Rakesh Khurana's Weblog

Tanjore for Brunch

We went to brunch this afternoon at Tanjore. Tanjore is an Indian restaurant in Harvard Square right across from the Kennedy School of Government. Dharma, the club for Indian students at Harvard, sponsored the brunch. The chicken curry and the saag paneer is excellent. For those who like Northern Indian cuisine, I highly recommend this restaurant.

Obituaries

We lost two important scholars this week: Franco Modigliani and Edward Said. Modigliani, an Italian economist, is best known for his work on how people save money over the course of their life. Said, an English literature professor by training, was also a Middle East scholar closely identified with the Palestinian cause. While I don't agree with much of what Said wrote, he was a nuanced and careful thinker. Take a look at Said and Modigliani's New York Times' obituaries.

Reform @ the NYSE

Dick Grasso resigned from the NYSE last week. Unlike previous CEO resignations which often end with a new CEO being appointed and the board of directors immunized against further criticism, I think things will be different this time. Writing in yesterday's Times, Muriel Siebert, the first woman to hold a seat on the Exchange, writes about how the clubby nature of the exchange created the corrupt culture. Siebert calls for multiple board resignations and a re-examination of the Exchange's purpose. She writes:

As necessary and obvious as these changes may be, they will not be easy for the exchange to swallow. Those who have been running the exchange for generations would have to cede control to outsiders who serve the investing public's interests before those of the financial industry.

This opportunity to reconsider the institution, its function and its responsibility to society cannot be squandered. The New York Stock Exchange is an integral part of a capital system that has made America the envy of the world. It is no accident that most technological breakthroughs come from the United States. In part because of the exchange, American companies have the funds they need to innovate, grow and start whole new industries.

Amen. Those who believe that Grasso's critics are being too hard miss the point of American capitalism. American capitalism is built on a spirit of openess and trust, that is the open society not the closed society. What is wrong with closed societies and closed markets? Along with the more particular problems that they create (such as paying some individuals excessive amounts and blocking access to positions for talented potential candidates), closed markets undermine the faith in an open market system on which financial markets rest, and that it would be monumentally expensive for society to have to replace through enforcement mechanisms. Nor is it just the financial markets whose smooth operation depends on the maintenance of trust in the basic fairness of the market system, but also all of the interlocking economic, social, and political institutions of which our society consists.

WTO Talks

With the collapse of the World Trade Organization talks in Cancun, there is considerable speculation that poor countries have done themselves a disservice by walking out of the talks. I think this view is a mistake. It suggests that the developing countries are irrational and don't recognize what is in their best interest. Since I am a big believer in free trade, I was intrigued by what Joseph Stiglitz and other critics of the WTO had to say. They make some important points. Robert Kuttner of the American Prospect writes:

The American press has been filled with pious commentaries about what a tragedy this failure is for poor countries themselves. In theory, a grand bargain could have benefited everyone, especially the poor countries with potential to increase farm exports. In this bargain, the rich countries would cut farm subsidies, and in exchange poor countries would embrace more of the rich north's agenda of rules for investment.

So why did the poor countries apparently shoot themselves in the foot? Don't they know what's good for them?

The answer is that the system is rigged against poor and vulnerable countries, and these nations have had a bellyful. For decades, the United States and Europe have set agendas for these "rounds" of trade negotiation, and the outcome invariably does more to advance the interests of the sponsors. This time, the Third World finally cohered as a strategic bloc.

This is a brilliant strategy. With the exception of a the G8, a single country has little negotiation power. As a unified block, however, they become a significant trading block. My guess is that in the next few years Europe and the U.S. are going to have to stop subsidizing the agricultural industry which is one of the few sectors in which developing countries have a comparative advantage. The scary part of all of this is that it resonates with what happened during the Great Depression where the popping of a stock bubble was followed by the collapse of international trade due to the Smoot-Hawley tarrif. As Marx noted: history repeats itself, the first time as tragedy and the second time as farce.

