Incentives matter, so best not ignore them.

A story was doing the rounds last week that was drawing praise and admiration from various quarters:

The idea began percolating, said Dan Price, the founder of Gravity Payments, after he read an article on happiness. It showed that, for people who earn less than about $70,000, extra money makes a big difference in their lives.

The idea began percolating, said Dan Price, the founder of Gravity Payments, after he read an article on happiness. It showed that, for people who earn less than about $70,000, extra money makes a big difference in their lives.His idea bubbled into reality on Monday afternoon, when Mr. Price surprised his 120-person staff by announcing that he planned over the next three years to raise the salary of even the lowest-paid clerk, customer service representative and salesman to a minimum of $70,000.

If it’s a publicity stunt, it’s a costly one. Mr. Price, who started the Seattle-based credit-card payment processing firm in 2004 at the age of 19, said he would pay for the wage increases by cutting his own salary from nearly $1 million to $70,000 and using 75 to 80 percent of the company’s anticipated $2.2 million in profit this year.

Those doing the praising were generally of a left-wing bent, and some went so far as to say this was a vision of the future and an example for other firms to follow.  Me, I’m not so sure, and I think Mr Price’s company is going to run into trouble over this at some point.

Now I’ll start by saying that Mr Price is perfectly within his rights to distribute his own salary among the workforce in such a manner.  And as I understand he is the owner, hell he can pay them $1m per year to watch TV for all I care.  I just don’t think he’s thought through the implications.  There are several problems which I think will arise, all of them to do with incentives.

The paychecks of about 70 employees will grow, with 30 ultimately doubling their salaries, according to Ryan Pirkle, a company spokesman. The average salary at Gravity is $48,000 a year.

His idea bubbled into reality on Monday afternoon, when Mr. Price surprised his 120-person staff by announcing that he planned over the next three years to raise the salary of even the lowest-paid clerk, customer service representative and salesman to a minimum of $70,000.

Firstly, if the lowest paid clerk is now on $70,000 per year there is almost no incentive for anyone to grow professionally by taking on more responsibility, tackling harder tasks, volunteering for the shit jobs, and putting in additional hours to increase their own value within the company.  If the clerk is on $70k, why would somebody from the middle-ranks with marketable skills and a higher education apply themselves if they were on similar wedge, or work extra hard just to earn $80k when by loafing he can earn $70k?  Better to take it easy and spend more time with the family.  And this will be made worse by the plan being phased in over 3 years.  Who is going to be interested in the new night manager role now the main incentive to take the crap hours is gone?  This will be felt even more keenly in sales: how much effort is the junior salesman going to put in now he’s on $70k per year?

Secondly:

Hayley Vogt, a 24-year-old communications coordinator at Gravity who earns $45,000, said, “I’m completely blown away right now.” She said she has worried about covering rent increases and a recent emergency room bill.

“Everyone is talking about this $15 minimum wage in Seattle and it’s nice to work someplace where someone is actually doing something about it and not just talking about it,” she said.

From the above quotation I think it is safe to assume that Hayley Vogt will never leave Gravity of her own free will because she is now paid 55% above market rate for being a communications coordinator.  Nobody above her is going to leave either, so it is an equally fair assumption that as long as Gravity exists, Ms Vogt – currently 24 – will be a communications coordinator.  So by the time she’s 40, Ms Vogt will still be a communications coordinator.  Do you see the problem here?  She’s undergone no professional growth.  She can’t be promoted internally because her superiors – also being paid well over market rate – will hang onto their jobs for all they’re worth.  So if Gravity goes tits-up in the future, Ms Vogt will find herself on the job market not only facing a severe cut in her income but also competing against people much younger from whom she cannot differentiate herself in any meaningful way.  For those on the lower rungs doing jobs which don’t require much skill or training, and thus youth, energy, and flexibility are major selling points, this could be a problem.

Of course, many people doing those kind of jobs aren’t looking for a career anyway, they just want to pay the bills.  Which brings me onto the third problem: with nobody leaving, how do you get rid of the underperformers?  Normally these people would leave because, having been passed over for promotion and higher pay for a few years running, want to try their luck somewhere else.  Now Mr Price is stuck with them.

Finally, how does Mr Price intend to bring new talent into the company?  Nobody is leaving, so that means only newly created positions will bring outsiders in.  Aside from not being a very healthy environment for any company, this creates an additional problem.  If a new position is created and advertised, every store clerk within 200 miles is going to apply for the job if it pays $70k per year.  Having an avalanche of CVs hit your desk is not helpful. When I worked in Dubai we advertised for an assistant accountant position and put an advert up somewhere.  Even though we were a small, unknown company we were receiving CVs by the thousand, mostly from Indians.  The problem was almost all the CVs were from labourers, forklift drivers, and other unskilled workers chancing their arm having seen a “big” salary (and indoor work) on offer.  Sifting through them all, trying to identify who was genuinely interested in the position and had the matching skills was a hopeless task.  Gravity Payments is going to find themselves with a similar problem: how many of the tens of thousands of CVs they will receive are from people who aren’t motivated solely by the incredible pay and couldn’t care less about the actual job?  And even those who are qualified, are they confident they will secure a suitable candidate from a shortlist all of whom are overwhelmingly motivated by the pay above everything else (and know they can likely loaf once they get in)?  HR departments in major oil companies will recognise this problem.

