Last week’s Big Fail by the press and punditocracy in predicting Donald Trump’s election has been attributed by some to rampant bias. That’s an understandable charge: Trump supporters in media or among the political class were few and far between.
But the real problem was the polls, which misled analysts of all stripes. Their failure raises the question: is public opinion polling, one of the great innovations of the 20th century, dying in the 21st? That has implications for business as well as politics.
My former colleagues at the Pew Research Center have done a good job summarizing the three leading theories behind the poll miss in a blog post here.
The first is the most fundamental – known as “non-response bias.” The science of polling is based on an understanding that you can accurately infer the attitudes of a large population by polling a relatively small random sample. Random selection of phone numbers thus became the heart of modern polling, and the best pollsters – like Pew – extended that to cell phones. But these days, most people won’t take the time to answer a pollster’s questions. Response rates have fallen below 10%. And while statistical methods are used to ensure the polling sample accurately represents the broader population, there’s still the nagging question of whether some inherent bias separates those who will talk to pollsters from those who won’t. It’s a big issue for polling generally. But I’m not convinced it has much to do with the Trump fail.
Second is the “shy Trumpers” theory – the notion that some Trump supporters weren’t willing to admit their support to telephone pollsters. But comparing telephone polls with online polls suggests that difference was pretty small. So again, not persuasive.
That leads to the third, and most important, reason. Pollsters may have done a pretty good job measuring the attitudes of the American public. Where they failed was in accurately predicting who would show up at the polls. Their “likely voter” models were based largely on history; and there was nothing in recent history like Election 2016.
Bottom line: today’s polls, while challenged by the difficulties of obtaining truly random samples, are nevertheless still pretty good at divining public attitudes. But what they can’t do is predict public behavior. “The weakest point of all election polls is likely voter modeling,” says my friend Jon Cohen, chief research officer at SurveyMonkey. “That’s now completely broken.”
More news below.
• Bonds Get Another Leg Down
It was only a pause for breath after all. The global rout in bonds continued in Asia and Europe Monday, as the weekend’s news flow did nothing to invalidate the basic premise that Donald Trump’s presidency will lead to higher borrowing and inflation in the pursuit of more balanced growth. The rise in Treasury yields (over 3% for the 30-year, and 2.29% for the 10-year) continues to make the dollar more attractive on foreign exchange markets, pushing the Chinese yuan and Turkish lira to fresh lows. It’s also pushed the euro out of an uncannily flat trading range, and Deutsche Bank analysts predicted Monday it will finally break through parity against the single currency next year for the first time since 2002. Markets are now pricing a Federal Reserve rate hike in December as a near certainty. Stock futures, which raced higher last week, are indicated to open flat, however.
• Samsung Buys $8 Billion Entry Ticket to the Auto Sector
Samsung Electronics said it had agreed to buy Harman International Industries for about $8 billion. The acquisition would give Samsung an immediate foothold in connected technologies, particularly automotive electronics, which the company says has been a strategic priority. Two-thirds of its $7 billion annual sales are auto-related. More than 30 million vehicles are equipped with Harman’s connected car and audio systems, including embedded infotainment, telematics, connected safety, and security. The news will also give the company a welcome chance to talk about something other than the Galaxy Note 7 fiasco, Korean corruption scandals and ongoing governance sagas. Harman CEO Dinesh Paliwal will continue to lead the company.
• Variations on a Theme of Chip M&A
Siemens said it will buy Mentor Graphics for $4.5 billion in cash. It’s the German company’s second acquisition focusing on software for semiconductor design this year, following a $1 billion deal for CD-adapco. The news comes hot on the heels of it deciding to list its healthcare unit in a move that investors hope will free up capital for investments in higher-margin businesses. Mentor appears to have tired of fighting for its independence, having fought battles with Carl Icahn, Cadence Design Systems and, most recently, Elliott Management Corp. Its shares had hit a multi-year high on Friday but Siemens’ offer is still over 20% above that level.
• Novartis in Talks to Buy Amneal
Generic drug maker Amneal Pharmaceutics is in talks to sell itself to Switzerland’s Novartis for up to $8 billion, according to Bloomberg’s sources. The deal, which hasn’t yet been confirmed, would be consistent with Novartis CEO Joe Jimenez’s hints that it will use cash from selling down its stake in Roche AG to fund acquisitions in other areas, notably generics. Novartis’ Sandoz unit was one of the companies caught up in the Justice Department’s investigation into suspected price-fixing by generic drugmakers in March.
Around the Water Cooler
• Toyota Pays $3.4 Billion to Settle Rust Claims
Toyota has agreed to pay $3.4 billion to settle claims from U.S. drivers that some of its trucks and SUVs lacked effective rust protection and were prone to early and severe corrosion. The deal covers around 1.5 million Tacoma, Tundra and Sequoia vehicles from between 2005 to 2010. It’s the last thing that Toyota needs as the strength of the yen and the Takata airbag scandal continue to drag on earnings. The company admitted no wrongdoing or liability.
• Kenneth Cole Beefs up Online
Kenneth Cole said at the weekend it will shut all of its 63 outlet stores in order to free up money for expanding its online presence and its international business. Evidently the Internet is the best place to get rid of such stock as its two remaining full-price stores in the U.S. can’t sell. Elsewhere in the retail sector, American Apparel filed for bankruptcy protection for the second time in less than a year. The filing was triggered by the decision of Canadian-based Gildan Activewear to buy intellectual property rights related to the brand for around $66 million in cash. Gildan won’t be touching any of American Apparel’s stores, though.
• The Travails of Liberal Business
The struggle of liberal-led business against the rising tide of nativist/populist sentiment took an intriguing turn at the weekend, as Denmark’s Lego–as politically correct an employer as one could wish to meet–pulled its advertizing from the U.K.’s Daily Mail (familiar to U.S. readers from its Mail Online website). The decision came after pressure from activists complaining about the Mail’s coverage of migrants and, most recently, Brexit. Two weeks ago, it had raised a furor by labeling, without any apparent nuance or irony, the judges who rules that parliament must vote before the U.K. formally starts separation talks with the EU as “Enemies of the People”, a phrase beloved of mass-murdering tyrants of both Right and Left ever since Robespierre. It’s unclear whether the newspaper, caught between its readers’ tastes and its advertizers’ conscience, intends to change its ways.
• BMW Raises its Electric Game
Germany’s response to Tesla Motors is getting into gear. Having been slow to embrace the technology shift because of its faith in ‘clean’ diesel and the awful prospect of retraining or shedding highly protected labor, its biggest automakers are now making up for lost time. BMW’s CEO Harald Krueger said at the weekend he wants to boost sales of electric cars by two-thirds next year to 100,000 vehicles. That’s as many as it has sold in the three years since it launched its first batter-powered car. The company, which has dropped behind Daimler’s Mercedes-Benz in global luxury-car sales rankings, wants to expand the share of electric cars and hybrid models to between 15 and 25 percent of sales by 2025, Krueger said.
Summaries by Geoffrey Smith Geoffrey.email@example.com;