No Runny Eggs

I worked in the wireless provider industry for a number of years.   When I started it was a very new business with few rules and very little history to draw on.   At that time, fast, significant change was either something that energized and motivated you or you didn’t last long in the business.   I don’t remember where the phrase came from but we often referred to our environment as “playing Chinese baseball.”

I’m not sure why it was ever referred to as “Chinese” except that the concept was similar to a “Chinese Fire-drill.”   In the latter, upon stopping at a stop light or sign, everyone in the car would get out, run around the car and try to get back in before the light would turn green or a car would honk from the other side of the intersection.   In “Chinese baseball” it was played like a regular baseball game except that every time someone would hit the ball, the people playing the base positions would pick up their base and run around the field with it trying not to let the runner get to the base.   The concept for our business was that like Chinese baseball, you would play  the game  by the general rules of the game you were playing.   However, some of the basic rules would change frequently enough that you felt like the game was always stacked against you or that it was impossible to know at any given time, what the rules really were i.e. bases moving each time the ball was hit.

Yesterday, Congress had oil executives sitting in front of them to explain why gas had become so expensive and why the companies were making such large profits.   I won’t even get into the stupidity of their questioning except to point you to this article  which makes a great argument that Congress, through it’s inability to control the budget and thereby depressing the dollar, is actually responsible for a significant part of the increase in oil costs.   Oh, and Congress is also the ones that won’t allow drilling in the US…but of course, it’s the evil oil companies that are controlling the prices!

Congress wanted to see the oil companies grovel  while they played some Chinese baseball.   See, Congress is upset that the oil companies aren’t behaving the way they want them to.   So, Congress is about to single out the oil industry and remove tax incentives, only for the oil companies, that ALL MANUFACTURING COMPANIES had received in 2004.   Additionally, the want to  renegotiate contracts for extraction fees and other things.   Please note that the  “tax breaks” that Congress keeps wailing about are nothing more than the ability to depreciate equipment (something that oil companies have a LOT of)  at an accelerated rate.   This is  something that Congress believes is good for increasing economic activity in every other maunfacturing business…why wouldn’t that be so for oil companies…but I digress.   Congress seems to miss any understanding that when you change the rules on businesses, the businesses will react to those changes.   By making these changes the oil companies will experience additional costs and those costs will be passed through as increased prices for gas.   If changes  are believed to be  unpredictible, shareholders will demand higher returns on their investments and this will increase the cost of capital for the oil companies in turn increasing the price of gas.

Another place where Congress wants to play Chinese baseball is in the home mortgage industry.   The most recent bill proposed by Rep. Barney Frank would,  rewrite the contract that homeowners have with their lending institutions.   Rather than letting these issues get settled on a case by case basis, using what will surely be the unique circumstances of each i.e. payment ability, specific market conditions, condition of the home, equity to loan ratios etc., Congress wants to tell lenders, just like the oil companies, how to run their business.   The results will be the same as with oil; Congress will tell everyone what a great job they’ve done “saving homeowner from evil lenders” and lending costs will ultimately increase because Congress will have created a new, unquantifiable  risk in what has  historically been a very risk estimable financial contract.

Socialism and Communism are economic systems where Chinese baseball is the norm.   Capitalism is a system that abhors Chinese baseball and severely penalizes the players every time, with increased costs.