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Sydney Williams
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Sydney Williams is Founder and President of Lyceum Associates (, exploring transitions in health care, IT, financials, and the economy.
My company:
Lyceum Associates
My blog:
Talking Transitions
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  • Book Review: 'The Social Animal'
    THE SOCIAL ANIMALDavid Brooks delivers a powerful narrative. The Social Animal assimilates studies in neuroscience, sociology and behavioral economics to paint a composite picture of the world in which we live.

    It's not an obvious investment book, but it encompasses many aspects of market pyschology and corporate behavior.

    Nor have critics widely embraced it. (Do they have to?) I enjoyed it, because it frames a conversation that until now has mostly occurred in silos across academic disciplines.

    According to Mr. Brooks, who is a New York Times columnist, we live in a bifurcated world. On the one hand, we promote high-achieving cognitive skills, and, on the other hand, we ignore intuition and valuable "soft skills".

    He describes this great social fissure from the perspective of two characters, Harold and Erica.

    As a child, Harold enjoys two loving, married parents. He plays with imaginary friends, his stories end happily, and he cries when his parents go out to dinner on Saturdays. In high school, he comes across an English teacher who imparts a new way of learning. Her method turns Harold from a professional student zeroing in on the right college into a knowledge acquirer, a person who understands the details because he understands the context.

    Erica, in contrast, grows up in a broken home, mostly in poverty. She is the child of Mexican and Chinese immigrants. At age ten, she almost gets arrested. Erica is an ambitious person, which we observe when she gains admission to the Academy, a new school built to break its students of poverty's vicious circle by surrounding them with an entirely new culture and a web of new relationships.

    Circumstances eventually bring Harold and Erica together. They wed, and we follow their lives and careers, from adulthood to old age and death.

    Mr. Brooks' multidisciplinary study works because he creates empathic characters. His characters anchor the book, keeping Mr. Brooks' wide-ranging commentary and multiple scientific citations from drifting and dissipating.

    Reason and emotion aren't separate or opposite, as Mr. Brooks notes. In fact, they intertwine. The unconscious mind (emotion) assigns a value to a choice; the conscious mind (reason) makes decisions based on those values.

    Investors searching for additional explanation of how emotion might factor into buy and sell decisions might draw some lessons here, in particular those wanting something more than traders' tales and how-to investing books.

    Frankly, The Social Animal really only works if the reader buys into Harold and Erica. This writer did. And remember, Mr. Brooks has designed them to be sketches, not the sort of characters you'd find in a novel.

    My best recommendation in reading this book: Absorb it. Don't over-analyze it.

    To the extent that investors increasingly acknowledge qualitative and pyschological factors, expect them to seek out alternative writings. Behavioral economics is a fast-evolving field, and probably best pursued in non-business aisles—online or at the bookstore. This book is an easy, and therefore excellent, starting point.

    Investors who fully accept these factors are probably already considering the book. If they aren't, they should.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Mar 17 4:12 PM | Link | Comment!
  • PDUFA Reauthorization: The Health Industry's Next Major Legislative Challenge

    For better of worse, PDUFA reauthorization will likely be the only FDA-specific legislation that the 112th Congress considers. You can bet, therefore, that the 2012 bill will become a lightning rod for device and drug industry issues.*

    User fees constitute 20% of the FDA's budget, plugging a near $500 million gap that federal appropriations (the agency's other revenue source) leave open.  In the prescription drug program, the split is 50:50.

    The nation's economic backdrop and emphasis on deleveraging will also weigh on the legislative debate. And depending on how health reform plays out and the extent to which it bites into device- and drug-maker profits, industry could strongly resist efforts to shift more responsibility for the agency's budget onto its shoulders, i.e. paying even higher fees.

    The tax payer, meanwhile, will certainly take note of the more-than $2 billion  in annual appropriations that the bill will lift from his pocket.

    The FDA's scope is endless. At least six to 10 times each day we interact with products it regulates—equal to roughly 25% of consumer expenditures in the United States. Its oversight encompasses 80% of the food supply and nearly every radiation-emitting device.

    As with any regulatory body, it fights a constant battle of keeping pace with innovation. It features staffers much less well-paid than their industry counterparts, and substantially inferior technology and organizational structure than fast-evolving private enterprises.

    Any massive budget surge would likely produce only a fleeting advantage, if one at all.

    It should be no surprise, then, when the debate over user fee reauthorization begins later this year that many will scrutinize the agency in a different way. Rather than size, the yardstick will likely be return on investment. (If the new Congress accomplishes anything, it will be the introduction of more business-centric language to debates on the Hill.)

    Industry will question the limited extent to which increasing user fees have yielded new product approvals, and whether the Patient Protection and Affordable Care Act and other legislative burdens allow for even higher fees. Taxpayers will question the responsiveness and adaptability of an even larger agency.

    At this early point in time, the odds favor a future bill resembling previous reauthorizations—an inflation-adjusted continuation of the same model.

    In the coming months, those odds could change substantially.

    * This article builds on Steven Grossman's recent article "State of the Food and Drug Administration", published in the Lyceum newsletter Perspectives. It reflects a more skeptical viewpoint.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 20 10:29 AM | Link | Comment!
  • CEO Pay: Finding a Better Way to Hold Management to Account
    Big company boards of directors need to recognize their responsibility to shareholders, and adjust how they compensate chief executives.

    "Short-term perspectives", begins a recent article* in Lyceum's Perspectives, "increasingly dominate how we think and perform."

    Too often, corporate directors dismiss the long-term interests of their companies and their shareholders, as a result.

    Even in this tenuous post-financial-crisis world, legislators and regulators still won't acknowledge a dangerous, persistent market distortion. What happened before will likely happen again to the detriment of shareholders:

    Did Robert Nardelli's contract terms serve Home Depot's shareholders well when the board offered him $82 million ($20 million due in cash within the first 30 days) if it dismissed him?

    Did Carly Fiorina's $21.4 million pre-nup serve her shareholders well?

    What about Stanley O'Neal and Merrill Lynch? He steered his shareholders into subprime mortgages in the mid 2000s, and was fired “for cause” in October 2007. Still, he pocketed $94 million.

    Did legislators and regulators hold directors responsible in any of these cases? Of course they didn’t.

    Priorities," the article continues, "need to shift so that boards and management take long-term perspectives. It's no surprise that the problem exists most prominently in large public companies long absent their founders."

    The solution isn't a government mandate or compensation czar, but rather a shift in incentives that allows "old-fashioned entrepreneurship to root itself beyond privately-held enterprises".

    And the best way to alter incentives is to alter the tax code to encourage long-term savings and investment, and discourage short-term value destruction.

    * Read "Turning Fat Cat CEOs into Long Term Lions" here.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jan 14 11:01 AM | Link | Comment!
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