The fluctuation

The little crash in ‘62

retort that J. P. Morgan the Elder is supposed to have made to a naïve acquaintance who had ventured to ask the great man what the market was going to do. “It will fluctuate,” replied Morgan dryly.


The expectation of an event creates a much deeper impression … than the event itself.”—de la Vega.)


The fate of the Edsel

A cautionary tale

The interviewers did not ask simply what the respondent thought of some such name as Mars, Jupiter, Rover, Ariel, Arrow, Dart, or Ovation. They asked what free associations each name brought to mind, and having got an answer to this one, they asked what word or words was considered the opposite of each name, on the theory that, subliminally speaking, the opposite is as much a part of a name as the tail is of a penny.


“We simply have to have quality dealers with quality service facilities,” Krafve said. “A customer who gets poor service on an established brand blames the dealer. On an Edsel, he will blame the car.”


“I don’t think we yet know the depths of the psychological effect that that first orbiting had on us all,”


Somebody had beaten us to an important gain in technology, and immediately people started writing articles about how crummy Detroit products were, particularly the heavily ornamented and status-symbolic medium-priced cars. In 1958, when none of the small cars were out except the Rambler, Chevy almost ran away with the market, because it had the simplest car. The American people had put themselves on a self-imposed austerity program. Not buying Edsels was their hair shirt.”


They are inclined to speak of their Edsel experience—except for those still with Ford, who are inclined to speak of it as little as possible—with the verve and garrulity of old comrades-in-arms hashing over their most thrilling campaign.


Doesn’t it all tell you something about America in the fifties—high hopes, and less than complete fulfillment of them?”


In industry, you take a bump now and then, but you bounce back as long as you don’t get defeated inside.


The federal income tax

Its history and peculiarities

the tax is neither logical nor equitable.


it provides for taxing incomes at steeply progressive rates, and then goes on to supply an array of escape hatches so convenient that hardly anyone, no matter how rich, need pay the top rates or anything like them.


Like any tax law, ours had a kind of immunity to reform; the very riches that people accumulate through the use of tax-avoidance devices can be—and constantly are—applied to fighting the elimination of those devices.


the ultimate commitment of enmity toward the income tax. If such a measure were necessary to save the country, they said, then they would reluctantly have to choose to let the country go.


a common thread runs through the history of income taxes everywhere: Opposition is always at its most reckless and strident at the very outset; with every year that passes, the tax tends to become stronger and the voices of its enemies more muted.


The significant change, invisible in the rate schedule, has been a continuation of the one begun in wartime; namely, the increase in the proportionate tax burden carried by the middle and lower income groups. Paradoxical as it may seem, the evolution of our income tax has been from a low-rate tax relying for revenue on the high income group to a high-rate tax relying on the middle and lower-middle income groups.


the aboriginal income tax of 1913 extracted money from citizens with stricter regard to their ability to pay than the present income tax does.


“We all should understand that the Service is not simply running a direct enforcement business aimed at making $2 billion in additional assessments, collecting another billion from delinquent accounts, and prosecuting a few hundred evaders. Rather, it is charged with administering an enormous self-assessment tax system which raises over $90 billion from what people themselves put down on their tax returns and voluntarily pay, with another $2 or $3 billion coming from direct enforcement activities.


Our chief mission is to encourage and achieve more effective voluntary compliance.…


if he had small freedom of action, it would result in rigidity and certainty of interpretation, and would make it much easier for tax practitioners like me to manipulate the law to their clients’ advantage. The Commissioner’s latitude gives him a healthy unpredictability.”


Shortly after Caplin left office, he explained in detail what his ideal tax law would be like. Compared to the present tax law, it would be heroically simple, with loopholes eliminated, and most personal deductions and exemptions eliminated, too, and with a rate scale ranging from 10 to 50 per cent.


endorsing Caplin’s opinion that the Code leads to “hardships, complexities, and opportunities for tax avoidance.” He is more pessimistic than Caplin about finding the answer in simplification. “Perhaps we can move the rates down and get rid of some deductions,” he says, “but then we may find we need new deductions, in the interests of fairness. I suspect that a complex society requires a complex tax law. If we put in a simpler code, it would probably be complex again in a few years.”


“EVERY nation has the government it deserves,


Since the primary function of government is to make laws, the statement implies that every nation has the laws it deserves,


The Code, a document longer than “War and Peace,” is phrased—inevitably, perhaps—in the sort of jargon that stuns the mind and disheartens the spirit;


a fairly typical sentence, dealing with the definition of the word “employment,” starts near the bottom of page 564, includes more than a thousand words, nineteen semicolons, forty-two simple parentheses, three parentheses within parentheses, and even one unaccountable interstitial period, and comes to a gasping end, with a definitive period, near the top of page 567.


although 7,487 taxpayers declared gross incomes of $200,000 or more, fewer than five hundred of them had net income that was taxed at the rate of 91 per cent.


