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Comments about ‘Clayton M. Christensen: The New Church of Finance: Deeply held belief systems and complex codes must be changed’

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Published: Sunday, Dec. 9 2012 12:00 a.m. MST

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micawber
Centerville, UT

This was the best piece I have read in the Deseret News in a long time. Thank you. I hope Utah's Congressional delegation takes this to heart and works with Professor Christensen to craft capital gains legislation that would help.

Emajor
Ogden, UT

This is not a very complimentary article about how money is being made in this nation. I would feel much better about the American financial system and could maybe believe the job-creator myth if there were fewer people getting rich off these kinds of balance-sheet manipulations and more people getting rich from providing goods and services that actually led to job creation.

JoeBlow
Far East USA, SC

Interesting Article.

Actually, a great concept - Graduate the long term capital benefit.

Today, we may go from a 35% tax rate for an asset held for 364 days to a 15% rate once we hit 366 days.

How about a 7% reduction every year until we get to 15% to encourage sound business practice, rather than sound tax practice.

Roland Kayser
Cottonwood Heights, UT

Excellent piece. I would add just one thing. The main reason that all this has been happening is that Wall Street's "Masters of the Universe" have figured out how to put an ever expanding share of the national economy in their own pockets, leaving much less for the rest of us.

Looking at lists of America's wealthiest people from thirty or forty years ago, one finds that it was dominated by people who made things. Today it is dominated by financiers.

10CC
Bountiful, UT

Excellent, refreshingly candid assessment of a key part of the American economy.

This "Church of Finance" metaphor also explains how rifts in American society have emerged, as the people with economic means operate in a more sterile, numbers-driven reality than other Americans do, who are occupied with making a house payment, educating and raising children, and looking toward what has become an increasingly tenuous economic future.

We need more cohesion, more of a common purpose, and incentivizing capital to stay and be more stable within US corporations would help stimulate employment stability, and growth. Human beings need faith in the future, they need stability, otherwise everyone bunkers in and focuses on their own interests more intently, divisions and suspicions arise beyond immediate social bonds.

Obama talked about "Economic Patriotism", and we need leadership from the economic powers to help revitalize the American Dream, otherwise we're doomed to a more Walmart-style, bottom_line_only economic future, with more Americans falling out of the middle class and really not giving a darn about anything, their American Dream a cynical smirk.

This is poisonous, we've seen enough of this, we should be investing in a common, prosperous future, together.

Gildas
LOGAN, UT

We need to produce more in Utah, and stop attracting big corporations into the state that provide low paid, boring jobs, that expect you to work on weekends, day and night, and to ask for permission to use the restroom.

We could produce more of our own food and clothing. We could encourage local companies and industries by giving the tax breaks to domestic, local companies. We could manufacture cars and trucks. We could encourage artisanship so we could get a tradesman who doesn't say he can't get to your roject for one or two months.

Screwdriver
Casa Grande, AZ

The banks get most of our paychecks in the form of interest payments, only a small portion of that pays down our debts. How is it they were the ones that went "broke" and needed US to collectively bail them out?

Wally West
SLC, UT

Avarice is the reason for the disconnect between Corporate ledgers and jobs.

John Stossel pointed out recently how the US tax code was manageable in 1913 but since has gotten massively & incredibly humongous.

What else happened in 1913? The creation of the Fed. Coincedence?

The Taxman
Los Angeles, CA

As Dr. Christensen points out, this "New Church" has been around for 40 years. I received a masters degree in business from a top school 30 years ago and they were teaching these short-sighted ratios, so I assume Dr. Christensen or at least his peers also teach them at Harvard.
I agree with what he says in the article, but it certainly would be more useful if he were to suggest better ratios to use than "more tons of money is better than less tons of money". And I don't think the tiny step of reducing taxes on longer-held securities (although I am not opposed to it) will change behavior in the current "trading" world one iota.
Thirty years ago, the average holding period for a stock was approximately 5 years. Now the average share is held less than one year and huge businesses specialize in making stock trades cheap and providing up-to-the-minute information about their ratios (being taught at Harvard). If "investors" are not even holding shares long enough to take advantage of the 366-day incentive, what makes Dr. Christensen think his new proposed incentive will work?

Hutterite
American Fork, UT

The new church of finance is kind of like the old church of religion. It tends to become self interested and it abandons those that it should be helping.

Twin Lights
Louisville, KY

Great piece. The corollary here is educating the human "assets". When we outsource, we do not simply take the hard asset off of our books, we outsource the jobs. In the first generation, those jobs are menial. But the next generation includes floor supervisors and lower level engineers. By the third generation, they have all the locally grown engineering expertise they need. And, with the money they have been making, the banking industry similarly develops.

Now, this can be good to help other countries gain wealth. But we are absolutely kidding ourselves if we think that shipping jobs overseas does not mean shipping the expertise as well - the human "asset" or capital (your choice).

Even ignoring these issues, our focus on short term profitability (what did we do this quarter?) causes our businesses to make many decisions that they would not using a longer term view. Some businesses become like monkeys that dance to the tune of the organ grinder so that folks will toss a few coins.

Watch the (now) old movie Other Peoples Money. Instructive.

one old man
Ogden, UT

This is an article with a lot of food for thought. It explains some things I didn't quite understand as I read "Who Stole the American Dream."

It also brings to light another thing I've noticed. The more I try to learn about subjects like these, the more I realize how very little I actually know. (Or understand, since understanding must come before knowledge.)

It also brings into sharp focus the fact that most of us who post our comments frequently here really have no idea what we're talking about. We have read or heard a few snippets of stuff here and there and jump to the assumption that we are now world class experts.

