Tuesday, July 30, 2013

The Third Metric

Ariana Huffington is not just a ruthless self promoter.   I first came to know about her when a friend was applying to be the campaign manager for her then husband, Michael Huffington.   Michael Huffington was a one term congressman who won a contested primary against a somewhat out of touch incumbent and then promptly expressed interest in running for the US Senate.   He again spent a boatload of money in the primary and made a respectable showing against Diane Feinstein.   My friend described the couple as bizarre and has said subsequently that he was very happy he did not get the job.

Ms. Huffington went on to be a right of center talk show host and then gradually moved to the left.   Her conversion seems to have been somewhat related to the incursion into Serbia but she actually came out (to the left) when she endorsed John Kerry in 2004.   When Gray Davis was being recalled she was all over the map - first a candidate (in a classic dust up between the eventual winner - who in many ways is very much like her) and then an opponent of the recall.   I offer that history because Californians have known about her for at least two decades.   I have never been convinced that she is an especially deep thinker.    She has been very successful in developing and promoting a left wing news alternative called the Huffington Post which has lots of substance but also lots of tabloid elements.  I confess that I read the Huffpost on a daily basis, in part for the substance.

There is one other background on this post - George Easterlin was an economist who came up with something called the Easterlin Paradox in the 1970s which argued that happiness does not increase with increased wealth and therefore pursuing GDP for its own sake is not a good goal.   His original argument (and its offshoots) have been used by many to justify alternative ways to think about the relationship of economic growth to happiness.   The Paradox is troubling on a number of levels - measures of both GDP and happiness are noticeably squishy.   That is true within a country and even more so across countries.   And any first year economics student should understand the math of the utility function which postulates that as utility increases the marginal benefit for each increment decreases.

Two researchers from the University of Michigan have looked again at Easterlin and have found that if you look carefully at his data, the conclusions do not come from his data.   They find a very high correlation between level of GDP and levels of national happiness.  

So along comes Ariana - with this idea called the "Third Metric" which is a jumble of ideas about all those generalized concepts that much of the left uses to redefine "money can't buy happiness" or "there is more to life than money" or the current buzzword "sustainability" as if markets, without this new concept, have no interest in continuing.  Ultimate any market is sustainable or it loses its market function. From my perspective, even thought Huffington has pushed the concept hard this "Third Metric" when you think carefully about it is a bunch of bollix.  It is a classic "vochongo" a word which everyone uses but no one clearly understands.  (See earlier posts on the term here.)

Perhaps beginning with Adam Smith (in the Theory of Moral Sentiments) there has been a lot of writing on the multiple paths to happiness.   Smith consistently does not argue that more material success is a guarantee of happiness.   Yet, in his other book (that everybody quotes and no one actually has read - note I've read both) he discusses the "bull headed brewer" - the mainstay of markets.  

From my perspective much of the "Third Metric" is an imperfect restatement of Galbraith's Affluent Society which many of us had to suffer through in undergraduate work in the 1960s.    Her argument is that if we do not concentrate on economic growth that we will live in a better world.   Anyone with a brain can understand that there is more to life than the almighty dollar - but taking your eyes of GDP growth as an important metric will diminish happiness in society, simply by making all of us a bit less well off.   I am sure Huffington would agree with some of the President's speech today arguing that income inequality has increased in terrible ways in this country for the last several decades.   And yet even with that data, when you include things like transfer payments, the perceived inequalities are reduced.   One economist (James Galbraith - who is the son of JK and has written a lot on income statistics) argues that if you take out just fifteen counties in the US, the reality of a change in income equality has moved almost not at all for the past forty years.

The Third Metric is a diversion which will not help improve the lives of Americans.


Monday, July 29, 2013

Indexing Inspiration

The electronic rolodex, Linked-In, is an example of an internet app becoming dominant very quickly.  Less than two years ago there were a couple of alternative sources for keeping your contacts.   The most prominent was Plaxo.   But there were also some of the cloud services that kept your address book.  For a while I used a couple but soon found that some did a horrible job of keeping contacts updated.

