Crank of the Week - August 1, 2010 - Fox New Business Block

Every Saturday morning, the Fox News network presents two hours of purported business news, four half-hour shows staffed by talking heads that are billed as experts in the realm of business and finance. Most of the time their blather sounds knowledgeable, at least to a layman, but on occasion they stray beyond the bounds of business and into territory they are ill-equipped to handle. One such ignorance revealing foray occurred on the Saturday shows this past weekend. The topic was related to energy and automotive design—specifically, the value of Chevy's new Volt plug-in hybrid automobile.

The most powerful name in news brings you “The Cost of Freedom,” the most powerful business block on cable news! Or so Fox News channel would have you believe. The Fox business block's four shows—Bulls & Bears, Cavuto on Business, Forbes on Fox, and Cashin' In—are touted as providing investment advice to make you money. Cavuto on Business, hosted by the genial Neil Cavuto, claims to provide “information on how you can make and hold onto your money.” Forbes on Fox, often a soap box for magazine publisher and former presidential candidate Steve Forbes, proclaims “to make money in any market you need information from experts who aren't afraid to tell it like it is.” Presumably the experts are the various Forbes' editors that populate the show. For shows that advertise themselves as providers of investment and financial advice they seem to spend a lot of time arguing about socio-political issues.

In fact, the “Cost of Freedom” is pretty much a two hour, tag team arguing contest, often featuring a guest radio host or Democrat strategist to throw some liberal fuel onto the mostly conservative panel firebrands. While the regulars on these shows do generally have some claim to financial knowledge, their ability to jawbone and verbally abuse the guests and each other seem to be their primary qualifications. The rhetorical fireworks are often entertaining and even humorous, but seldom enlightening. And on occasion, the “experts” show themselves to be nothing of the sort. Case in point was when the subject of the GM bailout was mentioned on the shows (they always seem to discuss the same topics).


Part of the Business Block in action.

Granted, the Volt was not really the central issue. The discussion began by mentioning President Obama's visit to the factory that builds the Volt. Video was shown of the President actually driving one of the new hybrids about seven feet before hopping out to give what amounted to a campaign speech. Naturally, this set off a wave of commentary on the foolishness of the GM bailout, TARP and the government's policies in general. One thing led to another and soon the $7,500 tax credit offered for zero emissions vehicles was mentioned—so far still financially oriented—but then the mob turned on the poor Volt itself.

The venerable Ben Stein, a real economist as well as a media personality, questioned the need for such a vehicle on the Cavuto show. He expressed his preference for the more upscale Cadillac brand, which is certainly his prerogative. Maybe he should check out the top-end Lexus hybrid or the new models from Mercedes Benz. They may be a better lifestyle fit for Ferris Bueller's former instructor.

These Fox “experts” are not really experts at all when it comes to the automobile industry, but that is not our main complaint. It is the baldfaced hypocrisy that their comments represent which has garnered them a Crank of the Week. At one time or another these same commentators have complained about unemployment—the GM bailout did prevent the lose of many jobs, including jobs at associated parts suppliers in the surrounding communities; they complained about government “nationalization” of industry—intentions to sell off the government's stake in GM have already been announced; they complained that the government is doing nothing about US dependence on imported oil—the Volt, in an admittedly small way, is a positive step toward cutting that dependence. Now they claim it costs too much and nobody wants one—how about we let the market decide?

John Layfield, a former professional wrestler turned businessman, was perhaps the most vociferously short sighted. On Cashin' In, He blasted the Volt's $41,000 price tag, claiming he would rather buy a new Camaro with a 550 horsepower engine for the same amount (by they way John, that particular model has been canceled). Perhaps he hasn't notice that oil prices have been creeping up and that, sooner or later, gasoline prices will rise. Perhaps he doesn't mind contributing to the coffers of Hugo Chavez, middle Eastern oil sheiks and other unsavory petro-thugs around the world. Like all of the other Fox pundits who bashed the Volt that morning, he has no foresight.

The truth about the Volt is that it is a first, experimental step toward building better hybrid and electric vehicles in the future. No new product has ever burst on the scene fully formed and perfect, like Athena springing from Zeus' head. There is always a period of development, of trial and error, where production problems are solved, efficiencies perused and consumer complaints resolved. And most new products do have limited appeal and are initially overpriced. Consider the first cell phones.

