An Unexpected Surprise

This afternoon I had a meeting in Vallejo (in California) and we agreed to meet at a place called Sac's Tasty Hotdogs.  (Located at 2445 Springs Road in Vallejo.)  We located it on Yelp.

It is not a fancy place.  It only has about 30 seats inside (in warmer weather there is an outside eating area).   The menu is limited - hotdogs, chili, chips, and soft drinks.   The service is friendly.

Now about the food.   For $3.35 you get a first rate, all beef hotdog with sliced or chopped onions, sliced tomatoes, relish, mustard.   We got there about 11:30 and by the time we got seated, there was a line coming out the door. That lasted for more than an hour - but the service was always friendly.  No frills.  But great food.  Good enough so that I would stop there again on my way between my home and the Bay Area.   Well worth the stop.

Entitlements

"An entitlement is  a guarantee of access to benefits based on established rights or by legislation. A "right" is itself an entitlement associated with a moral or social principle, such that an "entitlement" is aprovision made in accordance with legal framework of a society. Typically, entitlements are laws based on concepts of principle ("rights") which are themselves based in concepts of social equality or enfranchisement."  That is the WIKI definition -( http://en.wikipedia.org/wiki/Entitlement) and it is about as succinct at one can make it.  The chart at the right shows the growth in entitlement costs.

But there is a deeper issue here which the WIKI does not highlight enough.  There are two kinds of entitlements.   The first are created as if they were a traditional contract.   Social Security is an entitlement based on a series of direct payments over a lifetime of work.   It is pretty clear that Social Security and a number of other like minded systems (public pensions for example) are systems that could work if the recipients were willing to pay the appropriate amount to fund the projected benefits.   The problem is the political class is great at growing these things without regard to prudent thought about contributions versus future costs.

The second kind of entitlement is one created simply by one's membership in a society.   That entitlement is based on the notion of a merit good.   In essence, society will be better if we provide an adequate amount of something, for example like food to people who cannot afford it (in California now known as Cal Fresh but formerly called food stamps) or education for people who cannot afford it (Pell Grants).   Both of those entitlements are designed to make society a little better but they are open ended spending commitments.   In recent years these kinds of entitlements have grown tremendously.    It is hard to assume that the tremendous growth in the use of food stamps was caused entirely by the recession.  So the whole notion of entitlement may produce some deeper societal consequences.

As I have watched the discussions on the fiscal cliff develop I have thought a lot about both types of entitlements.   From my perspective both are corruptive to the creation of a just society.   It is easy to think about alternatives to the first kind of entitlements - Jose Piñera, the Chilean economist, gave us a map for improving Social Security and other programs like it decades ago.

Traditionally the second kind of entitlements can be controlled by two methods.   First, they can be budgeted on a traditional basis.  Figure out how much we want to spend on these programs and keep to that budget. In extraordinary times we could agree to spend a bit more, which might be paid back in flush times.  Second, the benefit could be divided by the number of applicants - in very tough times that would mean a small amount of benefit.

A better way to think about both kinds of entitlements would be to decide whether it is better to put the benefit on a sound financial basis that covers both current needs and appropriate actuarial assumptions in the future(like what is trying to be done for public employee pensions).    A second way to improve the current situation is to privatize the benefit and the financing.   Government serves as the rule maker, but not the administrator.   Many of the best proposals for Social Security are based on that principle.  Make the system more like an IRA, with a defined contribution level which is limited to an approved list of investments.   Make a separate provision for the small number of people whose benefits are not realized either because of bad luck or even imprudence.

The moral hazard of entitlements is that individuals begin to believe that simply by being a member of society they are due something.   That separates the concept of rights offered by society from the inherent responsibilities of being a member of society.  The President's rap (You did not build this) is an example of that separation.   But there is a second hazard.   Entitlements encourage politicians of all political stripes to use governmental authority to play one part of society against another with the idea that benefits will accrue to one group and costs will be borne by another.

Nibiru and the Fiscal Cliff

OK, so on the date that Nibiru (that mythical planet which did not crash into the earth) did not come, the fiscal cliff moved one step closer.   Last night Speaker of the House John Boehner was unable to get his caucus to adopt a proposal that the President had already been poised to veto.   he picture at the right is of the "Mayan" weather forecast but the way the MSM speaks about the impending fiscal cliff it could also be about the state of DC politics.   In both cases the coverage is a bit overblown.

