framing

José’s last post made me think of visualizing processes.  Of late, I’ve been thinking about how Jim Cramer had his head handed to him by Jon Stewart on the Daily Show (link to 3/12 Cramer episode).  Stewart mentioned how markets are two-tiered, one for the insiders and one for the rest of us.  The warnings were out there that the system is broken.  One Frontline from a few years ago, Dot Con (2002),  talks about how during the dot com boom, initial public offerings (IPOs) of stock were rigged by the powers that be.  Another, The Wall Street Fix (2003), discusses the circumstances that led to the World Com bubble that led to a meltdown and eventually a $1.4B settlement between regulators and 10 Wall Street firms.

Sociologists often view markets as social constructions.  I tend to view markets as like sausage.  You really don’t want to know too much about the details of production.  An example of this is Google IPO in 2004, a novel approach which became riddled with turf wars involving the status quo.  Google sought to price its initial offering of stock in a more fair and equitable manner, eschewing the “insider” bias typical of IPOs.  A 2005 American Sociology Association presentation by Martin Barron noted Google’s intentions:

“Google’s IPO eschewed the traditional method for pricing and allocating shares for an unconventional auction format. This was an attempt to minimize the underpricing of its shares and allow a broader class of investor access to IPO shares. By pursuing this more equitable approach, however, Google threatened the enormous profits that IPOs had previously generated for entrenched Wall Street interests.” —The Google IPO

This NYTimes graphic tries to explain what Google intentions with a modified version of what is called a Dutch auction.

Personally, all you viz kids out there, I think the above is a horrible graphic.  I reworked it, as I do for when I teach data visualizations and highlight my (ahem) mad Photoshop skillz:

In my graphic, I have price on the Y-axis & number of shares on the X-axis.  Generally speaking, investors bid a given number of shares at a given price.  Starting at the highest price, the number of shares bid for is tallied until all the outstanding shares are allocated.  The price at which the last bid that allocates all shares becomes the offer price.  So, even if you’re the highest bidder, you buy shares at the offer price .

I like the idea of markets actually moving towards satisfying the underlying assumptions that economists make.  I feel the Dutch auction moves towards that by reducing the transaction costs that often go to the investment banks and increases fairness by not allowing insiders to buy at a deflated price, only to flip (dump) the stock just after it’s offered and reap huge profits.

Of course, there are consequences for countering Wall Street, as Barron notes:

“… far from passively accepting this challenge to the status quo, these interests actively worked to ensure that Google’s IPO—and hence the auction format—would be seen as a failure.”  —The Google IPO

Lo and behold, look at how the business press framed the IPO, despite it being a “success” in Slate:  “Four Ways Google Failed: How the IPO didn’t change Wall Street.”  So, we arrive full circle to Jon Stewart who quipped that maybe the business press should be more than cheerleaders for the status quo.  Perhaps business schools should consider this, as well.

One of my students sent me this interesting graphic that suggests we’re getting there.

This graph suggests that our stock market losses are equivalent to the losses during the great depression for the same time period.  Granted, this represents only one data point. Here’s another:

Nearly one in five own more than homes are worth – Time Magazine.

There is plenty of counter-data to suggest that we’re in a slowdown.  Unemployment is “only” 9.1 percent, a far cry from the 25% unemployment during the peak of the great depression.  I’m more interested in the question of how and when we construct a depression. Rahm Emmanuel has achieved conservative blog infamy for saying “Never let a serious crisis go to waste.”  Indeed, the Obama administration has initiated an agressive policy agenda (education, health care, environment, budget, bank bailout, housing, etc.)   The policy might fit the times, but Emannuel’s sentiment  reflects the investment an activist government has in constructing a depression.  An increasing amount of data suggests that “if the construction fits, wear it.”

