalization, rising market power and decreased antitrust enforcement, the decline in the number of workers covered by a collective bargaining agreement, financialization and the rising proportion of national income earned by the financial sector, and fissuring of the workplace,” to name a few.

Other research has shown, for instance, that a focus on shareholder value can cause employment to shrink as managers seek ways to cut costs, and that the relationship between shareholder payments and employee wages is on some level zero-sum: You cannot boost one without cutting the other. If nothing else, the data charted by Palladino shows the era of shareholder primacy has not been a particularly good one for American workers.

“The rise of shareholder primacy has contributed to America’s high-profit, low-wage economy, in which the wealthy few capture much of value created by working people,” Palladino concludes.

Defenders of practices like stock buybacks disagree with analyses like Palladino’s. They maintain, for instance, that returning profits to shareholders allows those shareholders to invest those funds in other companies with greater cash needs, benefiting workers in those companies. Cash from buybacks “is not disappearing into the vaults of billionaires,” as Benn Steil and Benjamin Della Rocca of the Council on Foreign Relations recently put it, “but is being reinvested in firms that do have good uses for it — like capital investment and worker retention.”

Some economists also argue that, somewhat paradoxically, buybacks prevent firms from becoming too shareholder-focused by putting more of a company’s value under the control of its executives. “A common concern about the public corporation is that it is owned by millions of dispersed shareholders, whose stakes are too small to motivate them to look beyond short-term earnings,” according to Alex Edmans of the London Business School. CEOs and remaining shareholders “have the incentive to look beyond earnings and instead look to a company’s long-term growth opportunities and intangible assets.”

In an interview, Palladino said that it is not just workers who are potentially harmed by an excessive focus on shareholder value. Customers lose when companies forgo investment in new or more affordable products to pay their shareholders.

The practice even puts small shareholders, including people holding retirement investments in 401(k) accounts, at risk, Palladino says. Buybacks, for instance, directly benefit only people who subsequently sell their stock in the company, which long-term retirement investors typically do not do. And overspending on dividends and buybacks can put a company in a financially precarious situation if a recession hits.

“If, in the next downturn, corporations do not have the funds on hand to maintain operations in leaner times, or have loaded up on debt that they then can’t repay, or simply aren’t making the kinds of investments that will make them grow and innovate over time, who is going to be affected?” Palladino asks. “Those of us who are counting on the stock market for our long-term economic security."

Washington Post

Overwhelmingly white school districts received $23 billion more than predominantly nonwhite school districts in state and local funding in 2016, despite serving roughly the same number of children, a new report finds.

The funding gap is largely the result of the reliance on property taxes as a primary source of funding for schools. Communities in overwhelmingly white areas tend to be wealthier, and school districts’ ability to raise money depends on the value of local property and the ability of residents to pay higher taxes.

And while state budgets gave heavily nonwhite districts slightly more money per student than they gave overwhelmingly white districts, in many states it was not enough to erase the local gaps.

“States have largely failed to keep up with the growing wealth disparities across their communities,” concludes the report released Tuesday by EdBuild, a New Jersey-based research and advocacy group that focuses on school funding.

The gap reflects a long-standing view that local schools should be both controlled and funded locally.

The funding disparities that result have been challenged in many states, frequently in court. Many states have worked to make formulas more equitable, with varying success.

“While we have made some progress on the issue of economic inequality in our schools, we still have a terribly inequitable system,” the report said.

EdBuild examined the nation’s 13,000 traditional public school districts and found about 7,600 where more than 75 percent of students were white, and about 1,200 where more than 75 percent of students were not white. The nonwhite districts, which included many large cities, were much larger than the white districts, which included many small rural areas. But the two groups each had about the same number of students — 12.8 million children in nonwhite districts and 12.5 million in white districts.

Nonwhite districts took in about $54 billion in 2016 in local tax dollars — or about $4,500 per student. White districts, home to higher incomes and less poverty, collected more than $77 billion, or just over $7,000 per student.

On average, states added another $6,900 per student to white districts and almost $7,200 per student in nonwhite districts. But the overall gap in state and local funding was $23 billion. White districts, on average, had more than $2,000 more in funding per student than nonwhite districts.

The analysis does not include federal dollars, much of which is targeted to the poorest communities.

The problem is worse in states where districts are small, cordoning off wealthy communities and limiting the likelihood that wealthier taxpayers will subsidize poorer students, said Rebecca Sibilia, EdBuild’s chief executive. In states such as Maryland and Virginia, she said, many school districts are comprised of entire counties, making funding more equitable.

