Tuesday, August 30, 2011

The SW Blue Sleeve Gambit

This morning while waiting to board a flight to Sacramento, there were 10 people who were offered pre-boarding based on real or perceived disability.  In addition to those people who boarded early there were another dozen hangers on who were there to ostensibly assist.   Southwest has another policy where a continuing flight has people stay on board.   Thus, as a Business Select customer, who paid an extra fee to be able to board the plane early, I was able to board when almost half the seats were already taken.

What also galled me about this flight was two grannies who were put on in wheel chairs and somehow had a miraculous recovery when they got off - but walked slowly enough so I was unable to exit the plane.   This is beginning to rank up with roller board suitcases - inexperienced travelers (and even some who know how to live with them) take up a huge portion of space in airports.  They become double or triple wide targets.

It is enough to want to quit flying.

Monday, August 29, 2011

The Work of Universities

Last week I spent a couple of days at a university in Mexico called Universidad del Mayab.  I am a member of their international advisory board.  But I would be a fan, even if I were not.

The Mayab is a selective independent university whose vision is to be engaged in the world around them.  They have worked hard at developing a series of collaborations with universities around the world.  They have sponsored conferences.  They have consulted with governments in the area of the Yucatan to improve the quality of administration.  In short they are engaged.

Last week we got to see something new, it is an incubator designed to accomplish two things at once.  First, the University has offered several startups space in which to work on their products.  At the same time they hope to encourage the development of a cluster in the region that would focus on some of the strengths of the university's graduates.   The picture above is of three prototypes of a medical information device which allows patients to take readings (on things like blood sugar and blood pressure) and then print them out and also to send the data to their physician.   The prototypes go from left to right - each one being simpler and smaller.   The center has a number of other projects in other areas where young entrepreneurs are given the chance to develop their ideas.   In the long term if a few of these ideas pay off the University will have contributed to the economic development of the region.

Stanford and a couple of other universities of that size have similar efforts in technology and entrepreneurship.  The Stanford Center has a series of lectures (which are available as podcasts) from entrepreneurs as well as a wealth of resources to help budding entrepreneurs think about the future.  The differences between Stanford and Mayab are many.  Stanford is significantly larger and has a larger endowment.   What is intriguing about the Mayab effort is their willingness, as they are in many other areas, to become involved in the active part of teaching and learning in their region.

Thursday, August 25, 2011

The President's Bus Tour

Politico has an article about an analysis of the President's bus tour into the midwest.   The vast majority of tweets analyzed by Crimson Hexagon were negative.   The people seem to have seen through the President's attempt to "govern" by rhetoric.

The tweeters were grumpy that he used tax dollars to campaign; that this kind of showboating does nothing to help the country; indeed only 6% of the people were positive on the tour.

One potential positive result might be to influence how individuals campaign for office.  At one point the focus of campaigning was to present one's ideas rather than to expose oneself in carefully managed cocoons - might not be a bad idea for 2012 to go "retro."   The handlers and spinmeisters might not like it but the voters would.

Saturday, August 20, 2011

Translating NPR

This morning NPR had a segment about the effects of closing Borders stores around the country.  Borders (that competed not very well with Barnes and Noble and Amazon) is closing its stores which in many places were anchor tenants in shopping centers.  This piece had a guy supposedly trying to explain the effects of these stores closing.  But it got bound up so badly in jargon, I was not sure what I was supposed to learn.  The best that I could discover was that some Borders closings were good and others were not as good.

The piece trotted out one Christopher Leinberger who was described as a "scholar at Brookings."   One need only look a bit to find out that he has been a professor at Michigan and a founding partner of Arcadia Land Company, "a New Urbanism/transit-oriented development and consulting firm dedicated to land stewardship and building a sense of community."   He holds a BA from Swarthmore and a Harvard MBA.   From my point of view it was interesting that his role as a land developer was left out of his bio.  Evidently this big time "thinker" is also in it to make a buck touting his ideas about development.  I do not begrudge him that but "scholar" is a bit of a stretch.  I also wonder whether his commercial ties would be an issue if he did not mouth the party line on NPR about development.

Mr. Leinberger seems to be somewhat of a vochongista.  In a spot that lasted a couple of minutes he used two terms incessantly - "driveable" (which evidently is bad) and "walkable" which evidently is good.  He prattled on about how "big box" (evidently in the "enlightened" view of NPR and Mr. Leinberger Big Boxes can be either good or bad depending on whether the big box is driveable (bad) or walkable(good).   He also seems to be willing to make other twists in NPR orthodoxy.  For example, he clucked approvingly that Reston, VA(even though it was developed "surprisingly" by an evil oil company/Mobil had "walkable" features.)

