andrew_gelman_stats andrew_gelman_stats-2012 andrew_gelman_stats-2012-1525 knowledge-graph by maker-knowledge-mining
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Introduction: I opened the paper today and saw this from Paul Krugman, on Jack Welch, the former chairman of General Electric, who posted an assertion on Twitter that the [recent unemployment data] had been cooked to help President Obama’s re-election campaign. His claim was quickly picked up by right-wing pundits and media personalities. It was nonsense, of course. Job numbers are prepared by professional civil servants, at an agency that currently has no political appointees. But then maybe Mr. Welch — under whose leadership G.E. reported remarkably smooth earnings growth, with none of the short-term fluctuations you might have expected (fluctuations that reappeared under his successor) — doesn’t know how hard it would be to cook the jobs data. I was curious so I googled *general electric historical earnings*. It was surprisingly difficult to find the numbers! Most of the links just went back to 2011, or to 2008. Eventually I came across this blog by Barry Ritholtz that showed this
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1 Job numbers are prepared by professional civil servants, at an agency that currently has no political appointees. [sent-4, score-0.157]
2 reported remarkably smooth earnings growth, with none of the short-term fluctuations you might have expected (fluctuations that reappeared under his successor) — doesn’t know how hard it would be to cook the jobs data. [sent-8, score-0.323]
3 I was curious so I googled *general electric historical earnings*. [sent-9, score-0.08]
4 Everyone agrees that GE practises one form of earnings management: it times one-off asset sales to coincide with one-off write-downs or restructurings. [sent-15, score-0.245]
5 GE also manages expectations about its earnings by managing its analysts. [sent-20, score-0.2]
6 managers who are in the habit of smoothing earnings have an especially strong motive to keep the good news coming, whether or not the business warrants it. [sent-24, score-0.3]
7 Also this from Marie Leone and Tim Reason: [In 2009,] after a four-year investigation, GE settled accounting fraud charges with the SEC for allegedly misleading investors with improper hedge accounting and revenue recognition schemes. [sent-26, score-0.698]
8 Specifically, GE was charged with violating accounting rules when it changed its original hedge documentation to avoid recording fluctuations in the fair value of interest rates swaps, which would have dragged down the company’s reported earnings-per-share estimates. [sent-27, score-0.633]
9 In addition, the SEC charged GE with concocting schemes to accelerate the recognition of revenue from its locomotive and aircraft spare parts business, to make the company’s financial results appear healthier than they actually were. [sent-28, score-0.372]
10 Without admitting or denying guilt, GE paid a fine of $50 million, and agreed to remedial action related to internal control enhancements. [sent-29, score-0.115]
11 “GE bent the accounting rules beyond the breaking point,” noted Robert Khuzami, director of the SEC’s Division of Enforcement, in a statement. [sent-30, score-0.309]
12 , take their data pretty seriously and I agree with Krugman that it’s hard for me to imagine them manipulating the numbers in any way. [sent-35, score-0.133]
13 And it’s not like better numbers would increase their budget line. [sent-37, score-0.086]
14 (In contrast, I can understand the motivation for those military guys who faked the data on missile tests: success can lead to more funding. [sent-38, score-0.152]
15 In contrast, Leone and Reason report: The SEC complaint relates several instances of round-robin email discussions among GE accountants, internal auditors, executives, and the company’s external auditor, KPMG, debating whether aggressive accounting would past muster with regulators. [sent-40, score-0.342]
16 So, it’s not about Welch being some sort of data sociopath; rather, data manipulation is part of corporate culture. [sent-41, score-0.163]
17 And, indeed, these guys have lots of motivation to fake the numbers (i. [sent-42, score-0.191]
18 The executives and accountants personally make millions of dollars from it. [sent-45, score-0.284]
19 Millions of dollars in win, very little personal risk if you get caught (it was GE that paid the fine, right? [sent-46, score-0.103]
20 Jack Welch has experience in data manipulation and so, when he sees a number he doesn’t like, he suspects it’s been manipulated. [sent-49, score-0.194]
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Introduction: I opened the paper today and saw this from Paul Krugman, on Jack Welch, the former chairman of General Electric, who posted an assertion on Twitter that the [recent unemployment data] had been cooked to help President Obama’s re-election campaign. His claim was quickly picked up by right-wing pundits and media personalities. It was nonsense, of course. Job numbers are prepared by professional civil servants, at an agency that currently has no political appointees. But then maybe Mr. Welch — under whose leadership G.E. reported remarkably smooth earnings growth, with none of the short-term fluctuations you might have expected (fluctuations that reappeared under his successor) — doesn’t know how hard it would be to cook the jobs data. I was curious so I googled *general electric historical earnings*. It was surprisingly difficult to find the numbers! Most of the links just went back to 2011, or to 2008. Eventually I came across this blog by Barry Ritholtz that showed this
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Introduction: Reading these news articles that slam more and more nails into the (perhaps unfairly) already-dead reputation of Hewlett Packard executive Meg Whitman, I keep thinking: what if she’d won her election a couple years ago and was now governor or senator or whatever she was running for? Then nobody would care that her company was falling apart! Conversely, when Jon Corzine lost his reelection and reentered the business world, he left himself open to charges of acts of corruption that wouldn’t have been possible in congress or from the governor’s office. But sometimes the immunity can go the other way. Jack Welch still has the street-cred to write Wall Street Journal editorials despite his history of data manipulation, but it’s hard to imagine he could be elected to public office, even if he wanted to. For another example, Al Sharpton was caught out on his lies in a well-publicized court case but that does not stop him from being bankrolled as a quasi-public figure. Big name
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