Despite his obvious success in business thus far, having set up Gravity Payments at he impressively young age of 19, I can’t help think Mr Price is still a bit wet behind the ears:

“Is anyone else freaking out right now?” Mr. Price asked after the clapping and whooping died down into a few moments of stunned silence. “I’m kind of freaking out.”

Whilst I might be persuaded that executive pay is too high in the US and the disparity between the lowest and highest paid is too wide in some companies, progressive pay scales are used and market rates adhered to for good reasons which might not be immediately obvious.  As Tim Worstall is fond of telling us, incentives matter.  Mr Price might end up learning this the hard way.

Posted in Business, Economics, USA | 3 Comments

Visiting Russia just got Harder

I missed this, but late last year Russia introduced compulsory fingerprinting for all foreign visitors:

Russia’s President Vladimir Putin has ordered fingerprinting of foreigners as part of the processing of visas to enter the country.

The decree, signed by Putin, explained that the move hopes to help the application of law enforcement, tackle illegal immigration and prevent terror attacks.

Decree…hopes…terror attacks.  Hmmm.  How many terror attacks within Russia have been carried out by foreigners?  And when I hear the word “decree”, why is it that I immediately think of this store?

“It is expected that biometric data will be collected mainly at the visa centers, which would make it possible to avoid long queues at the Russian diplomatic missions where, as you know, people come not only to get a visa but to resolve many other issues as well,” Yevgeny Ivanov, head of the consular department of the Russian Foreign Ministry, said.

Introducing new bureaucratic hoops will make it possible to avoid long queues?   More on that later.

The move comes after the Foreign Ministry proposed to introduce biometric data for foreigners entering Russia, in response to the EU’s proposed plan to take fingerprints of all Russians wishing to enter the Schengen area in Europe from 2015.

This is half the problem with Russian immigration laws: most of them are retaliatory.  Now I’m the last person to defend western immigration requirements, and the UK’s are as dumbassed as anywhere’s, but deciding to introduce additional hurdles for visitors to Russia in response to EU proposals is simply stupid.  Putin may not have noticed but his currency collapsed recently and the Russian economy – so dependent on imports – is in the shit.  One of the best ways to bring in hard currency is to get tourists to come and swap their Euros, Dollars, and Pounds for Rubles, and this will be much easier to do with a weak domestic currency.  Erecting barriers to make the entry of those tourists harder makes no sense whatsoever, but then Russians appear content with being poorer and less well-fed in return for being able to engage in ineffectual political posturing.

I heard about this new requirement because a British friend of mine is currently going through the visa application process, and had to go to the Russian embassy in person to get fingerprinted.  The agent advised that delays of up to an hour could be expected (so much for avoiding long queues), only when he got near the front of the queue the whole system packed up and he was told “to come back tomorrow”.  So far, so Russian.  Fortunately he lives in London and so this was easy enough, but anyone coming from say Manchester and visiting one of the two centres – located in Edinburgh and London – would have had to buy another train ticket or book a hotel, and take another day off work.

And this is where Russia is going badly wrong.  There are a handful of people who want to visit Russia, and they will go through this pantomime one way or the other.  But Russia loses out on the speculative tourists who plan to go “somewhere” and then look at their options.  A few years back another friend thought about going to St. Petersburg for a weekend and asked me what was involved.  By the time I had gotten halfway through the letter of invitation, the agent, the $100-$200 fee, the form-filling, the requirement to have a hotel booking, the registration on arrival, and the rest of it, he’d already said “Nah, forget it, I’ll go somewhere else” (and the fee has gone up since the fingerprint requirement came in).  So much of European travel is people looking for quick, easy breaks.  When people have a choice of Tallinn, Riga, Vilnius, Prague, Bratislava, Budapest, Krakow and a dozens of smaller cities in Eastern Europe that they can visit without a visa, why would anyone who wasn’t specifically interested in Russia go there?  The Ukrainians figured this out back in 2005, and allowed EU citizens to enter the country visa free, thus adding Kiev to the list of cities above.  Perhaps more importantly, it meant Europeans could visit Ukraine’s prime holiday area in Crimea much more easily, and that played a large part in my decision to go there in the summer of that year.  Only now Europeans wishing to visit Crimea need a Russian visa, which can’t have done much for the visitor numbers.

So of all those people considering a trip to Russia, how many will decide it’s simply not worth the bother, especially if the price ends up including a return train fare, a hotel in London, and two days off work?  My guess is a lot.  Putin’s decree has made it as costly and as much effort just to obtain a Russian visa as it is to take an actual holiday to a neighbouring country which offers better service at cheaper rates to begin with.

Somebody, somewhere, obviously thinks this is smart.

Posted in Economics, Politics, Russia, Travel | 5 Comments

There Was Once a Road Through the Woods

Perry de Havilland at Samizdata has linked to a piece in the Christian Post written by somebody apologising for being an ardent defender of Islam in recent times, somebody who now feels the critics of Islam were right all along.  This paragraph in particular nudged me into writing a post I’ve been meaning to for a while:

Though we claim the mantle of human rights, free speech and equality, we lack the courage of our convictions when it offends someone. We make the cowardly lion look like Churchill.

