Howzit Howard

If you slip a twenty to Bill Paty, will he give you preferential treatment?

This week I attended Business Leadership Hawaii for the first time since leaving Pacific Business News five fiscal quarters ago and had a thoroughly enjoyable time watching from deep in the audience an event that I used to emcee. Editor Jim Kelly was funny, which was to be expected, but so were some of the winners, and in particular Bill Paty, the longtime head of Waialua Sugar, who got this year's lifetime achievement award. Kelly asked what he was going to do next, and Paty told a story about heading for the little Castle & Cooke retirees' room at the Halekulani, meeting a brace of Japanese ladies coming the other way, and getting out of the way by moving behind the maitre d' lectern, only to have them approach him to be seated. His wife told Paty he may have found his new calling. Sure, it was just a joke, but there is no reason whatever to be surprised if Paty finds new work. Work can be life enriching and even life extending and while it is not the sole route to happiness in "retirement years" -- in my twenties I told a colleague I would never retire and he, a dozen years my senior, quietly suggested that while man was meant to work he is also meant to stroll on the beach, and I think about that a lot because I have not been to the beach in more than a year -- it is certainly a valid option, even if your 401k hasn't been gutted. I can think of two famous examples in history of great men who seemed to have lived longer and happier because of projects so important they couldn't die before completing them. Ulysses Grant was dying of throat cancer as he wrote his autobiography, a project suggested to him by a friend as a means of assuring an income for his wife after he was gone. He lasted just long enough to complete it, and the friend, a fellow by the name of Mark Twain, found him a publisher. It did assure an income for the widow, and survives to this day as one of the best autobiographies even written. The 20th century composer Bela Bartok was dying of leukemia and incurring enormous debt in the hospital when he was visited by Boston Symphony maestro Serge Koussevitsky. Koussevitsky presented Bartok with a sizable check for a commission from his family foundation, and when Bartok tried to refuse it on the grounds he was unable to fulfill the commission, Koussevitsky nodded and replied that sadly, under the bylaws of the foundation, he was unable to take the grant back on those grounds. Bartok went into remission for more than a year and the resulting work was the masterpiece of his career and one of the greatest classical works of the century, Concerto for Orchestra. I shall not recommend to you that you hold out one last project to attend to on your deathbed in order to prolong your existence. But we're living a lot longer these days. And we have seen that most of the mechanisms for living a life of leisure in the outyears cannot be absolutely relied upon. It's probably not a bad idea to have an extra career ambition in your back pocket.

Bailing, wailing and assailing

Now that the bailout plan has changed into something completely different from what Congress thought it was voting for, we're seeing a blame game, and lobbyists descending on the Treasury Department to explain why the bailout should be expanded to include their clients. Treasury Secretary Paulson, who originally was going to use a third of a trillion dollars to buy the securities that financial giants couldn't sell to anybody else, changed his mind and decided instead to simply let those financial institutions have the money in return for stock. Assuming lenders begin making loans again, Version 2.0 is better for taxpayers, giving their a piece of everything instead of a piece of toxic securities, improving the chances for the Treasury to resell what it bought in better times and perhaps even return a profit. Those assailing the Paulson plan complain that the money is going to lenders (and AIG) with no strings attached. That's not exactly true. Federal regulators have made it clear what lenders are supposed to do, or face more specific orders. Nevertheless, the problem, so far anyway, is the bit about "assuming lenders make loans again." They aren't. They're mostly sitting on the cash so far. The objective of this whole exercise is to get lending unstuck. If that doesn't happen, the bail fails. And those lobbyists? The New York Times says everybody from plumbers who want to be paid to fix foreclosure homes to auto dealers who want a handout because times are tough for them. Well, duh. When did auto dealers suddenly become socialists? Then there is President-Elect Obama's call for a bailout for the Big Three automakers, which President Bush says he does not support. Mr. Bush is not universally lauded for his brains, but in this instance I think he is right and the Punahou grad is wrong. The U.S. automakers have allowed their Japanese competitors to excel them for decades on fuel efficiency, and have done very little to control the massive cost structure that they and their labor unions built back when they did not have that competition. Any idiot could have foreseen that they would be in big trouble the next time oil prices soared, focusing so much on gas guzzling SUVs, pickups and vans. Any employee of Ford, General Motors or Chrysler should have known that when this happened, jobs would be lost, and the next job they got would not pay so much. Didn't they ever rent "Roger & Me" from Blockbuster? Do they think the rest of the American people, including people who make less money and enjoy fewer benefits, will sit still for a bailout? U.S. automakers aren't too big to fail. They're too big to bail. What they need is the old-fashioned kind of rescue, in which a federal judge with broad powers helps them line up financing, compels supplies from vendors, and supervises a sensible renegotiation of labor contracts, putting these dinosaurs back on a sound business footing so they can more nimbly compete with the automakers of other nations. It's called bankruptcy. I know this sounds -- mean. But how kind would it be to impoverish the nation pouring tens of billions of dollars into these three companies so they can keep building the wrong vehicles and paying wages that the industry can no longer support? The result would be a reprieve until the next crisis, and the migration of more domestic automaking jobs to other countries. With bankruptcy and renegotiated contracts, it might be possible to actually save the bulk of these jobs and keep them in America.