What has been amazing to me is that the left (Obama and beyond) have not had their feet held to the fire yet by the supposedly objective media.  Ultimately, Boehner and the President have moved a bit on their initial positions but the MSM seem to think the real discussion here is about revenue only or revenue and a tiny amount of spending cuts.   What we should be having a national discussion on is just how much of our GDP should be extracted to run the federal government.   The long term goal here should be to get us a lot closer to the 18-19% that it has been for the last couple of decades.

There seem to be several sticking points.   The difference between raising rates on taxpayers making $400,000 and $1,000,000 (Obama and the left would prefer the lower number).  There has certainly been movement here - the President started at raising rates on incomes of $200,000 and the Speaker rejected any raise in rates.   Both sides would limit the use of deductions for the highest income taxpayers.  They both seem to have agreed to raise rates to 20% on capital gains.  Although some of the hard left would prefer no capital gains differential.

The President has dropped his plan to extend the Social Security rate cut.  So it seems for sure that rate will go up on January 1.  And in my opinion, it should.   They seem to have agreed on modifying the COLA for Social Security to an index that would rise a bit slower and has an assumption that when prices rise in one area people substitute consumption of other products.   That seems like real progress.   Where they remain apart is the Boehner proposal to gradually raise the eligibility age for Medicare to 67.   That was done in the 1983 compromise for Social Security benefits and seems like an eminently reasonable change to Medicare.

The gulf on Estate Taxes is pretty large.  The President would like to both raise rates (to 45%) and lower limits (to $3.5 million) while Boehner would like to keep rates and set the exclusion at $5 million.  While I believe the Speaker's plan is appropriate, this seems like an issue where the difference could be split and then indexed.

But on spending there is still a lot of work to be done.  For example, according to the NYT about a quarter of the Administration's reductions in spending come from an economic assumption of lowered payments on the national debt.   While it is probable that interest costs will decline as a result of less spending, rates for federal borrowing are unlikely to remain at their depressed rates for the next decade. The President also wants some more money spent NOW on infrastructure and extended unemployment benefits.   Both of those should be paid for with more reductions in other government spending.

So our next sighting of fiscal Nibiru will be after Santa comes.  If you are interested the NYT has an option for figuring out how to reduce the deficit.  A graphic of my solution is presented to the left.

Ultimately I hope that the political class - in this case I mean a lot more than one group of GOP members in the House that stopped Plan B from moving forward - will act responsibly to reduce the deficit before the fiscal cliff happens.  Both sides should be looking for three things - real spending reductions, some revenue increases, and an overall plan that will reduce the percentage of the GDP going to the federal government.   Some members of the GOP have a problem with any revenue increase but more democrats have a problem with an real reductions in spending.   If they cannot act like grownups then I say we should let the cliff happen.

Customs vs. the TSA

I am always amazed how some public agencies can function better than others.  This morning as I was coming back into the country, I landed in Los Angeles and went through the customs process in about 25 seconds.   I am a part of Global Entry which is a project from US Customs which allows travelers who submit personal data to get through the process of reentering the country with minimal fuss and bother.   It is a successor to a system that did not work very well but for the couple of years but the Customs Service worked to perfect it.   Since the new program was adopted, it has simplified my life.  I give them a bit of personal data and they get me through the process.  You go through a line, stick your passport in a machine, give a photo and fingerprints, answer the usual questions and voila you are through the lines.  I have used the service in five different airports and in each the system works well.  Bravo for the Customs Service!!!!!

But then I got to the TSA part of the process.  As I think happens in all countries, you are required to reenter security after you have cleared customs to board a domestic flight.   I am not sure what it is about LAX but the TSA staff there is beyond horrible.   They represent the worst of a bad situation.

When I fly, because I fly a lot, I am allowed to go through the "expedited" line. (I am a priority traveller.)   But at LAX the TSA seems to delight in being bureaucratic.   Even with the special status the line this morning took about 30 minutes to get through.

LAX is so bad that when I come to the LA area I make it a point not to fly to LAX.