In Maryland, 880,000 students are served by just 24 districts, vs. New Jersey, where 1.3 million students are divided between 540 districts. Nonwhite districts in Maryland received $501 more per student than white districts, and in Virginia, they got $255 more per student.

Overall, the report found 21 states where white districts got more funding and 14 states where nonwhite districts got more. The other states did not have enough racial diversity to meaningfully analyze, the report said.

The gap was most dramatic in Arizona, where white districts were given $7,613 more per student than nonwhite districts. A dozen other states had gaps between $2,000 and $4,000 per student, with 10 of the states providing more funding to students in majority-white districts.

A spokesperson for the Arizona education department had no immediate comment.

Michael Petrilli, president of the Thomas B. Fordham Institute, a conservative think tank, says states should do more to equalize funding. But he added that there is some benefit to local control.

“When districts have to go to the community to get a bond passed, they have to make the case they are spending their money well and it’s worth investing in,” he said. “That has been an important form of accountability.”

But overall, he said, the system needs to become more equitable. “All of this is tough sledding in terms of the politics of it,” he said. “It’s an area where the courts have played an important role.”

Aaron Smith, an expert on school finance at the libertarian Reason Foundation, also supports more equity. He said conservatives should realize that if school funding were more even, it would bolster school choice programs, which many conservatives back. More equitable funding would make it clear how much money a school should get to educate each student, Smith said.

“Every state has some sort of mechanism in place to try and equalize and neutralize the effects that local property wealth has,” he said. “The problem is that these equalization mechanisms vary substantially in terms of how effective they are.”

NPR

In each of the past four years, 1,000 or more immigrant children who arrived at the southern U.S. border without their parents have reported being sexually abused while in government custody, according to federal records released Tuesday.

The data from the Department of Health and Human Services was made public by Rep. Ted Deutch, D-Fla., before a congressional hearing on the Trump administration's policy of separating migrant families.

As NPR's John Burnett reported,

"The federal Office of Refugee Resettlement, which is in charge of caring for under-age immigrants, received more than 4,500 allegations of sexual abuse and sexual harassment between 2015 and 2018. The reporting begins under the Obama administration. Of those complaints, some 1,300 were serious enough to refer to the FBI, but an official says 'the vast majority' proved to be unfounded.

"Most of the assault allegations involved one minor abusing another. But 178 of the complaints were against staff at the shelters — in particular, youth-care workers who escort the children everywhere they go. The complaints range from inappropriate romantic relationships between children and adults, to touching genitals, to watching children shower."

In a hearing by the House Judiciary Committee, Deutch said the government's 135 migrant shelters are "an unsafe environment."

"Together these documents detail an environment of systemic sexual assault by staff on unaccompanied children," he said.

Administration officials expressed their concern while defending the Office of Refugee Resettlement.

"We share the concern that I think everyone in this room feels, anytime a child is abused in the care of ORR is one time too many," said Jonathan White, the U.S. Public Health Service Commissioned Corps commander.

"The vast majority of allegations prove to be unfounded when they are investigated by state law enforcement and federal law enforcement and the state licensure authorities to whom we refer them," he added.

Children who travel to the U.S. border alone or who arrive with a relative who is not their parent or legal guardian are considered by the government to be unaccompanied minors.

"Some 13,000 so-called unaccompanied migrant children are in the custody of the ORR, Burnett reported. "They stay, on average, for about three months at the shelters before they are released to go live with an adult sponsor, while they await their day in immigration court."

The ORR first began collecting reports of sexual abuse of people in its custody in October 2014, the beginning of FY 2015.

The agency has "a zero-tolerance policy for all forms of sexual abuse, sexual harassment, and inappropriate sexual behavior at all care provider that house unaccompanied alien children," according to the policy statement. All care providers are required to report all such allegations to state or local authorities within four hours of learning such information.

The Atlantic

Everyone involved in the House Oversight and Reform Committee hearing on Wednesday needed a good lawyer.

Michael Cohen, the convicted felon, disbarred lawyer, and former fixer to Donald Trump, needed a trial lawyer to rein in his mugging for the camera, his tendency to take cheap shots at his detractors, and to remind him of the limits of his own credibility. He needed a stern counselor to elbow him in the ribs, tell him not to bait the politicians even if they deserved it, and to hiss at him stop quibbling over what lobbying for Khazakh banks means, stop it this instant.