Principles are strange things in the sense that they do not necessarily have to be pleasant to be attractive, and that even appalling principles can be more attractive (to some) than none at all.  I recall a section in David Hackworth’s book About Face where during the Vietnam War he interviewed an NVA prisoner to try to understand what made them fight.  Once the prisoner realised Hackworth wasn’t going to torture him, and in fact wasn’t after military information at all, he opened up.  It transpired that the prisoner was four-square behind the idea of Communism and the principles that the leadership in Hanoi was preaching and practising.  Hackworth remarked that although he didn’t agree with the cause the man was fighting for, he could not help but admire the fact that his prisoner was willing to endure extreme hardship in order to do so, and noted that he had a fist-sized hole somewhere on his person (I forget where) that was a result of some battlefield injury incurred earlier in the war.  Hackworth contrasted his prisoner’s dedication with those of the feckless ARVN who generally lacked the motivation to fight, were happy to dodge the action and let the Americans do the (literal) grunt work, and represented a regime that was morally bankrupt, corrupt, brutal and stood for nothing whatsoever other than not being Communist.  He concluded that unless the South Vietnamese get off their arses and start fighting in the way his prisoner was, they would ultimately lose the war.  And he was right.

I am about as far from a Communist as it is possible to get, yet there is no denying the ideas and principles attracted – and continue to attract – millions of people.  I have read enough Cold War history to know that the Chinese fought with fanatical, suicidal dedication to the Communist cause in North Korea, that millions of Russian soldiers died with Stalin’s name on their lips, and that a huge percentage of the Soviet people worked willingly in support of the Socialist cause for decades.  These people might be brainwashed, and they might be complete idiots, but the fact is that having been presented with a set of principles – however warped both in theory and practice – millions of them followed with unflappable dedication.

So how come the Commies lost the Cold War?  Theories vary, but one crucial element in the Western victory was the upholding of certain principles which the Communist Bloc didn’t recognise: free speech, liberty, property rights, the right to a fair trial, freedom of assembly, freedom of movement, freedom of artistic expression, etc.  Granted most, if not all, Western countries upheld these principles imperfectly at various times but this does not equate to an absence of principles any more than the largesse of the Politburo meant an absence of collectivist principles in the Soviet Union.

By upholding these principles that were alien to the Communists, the West was able to achieve two things:

1. Demonstrate how they were fundamentally different from the Communists in a positive way, i.e. better than them.

2. Provide an alternative set of principles for those in the enemy camp who wished to reject the Communist principles.

Convinced of its own superior system of government, the West thought nothing of blasting the populations trapped behind the Iron Curtain with propaganda, urging them to convert to its own way of thinking.  An American president – the leader of the free world – called the Soviet Union an evil empire not only because it was, but also because he knew those living under its rule against their will would take great heart from his words and continue to struggle.  The conviction of the West in shamelessly and incessantly promoting its own principles over the Communists’ likely did as much to inspire internal resentment over the Soviet leadership as their own degeneracy: without the former, against what standard could the Soviet leaders and their own circumstances be measured?

This brings me onto what I want to talk about, which is a thought that first started churning in my head in the aftermath of the Charlie Hebdo massacre.  That is, the question as to why moderate Muslims don’t speak out and condemn the atrocities carried out in the name of Islam.  It is tempting to say that many probably agree with the atrocities, leading one to question just how many moderates there actually are.  But shortly afterwards I read a comment in a blog by somebody who suggested putting yourself in the shoes of a moderate Muslim and asking whether you yourself would speak out.

And in doing so it became a lot clearer why they don’t.  What we are asking moderate Muslims to do is speak out against those whose actions are incompatible with our way of life.  But what we really want is confirmation that moderate Muslims have themselves accepted our way of life and the principles that underpin it, and will therefore reject the extremists in their ranks.  In theory, this isn’t much different than hoping citizens of Communist countries would accept our way of life and make things difficult for their overlords by seeking change.  But whereas during the Cold War we had clearly defined principles that we genuinely believed were superior and were not afraid to advertise them, what principles are we supposed to be waving in front of Muslims?

And that’s a question I can’t answer.  Whatever free speech we currently enjoy is fast being eroded: when citizens can be jailed for offensive Tweets or nasty Facebook comments, and homophobic remarks are grounds for arrest as a matter of course, then we can probably say that this isn’t solid ground on which we can fight a battle of ideas.  Individual freedom is rapidly disappearing as a concept now that refusing to bake a wedding cake is a matter in which the full force of the law is brought to ensure conformity: I’d not fancy my chances arguing that individual freedoms in the West are nowadays sancrosanct in a way that they are not in the Muslim world.  The state is becoming ever more intrusive, particularly into family matters: with Scotland now setting up a truly Stalinist system of shadow parenting by state officials (H/T Samizdata) it would take a brave soul to try to win over a Muslim by pointing to our superior methods of running a family.

That’s not to say the West has nothing to offer Muslims, because it clearly does.  But the differentiator which enabled them to offer all people – not just Muslims – something better was the society that resulted from first fighting for, and then upholding, the principles on which it was based.  The West appears to have forgotten that it was these principles that made its society attractive in the first place, and it doesn’t seem to realise that if it abandons those principles then it won’t be the same society; and if it’s not the same society, who is to say it will be an improvement on any other, particularly one that’s been aroud awhile?

To repeat what I quoted from the Christian Post:

Though we claim the mantle of human rights, free speech and equality, we lack the courage of our convictions when it offends someone.

If our leadership – and I use that term loosely – lacks the conviction to uphold the principles which supposedly define the West, why the hell should we expect Muslims to come out in support of them?  I suspect for many, faced with a choice between leaning towards Islamic principles and Western principles, many moderate Muslims are choosing the former because they are unconvinced that the latter even exist.  Hell, I’m not convinced they exist in any meaningful sense any more, so why should somebody who comes from a culture where they have been historically absent?