KPFA in Berkely has a wonderful radio show called Against the Grain.   Tuesday’s show had an interview by the host C.S. Soong with William Irvine, a philosophy professor at Wayne State University.  The talk fouced on Irvine’s new book “A Giude to the Good Life: The Ancient Art of Stoic Joy.”  The book focuses on the anicent Greek/Roman philosophy of Stoicism.  In the interview, Irvine notes that the goal of the Stoics was “tranquility” or the moderation of passions and desires which often lead us towards emotional higs and lows.  He claims the stoics did this through reasoning.  If you want a brand new car that you don’t need, the Stoics prescribe that you think about your current car being stolen and how that loss would make you feel.  That in turn would make you appreciate your existing car more.

My policy class is looking at metaphors and symbols in politics and how they are used to frame debate about issues.  A growing consensus in emerging on our biological predispositions to become vulnerable to frames.  Matt Bai has a good New York Times Magazine article that describes the Democratic party’s love affair with George Lakoff and his theories of framing.  But listeinging to Irvine’s description of the stoics makes me think about how much we’ve allowed ourselves to succumb to emotion and desire in political discourse.  The Greek conception of man (people) was that they were half animal and half god.  The animal was the impulsive, irrational side and the god was the reasoned, logical side. I contend that our politics have drifted towards appealing to our “animal side.”  See Frontline’s great documentary The Persuaders for an example of emotional appeals.

Of course politicians have always appealed to lower instincts in making claims to power.  But do we have a responsibility to create a “push back” from the “god side.”

What are the consequences of policies that are sold to us using strong emotional appeals?  Should we as a society demand that our citizens work to cultivate virtues like tranquility and reason?  Or has the train left the station… message makers have become much too sophisticated at pushing our emotional buttons that reason’s not making a comeback, and it hasn’t been here for years  (apologies to L.L. Cool J).

Bear with me with my French references.  First Bourdieu and now Ségolène Royal. Last spring, I followed the Royal/Sarcozy campaigns in the French Presidential elections, which was full of frames.  Ségolène wasn’t a folksy “hockey mom” type with (say) non-Parisian French and a homespun demeanor of  a country “girl” from Provence.  No, “Ségo” was a “hottie” Socialist, who was the daughter of a general and a disciple of François Mitterand in the 1980s.  She and her romantic male partner, François Hollande (also a Socialist politician) both won seats in 1988 and rose in the ranks of the party throughout the 1990s.  Despite having 4 children out of wedlock, Ségo navigated the French culture wars.  I’m sure it helped she was deemed as sexy and charming.  Her version of femininity resonated with many.  In early 2006, Salon.com, true to type when it comes to missing the point, had an article comparing Ségo Royal to Hillary Clinton.  The Salon.com similarities are superficial and incidental in my book, but the Salon piece did bring up two issues:  (1) the issue of credibility and (2) having an ideologically confused message/platform.  In a post mortem article on her loss, these issues would sink her, along with Sarcozy’s “on code” messages tapping into the concerns and worries of many French citizens.  While her specific “femininity” frame may have helped her, it may have also been a dual-edged sword.  What are the “rules” for a woman be sexy and credible with the masses?  In the end, Ségo’s credibility was hurt by her policies seeming improvised, as she was campaigning.  In addition, the socialist “code” wasn’t on track and failed to resonate with the fragmented left.

How can this relate to McCain/Palin?  I think that McCain was expecting to use Palin as a critical “selling proposition” to the ticket, in addition to having a “wow” factor.  I think Palin was expected to mobilize the conservative base while still having appeal to the moderate “everyperson,” i.e., hockey moms and Joe Six-pack.  If Palin is going to be front-and-center and in the campaign trenches, I’m afraid the “credibility” issue will always be an albatross.  She has been framed in a certain way and now she has to expend so much energy to dispel that perception.  Think Swift Boat veterans in 2004.  Was she framed this way due to her gender or her brand of femininity?  Even if she appears competent and knowledgeable, is the public primed to expect a gaffe from her and will this undermine the credibility of the entire ticket?