Schumpeter described creative destruction in a much clearer way.  When some entities in the economy lose their utility, they are gobbled up by ones that will take their place.  The creative destruction does not matter whether the entities are "walkable" or "drivable."

Thursday, August 18, 2011

Tone Deaf

Yesterday the President, in response to a question, said to a farmer if you are worried about some potential regulations, contact the USDA.

Here is the video (supplied by Politico).   What amazes me about this clip is that Obama's first response is that a guy who knows the business of farming should first consult with the USDA.  Doesn't that seem a bit odd - shouldn't the first question in Washington be about whether a particular idea is going to inhibit the ability of private producers from doing what the market system allows them to do?   Why should a guy who knows farming also have to navigate through a bureaucracy?

Perry, Bernanke and the Use of Appropriate Language

Presidential candidate Rick Perry commented that it was "almost treacherous -- or treasonous" for the Fed Chairman to increase stimulus spending before the 2012 election.  From my perspective that is a bit extreme.  And while I am not a Perry fan (for lots of other reasons) I was surprised by the immediate "gather round the wagons" mentality that emerged from the Washington establishment.   Chris Matthews compared Perry's comments to ones that Bull Connor might have used (Matthew's ability to be subtle is not well developed.)   Al Hunt, who has become an epitome of the Washington establishment, goes on in the clip below to natter about the effects on the campaign.   But there is legitimate disagreement in the electorate about whether QE has actually done anything to boost the economy.  And there are a number of prominent economists who have argued that the Fed actions have been ineffective at best and destructive at worst. 

What this dustup highlighted for me is two things.  First, Perry indeed needs to chose his words more carefully. The left, its willing lapdogs in the press will use this to try to "Sarah Palin" Perry.  But, the Washington establishment showed once again how they live in a closed environment isolated from the real world.   "We know better" may have worked at one time but I am not sure it will work in this environment.

Sunday, August 14, 2011

Arthur v. Arthur

I watch movies when I work out and for the past couple of days I watched the new and old versions of Arthur.  Arthur, 1981, is about a very rich young man who galavants a bit too much and is ultimately given a choice by his family to marry a wealthy young woman or lose all his dough.  Ditto for the 2011 version.

1981 starred Dudley Moore, John Gielgud and Liza Minnelli.   Moore is the young playboy; Gielgud the unflappable servant and Minnelli the person that Arthur falls in love with.  2011 stars Russell Brand, Helen Mirren and Greta Gerwig.   For my money Moore and Gielgud far outpaced Brand and Mirren.  But Brand and Mirren turn in credible performances. The 2011 version has Arthur being a bit more outside the realm - a bit wackier.  In my mind Gerwig far outshines Minnelli in the love interest.  Minnelli is annoying; Gerwig is charming.

There is one other role in the movie that bears notice.   The premise is that Arthur will be straightened up if he marries the right girl.  In 1981 the right girl was Jill Eikenberry.  She was directive but still a creature that was very much subsumed under her father.   In 2011 Jennifer Garner becomes Susan Johnson and is a lot more self directed - even ego maniacal.

Neither picture was designed to be something deep.  But both are charming and entertaining.

What do the 2011 Rivercats have in common with the decade of the 1970s?

The 2011 Cats have been prone to Streaks.   For the first time in their history, the Cats amassed a new record by losing 9 in a row.  With 23 games left and 10 games up over Las Vegas, their current losing streak is 7.   At the same time they have had some powerful winning streaks too.  Before this current losing streak they had run through opponents easily.

The last three games may be a preview of the finals, if the Cats are able to recover and win both the division and the Pacific Conference.  Round Rock seems a likely winner of the Atlantic Conference.

In the last sets of series we are at Fresno (5), then at home against Las Vegas (4) and then at Colorado Springs (4).  All three of the series are ones where we should do well but can produce wild results.   Last night I wore a Nashville Sounds jersey - and indeed the Sounds won their game so we moved up in the magic number even if we could not beat Round Rock.

They lost another on Sunday which puts the current streak at -8.

Wednesday, August 10, 2011

The Wisconsin Recall Results

Tuesday's recall results showed a couple of things.  First, the power of public employee unions is not absolute.  It has been estimated by Reuters that both sides spent something approaching $37 million (that is more than was spent in the total election cycle in 2010 for legislative elections.  There are not reliable estimates of how money divided but it is likely that the public employee unions outspent the supporters of Governor Walker's position by a substantial margin.   Second, while there are two remaining recalls (both against democrats) it is likely that the GOP will maintain control of the state senate at least until 2012.   Third, with the amount of money spent trying to unseat Judge Prosser and the recalls - midwest union funds will be less important in the coming election cycle.

Monday, August 08, 2011


To review: The president's statement is presented in its entirety.   He quotes Warren Buffett early on - Buffett's company also received an S&P downgrade today.  He said he "intends to present my own ideas" soon - isn't that something he should have done a while ago.  A Teleprompter is no substitute for leadership.