House Democrats needed a good trial lawyer too, to teach them how to handle a morally bankrupt cooperating witness. As a former prosecutor, I know that your tone has to be stern and your questioning methodical. You have to convey to your audience that although the witness is nobody to admire he can still offer useful information. If you’re friendly, the jury just thinks you’ve fallen for a con artist. The Democrats treated Cohen like a minor celebrity, perhaps a YouTube star. A trial lawyer would not have simply draw out Cohen’s incriminating information about Trump, but used Cohen to emphasize the corroborating evidence from the Special Counsel investigation that backs many of his accusations. This was an opportunity to build the outline of a case against Trump. Democrats didn’t. Instead they triumphantly repeated Cohen’s more salacious accusations, speechified, and uncritically embraced Cohen’s I-am-a-sinner-seeking-redemption narrative. They didn’t hurt his credibility, but they utterly squandered the chance to support it.

House Republicans needed a trial lawyer—or even a moderately bright junior-high mock-trial participant—to tell them how to do anything. Cross-examination is hard. It’s not just barking at the witness. It takes meticulous planning and patience. Republicans could have marshaled Cohen’s many sins of the past to undermine his statements today. Instead they returned repeatedly to lies and misdeeds he’d already admitted, wallowed in silly trivialities like the “Women for Cohen” Twitter account, and yelled. The effect was to make an unsympathetic man modestly more sympathetic. Republicans committed the classic cross-examination blunder: They gave the witness the opportunity to further explain his harmful direct testimony. They provided Cohen with one slow pitch up the middle after another, letting him repeat the cooperating witness’s go-to explanation like a mantra: I did these bad things so often and so long because that’s what it took to work for your guy. I have seldom seen a cross-examination go worse.

If the hearing’s participants needed trial lawyers, its absent subject needs them even more. Whether the danger is looming impeachment hearings or the Special Counsel’s investigation, the president of the United States is in the soup.

Cohen put Donald Trump squarely at the middle of the harebrained scheme to hide hush-money payments to Stormy Daniels. He corroborated that tale with checks from Trump and from the Trump organization. The odd and haphazard way Trump reimbursed Cohen helps make the case that Trump knew the entire ruse breached campaign finance laws—if not clearly enough for a federal jury, at least enough for a House Committee on Impeachment. Cohen offered enough specific examples of Trump Organization financial skulduggery to launch a thousand subpoenas. He confirmed that Trump’s lawyers knew about, and even edited, Cohen’s prior false statements to Congress, suggesting a possible conspiracy to obstruct justice and lie to Congress. He also claimed that Trump talked to Roger Stone about Wikileaks in advance of the release of hacked DNC emails. That’s not itself illegal or “collusion”—it’s not against the law to receive dirt, even eagerly—but it probably contradicts the statements Trump has given under oath to the Special Counsel, leading to more danger for the president. Finally, Cohen confirmed that the U.S. Attorney’s Office for the Southern District of New York is still investigating Trump for unspecified crimes. Nothing good has come out of the Southern District for this administration.

Team Trump should be worried. Republicans did not successfully destroy Cohen’s credibility. Cohen, while characteristically squirrelly on some subjects, did not exude his customary arrogance.In fact, he probably gained credibility by limiting his accusations—he passed up numerous opportunities to make expansive claims about collusion or salacious ones about sex tapes, focusing instead on relatively narrow allegations. Democrats didn’t help him, but they signaled that they were willing to conduct further investigations based on his word.

Time after time, Trump and his underlings and supporters have stumbled when they’ve missed the difference between court and culture. Stone learned last week that U.S. District Court is not like Instagram. Paul Manafort, Rick Gates, Michael Flynn, George Papadopoulos and Cohen have learned that the easy lies offered thoughtlessly in the media scrum can lead to jail time when uttered to FBI agents. Today Republicans had the opportunity to learn—though if they actually learned who can say—that theatrical committee hearing tactics are ineffective against a witness trained to withstand cross-examination. Will the president of the United States ever learn that a federal criminal investigation is not a reality show?

The Atlantic

Up and down the economic ladder, many Americans who work—and especially those raising kids—are pressed for time, wishing they had more of it to devote to leisure activities (or even just sleeping). At the same time, research has indicated that people who are busy tend to be happier than those who are idle, whether their busyness is purposeful or not.