As the aforementioned blog commenter asked, if you were a young Muslim living in Britain over the last few years, which way would you lean?  Which way is the wind blowing?  When you have elected officials condemning the publication of blasphemous cartoons, and newspaper columnists suggesting Charlie Hebdo was probably at fault, would you stick your head above the parapet and argue that insulting the Prophet is a fundamental right?  When any atrocity is immediately followed by politicians mumbling vague approximations of supposed bedrock principles which they contradict in the very same sentence through use of the word “but”, and fall over themselves to assure you – a Muslim – that this is nothing to do with your own principles and faith, and then an utter headcase is invited for an interview on the state-owned TV channel where he defends the bloodshed and nobody says a peep: which way are you going to jump?

As the Christian Post article goes on to say:

In reality, those who criticize Islam, especially reform minded Muslims, are the bravest of the brave. They are literally putting their lives at risk by the simple act of criticizing the Quran, Muhammad, and Sharia.

It’s hard enough as it is to get Muslims to question aspects of their faith they might find distasteful and risk the opprobrium of their family, friends, and community.  But it was equally hard to get Russian citizens to criticise their own people and system as well.  Back then, we realised the importance in upholding our own convictions and demonstrating our principles in the struggle to convert people away from Communism and to adopt our way of life.

But today we have abandoned our principles, yet at the same time we expect Muslims to start questioning theirs.  Somebody with principles will not abandon them – even if they are appalling – unless there are alternatives on offer.  And although I see much merit in the principles on which Western society was based, the past decade or two has seen them eroded to such an extent that their function as an alternative which others can adopt has diminished to the point that few appear to be taking them up any more.  What’s more worrying, as David Hackworth’s prisoner demonstrated, those with principles – regardless of what they are – tend to prevail over those who are operating with none.

If the West wants its way of life to continue its citizenry had better rediscover the principles on which it developed and not only start upholding them, but demanding their leaders do the same.  They’d be wise to consider that the Muslims they are hoping to convert already have principles, they’ve been following them faithfully for hundreds of years, and there is very little they would have seen in recent years which would make them do otherwise.

Posted in General Observations, Islam, Politics, Terrorism, USSR, Vietnam War | 11 Comments

This will have Ronald quaking in his boots!

Michael Jennings alerts me to a new business idea in Russia:

Russia has a grand plan to launch its own, patriotic fast-food chain to rival Western burger joints like McDonald’s and rescue its struggling farmers.

The $18-million initiative stems from brothers Nikita Mikhalkov and Andrei Konchalovsky, two of the country’s most famous film directors.

Both have poured scorn on Western influence in the past and are known for their close ties to the Kremlin.

The brothers have already picked a name for their brainchild: “Let’s Eat At Home!” (Edim Doma!)

Andrei Vorobyov, the governor of the Moscow region, has welcomed the project.

“It’s a good idea,” he said. “Small businesses and chains create jobs, and the food produced on our territory is perfectly suitable for these cafes.”

The deputy chairman of the regional government, Denis Butsayev, has already hailed the proposed chain as a “McDonald’s killer.”

“The goal of this project is to promote import substitution and create alternatives to Western fast-food chains,” the brothers wrote in their proposal, quoted by the Kommersant daily.

The brothers want to open 41 cafes in the Moscow and Kaluga regions, all supplied by local kitchens and factories. Up to 40 percent of the menu will be made from regional produce.

This is dumbassed on so many levels.  Firstly, as I mentioned here:

The primary beneficiary of McDonald’s in Russia are those Russians wishing to purchase its products, who number in the millions.

The secondary beneficiary of McDonald’s in Russia are the Russian owners (it is a franchise), managers, employees, and suppliers whose income derives from its operations.

Pinching customers from McDonald’s is unlikely to result in a boost for Russia at the expense of the west.

Secondly, Russians eat at McDonald’s because they like McDonald’s.  They don’t eat at McDonald’s because they cannot find cafes selling pel’meni and borsch to sate their hunger.  As has been proven in any country you care to mention – but let’s take France as a good example – you can easily find an alternative burger which is almost always better.  But something about the whole McDonald’s setup, i.e. not just the food, attracts people.  I suspect eating in McDonald’s for young Russians is, like in France, seen as a cool thing to be doing.  Good luck getting the kidz to buy into the idea that ordering buckweat washed down with kompot is now cool.  As the article points out:

McDonald’s remains hugely popular among Russians, despite a number of recent setbacks amid deepening tensions between Russia and the United States.

Thirdly, given the low probability of being able to compete with McDonald’s, if this scheme gets lanched it will likely take business away from the dozens and dozens of small, independent stolovayas and cafes that already sell Russian food using locally-sourced produce.  The knock-on effect will therefore be felt by their existing suppliers and probably result in some of the current alternatives to McDonald’s going out of business.

Fourthly, if prominent Russians wants to “rescue its struggling farmers”, “create alternatives to Western fast-food chains”, and “create jobs” then they might want to start by getting rid of the brazen gangsterism, thuggery, and corruption that infest the entire country and prevent these things happening of their own accord.  But no, this is Russia so:

The $18-million initiative stems from brothers Nikita Mikhalkov and Andrei Konchalovsky, two of the country’s most famous film directors.

Mikhalkov and Konchalovsky had reportedly called on Russian President Vladimir Putin to help secure government backing for the project in light of its “sociopolitical character.”