The Pianist

Last night, I watched Roman Polanski's The Pianist. It is based on the true story of Jewish piano virtuoso, Wladyslaw Szpilman, surviving the Nazi occupation of Poland. Adrian Brody, a thirty-something actor who grew up in Queens, New York (my 'hood) plays Szpilman.

The cinematography is extraordinary. The movie's structure parallels Dante's The Divine Comedy triology. Like the epic, the move can be divided into the three settings of Hell, Purgatory and Heaven (each entitled Inferno, Pergatorio, and Paradiso, respectively). The descent into hell starts with the Nazi occupation of Warsaw and ends with Szpilman's family being 'relocated' to Treblinka. Like Dante, Polanski painstakingly details the Nazi's crimes in order to ultimately convict them to the 10th circle. Purgatory is set in Szpilman's hideway apartment, just outside the ghetto wall and nested between a Nazi police station and hospital for wounded German soldiers. Here, we find Szpilman hiding in an apartment where he cannot make a sound only to find it furnished with a piano. If this isn't Purgatory, what is? Finally, Heaven is the Russian liberation of Poland and Szpilman once again playing on Polish radio as a recognized talent. The film ends like the the Inferno, in the 10th circle of Hell where we find the Nazi commander of Warsaw in a Russian Prisoner of War Camp -- looking much like the "frozen marsh where the Arch Traitor himself", was "forever immersed up to his breastbone."

Two years ago today I was sitting in my office when my assistant informed me that a plane had crashed into the World Trade Center. Like others, I had assumed that a small turbo-prop or commuter jet, with an inexperienced pilot at the controls, caused the accident. I crawled under my desk to plug in my Ethernet connection to see what the NY Times had to say about it. When I couldn't get on the NY Times website or CNN's, I turned on the radio on my desk. Needless to say, it was in the next few moments that I realized a history altering event had occured. A commericial jet? How could that be? Those planes have all sorts of equipment on-board to prevent such an occurence, I thought to myself. As I listened to the new, the reporter gasped and annouced that a 2nd plane just crashed into the other tower. With that, suddenly everything made sense.

I gathered my things and called my wife while running to the parking lot. She travelled to New York City on business quite frequently, usually just for the day, and didn't always let me know. I prayed as I dialed the numbers. Luckily, she was in Boston. I told her what happened and that I was going to pick up the children from school and that she should come home.

I picked up the kids and prayed again for their well-being ( I prayed alot that day). The kids were laughing, elated about the early pick-up. I think they envisioned a day at the park ending with a chocolate dipped ice-cream. I took them home and then called the rest of my family members. I turned on the television and watched the terrifying images. The smoke. The people standing by the broken windows shook me. I prayed for them. I tried to imagine myself in their position. You could tell they knew this was the end. They stared out the windows. Some of them took control of their fate and jumped. I prayed for their families.

For me, this second annniversary feels raw. The first anniversary was filled with speeches and ceremonies. Today, is more stark. And, in many ways more terrifying. Thinking about the wars in Iraq and Afghanistan and the September 11th attacks, I remembered Rudyard Kipling's line about WW I:

Our world has passed away,
In wantonness o'erthrown.

The other image I can't forget is of the people dancing in the street celebrating the attacks. I wondered about these people rapturously celebrating death. I know of no God that sanctifies the taking of life. This went beyond religion. This went to first principles of the the sociological, ideological, psychological, economical, and anthropological roots of human society. As a social scientist, I can't believe that all those who danced are simply "evil". There were women, children, the old, and young. To seem them as evil is too simplistic. It is too banal. It ignores the established fact that ordinary people under certain conditions can be extraordinarily inhumane. I think one thing that the Stanford Prison Experiments and the Yale electric shock experiments made clear is that under the right conditions ordinary people can become not only immoral, but sadistic. To simply categorize people or behaviors as evil runs the risk of seeing such actions as epiphenomenal and their actions as governed by some supernatural force that can neither be controlled or influenced or mitigated. I don't know the way forward, but I don't think this current road is going to take us where we need to go as a society, a civilization, and a people.