Throughout its life, the rate of 91 per cent was a public tranquilizer, making everyone in the lower bracket feel fortunate not to be rich, and not hurting the rich very much.


to top off the joke, if that is what it is, there are the people with more income than anyone else who pay less tax than anyone else—that is, those with annual incomes of a million dollars or more who manage to find perfectly legal ways of paying no income tax at all.


By favoring capital gains over ordinary income, the Code seems to be putting forward two very dubious notions—that one form of unearned income is more deserving than any form of earned income, and that people with money to invest are more deserving than people without it.


The process by which new tax legislation comes into being—an original proposal from the Treasury Department or some other source, passage in turn by the House Ways and Means Committee, the whole House, the Senate Finance Committee, and the whole Senate, followed by the working out of a House-Senate compromise by a conference committee, followed by repassage by the House and the Senate and, finally, followed by signing by the President


The ideal income tax envisioned for the far future by many reformers would be characterized by a short and simple Code with comparatively low rates and with a minimum of exceptions to them.


A reasonable amount of time

Insiders at Texas Gulf Sulphur

it has been widely argued that the privilege of cashing in on their corporate secrets is a necessary incentive to business executives to goad them to their best efforts,


The law in our time is, and probably ought to remain, almost unrealistically humanistic; in its eyes, corporations are people, stock exchanges are street-corner marketplaces where buyer and seller haggle face to face, and computers scarcely exist.


Xerox Xerox Xerox Xerox

(By the middle of the seventeenth century, the medieval use of the noun “copy” in the robust sense of “plenty” or “abundance” had faded out, leaving behind nothing but its adjective form, “copious.”)


All the evidence suggests that communication between people by whatever means, far from simply accomplishing its purpose, invariably breeds the need for more.)


because they and their function exercised a powerful psychological fascination on their users. In a society that sociologists are forever characterizing as “mass,” the notion of making one-of-a-kind things into many-of-a-kind things showed signs of becoming a real compulsion.


THUS baldly outlined, the story of Xerox has an old-fashioned, even a nineteenth-century, ring—the lonely inventor in his crude laboratory, the small, family-oriented company, the initial setbacks, the reliance on the patent system, the resort to classical Greek for a trade name, the eventual triumph gloriously vindicating the free-enterprise system.


the Cleveland Plan—a system inaugurated in that city under which local industries agree to give one per cent of pre-tax income annually to local educational institutions, apart from their other donations—


I find that companies are inclined to be at their most interesting when they are undergoing a little misfortune,


A girl who uses a typewriter or switchboard has no interest in the equipment, because it holds no mystery, while one who operates a computer is bored with it, because it is utterly incomprehensible. But a 914 has distinct animal traits: it has to be fed and curried; it is intimidating but can be tamed; it is subject to unpredictable bursts of misbehavior; and, generally speaking, it responds in kind to its treatment.


police departments in New Orleans and various other places, instead of laboriously typing up a receipt for the property removed from people who spend the night in the lockup, now place the property itself—wallet, watch, keys, and such—on the scanning glass of a 914, and in a few seconds have a sort of pictographic receipt.


Various magazine articles have predicted nothing less than the disappearance of the book as it now exists, and pictured the library of the future as a sort of monster computer capable of storing and retrieving the contents of books electronically and xerographically.


“There is no possible protection from technology except by technology,” he wrote. “When you create a new environment with one phase of technology, you have to create an anti-environment with the next.” But authors are seldom good at technology, and probably do not flourish in anti-environments.


the development of xerography was largely empirical. We were trained scientists, not Yankee tinkers, but we struck a balance between Yankee tinkering and scientific inquiry.”


Everybody was keyed up. The union people temporarily forgot their grievances, and the bosses forgot their performance ratings. You couldn’t tell an engineer from an assembler in that place. No one could stay away—you’d sneak in on a Sunday, when the assembly line was shut down, and there would be somebody adjusting something or just puttering around and admiring our work.


not only was no copy made but a giant generator serving the line was blown out. Thus was xerography introduced in Great Britain, and, considering the nature of its début, the fact that Britain later become far and away the biggest overseas user of the 914 appears to be a tribute to both Xerox resilience and British patience.


all they want in return is for us to provide top-quality education—not do their research for them, or anything like that. Oh, there’s a good deal of informal technical consulting between our scientific people and the Xerox people—same thing with Kodak, Bausch & Lomb, and others—but that’s not why they’re supporting the university. They want to make Rochester a place that will be attractive to the people they want here. The university has never invented anything for Xerox, and I guess it never will.”


he felt he’d been part of three entirely different companies—until 1959 a small one engaged in a dangerous and exciting gamble; from 1959 to 1964 a growing one enjoying the fruits of victory; and now a huge one branching out in new directions.