Saturday, August 06, 2011

Warren Buffett's Secretary and Other Fantasies

During the run up of the discussion on the Debt Limit, one of the claims made by supporters of increases in taxes was that Warren Buffett pays a lower tax rate than his receptionist.   For example, there is a YouTube of Buffett making the claim here.   Is Buffet's claim reliable?

First, the "rate" here is average not marginal rate.    In other words, take all the income that his receptionist earned (from salary, savings, interest, and other sources) and divide it by the amount paid in all taxes (income, social security, other employment taxes - the calculation presumably excludes things like sales and property taxes as well as license fees.).   Ditto for Buffet.   Buffet's marginal rate for income earned is the top rate. But of course most of his income comes from investments and he is a long term investor so his average rate would be somewhere between 15% (if all of his income is from capital gains) or the highest marginal rate.   One can infer that the vast majority of his income comes from these sources to lower his rate to just above the capital gains rate.   The Nebraska income tax keys off the federal return but the top rate begins to apply at a very low level of income. ($54,000 for a married person filing jointly).

Second, if one looks at the tables from the IRS data for income taxes paid by adjusted gross income, to reach an average income tax rate of 20% one needs to make almost $160,000 per year.  I am not sure about Mr. Buffet's compensation ranges but that sounds like a pretty handsome salary for a receptionist in Omaha.  Add in the other taxes (Social Security, Medicare, Unemployment,Nebraska Income tax) and you might well get to a 30% rate.   The average federal income tax rate for some earning $30,000 per year is under 14%.  Double the income and the average rate jumps to just under 16%.   The Nebraska income tax rate schedule shows that for a married person filing jointly, the highest rate (7%) begins to attach at $54,000. (The rates begin at half that income for single filers.)  Let's assume that Buffett does not pay his receptionist $160,000 per year - if you assume payroll tax and federal and Nebraska income tax you can get the average rate to 30%.   According to the Nebraska Revenue Department a worker with a median income of $45,000 pays a rate of 7%.   But it is pretty hard to imagine, that unless Mr. Buffett is still deducting his gift to the Gates Foundation (which presumably can be carried over five years if it exceeds the percentage limit on charitable donations), how he can reach a 17% average income tax rate.

Mr. Buffett's receptionist also does not seem to be taking advantage of things like retirement savings.  Were she to maximize those savings her average rate on income would decline.  It seems odd that the "oracle of Omaha" has not encouraged his employees to save for their retirement.

One more fact check, based on my own data.  Last year I made considerably more than even the hypothetical receptionist.  I was a joint filer.   I've kept a spreadsheet on my average tax burden for all of my working life.   I am married and filing jointly.  My total tax burden including sales, property, income and employment taxes was under 32%.  My combined income tax burden (California and Federal) was just under 26%.   Admittedly my return did not have the capital gains that Mr. Buffett's did.   But from even this cursory review, his numbers a bunk.

Finally, a tax policy comment.  Buffett has long favored a progressive consumption tax, where taxpayers pay on their consumption and all savings (including unrealized capital gains, retirement savings) go untaxed.   The lowered rate for capital gains, which Mr. Buffett seems to object to but which he also seems to take advantage of, is a precursor to the very system that he says he believes in.  He must be making a political rather than an economic point.   But most of us had already figured that out.

Friday, August 05, 2011

The Hershey Hotel

We just spent a week at the Hershey Hotel.  It is a very memorable place.  The service is exceptional. The opportunities for fun including a good amusement park, a pretty good garden on the grounds, the Gettysburg battlefield and a host of other things to do - make it a place with lots of possibilities.

The Hotel has three restaurants.  An expensive, but well appointed, Circular Dining Room; a locally sourced place (which offers fresh produce) called Harvest and an informal Italian restaurant called Trevi 5.   During the week we tried all three.  One night we had an agnolotti which was very good at Trevi 5.   The burgers at the Harvest were very well done.  The ambience at the Circular Dining Room matched the food.

The service throughout the hotel is exceptional - courteous and personal.  The staff was helpful not intrusive.

For the last couple of years I have had 90-100 hotel nights including some in pretty fancy hotels.  I would match the Hershey with the best I have experienced.

Monday, August 01, 2011

Dirty Rotten Scoundrels - with a right to be

In the discussions about the debt ceiling issue a lot of people have ascribed motives to their opponents which I believe are unjustified.  The most egregious of these have come from commentators on the left who have described the Tea Party members in the House as being immature.     One writer called the Tea Party people "petulant children."  

Most of the people elected in the wave of 2010 were elected with a very explicit mandate - to lower the debt and governmental spending.  I understand that there is too much vitriol in American politics but this snide side is too much.