Wednesday O/R/T/C - Volvo Isn't Delivering, McKinsey Backs Up, Lewis Surges Ahead

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Plenty to talk about today — but let’s start with a classifieds post, shall we? Mike is selling his Fiesta ST. He’s asking top dollar, but to be fair it sounds like a top-dollar car, and values for this little zipper have gone up significantly in the past couple of years. Under 20,000 miles, too. I bet the brake pads are even installed right way up, which is not something I can say about the “tuner-improved” Fiesta ST that Danger Girl bought nine years ago.

Alright, on with the show.

That’s SIR Lewis to you

If you watched the British Grand Prix, you saw a true race for the ages. Lewis Hamilton is my all-time least-favorite F1 driver, but there’s no way for even a confirmed player-hater like me to minimize what he accomplished on Sunday. On his home track, in questionable weather, he simply out-drove Princess George to earn the preferred strategy in the first pitstop. All that had to happen then was for McLaren to utterly and completely botch their strategy, which they helpfully did. With three more laps, this would have been another Max Verstappen victory, but if my mom had a sack she’d be my dad, ya know?

Lewis cried in the car, he cried with his dad, he cried in the interview. And why not? Surely he never expected to win another race at all, let alone the British Grand Prix. This was a statistics-and-record-significant win, too.

Hamilton’s record of luck in Formula One remains near-perfect — of course it was his teammate who got the Bottas Blowup, not him — but on this Sunday in England, there was no one better. One has to wonder if this will lead to some return of form. I’d still bet on Princess George to beat him for the year, but only just. Other thoughts:

• Mercedes can’t reasonably pose a challenge to Max this year — Lewis would need six wins where Max scored nothing, just to draw even — but Lando Norris must be slightly horrified. The script called for him to beat Max often enough in the second half to maybe win it all. But now, in meme terms:

  

• One wonders, however, if Mercedes can’t pluck the Constructors win from Red Bull. Imagine a season where Lewis and George run 1-2 (in either order) and Max pulls 3rd every time. That’s a 28-point pull every time it happens. Five of those in the next 12, and it’s a done deal. What’s that, you say? I’m not counting the points Sergio Perez will bring to the table? Yes I am.

• Much respect to Hanna Schmitz, who put Max on the hard tire, to the derision of the commentators, only to see the strategy pan out and extend Verstappen’s lead in the championship.

• Nico Hulkenberg is on a bit of a tear, isn’t he?

• Apparently Danny Ric had old parts on his car, which was misbehaving before the start. Doesn’t explain why Yuki out-qualified him again.

• Speaking of Yuki: Isn’t it interesting that Danny Ric got a Red Bull test, and now Liam Lawson is getting a Red Bull test, but Yuki

• Logan Sergeant is pulling a Fiero GT, by which I mean “get it right after cancellation”.

• Lance Stroll continues to ride the Fat Brad hate wave to another finish ahead of Fernando Alonso. You love to see it.

• If Ocon really goes to Haas, that leaves open seats at: Mercedes, Alpine, Williams, VCARB, and Sauber. What a driver market!

One thing is for certain; this won’t be one of those seasons where Netflix has to manufacture drama after the fact. For more on this, including a list of drivers who will never be an F1 WDC, check out Ross Bentley’s free post from this morning.

“If it’s a lie, then we fight on that lie”

The lizard people at McKinsey are in the news right now for a particularly tasty bit of salesmanship, as seen in the above image, but a few other people have recently picked up on the fact that their infamous “diversity studies”, which have been used to justify a positively Beria-esque ideological/sexual/racial purge across the Fortune 500, are something between “mathematically wrong” and “made up”:

However, when we revisit McKinsey’s tests using data for firms in the publicly observable S&P 500® as of 12/31/2019, we do not find statistically significant relations between McKinsey’s inverse normalized Herfindahl-Hirschman measures of executive racial/ethnic diversity at mid-2020 and either industry-adjusted earnings before interest and taxes margin or industry-adjusted sales growth, gross margin, return on assets, return on equity, and total shareholder return over the prior five years 2015–2019. Combined with the erroneous reverse-causality nature of McKinsey’s tests, our inability to quasi-replicate their results suggests that despite the imprimatur given to McKinsey’s studies, they should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives.