According to Kommersant, Putin had personally ordered Deputy Prime Minister Arkady Dvorkovich to “examine and support” the proposal.

Under the program, 70 percent of the sum is provided by banks under a state-guaranteed loan, with the remaining 30 percent coming from private investors.

State-controlled Sberbank has been touted as a potential lender.

[The government] rejected the brothers’ request for direct funding at a government meeting late on April 9, suggesting that the would-be entrepreneurs should instead seek funding through Russia’s existing scheme to support small businesses.

Instead we have two politically-connected multi-millionnaires looking for state-financing of their pet project whose major selling point is that it represents the type of crude patriotism that is currently in vogue with the President.  And although they appear to have had their appeal for direct funding rejected our multi-millionnaires, who were able to meet with Putin in person, have been advised to raid the state fund set up to assist small businesses.

I’m wondering how this project represents anything different in Russia, let alone an improvement.

Posted in Business, Russia | 8 Comments

The Failure of Russian Projects

The Streetwise Professor writes about another ambitious Russian state project which has gone badly off the rails, this time the Vostochny Cosmodrome project.  As usual, the project is way behind schedule, way over budget, and workers haven’t been paid for months.

All of this would seem drearily familiar to anyone who has worked on Russian projects, but outsiders might not know the mechanism behind the failures.  Russian certainly would, but only those who have gotten their hands dirty on a project, i.e. the mal’chiki-mazhory who are the most enthusiastic of grand Russian projects won’t have a clue.

The problem is not in the experience, competence, or attitude of the technical workforce.  Russia has a ready supply of clever, motivated, experienced, and competent engineers and technicians.  These men and women are more than capable of designing and constructing pretty much anything in Russia.  Granted, it might not look too pretty and the design might be a bit dated, but it will work as intended.  The problem is in the management of these skilled resources.

The root cause is that owning a successful company in Russia is a result of your being allowed to do so by virtue of your personal connections or the muscle you can deploy (preferably both).  Without one of these, you are never going to be able to run a company large enough to execute a sizeable project, as you will be shut down or forced out by the local powerbrokers – either government authorities or gangsters – before your business is anywhere near mature enough to bid for large contracts.  Competence, a sound business plan, or good management practices count for nothing if you don’t have connections or the muscle to defend yourself.

As such, all players bidding for a large engineering and construction contract will have achieved and maintained their position by something other than technical competence and delivery.  The problem is further compounded by the fact that those very same connections which allow them to operate are used to determine which company gets the juicy contracts.  The award of contracts in Russia is therefore an exercise in nepotism; the selection of contractors is done not on the expectation of competent execution, but by which company offers the most beneficial kickbacks, favours, counterfavours, and financial rewards to those who have the final say.

This would not be a problem in itself if the winning contractor has within its organisation the skills required to execute a project competently.  Surprisingly, quite a few of these contractors do: they have on their staff the experienced technical resources that I mentioned earlier in the post.  Or even if they don’t, at the beginning a contractor will hire in the competent people and the project will start well.

The problem comes when the cashflow situation goes belly-up.  This always happens for the simple reason that cashflow is very difficult to manage on any project and especially so in Russia.  Whereas normally any contractor will have demonstrated their skill in managing cashflow by virtue of a proven track record and still being in business, in Russia this isn’t a requirement at all: personal connections are what matter.  So on Russian projects there is a strong likelihood that the management of the entity in charge doesn’t know much about cashflow, or indeed any other aspect of running a normal business.

Whereas some aspects of business can be ignored in favour of lies, threats, and pig-headedness, e.g. HR, HSE, quality, accounting, etc. cashflow isn’t so easily ignored.  If your bank account is empty, then you can’t pay suppliers; if suppliers aren’t paid, you don’t get the materials and equipment; if you can’t get the materials and equipment, you can’t make progress; and if you can’t make progress, you can’t invoice for the next stage payment.  Managing cashflow on a project is a very specific skill, and even major oil companies get it wrong and have to rely on the parent company and partners having large cash reserves to keep the project solvent.  Most Russian companies simply don’t possess this skill and probably few CEOs appreciate what it is, not having attained their positions through business acumen.

If a project experiences a problem with cashflow, one of the early signs is the workforce not being paid on time.  This is particularly true in Russia.  In countries like Russia and Nigeria, shafting the workforce by not paying them on time (or at all) appears to be perfectly acceptable behaviour in the eyes of many Managing Directors.  Indeed, some almost seem to think it a very clever way of saving money and engage in this practice even when they are flush with cash.  I knew several engineers and technicians in both Russia and Nigeria who had quit previous jobs having been owed months and months of wages, and given up hope of ever seeing it.  So if the company in question had experienced and competent technical staff on their books at the beginning, the best of these will leave once the pay problems start, with the rest following in a steady trickle depending on how bad the situation gets.  They will be replaced by inferior people, who will also get fed up and leave, to be replaced by even less-qualified people, and so on in a vicious circle until – like I saw in Russia – the site is filled with undocumented, uneducated rural folk from Tajikistan and North Korea working for meagre cash-in-hand wages.  When this manpower drain is coupled with the other side of the cashflow problem – the suppliers not being paid, hence materials not being delivered to site – the situation is almost impossible to reverse without massive cash injections from somewhere.  And this being Russia, the project owners are not the sort to be handing out extra cash even assuming it is available.