Sandy Hook and the State of Public Discourse

I am a member of a group on Facebook which is made up of current and former political types.   This morning I posted something from Ezra Klein which presented two graphs one from Mother Jones which shows a shocking (my terminology) increase in gun violence and another from a contributor to Reason which shows the trend to be more flat.   As someone who spent a good part of his career on public policy issues I am always interested in seeing whether we can use data to understand how to make a situation better.   Here are a couple of things that we know.  First, compared to OECD countries, the US (see the first chart) has a higher level of gun ownership than other developed countries.   But second, gun ownership in the last several decades has decreased from about 50% of households to about 35% of households.   Simultaneously, the number of gun laws has increased significantly.   There is a perception, supported by the Mother Jones data that even with the decline in gun ownership and increase in laws, that gun violence - especially the type of violence in Aurora or Sandy Hook - is up.

So if you are aghast at the tragedy that unfolded in Connecticut, but you are aware of the underlying logic of the Second Amendment, how should the discourse go forward?   So this morning I posted to the Facebook group the article offered by Ezra Klein.   From my perspective more there is something missing from the debates about how to deal with this issue from the absolutists on both sides.   We need to do some good old fashioned clear headed thinking about how to reduce risks to society, especially school children.   The most realistic answer does not lie in the absolute positions of either gun antagonists nor gun advocates.

As I have thought about it we seem to have been able to let some guns slip through to people who should not have them.  Indeed, a couple of articles have suggested ways to tighten restrictions on gun ownership for people with mental problems, that on first glance seem eminently reasonable.  From my perspective, it would also be reasonable (although not something we should do in statute) for television networks to quit four walling tragedies like this.   I would prefer that the perpetrators of these kinds of things are referred to as "loon" or "nut case" but never with their names.  I am sick and tired of the endless coverage that every network does on people who had the most remote contact with the shooter - "Yes I was at a Dunkin' Donuts about two years ago and the guy behind me looked a lot like the shooter and I could tell he was deranged...."    

From my perspective we need not pass a bunch of laws which are not likely to solve the problem.   But as I have looked at the commentary on Facebook about this event, I've seen both sides devolve to the legislative kabuki which will not begin to solve the problem.    Perhaps the most odd response to my original post came from someone in the group who said - (quoted in its entirety)...

oops the rest of this is: trajedy and say hey stats show no prob, it's God punishing us for a woman's right to choose or gay marraige, stop. Children are dying. George, Ben and Thomas never could conceiv ably foressen asswault weapons. Maybe we should all be allowed to have hand grenades and bazookas. Afterall, they arms too.

The American political system depends on civil discourse.  From my perspective this issue suggests that we have lost a lot of what we need to work on common problems.

The UC Logo fiasco

Well the University of California finally recognized the obvious and cancelled the new logo.   The administration "suspended" the monstrosity but I think I know what that means.  I hesitated in writing about it while the issue was hot because it was a story which just kept expanding.

Here are some thoughts.

#1 - One wag commented that UC was flushing California down the toilet. There were tons of other comments - many with a good deal less respect.   Evidently more than 50,000 people signed a petition against the new logo.   Our Lieutenant Governor agued that rather than rearranging the logo the University should be thinking about how to fund this great university.  I do not alway agree with Newsom - but on this issue - he was spot on.

#2 - The University, if indeed it needed a new more web friendly design, could have exercised its role as a public university that has a couple of superb design programs - have sponsored a statewide competition.  I am not sure whether senior UC officials have ever read James Suroweicki's excellent book on the Wisdom of Crowds but they should have.  It is available in paperback and online.  Well worth the read.

#3 - This pointed out, as if there were need to do it again, that the university, like much of higher education has not spent a lot of time thinking carefully about how UC fits into society.    Any organization that would refer to itself as "the University" needs some deportment classes.

Mexico at the end of 2012

I had a short visit to Mexico City on Sunday and Monday and have three distinct impressions.   They are not presented in any order of importance.  The first picture is of the "angel" on Reforma- which is an important public monument.  Next to it is the Sheraton Maria Isabel - which was the scene of riots in the past and next to that is the American embassy.  So Reforma is one of the centers of the city - although compared to when I first came to the country - Mexico City now has a lot of centers.   So here are three impressions --

#1 - Mexico is enthusiastic - That may be an odd way to describe it but in the last couple of trips to the country in all sorts of places from the Yucatan to Xalapa to Aguascalientes to Mexico City - I have failed to notice the ennui that seems to pervade the American psyche at this point.   Mexico did not suffer the kind of economic dump that we did beginning at the end of 2007.   The peso has remained in the 12-13:1 range and all over the country there are signs of growing prosperity.  The middle class is visible and growing.