A research paper released late last year investigated this trade-off, attempting to pinpoint how much leisure time is best. Its authors examined the relationship between the amount of “discretionary time” people had—basically, how much time people spend awake and doing what they want—and how pleased they were with their lives. (Some examples of “discretionary” activities were watching TV, socializing, going to the movies, spending time with family, and doing nothing.)

The paper, which analyzed data covering about 35,000 Americans, found that employed people’s ratings of their satisfaction with life peaked when they had in the neighborhood of two and a half hours of free time a day. For people who didn’t work, the optimal amount was four hours and 45 minutes.

The research traced a correlation between free time and life satisfaction, but didn’t provide any definitive insight into what underlies that correlation—“which is exciting, because this is a work in progress,” says Cassie Mogilner Holmes, a professor at UCLA’s Anderson School of Management and a co-author of the paper, which hasn’t yet been peer-reviewed or published in an academic journal. Holmes’s co-authors are her UCLA colleague Hal Hershfield and Marissa Sharif, a professor at Wharton, the University of Pennsylvania’s business school.

The correlation that Holmes and her collaborators hit upon persisted even after they controlled for people’s age, gender, race, parental status, and other demographic variables (though they did not calculate how the optimal amount of free time varied depending on these factors). The researchers write that their finding is a “small” effect, but still significant, considering that “there are a slew of other variables that play into people’s overall assessment of their satisfaction in life.”

An experiment that the researchers arranged hinted at a possible explanation of the correlation they found. They asked participants to picture and describe what it would be like to have a certain amount of daily free time, and then report how they’d feel about that allotment. “What we find is that having too little time makes people feel stressed, and maybe that’s obvious,” says Holmes. “But interestingly, that effect goes away—the role of stress goes away—once you approach the optimal point.” After that point, Holmes says, the subjects started to say they felt less productive overall, which could explain why having a lot of free time can feel like having too much free time.

It’s not clear what an individual is to do with these findings, since the amount of free time people have usually has to do with a variety of factors, such as having children or a degree of control over work schedules. That said, Holmes told me that she shared her research with the MBA students in her class on happiness, and some of the most time-crunched among them were comforted by the findings: “I think that two and a half hours creates a nice goal that, even if you increase a little bit more of your discretionary time use, you [can expect] that it will translate into greater life satisfaction.”

Daniel Hamermesh, an economist at the University of Texas at Austin who studies time use, said it can be difficult to suss out the relationship between free time and life satisfaction. For one thing, some of the data analyzed in the paper was obtained by asking people to estimate how much free time they have, and those estimates can be unreliable. For another, it’s difficult to systematically say what qualifies as “discretionary” time and what doesn’t. “Every minute we have is subject to choice one way or the other, consciously or not,” he notes.

While Hamermesh didn’t inspect the underlying data in the paper, he offered a couple of possible (but, he notes, hard-to-test) explanations for the findings. “Let’s say everybody around me has two hours of discretionary time, and for some reason I have four,” he says. “I have no friends to play with”—his point being that people’s free time might be less fulfilling if they can’t spend it with others.

Another theory: Having too much free time might challenge a person’s self-image. For a man who provides for his family, Hamermesh says, “if I have so much time that I can spend it on, I don’t know, watching television, maybe I feel I’m not a real man.” (This feeling could be related to the pressure many people feel to appear useful and in demand as they vie for work in a competitive labor market.)

While overall life satisfaction is a metric shaped by many variables, Hamermesh said there’s some research specifically on how stressed people are feeling about time. “Perhaps not surprisingly,” he writes in his forthcoming book, Spending Time: The Most Valuable Resource, “any switch that increases time away from work reduces stress.” Some of the biggest reductions in feeling stressed about time, he notes, come from substituting an hour of sleep or TV-watching for an hour of work.

Another thing that studies show would likely affect people’s well-being is, for those who can afford it, spending money to buy free time—for example, getting takeout instead of cooking, or hiring someone to clean the house instead of doing it yourself.

Figuring out how time use affects people’s well-being can be difficult because getting experimental evidence would require people to upend their usual rhythms for the sake of research. Still, Holmes said she’s interested in studying how the sequence and structure of free time might affect the pleasure it brings. For instance, is it better to cluster it at the beginning or end of one’s day, or disperse it throughout the day? And on a larger scale, would people be happier with the standard five-day workweek or a week with four longer workdays and a three-day weekend? What about the best time to go on vacation? Maybe, Holmes wonders, happiness is not just about how much free time people have, but also when they have it.