So in short it is a management problem, particularly their inability to manage cashflow.  This is compounded by the fact that the sort of people who manage large contracting companies in Russia are the sort of people who would treat the project account as their own personal fund for the purchase of dachas and Porsche Cayennes in the days after the initial advance payment, and also the sort of people who would think nothing of shafting the workforce and suppliers by not paying them for months or years.  Few, even in 2015, seem to understand the concept of a market for skilled labour which enables a skilled Russian welder to walk off the job if he hasn’t been paid and pick up another one elsewhere.  For those managers skilled only in Soviet-style thuggishness and corruption, they have yet to understand the Soviet labour system of being shackled to your workbench doesn’t, for the large part, exist any more.

This is why, despite Russia having easily enough technical resources to complete such a project, the Vostochny Cosmodrome project has been unable to even pay its bill for lighting.  The failure was never about Russian engineers being useless, or lazy, or too few in number, or Russian contractors not knowing how to do complex works.  It was always about that one thing Russia never had in the Soviet times or now, the one thing which they increasingly insist the West cannot help them with: managerial competence.

If somebody in Russia could harness Western management practices with local technical resources, we’d see a vast improvement.  One chap did this once, went by the name of Mikhail Khodorkovsky and had a company called Yukos.  Whatever happened to him?

Posted in Business, Engineering, Russia | 11 Comments

Meetings in France

Over at Tim Worstall’s gaff, reader Andrew M alerts me to this piece in the New York Times on the subject of French, English, and American conversations.  This bit had me nodding along vigorously:

But many modern-day conversations [in France] make more sense once you realize that everyone around you is in a competition not to look ridiculous. When my daughter complained that a boy had insulted her during recess, I counseled her to forget about it. She said that just wouldn’t do: To save face, she had to humiliate him.

This is probably worse in Paris, and among the professional classes. But a lot of French TV involves round-table discussions in which well-dressed people attempt to land zingers on one another. Practically every time I speak up at a school conference, a political event or my apartment building association’s annual meeting, I’m met with a display of someone else’s superior intelligence.  Jean-Benoît Nadeau, a Canadian who co-wrote a forthcoming book on French conversation, told me that the penchant for saying “no” or “it’s not possible” is often a cover for the potential humiliation of seeming not to know something. Only once you trust someone can you turn down the wit and reveal your weaknesses, he said.

Meetings in France are perhaps the greatest single source of puzzlement in the working lives of expats.  Anyone from the Anglo-Saxon world will sit through a meeting with no agenda that started late and concludes (also late) with no substantial decisions being made and wonder what the purpose of it was other than to offer workers an opportunity to demonstrate how wonderfully clever they are in front of their peers.  The way in which meetings are conducted in France was a major subject covered in my intercultural awareness training when I first arrived, and remains a frequent topic of conversation among the expats.  Apparently, according to the article, this sort of behaviour has a long history:

Life at Versailles was apparently a protracted battle of wits. You gained status if you showed “esprit” — clever, erudite and often caustic wit, aimed at making rivals look ridiculous. The king himself kept abreast of the sharpest remarks, and granted audiences to those who made them. “Wit opens every door,” one courtier explained.

Indeed it does.  An inability to answer a random, irrelevant, and often daft question in a French meeting will demonstrate that a speaker is “unprepared”, and thus possibly unsuitable for promotion.  Hence he or she must “prepare” by stuffing their presentation with dozens of slides containing table after table of raw data in Font 8 or smaller, which are preceded by five or more slides of “context” containing sentences such as “In the beginning God created the heaven and the earth” and “When viewed in an inertial reference frame, an object either remains at rest or continues to move at a constant velocity, unless acted upon by an external force.”  Given French presentations normally consist of the speaker reading the contents of a slide line by line, one after another, it’s no surprise to learn that meetings can run on for hours.

Whether these practices are fit for a modern business operating in an increasingly competitive and globalised world is a matter for debate.  A glance at the French economy and unemployment rate would suggest not.  Us Anglos could learn a lot from the French in many fields, but conducting meetings and delivering presentations are not among them.

Posted in Business, France | 12 Comments

Job vacancy opens on Sakhalin

Like NKVD chiefs under Stalin and Hamas leaders, it appears being governor of Sakhalin oblast’ is a risky business:

Alexander Khoroshavin, the governor of the Sakhalin Region in Russia’s Far East, has been arrested along with three of his associates on suspicion of taking a substantial bribe. According to an investigation into Khoroshavin’s activities, the governor received $5.6 million for his part in approving a contract for the construction of a local thermal power station.

On March 4, law enforcement authorities searched the government building of the Sakhalin Region as well as Khoroshavin’s official residence, dacha and apartment in Moscow. In the course of the investigation, the agents found large sums of money, as well as a large amount of valuables.

Khoroshavin had held the post since 2007 when his predecessor was forced to resign, allegedly due to non-action when an earthquake struck the island but possibly because he “wasn’t persistent enough in the battle against foreigners”. I blogged about this here.

This being Russia, the arrest took place as depicted in the picture below:

Because having FSB agents dressed like the Provisional IRA arresting a governor decked out like a football hooligan does wonders to dispel stereotypes about Russian law enforcement.

Posted in Politics, Sakhalin | 14 Comments

Tickled Pink

When I read stories like this, I can’t help but get the impression that Australia is going to disappear up its own arse before too long:

The pink jersey worn by Australian rugby league referees is being scrapped as there is a feeling among officials that it undermines their authority.

So far, so meh.

But the move has come in for criticism for alienating certain groups.