Then our egos take over and our minds turn off. We post and post and post the same old messages over and over again. In the process we drive ourselves farther and farther apart. Then we wonder why we live in a divided nation.

Perhaps we all need to spend more time learning than posting. Then, when we post, we might actually have some measure of credibility.

MarkMAN
West Columbia, TX

Probably a couple of correction should be in order. Both Apple and SAM manufacture processor chips in the US not just Intel. (In fact, they do so just down the road from where I live.) Second, government regulation has done far far far more damage than ratio controls of business. I was taught always fix the bigger problems first. As one who watched the government regulation move very important business out, and had to move several times because they did, I have had some very real first hand experience.


Mark

Mike Richards
South Jordan, Utah

An excellent article, but doesn't the conclusion just "kick the can" further down the road?

Should tax policy dictate business policy? It does. I had no idea, when I opened my first business, just how deep Uncle Sam had his fingers in my wallet. He never swept the floors or cleaned the restrooms. He never, once, showed up for work, but his "take" from my business greatly exceeded my own. I had to meet payroll. I had to payoff loans. I had to pay suppliers. I had to find capital and risk capital, but good old Uncle Sam got the lion's share.

The government told me what my equipment was worth and how much I could depreciate every year. The government taxed me on my earnings and then again if I earned interest by saving some of those earnings for future needs.

The government made my business decisions for me, because, if I ignored any "loophole", there would be little or no profits.

That philosophy is not what America is about, but that is what America has become. Businessmen are not fools. They will make a profit. The consumer will always pay 100% of the taxes.

Kent C. DeForrest
Provo, UT

Excellent piece by one of the world's best unconventional thinkers. Sometime after the year 2000, the financial sector overtook manufacturing as the largest sector in the economy. It used to be that finance existed to serve production. Now it's the other way around. When money, which is no product at all, becomes the most sought after product, something is wrong with our economy.

JoeBlow
Far East USA, SC

"within 3 lines, you completely contradict yourself.

So, Which is it?

1) "if I ignored any "loophole", there would be little or no profits."
OR
2) "Businessmen are not fools. They will make a profit. The consumer will always pay 100% of the taxes."

Ultra Bob
Cottonwood Heights, UT

Business has changed from the notion of sharing skills and benefiting the group to a system of legalized robbery of the weaker members. While we try to snuff out actually slavery, what we have now is simply “voluntary slavery” where people voluntarily set aside their rights and freedoms under the threat of starvation. Voluntary slavery is not something new, it is just the concession made by the rich and powerful when society said they couldn’t have slaves.

It is our own lazy nature that has done us in. Always seeking the easier, faster and better way to do everything. But so doing has brought us near the point where our physical and mental efforts are no longer needed and we are facing the notion that people are obsolete. If we are to survive beyond the next few years, there needs to be some changes to the paradigm of life for humans.

We must find a new way of sharing the benefits of the world. The old way of capitalism, voluntary slavery and legalized robbery, is not working any more. The events of the world would tell us that if we would only listen.

Mike Richards
South Jordan, Utah

Is anyone so foolish to think that any business pays taxes WITHOUT first charging every tax dollar owed to his customers? If government demands that a businessman "contribute" half of an employee's SS, then that businessman passes that tax on to his customers.

Obama's tax increase on the wealthy is just an indirect tax on every American.

"Loopholes" are creations of the House to shift responsibility to pay for services from one person to another. Businessmen know those "loopholes". They are not idiots. They base their business decisions on maximizing profits using every LEGAL means. Congress determines what is legal.

We can demand that Congress raise taxes on the wealthy, but unless we are totally self-sufficient, we are just telling Congress to indirectly tax us into oblivion.

The Taxman
Los Angeles, CA

Since I criticized Dr. Christensen's idea (of tax-exempting gains on longer-term held securities) as demonstrably ineffective, I feel compelled to offer better alternatives.

One more effective alternative would be to disallow all short-term performance-based compensation in the USA. Currently, outside investors encourage short-term focus through rewarding short-term successes by stock price changes. Dr. Christensen's idea (unsuccessfully) attempts to remedy this problem. But corporate insiders are also rewarded for short-term decisions through bonuses, raises and stock-based compensation based on short-term achievements. Disallowing all short-term performance-based compensation in the USA (in favor of longer-term measurements), would immediately lessen the strong personal incentives CEOs and other employees have to make decisions that temporarily increase income at the expense of long-term growth.

Another simple, yet more effective way to slow down stock trading (speculation) is to impose a meaningful financial transactions tax. I recently paid $8 for a stock trade that 20 years ago would have cost $200. Day trading would literally cease if the cost of each transaction were substantially raised so that only long-term investing made economic sense.

David
Centerville, UT

Like One Old Man, I realize how little I know and understand. I own a small business but I do not completely understand what the author was writing about. I am forwarding this to my CPA and also my brother-in-law (Harvard MBA grad) to seek their help.

What I did understand was that government tax law set up these financiers to operate the way they did (and still do) to gain profit. If I understand Clayton Christensen then changing tax law to encourage long-term investment would benefit many more: middle class jobs, reinvestment into manufacturing and industry, and the capitalists would also benefit.

But how would government revenue be affected?

It seems that everyone is greedy: the venture capitalists, the investors, the bankers...but so is the government. And our government today is as greedy as any venture capitalist. I was nodding my head throughout Mike Richards post regarding government taking so much from small business to the extent that the business can be threatened for survival. Why is government the enemy of business?

Change the tax code. Make it simpler, and encourage long-term investment.

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