I asked him which one he liked best, and he thought a long time. “I don’t know,” he said finally. “I used to feel greater freedom, and I used to feel that everyone in the company shared attitudes on specific matters like labor relations. I don’t feel that way so much now. The pressures are greater, and the company is more impersonal. I wouldn’t say that life has become easier, or that it is likely to get easier in the future.”


world coöperation is our business, because without it there might be no world and therefore no business.


“The whole matter of committing the company to taking stands on major public issues raises questions that make us examine ourselves all the time. It’s a matter of balance. You can’t just be bland, or you throw away your influence.


But you can’t take a stand on every major issue, either. We don’t think it’s a corporation’s job to take stands on national elections, for example—fortunately, perhaps, since Sol Linowitz is a Democrat and I’m a Republican. Issues like university education, civil rights, and Negro employment clearly are our business.


I’d hope that we would have the courage to stand up for a point of view that was unpopular if we thought it was appropriate to do so.


It was a dank, dark morning, such as I’m told the city is famous for much of the year,


Making the customers whole

The death of a president

chagrin that Kamerman had come to the Exchange with his problem before the Exchange, through its elaborate system of audits and examinations, had discovered the problem for itself.


This convergence of disasters confronted them with a definable task.


fatherly-looking graduate of Harvard and of Omaha Beach, 1944


“One’s idea of public responsibility is evolutionary,”


The impacted philosophers

Non-communication at GE

“the people who were advocating the Devil were able to sell me better than the philosophers that were selling the Lord.”


CHAIRMAN Cordiner, then, had been able to fairly deafen his subordinate officers with lectures on compliance with the rules of the company and the laws of the country, but he had not been able to get all those officers to comply with either, and President Paxton could muse thoughtfully on how it was that two of his subordinates who had given radically different accounts of a conversation between them could be not liars but merely poor communicators. Philosophy seems to have reached a high point at G.E., and communication a low one.


But perhaps the problem is cultural as well as technical, and has something to do with a loss of personal identity that comes from working in a huge organization.


The last great corner

A company called Piggly Wiggly

a series of advertisements in which he vigorously and pungently told the readers of Southern and Western newspapers what he thought of Wall Street. “Shall the gambler rule?” he demanded in one of these effusions. “On a white horse he rides. Bluff is his coat of mail and thus shielded is a yellow heart. His helmet is deceit, his spurs clink with treachery, and the hoofbeats of his horse thunder destruction. Shall good business flee? Shall it tremble with fear? Shall it be the loot of the speculator?” On Wall Street, Livermore went on buying Piggly Wiggly.


Do you hear? Do you listen? Do you understand?


A second sort of life

David E. Lillienthal, Businessman

‘You think you’ll make your pile and then be independent. My friend, in Wall Street you don’t just win your independence at one stroke. To paraphrase Thomas Jefferson, you have to win your independence over again every day.’


defensiveness shown by belligerence.


Stockholder season

Annual meetings and corporate power

It was only then that I understood the nature of the advantage that the company had gained by moving its meeting away from New York: it had not succeeded in shaking off the gadflies, but it had succeeded in putting them in a climate where they were subject to the rigors of that great American emotion, regional pride.


when the role of dissenter is left to the Fool, there may be trouble ahead for everybody.


In defense of Sterling

The bankers, the Pound, and the Dollar

every exchange of currencies might be called a speculation in favor of the currency being acquired and against the one being disposed of.


European central bankers have always used French (“bad French,” some say) in talking with each other, but during the long period in which the pound was the world’s leading currency English came to be the first language of central banking at large, and under the rule of the dollar it continues to be.


the Bank of France officers are forced to keep translators at hand, in consideration of the seeming intractable inability or unwillingness of most Britons and Americans to become competent in any language but their own.


“Seven per cent will drag money from the moon,” a Swiss banker commented,


Bagehot, who had said, in his earthbound, Victorian way, “Seven per cent will pull gold out of the ground.”


If Hayes had acquired his mastery of the arcana of international banking by patient study, Lord Cromer, who is no scholar, acquired his by heredity, instinct, or osmosis.


I went down to the capital of world finance, Wall Street, to look around. A nasty wind was whipping papers through empty streets, and there was the usual rather intimidating off-hours stillness in that part-time city.