Dr Tom Heenan, of the National Centre for Australian Studies, said: “I don’t think this move away from pink really supports social inclusion.”

Heenan told the BBC World Service that the change risks alienating the gay community and breast cancer awareness groups.

Leave aside for a moment the laughable idea that Australia is a tough, frontier nation and the even more laughable fact that certain of its menfolk go on holiday in Japan, aged 40, wearing a t-shirt saying “Harden the f*ck up!” on the front.

Really, people are going to become alienated by rugby league referees changing their shirt colour?  What a load of bollocks!  But it’s yet another example of the most patronising language deployed against any given group of people coming from those who profess to speak on their behalf.

I assume there are a lot of gays in Australia who like watching rugby league, and I doubt there is a single one who genuinely gives a shit that the referees are not going to wear pink any more.  Probably because, unlike the crude stereotype Dr Heenan is peddling, most gay men don’t go all giddy over the colour pink any more than they have limp wrists and wear bottomless chaps.

Then again, Dr Heenan is an academic.  Here’s what his profile at Monash University’s website says:

Tom believes that learning should be informative.

Just think: that is only the second most stupid Tom Heenan line I have posted today.

He likes nothing more than taking students on the road. His students sample life in Outback New South Wales. He introduces them to the mining community around Broken Hill, and the endless expanses of Eldee Station and the Mundi Mundi Plain.

They ride camels, visit the ghost town of Silverton and meet the indigenous custodians at Lake Mungo National Park. Students explore this and other Australian places and issues as part of Tom’s Australian Idols: Exploring Contemporary Australia unit.

I have no idea what Dr Heenan teaches, but his students would be forgiven for thinking they’d joined a rambler’s association by mistake.  I wonder what they get charged for this?

Posted in Australia, Education, Sport | 13 Comments

Getting beds delivered in France

Well, our beds got delivered.  Yup, a couple of professional, uniformed, well-groomed young men turned up in a Compagnie du Lit transporter – the one we’d heard so much about last time – and installed our beds without a hitch.

Heh.  Only joking.

What happened was a couple of Algerians turned up in a rented Europcar van, one of whom was in a foul mood.  Within 10 seconds of trying to get a giant mattress in the elevator, he started screaming that the elevator was shit, and the stubborn mattress corner that wouldn’t quite fit he tried to persuade in by booting it as hard as he could.  This is the mattress I’d forked out about 800 Euros for.  They appeared to be in a blinding rush, the grumpy one hurling bits of bed in the first room he found and then shouting at me for telling him it was in the wrong room.  He then got upset because I said if he drags that dirty plastic mattress cover across my wallpaper again I’ll kick him out and refuse to sign for anything.  The less grumpy one leapt in and said “Sorry, but my friend is very tired”.

Like I give a fuck.

No, they could not assemble the beds (as I’d been promised by the salesman) and no they couldn’t take away the packaging (as I’d been promised by the salesman) because they work for a different company and their boss had told them they could not and blah blah blah.  Get the fuck out of my apartment, and tell your friend to have a shower some time in 2015.

So there you have it.  If you go to the one of the largest, nationwide bed suppliers in France you pay a few thousand Euros up front, then they give you all kinds of reasons why they can’t deliver them at a time of your choosing making references to the “transporter”, only to discover they’ve awarded the delivery to a couple of angry Algerians who’d nipped down to Europcar the day before and hired a van.

The beds themselves are damned good, though.

(Oh, and before anyone leaps in and tells me how wonderful this sort of thing is in the UK, last month I ordered a small item from a British shop online.  They sent it to my office address in France only neglected to put my actual name on it.  My office building has about 3,000 people in it.  So the mail room handed it back to the UPS driver and it was never seen again.  It took several threats of disparaging reviews and blog posts to persuade the company that they were at fault for not putting my name on the delivery, and that they should send a replacement.

And I should also mention that Darty delivered a fridge and washing machine on the same day the beds arrived, and that went like clockwork.)

Posted in Customer Service, France | Leave a comment

On the killing of Boris Nemtsov

I received the news that Boris Nemtsov had been murdered as I was leaving the cinema.  When I jumped to the news sites to confirm the story, my first thoughts were that this is another Kirov.  Sergey Kirov was a popular leader in the post-Lenin Soviet Union, and was shot and killed by unknown assassins in 1934.  Speculation abounds that Stalin ordered the hit, but despite the obvious threat that Kirov posed to Stalin’s leadership, there is no evidence which supports his involvement.

What we do know is that Stalin siezed the opportunity to launch a nationwide campaign of repression against enemies both real and imagined, having shed crocodile tears over Kirov’s death and vowing to handle the matter personally.  Involvement in Kirov’s assassination became a common accusation in the show trials that followed, as Stalin consolidated his power in what became known as the Great Terror.

Before I had a chance to post this, Streetwise Professor had noted the same parallel:

With a chutzpah that puts OJ Simpson’s pledge to track down the real killers to shame, Putin announced that he is putting his Chekist skilz to work and taking personal charge of the investigation.

In other words, we are going to see a reprise of the Kirov murder, which Stalin exploited to justify the purges that began soon thereafter. Note the similarity:

“Comrade Stalin personally directed the investigation of Kirov’s assassination. He questioned Nikolayev at length. The leaders of the Opposition placed the gun in Nikolayev’s hand!” (Barmine, Alexander, One Who Survived, New York: G.P. Putnam’s Sons, 1945.)