Eat your vegetables, don ' t beat your vegetables

The Weekly Standard of London reports an ethics panel in Switzerland has decided that the arbitrary killing of plants is immoral. Do plants have rights? While better minds than mine chew on this problem, certain behaviors seem prudent to adopt, just in case. Don't cast aspersions against asparagus. Don't dislike leeks. Never make onions cry. Don't beat your beets. Don't cane any form of sugar. Don't bruise your Brussels sprouts, and especially not in Bruges. Don't rile your rice or perturb your potatoes. Don't be vulgar to your Bulgar wheat. Don't kick the starch out of any of these plants. Where possible, appease your peas. Be friendly and companionly to all your fruits and vegetables. For once, get stewed WITH your tomatoes.

Bailout shifts from Wall St. to Main St.

The bailout plan is still changing, weeks after it was enacted. The changes appear to be improvements. First officials decided it would be better to give money to lenders in return for stock, which might be resold at a profit in better times. Earlier the plan was to buy the worst securities, the ones no one wanted. They, too, could have been resold later, but under the new plan the taxpayers get a piece of all the action, not just the bad stuff. Shareholders suffer: instead of having the bad stuff taken away, it remains, reducing the value of their stock, which is further reduced through dilution as new shares are sold to the Treasury Department. But this is fair. Stock investment is always a gamble. You buy General Motors, you gamble that its executives won't make a really stupid decision like making lots of gas guzzlers, betting the ranch that gasoline prices will never soar. You buy Lehman Brothers, you gamble that they actually know what they're doing. So if socializing losses while keeping profits private is no longer the plan, what is the plan now? It is to give lenders some freedom to do what they think best with the money they get. Some freedom. With a threat of regulation. "Our banks will be more confident," Treasury Secretary Henry Paulson said Wednesday, "and better positioned to play their necessary role." If you can't read between those lines, here are some more, from a joint statement issued by the Federal Reverse, the FDIC, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision: "We expect all banking organizations to fulfill their fundamental role in the economy as intermediaries of credit to businesses, consumers and other creditworthy borrowers," the agencies said, "to work with existing borrowers to avoid preventable foreclosures." The message between the lines is two words: "Or else." The regulators have the power to make life a living hell for lenders; this is them asking nicely. Achieve the goal your own way, or we'll write rules and you'll do it our way. They specifically warned lenders to think twice before using federal funds to maintain shareholder dividends or high executive compensation. The friendly warning on this doesn't say, "Do this because the American people are ready to string you guys up as it is," but it does say, "Poorly designed management compensation policies can create perverse incentives that can ultimately jeopardize the health of the banking organization." A very good point. The CEOs of Fannie Mae and Freddie Mac, who caved in to pressure from bipartisan Congressmen on one side and subprime lenders like Countrywide Financial on the other, had compensation packages that rewarded them for caving in and buying up or guaranteeing risky loans. On Wall Street the concept of rewarding performance has somehow become "rewarding short-term performance, never mind what happens later." Paulson told the House banking committee (lowercase letters used because these days the committee calls itself something else) that in times like these "even the healthiest banks tend to become more risk-averse and restrain lending," a reasonable and sympathetic characterization of bankers' loss of nerve and the very human tendency to react to excess by going excessively in the opposite direction. If this works, however, the new plan impels bankers to do more consumer and small business lending, which could help everybody including the would-be beneficiaries of the original bailout, thus turning the Wall Street bailout in something more akin to a Main Street bailout. If it works, you will see more lenders renegotiating terms with mortgage borrowers rather than foreclosing on them. If the current monthly payment, X dollars, will drive the borrower to the poorhouse, there may be a point, X minus Y, at which it won't, but which is still enough money that it's cheaper for the lender to accept the new terms rather than proceed with a foreclosure filing. (In some cases where lender and borrower are in the same community, a lender may also feel that lowering payments at breakeven will make a client for life, a client who in the future may be wiser.)