That does not mean that Mexico is silly with its enthusiasm.  There are real problems.  On this trip I only noticed one officer with the face mask described in a post I did from Xalapa.  He was in the airport this morning and I wanted to get a picture because both he and his drug sniffing dog were wearing masks.  The dog's was more of a muzzle.  But for obvious reasons I did not try to take a picture.

I am not a big fan of Mexico City - it is very large and very complex. (I am not generally a fan of big cities.)   This time I stayed in the Reforma area (more about that later).    I got caught up in the annual Coca Cola Caravan and so my cab driver was unable to drop me at my hotel - which precipitated a walk of some length.   But as I walked I saw families coming back from seeing the parade - as with many social events there were all ages coming back fathers, mothers, grandparents all taking a hand in bringing the little ones back.

The hotel I stayed in (Holiday Inn Express) was superb and inexpensive - it had both a good breakfast for free and free internet and it is close to many things including a big shopping mall next door.   The shops along the Reforma (I walked to my appointments on Monday) were open and seemingly prosperous.   So enthusiasm is one word to describe the spirit.   At earlier times I've understood cynicism but that at least for now seems a bit muted.

The second picture is of no particular importance except that it is the desk which I have used at the United Club many times over the last twenty years.   At one point I was stuck in the airport for about 20 hours- when a flight was delayed - so this desk is very familiar.

#2 - Mexico is changing - the Mexico City airport is a good example - almost every time I fly through there there is some new wrinkle.   On Sunday night I was stuck in the customs line with a young woman who is doing a Deloitte project studying the feasibility of creating an APP for online grocery shopping through Walmart.  That would have been unthinkable even five years ago but the internet is becoming ubiquitous.   I now spend a lot of time on Skype with colleagues and friends in Mexico.  Telmex - keep your damn monopoly - it no longer matters. (Unless of course you want a land line.)

The path from landing through customs seems to take a slightly different path each time I come through the airport.   Each time I come to Mexico there are new places where both cellular and internet are more widely available.  AT&T has set up a new plan (which is great) to give you 80 minutes of talk time in Mexico for $30.  I generally turn off data in Mexico because it can be very expensive but that is no longer a big problem - pop into many shops and there is free wireless.

Last night we went to a VIP theater - which I have described before (good food and drink and premium seating) and saw a recently released movie.   While not all of Hollywood's pictures get there - the blockbusters do.  Action and Disney are still sure sellers in Mexico.   We saw a movie called the Words (which in Spanish was translated into the Secret) which was actually pretty good.

#3 - Mexico has become a partner not a client - when I first came to Mexico I had the distinct impression that many of the US-Mexican relationships were more like clients than partners.   I think that is a lot less true.    Yesterday, I met with the Secretary-General of an education organization and was impressed at how informed he was about developments in the US and Europe.   We talked about several initiatives that he is thinking about with the new government and beyond and he had some interesting perspectives.  I also met with an attorney who is working on a big case in another part of the country.   He had spent a lot of time thinking about how his case might operate in other countries.

Bill Moore

On Thursday, a mentor, friend and colleague died as a result of the effects of Lupus.   I first came to know him when he became President of the Association that I worked for.   I was the runner up.  The board chose him because they wanted to get on a different tack than his predecessor had chosen to take the group.    We quickly figured out how to work together, I think quite well and continued that collaboration for six years before he retired and then beyond as I succeeded him.   During that time he taught me more about management and leadership than I had understood in all of my previous work.

Bill spent a career in higher education after completing a PhD.  He went to the University of Redlands (where he served on the board for a couple of terms) and then taught there and began a rise in university administration.   His last job before I met him was at Chabot College in the Bay Area.

He had a several skills - which I continue to try to emulate (some more effectively than others).  One was an ability to listen.  It is strange that the old admonition all of us heard as kids (God gave you two ears and one mouth for a reason) is not followed more closely.   Bill was the exception to the rule and had a special skill in keeping that standard.  He also had a remarkable ability to synthesize what he had heard.   About ten years after I succeeded him, I asked him to come back and help us with some strategic planning.   I asked him to go around with our board and gather information and then join us in a retreat to help us think about next steps.  At the meeting he did a remarkable job of bringing together 20 or so opinions into a thread that we could work with.   I was working with a board earlier in the week, in my role as a consultant, and thought of how I have tried (imperfectly) to emulate what I watched in that role.   It is a lesson I keep thinking about.   Finally he had a nice touch of being able to synthesize what he had heard - to continue to bring people together.