Perhaps the anti-war activities and revelations about Putin’s lies about Ukraine were the proximate cause of Nemtsov’s killing. But I think that the murder serves a far larger purpose for Putin. It eliminates a gadfly, yes, but Nemtsov was hardly a threat. But a la Stalin and Kirov, the murder gives Putin a pretext to unleash a full-scale repression.

As with the murder of Anna Politkovsyaya (fitted-up Chechens notwithstanding), I doubt we’ll ever know who killed Nemtsov because, as the Prof. points out, Putin’s personal involvement will:

“[E]nsure that no mistakes are made that could result in the identification of the real executioners. There are frames to be fitted.

Indeed.  The last thing that Putin et al will be interested in is finding the killer, they’ll care far more about exploiting this for all it’s worth.  Although it would be tempting to suggest Nemtsov was whacked on Putin’s orders, I think this would be unlikely.  I don’t believe Nemtsov posed enough of a threat to Putin’s rule, and direct assassinations are not his style.  I suspect it was more of a case of Nemtsov being a modern day Thomas Becket, and I was about to post this when I noticed David Duff had beaten me to it:

So, on the day that ‘Vlad the Impaler’ successfully imitates Henry II of England by asking the Russian equivalent of ‘Who will rid me of this turbulent priest/irritating critic’ … the exceedingly courageous, liberal politician, Boris Nemtsov, was shot down in cold blood by four gunmen.

Perhaps some hothead, hearing Putin had a problem, jumped in to do his patriotic duty?  With this sort of thing going on, it will be difficult to rule out an independent group thinking they were doing Putin a favour:

Putin’s Russia has crossed a Rubicon: it now has sanctioned the Anti-Maidan Movement, a domestic version of Hitler’s storm troopers, and thus created a monster that almost certainly will engage in pogroms against one group or another in the future, according to Moscow commentator Matvey Ganapolsky.

As Ganapolsky reports, “the new Russian storm troopers call themselves ‘the Anti-Maidan Movement” and have ostensibly been created by the Militant Brotherhood, the Union of Afghanistan Veterans, the Central Cossack Forces and the Night Wolves, thus allowing the Kremlin plausible deniability about who and what is really behind them. (h/t Samizdata)

There is an interesting discussion going on over at The Dilettante’s place which includes a list of possible perpetrators.

Personally I have no idea, but there is one thing of which we can be absolutely sure: the Russian population will swallow wholesale whatever bullshit the Kremlin will come out with.  For a nation of individuals who believe they can sniff out bullshit across a mile of Steppe – which they often can – they don’t half believe in some batshit insane conspiracy theories.  Take a look at this comment, from a Russian, over at Mr Duff’s place:

It’s a sort of strange… the last summer… the USA insists sanctions against Russia to be introduced, the EU doesn’t go for it… MH17 falls… and then EU introduces the sanctions.

The end of the winter… the USA insists new sanctions against Russia to be introduced and Russia is to be isolated the EU doesn’t go for it… a well-known (but not popular) oppositioneer is killed… what’s next?

Yet laughably, a few comments down the same chap points to an article in The Daily Telegraph and says:

If anyone would like I can provide a step-by-step brainwashing analysis of the twaddle written in the article below. It made me laugh. However, as Russian proverb says – it would be merry if it wasn’t so sad. The West judges about Russia by that kind of scribbles made by propagandists.

There’s a lot of this.  Otherwise intelligent Russians are convinced everything they read about Russia is unalloyed, CIA-produced propaganda whilst simultaneously believing the most Blofeldian conspiracy theories dreamed up for domestic consumption.  This is by no means unique to Russia, but it is probably more prevalent there than anywhere I’ve been save the Middle East (there, you’d have little difficulty persuading the bloke at the next desk that the moon is really an Israeli weapon aimed at controlling the minds of American presidents).  I remember being in Sakhalin shortly after the South Korean warship ROKS Cheonan was sunk.  I was at a barbecue and one of the Russian engineers who I vaguely knew – an intelligent, professional man – declared confidently that the Americans sunk it and – these were his exact words – he was “an expert in this subject”.  His expertise consisted of his having studied in South Korea, and this was apparently enough to conclude that the Americans had sunk it in order to demolish any hopes of a peace deal between North and South Korea thus allowing them to keep their troops on the peninsula and dominate the region.

Now there are no doubt plenty of people in the West who also believe this bollocks and more like it, but generally they are on the crankier end of the political spectrum and have limited influence beyond obscure truther web forums.  But in Russia, this kind of stuff is peddled on government media and gobbled up by the mainstream population. I mentioned in an earlier post that most Russians believe they had no choice to invade Crimea because the Americans were about to build a naval base there.  The accept without question the Kremlin line that Russia cannot tolerate having Nato on its borders, despite Russia enjoying borders with Poland as a Nato member since 1999 and Estonia and Latvia since 2004.

So I think it will come as no surprise if, in the coming weeks, we hear from ordinary Russians that Nemtsov was killed by American spooks looking to discredit Putin/escalate the Ukrainian crisis/galvanise the Europeans into accepting stiffer sanctions and all manner of other nutjob conspiracy theories.  And all the while they’ll find their own freedoms curtailed, their internet monitored, their economy crumbling, and more outspoken people beaten or killed as Russia rushes headlong back to the murderous, chaotic, and impoverished 1990s – and possible further.

All in the interests of gaining “respect”.

Posted in Politics, Russia | 8 Comments