Looking back, these studies were clearly a matter of “hyper-successful companies can afford luxurious potlatch-style behavior”, but nobody wanted to go on record as pointing it out. Cue our second stupid meme of the day:

Furthermore, even McKinsey knew they were playing fast and loose with the truth:

Wouldn’t this methodological problem have been obvious to McKinsey researchers? Apparently, it was. Buried in the firm’s 2018 study, its researchers concede the possibility that “better financial outperformance enables companies to achieve greater levels of diversity”—in other words, that more profitable firms may pursue diversity-hiring policies as a result of their profitability. McKinsey’s public presentation of its results, however, has not been so nuanced. As Green and Hand record, Dame Vivian Hunt, a McKinsey managing partner and a coauthor on each of the firm’s diversity studies, claimed in 2018 that “the leading companies in our datasets are pursuing diversity because it’s a business imperative and driving real business results” (emphasis added).

But it doesn’t matter, because McKinsey now says that you need diversity even if it doesn’t add to the bottom line:

Business success is not only about financial returns: with companies across the world considering their holistic impact, we’ve broadened our research lens to include environmental and social-impact performance. Our findings are striking. Across all industries surveyed, more diversity in both boards and executive teams, in both gender and ethnicity, is robustly correlated with higher social and environmental impact scores.

Let me tell you a “social impact” factor that McKinsey will never consider: the value of making a product in the country or state where it is sold.

Putting on my maximum-cynicism hat for a moment: McKinsey is full-throttle advocating for diverse executive teams because they know that diversity tends to hamper actual business performance. (Forced racial or sexual diversity tends to hamper all performance, when measured quantitatively.) Which, in turn, increases the likelihood of a company sourcing McKinsey to help them get out of the hole they’ve dug for themselves. It’s the most MBA of business models: cause a problem, then charge money to “fix” part of it. No wonder slacktivist Marxism is so popular among young people. From their perspective, this is the face of normal capitalism.

You cannot has volvburger, not yet anyway

Speaking of capitalism: Many thanks to the reader who sent me this, and apologies for the delay in publishing it. When President Biden imposed the 100% tariff on Chinese EVs, there was much weeping and gnashing of teeth among the kind of “free market” types who won’t be satisfied until each and every job in the broad career space between “fry cook” and “VP of Solutions Delivery Marketing” has been sent overseas. Some of the television interviews I saw, particularly on “business media”, were eerily reminiscent of a Guild Navigator in his tank intoning the spice must flow.

The most disingenuous of them tried to make the case that EVs simply couldn’t be built anywhere but China. Now Volvo, a Chinese company, is explicitly un-making that case by moving EX30 production to Belgium as a result of Biden’s tariff. How much of this “production” is simply the slapping together of a CKD (completely knocked-down) kit from China? Only time will tell.

(Ironically, Volvo started their production in China and Southeast Asia via “CKDs” from Sweden. There was also a long time when Malaysian Volvo kits were sourced from Sweden instead of China. Now the Chinese CKDs will be assembled in Europe.)

Ignore the blackpillers and hobby economists who tell you that tariffs don’t work. They do. The United States has far fewer actual needs for imports than the average Cato Institute type would claim. And while it’s true in theory that a complete lack of tariffs improves the “average economic posture” of Americans, in practice the way the math works is: “By closing a factory and letting a town of 2,500 people descend into the hell of meth addiction and dissipated crime, we were able to lower the price of kitchen sponges by ten cents — and since 350 million Americans need kitchen sponges, it actually averages out as a benefit.”

Tariffs and VRAs are the only reason that Accords and Camrys and Sonatas are built in America. They are the only reason that you can still buy a new Harley-Davidson motorcycle. They are not the reason that we get the Tacoma instead of the Hilux. Blame Toyota for that.

Is a Belgium-built Volvo better for America than a Chinese-built one? It’s hard to say — but I believe we benefit as a nation from not being flooded by BYD Seagulls and the like. The United States has a positive balance of trade with Belgium, so it’s certainly more than fair to get our Volvos from there instead of from China.

One final note: Note that Volvo’s “we’re sorry” incentive is $2500 for an EV and $1500 for a “mild hybrid”, by which Volvo means the rest of their lineup. Everyone who receives the email should use that $1500 to buy an V90 Cross Country, which is still an actual Swedish Volvo made in Sweden.