Oceanic Cable, Hawaiian Telcom and Hawaiian Electric

Hawaiian Telcom might have to file for Chapter 11. It might even be a good thing. But its current travails provide an occasion for pondering the future of Hawaii's three great grids -- the telephone company, the cable company, and the electric company. All three have expensive networks to maintain and develop. All three face upstart competitors who don't have expensive networks to maintain. All three are trying to come up with fresh ideas for the future. But beyond those similarities we're talking about three very different stories. Hawaiian Telcom faces bankruptcy if it can't negotiate new terms on its debt, and two of the big three credit agencies cut their ratings on its debt in recent days. Bankruptcy would buy time to work on the company's underlying problems, followed by an investment opportunity if those problems are fixed. Oceanic Cable and Hawaiian Electric are virtually assured of profitable futures but nonetheless face some major issues of their own. For Telcom, the problem is simply described. It has an expensive legacy wired telephone network, which revenues will no longer support. The company has lost one in ten of its remaining residential telephone lines in the past year. Mainland legacy phone companies have the same problem but not that bad. Telcom has a wireless division, but you can't simply transfer the wired network revenue to the wireless division as people drop their old lines to rely more heavily on their cell phones. For one thing, that revenue from wireless service is much less. For another, there are more choices, and most consumers will choose one of the many other providers. The company's strategy, developed by the original management that got shown the door after bungling the transition from Verizon's operations, is to bundle services. If you have wireless service and a land line from the same provider, you can automatically transfer a cell phone call to your wired phone when you walk through the door. Or you can manage voicemails on your computer, using a Net connection that also comes over the phone line. The problem, at least so far, is that the advantage of this has not yet proven to be sufficient for large numbers of people to back out of their current separate contracts for cell phone and Web access service. A longer term problem is that if Telcom develops a killer application or a killer marketing idea, there is less of a barrier to entry for a rival wireless provider to offer something similar, or for that matter the cable company. Which brings us to Oceanic. Oceanic Cable, or whatever they're calling themselves these days, also has an expensive wired network. But as a younger company it has a lower cost structure, its network architecture is a little easier to maintain, and instead of aggressive, well-financed wireless competitors it has feckless competition from satellite television services that most consumers seem to have no interest in considering. Cable companies have more experience than telephone companies at marrying content to technology, and this is especially true of the Hawaii cable company, a national pioneer of interactive services. And now Oceanic can compete with Hawaiian Telcom by offering Internet telephone service over its cable modem Web access channels. Hawaiian Electric, the third network, could also sell Web access if it wanted to, and it may one day want to. Data can ride an electrical current transmission the same way radio signals ride waves through the air. Hawaiian Electric already does this for internal data transmissions. This is not blue sky stuff, it's happening now. And the most expensive part of the infrastructure already exists. The electric company is distracted by a completely different problem. Some utilities on the mainland decided many years ago that it would be more profitable and less controversial to transform themselves into electrical networks only, selling their power plants to others. Let someone else face the anti-nuclear demonstrators or the acid rain complainers. We just run the high-tension lines. But this thinking created a business opportunity for people who wanted to produce power in new ways and sell it to the grid, and the industry took off on the wings of renewable power dreams. For years Hawaiian Electric has been struggling to let individual power producers sell to the grid without making problems for it. The problem, from Hawaiian Electric's point of view, is that if the third party provider screws up, it's still the legacy electric company's responsibility to make it right. If the wind farm that promised 40 zillion kilowatt hours only supplies 10 zillion because there's a Kona, the old electric company still has to make up the difference, probably by firing up the expensive old oil-fired generating station that the renewable power sources were supposed to render obsolete. And what if a third party provider sends too much power and the surge damages the grid? A high tension line with too much power will sag! Load balancing, as the electric company people call it, is tricky. It's an open secret that for years there has been fierce internal fighting at the local electric companies over this, with foot-dragging by the people whose job it is to clean up the mess when third party providers mess up. And now there are scores of businesses and hundreds of residences installing solar panels to defray their electric bills, intending to sell excess power back to the grid. This makes everything I just said even more complicated, and probably harder to manage as well. Hawaiian Electric, Hawaiian Telcom and Oceanic Cable have varied opportunities and issues, but they all share this: while they work to solve their problems and exploit their opportunities, they have complex networks to run.