Twenty five years ago, most cell phones were permanently installed in automobiles and cost more than $1,000. There were some portable models, Dr. Hoffman recalls owning a “bag phone.” It came, quite literally, in a bag and consisted of a handset about the size of a normal home phone with a battery the size and weight of a brick. It cost about $700 back in 1985. It was clunky, overpriced and had little mass appeal, a much worse product than the Chevy Volt. A quarter of a century later everyone has a cellphone that is smaller, lighter, longer lasting and far less expensive than the old bag phone. Yet, it is from those old clunky bag phones that the sleek new cellphones descended.


The 2011 model Chevy Volt plug-in hybrid.

The point is this: building the future requires present day experiments and a lot of work along the way. Electric cars are inherently more efficient than internal combustion automobiles, their only real drawback is limited range due to battery capacity. There are a number of companies, large and small, that are feverishly working on solving that limitation, driven by those market forces that the trash talking Fox pundits worship so fervently. If you want to see where electric and hybrid vehicles are headed see Dr. Hoffman's “I Sing the Auto Electric.” We should be praising the Volt's developers, not listening to criticisms from the vapid intellects on Fox or any other network.

These same commentators will be the first ones to scream about the government not doing anything when the next oil embargo hits, or China and South Korea are producing sexy, appealing and highly functional electric cars that are kicking Detroit's ass in the market place ten years from now. Ben Stein, buy yourself a new Cadillac, John Layfield, buy that new Camaro with the Corvette engine, but stay silent on matters that you don't understand. There are automotive engineers around the world who are building the future; your job is to shut up and consume. So, for a breathtaking demonstration of ignorance and network orchestrated group-think, this Crank of the Week is for all those who appear on the Fox Business Block (we just couldn't bring ourselves to call it “The Cost of Freedom”).


The real cost of freedom.

The Worst Choice

Greetings Admin, great article, you correctly point out the evolutionary processes required to make new technologies available to the general public, the process is not pain free and many of the pioneers take arrows the rest of us are lucky enough to avoid. The example of the cell phone is one of many hundreds we could enumerate, indoor plumbing, residential electrification, land based phone systems are just a few I could ad, off the top of my head.

If I could make one small disagreement, the bailout accepted by the auto manufactures was for the purpose of not letting the receipt’s file for bankruptcy. The jobs in question would not have vanished (the Airlines is one example) if the companies had filed for bankruptcy, but their contracts (Vendor Contracts) and retirement plans would have had to have been renegotiated, the bailout short circuited this much needed correction. The underlying burden of paying gold plated retirement plans for individuals no longer producing for the company adds significant costs to every unit produced and at some point in the future will be unsustainable which will then mean that we tax payers are likely going to be paying for the gold plated retirement plans, which then begs the question; How many non producing individuals can be supported by a diminishing number of productive workers? There are certain realities that limit what government can, or rather should do. The amount of debt that our great grand children are going to inherit from this generation is unconscionable and is being racked up at a rate of more than three million dollars a minute 24/7.

You correctly point out that the market should make the decision of whether the electric car’s time has come and it is true that government sometimes provide the juice for advances in technology (Jet engines, GPS, advanced plastics, the National Interstate system to name a few), however given the staggering amount of government debt being generated today, the bailout was the worst choice possible.

Bailouts

In my libertarian, free market capitalist heart I also feel that companies should be allowed to fail. But I disagree with your conclusion that a GM bankruptcy would have cost no jobs. To recover from bankruptcy, the General would have needed to reduced cost and the easiest way to do that would have been to close plants. You use the airlines as a counter example but I think you will find that they also slimmed down and shed jobs.

We can argue over how many jobs would have been lost without the bailout, much as the current administration does, and we can argue about whether the bailouts will do more harm than good in the long run. I only made the statement because it illustrated the knee-jerk, contrarian responses from the Fox commentators.

Has the electric car's time come? Not yet, but it could be on the way. As I have pointed out to some of my critical friends, once you build a hybrid that has no physical link between its IC engine and the drivetrain you are halfway there. The IC generator set can be replaced with anything in the future: fuel cells if hydrogen ends up working out, or better batteries when they are developed. Who knows, maybe even a "Mr. Fusion" like in the Back to the Future movies. In any case, thanks for your comments.