One of his key roles during his tenure was working on a revision of the California Master Plan for Higher Education.   That required a set of meetings in five or six venues - often with similar but not exactly the same participants.   In the end we came out of that process with something that was useful to our members.

Bill had a good sense of humor.   Early in his tenure he had played a trick on me - I am not sure what it was.   But I decided to get him back.   At the time we had second or third generation Macintoshes.  He would commute to the Bay Area each day so would leave on most days by about 5:30.  I went into his office after he had left and wrote a short Applescript which would start up an Application (I've forgotten the name) which made noises of a woman in hot passion.  I thought it would be funny when he started up on the following Monday - but little did I know.  My office was next to his and he came in that morning and immediately got on a conference call with the straight laced President of the University of California (David Gardner).    He sat down, started the call and then flipped on his computer which immediately began to make the noise - as I rushed in laughing he was red-faced and trying frantically to shut the thing down.

 
Bill introduced me to two other things for which I am grateful.  He served on a corporate board (including a role as the chair and then as an emeritus member) and I succeeded him on it.  For the first several years he offered valuable advice and counsel on the culture of the board.   It was much appreciated.

But then there is fly fishing.   Each summer Bill would take a month off to go to Montana and fish near West Yellowstone. It was a way of keeping balance.  He eventually built a house there and after retiring there spent about six months a year there.   He was passionate about fishing.   And little by little I have been drawn into the sport.   The three pictures are in Montana, near his house and in a place that both of us loved to fish in Wyoming.

One thing Bill and I did not share was politics.  He was a New Republic Democrat and I am not.   We had some spirited discussions about issues of the day.   We did share a passion for one political issue - the improvement of opportunities for all students in higher education.  In one of his last notes to me he said he had moved to his new home to help balance out the voting.  (Obviously in his half year home in Napa his vote did not make a difference.)  In one his last notes to me Bill explained why he moved from his "beloved" California - "We left CA not so much in anger as in sadness.  It seems bent on becoming a banana republic, the same status as the country seems headed for if the idiots in Washington cannot bring themselves to understand the difference between governance and campaigning."   On that we could agree!

Bill asked that his ashes be divided between his new favorite spot at the Swann and on the Madison where he fished for many years.

Customer Service? Not from Hotels.com

Over Thanksgiving we went to LA to visit my daughter and her family and my mother in law.   We used Hotels.com to do the reservation.   We wanted a hotel which is literally a block away from my daughter's house.   We chose it for the location.   The search term used was EAGLE ROCK, CA.   Eagle Rock is a suburb of LA but a recognized region of LA.   When you search on Mapquest you get the area as a separate part of LA.

When the options came up the top listing for the brand we were looking for was on Colorado Avenue, which is where the hotel we were looking for is located.   So I reserved the hotel.  We've stayed at the hotel previously and I remembered the approximate price, noted the hotel was on the street we had stayed at before.  I even looked at the other options including a hotel from another chain which is right down the street. The location of the place we wanted to stay is located on the map with the purple dot.  The place where the Hotels.com search engine placed us was nine miles away. (note the city of the alternate location is the city of Pasadena).   These kinds of problems are minor but annoying.   I discovered that the price you could get from Hotels.com is no better than a number of other booking services or by going directly to the chain in question.   What's more I tested a couple of the other booking services to see whether they would do the same thing and found that when I searched for one city the top response was for that city.

I immediately wrote Hotels.com and complained.   I had been explicit in my request and the search engine over-rode the request.  They came back to me within one day with the following response -

"We apologize for the inconvenience, we are committed to providing our customers with quality hotel reservations and superior service. We consider your feedback to be very valuable. We have noted the information you provided and escalated this to the appropriate department. Rest assured that we will look into this matter. "

I expected that after an appropriate review they would come back to me again with a response which explained why their search algorithm could ignore my request.   But almost two weeks after their initial response I have heard nothing.   Can you guess whether I will use Hotels.com again any time soon?