CNBC

I'll be on CNBC today at 6:00 p.m. to discuss Dick Grasso's pay at the NYSE. My comments will be similar to what I described in the Sept. 5th blog.

I started teaching this past Monday, so I haven't had time to add to the blog. This is not because of a lack of interest. Between the President's speech on Sunday and the latest revelations of wrong doing at Tenet healthcare and the after-hour trading of mutual funds at Bank of America, there are lots of issues directly related to governance and the role of professionalism in management.

NYSE

The New York Stock Exchange's Dick Grasso has come under fire for his extravagant pay package. People are outraged that the head of a supposed "regulatory" agency who is supposed to be a disinterested professional is paid like an investment banker. As Floyd Norris put it: Is the NYSE a quasi-governmental regulator, one with authority over every substantial brokerage firm and most of the major companies in America? Or is it a profit-making company, beset by competition on all sides?

The answer is neither. The original organizational structure of the NYSE was a self-regulatory cooperative body like the American Medical Association or the American Bar Association or the American Institute of Cerified Public Accountants. However, it has veered away from this role. In part, the breakdown of such self-regulatory institutions leads to the breakdown of professions. In its current state, we need to think of management more as a quasi-or-proto-profession. The qualities of a profession are a combination of certification, objectivity, disinterestedness, adherence to a set of professional ethics, and a service orientation. In short, professionals are supposed to put society's interests in front of their own. In this regard, Mr. Grasso has fallen short, miserably short.

Review: The Elementary Particles

Michel Houellebecq's, The Elementary Particles, is the like the aging painting in Dorian Gray. Except replace Dorian Gray's portrait with a portrait of Western society. Houellebecq sketches the structure of the atomistic and alientated life of contemporary society using the lives of two half-brothers, Bruno and Michel. Bruno, a mentally unstable poet is seeks meaning in his transient life. he spends hours in chat-rooms and Club-Meds looking for casual sex. In contrast, Michel, a molecular biologist, lives a sterile, monastic existence, and with the realization (which he is totally comfortable with) that he is incapable of feeling genuine emotion. The book parallels Aldous Huxley's Brave New World in which social institutions (sex without consequence, reward without effort, etc.) create maximal individual autnonomy and facilitate the singular pursuit of pleasure. However, unlike Huxley's world, today's society does not need a drug to lull it into narcissism. With internet chat-rooms enabling virtual relationships and the never-ending productionof self-help books emphasizing "your happiness" and credit-card inducing instant emo-material gratification, we are already in Huxley's world. Reading the book feels like looking at one of those magnifying mirrors in a hotel room. You know its your own face, but you never realized that your pores were so large, your eyebrows so mishapen, and your laugh-lines so deep.

Bye, Bye Summer

We spent the long weekend in Martha's Vineyard with good friends. It was the perfect way to end summer. The expected rains never came. Saturday was warm, almost hot. We spent it eating, swimming, hot-tubbing, and catching up with friends. The day ended on a secluded beach watching a sunset and drinking champage. Blues becoming greys. The color of the sky bleeding into the ocean.

Sunday was clear and crisp. A reminder that autumn would start tomorrow. Again, we spent the day swimming, hot-tubbing, jumping on a trampoline and riding an old-fashioned carousel. For dinner, we found an open-air, harborside restaurant. We ordered a couple of jumbo lobsters, two dozen shrimp and clams, french-fries, and fried zuchinni sticks. For desert, we had soft-serve vanilla ice-cream dipped in chocolate. I cant' find the words to describe Sunday's sunset. A sky of swirling clouds refracting the sun's light into its primary colors and then, like a perfect mirror, painting the entire image onto a canvas of still water. All we could do was sigh.