D.C. Five-O

Once America seized power in Hawaii. Now it's like the other way around. Aloha Power has come to the fore in the nation's capital, where a son of Kalihi will sit in the Oval Office and a former Beach Boy will chair the Senate Appropriations Committee. West Virginia Sen. Robert Byrd, a nonogenarian who for decades would play the fiddle and sing when he campaigned, is retiring from the chairman's chair on Jan. 6 and gave his blessing to Sen. Dan Inouye to succeed him. The leadership confirmed Friday that Inouye has got the job. Sen. Daniel Akaka is in line to chair the Senate Homeland Security Committee if, as expected, the Senate leadership strips Joe Lieberman of the post for campaigning for John McCain. (Maybe they want to drive him to the GOP after seeing what a gripping campaigner he was as Al Gore's running mate.) Bobby Byrd used his power as Appropriations chairman to help his state, one of the poorest in the nation. He stood in the way of anything that would hurt the coal industry. He made the IRS site its largest computer center in the eastern panhandle, a two-hour drive from Washington, D.C. He saw to it that every road in West Virginia is well-graded and well-paved and you can drive a beautiful road all the way to top of Spruce Knob, the state's tallest mountain. The other Appropriations committee members always support what the chairman wants because they have their own needs. Sen. Inouye could get even more than Byrd, simply because Byrd grabbed at anything that would help his constituents whether it was good for the nation or not, while Inouye has always had the knack of finding things that help Hawaii which ARE good for the entire republic, making it enjoyable rather than distasteful for colleagues to support him. Homeland Security money would be spent plentifully in Hawaii even if we had junior senators. We handle a lot of international visitors, our ports have the potential to be a remote access point to the West Coast if not guarded well enough, and we are home to many military men and women and their families. I have also been told that Hawaii airports, with their openness to the elements, are good places to test new screening equipment. But with Akaka in charge of the committee, it would be easier to secure such funds. As for President-Elect Obama, see if he doesn't name a transportation secretary who will facilitate rail, the mass transit form so well-suited to the linear population centers of our islands. Neighbor islands should explore the possibility of getting federal funds to acquire land for transportation corridors, knowing that rail takes less land than highways and tourists riding trains cause fewer accidents.

Why is it Arbor Day?

Very few holidays are located where they ought to be. John Adams and Thomas Jefferson, who conceived the Declaration of Independence, and who died the same day on a July 4, both thought in 1776 that July 8 would be considered our independence day. The date could have been fixed on any of several dates during a protracted process of writing, voting, signing and printing. The placement of Christmas and Easter was affected by the Roman church strategy of pre-empting pagan holidays, which had been timed to the winter solstice and spring equinox. Thanksgivings were held all over the calendar map until the government picked a spot on the calendar and made it stick. Other holidays were moved to Mondays for three-day weekends. But Arbor Day is held on different days in different places because the objective is to plant more trees and shrubs and you might as well time it for the right weather. That's why the mainland Arbor Day is in April, shower time in a temperate zone, but Hawaii marks it on the first Friday in November. Jayme Grzebik of the University of Hawaii Extension Service, who comes on "Sunrise on KGMB9" monthly to discuss planting topics and promote the Saturday morning educational sessions and freebies at the Urban Garden Center in Pearl City, gave me some educational materials that Hawaiian Electric Industries prints up. HEI promotes Arbor Day to be a good neighbor and, I suppose, to counter any neighborhood angst that arises when the electric companies have to trim trees to protect power lines. The Plant Information Guide is excellent, detailing the origin, height, width, tree form, flower, fruit, growth rate, and sunlight, water and soil needs, of dozens of trees and shrubs. For example, the common fig tree (ficus carica) can grow to 25 feet, grows fast, likes full sun and does not require a great deal of water, but needs soil that drains well. The mountain apple (Syzygium malaccense) by contrast can grow from 16 to 40 feet, has only a moderate growth rate, prefers partial shade, and though it also prefers well-drained soil it requires abundant water. The booklet specifies which plants are indigenous and which ones work well in small spaces. Sometimes they are the same -- some truly kama'aina plants are slow growing, don't get too big, and work well in areas that are sunny and dry. I learned this recently from interviewing a Big Island developer and a Forest Service lady who are working together on an experiment to see how best to regrow dryland forests. One of the keys is patience because it can take a century before such trees become very large, yet because they're meant for the habitat they don't require a lot of expensive watering. The UH Extension Service has a corps of volunteers who propagate these trees and shrubs to give away to you, with all the instruction you need to make a success of it. Some of the tricks are already well-known to people with some experience in growing, or a good dose of common sense. For example, cutting a tree back is usually very good for it. And if you want to know what to grow on your property, walk around the neighborhood and simply observe which kinds of trees seem to be doing well nearby.

Romy Cachola fails to railroad city council

Romy Cachola, who held rail hostage last year with a ransom demand, is shocked and appalled that any councilman would undo what he got. It's like a kidnapper complaining you can't trust anybody any more after discovering the bills were marked. The marked bill in this case was the city council measure that rerouted the rail line from the airport, where common sense demanded it go, to the heart of Cachola's home district, where Cachola demanded it go. Charles Djou, who opposed rail altogether, now says if there is going to be rail then it needs to go to the airport. Rail supporter Todd Apo, who bowed to Cachola's ransom demand last year, counts enough votes to change the route back and says that's how he will vote. I took a benign view of the route change last year because, coming from a city with a rail system, I knew that once a line is built anywhere, opposition will cease altogether and public demand will get a line built to the airport. But it does make rather obvious grade school level sense to have the first line go there. And it is unreasonable, given Charles Djou's vote change that makes it possible to return the line to the more sensible alignment, to expect people to stick with an inferior route that Cachola forced on them with an unseemly power play in the first place. An interesting aspect of this affair is that Cachola behaves as if he won something for the residents of Salt Lake fair and square and they were all happy about it. But during the debates we got emails from Salt Lake residents who said they were going to vote against Mufi Hannemann because they didn't want a rail line near their house. These residents, at least, will be delighted at this new development. That's ironic because Hannemann never wanted the line to go to Salt Lake and agreed to it only to get something built somewhere to get the system begun. Now Cachola blames Hannemann for this new twist. "You're playing with fire," the inflamed councilman said. "Save the drama for your mama," the mayor replied. I'm thinking he didn't learn that one at Harvard.

Help us, Obiwan! CNN has gone nuts!

If you've ever wondered what a roomful of monkeys would write instead of Shakespeare, consider what a roomful of alpha geeks has done at CNN. After more than 80 years of broadcasters struggling to develop better technologies -- and budgets -- for reporting the news live from remote locations, digitheads figured out how to make it look like the reporter in the field never left the studio. The only silver lining is that Comedy Central may one day be able to use the technology to fake putting its people onto news scenes for comedic purposes. I'm going to make a wild hypothesis here and guess that the techies originally wanted to do it the other way around, so Wolf Blitzer could stand in the middle of a war or flood zone and debrief the reporter who is actually there. The reporter is standing there minding her own business, covered with water or shrapnel or whatever, and suddenly this guy in a suit with a clipboard appears -- his hair is perfect! -- demanding to know what is going on. The presentation of the idea probably got to the point of telling Blitzer what color suit he had to wear for the effect to work optimally before he threatened to quit. Technology for technology's sake has been a problem for a very long time. It is tolerated, and should be, only because stupid technologies sometimes lead to useful ones. For example, fiberoptics were originally developed as a novelty form of lighting. We tend to get excited about new technologies and only later, when they are no longer new, and lose the novelty advantage over whatever they replaced, are we able to rationally consider their value. Then the technology recedes and assumes its proper place. An example of this is the pen and paper, which not only has not been replaced by computers but have assumed new importance next to the computer. So maybe hologram reporters will lead to something good. Although I doubt it.

Democrats gain in Congress; Republicans keep the filibuster

Barack Obama's ability to actually keep his legislative pledges will be real because Democrats won more than a dozen extra seats in the House and turned a fake majority in the Senate into a real one. But Democrats fell short of a filibuster-proof majority in the Senate, allowing Republicans to stand fast on the really important stuff. Before the election, the alleged majority in the Senate consisted of 49 Democrats and two independents, one of whom was Joe Liebermann of Connecticut, who endorsed John McCain and campaigned with him in recent days. Now Democrats will have an outright majority. To give you one specific example of how this will be important: the federal government has long wanted to control medical costs by negotiating lower Medicare drug prices, but a small number of senior Republican senators including Pete Domenici of New Mexico, John Warner of Virginia and Wayne Allard of Colorado were always able to round up the votes to block it. All three are retiring. All three are being succeeded by Democrats. Republicans, by their own count, used filibusters to block Democratic initiatives more than three dozen times in the last two years; depending on the outcome of some close races, Democrats will need fewer than half a dozen Republicans to close off debate. Even in today's polarized times you can sometimes find that many moderates under the dome.