In this stage in life I am not a hardcore user of these services.  I have about a thousand contacts in my computer.    I know some active networkers who have several times that.  A percentage of those contacts are purely personal (family and friends that I do not work with) - but I often need to remember people that I meet and may work with briefly in my new role as a consultant.  Linked In offers a simple way to do all that.

Linked In has begun a couple of projects which have a lot of prospect for increasing stickiness.   They have established groups where conversations can occur.   Some of those, like from one university I am connected with, are downright awful.   But some have some interesting posts.  This morning I got an email to respond on how inspired I am in my work.   There is no definition of how to define inspiration but using the Potter Stewart definition (I'll know it when I see it) I went ahead and responded.

At this point the survey has more than 34,000 responses. (Just in the time I have been writing the post 2000 responses have added.)  My level of inspiration was 78 which is slightly above the average for all responses.   But based on age there seems to be more inspiration as one ages.  (I was right about on the median for my age.)   There also seems to be a correlation on where you are in a job - the higher your position the more likely you are to be inspired.  

Obviously, this is not carefully structured research.  There may be some skewing of data simply based on who participates in Linked In and the subset of who responded to an email.   But I think the results are interesting.   Presented below are the five industries with the most inspired and least inspired workforces.    Again, the results may be skewed based on who responded in the industry.  All in all some provocative results.





Saturday, July 27, 2013

The Reileros of Aguascalientes

Last night I had the opportunity to see the Reileros of Aguascalientes the baseball team in a city where baseball has a long history.   When the railroad was being built Mexican and American workers began to play baseball games to relax.  The first baseball stadium in the city was there before 1910.   Aguascalientes is a city in the center of Mexico.  It has about the same area population as Sacramento.  Last night both the soccer and baseball stadiums (which are next to each other) were active - the soccer stadium has about 25,000 seats.  The team name is a railroad worker which is fitting for a town so deeply imbedded in trains and logistics.

The baseball stadium seats about 10,000 fans.  It is nicely appointed.  One interesting point is that the vendors actually bring service to you.   Last night we ordered beers and cokes from our seats and settled up as we left the stadium.   On Wednesday night I had watched the Mexico-Panama soccer game on TV - while I grabbed a bite with a son's friend who is a sports nut.  Needless to say he was disappointed that Mexico did not play up to their game.

The baseball is somewhat equivalent to Single A play in the US.   They did not clock the pitching but my guess is that a fast ball came in at about 85.  The pitchers also were not great on control.  They also did not post a pitch count last night - in part because it was not necessary with a total of 13 pitchers used between the two teams.   The opponents in this game were the Acereros del Norte and in one part of an inning their pitcher did 16 balls out of 20 pitches.   A good indicator of the quality of pitching is the relative batting averages.   The Reileros are next to last in their division with a .462 average. (48-56)   The league has a ton of hitters with .300+ batting averages.  With a record of eight games under .500 - their team batting average is .288.  Last night between the two teams there were 6 home runs.  The stadium is not a toy box with center at 400 and right and left at 340.

The best ERA in the league is 4.23.  The Reileros have a combined ERA of 5.81.  The lowest individual ERA in the league is with a Reilero pitcher named Paul Oseguera and his ERA is 3.0.

We left in the top of the fifth (I had a very early plane this morning) and when I checked the home team was down 11-6. The game ended up 15-10.   The Reileros had 10 runs,15 hits and 2 errors and the Acereros had 15 runs18 hits and 1 error.

There are some other distinctions about this league based on seeing two games (I saw a game in Oaxaca several years ago).   First, like many other things Mexican, this is a family affair.  It is fun and low key.   Kids are welcome, so are grandparents.  There is lots of noise and cheering. Second, they use a lot of the same things like CHARGE that we use in American baseball.  A ball is called a bola - but a strike is a strike - there is a mix of English and Spanish in the terminology of the game.   Third, there is a wider range of ages for the players - there are several in the league who have a 1970 birthdate.  Finally, both teams were allowed a lot of leeway in the pace of the game.   There were a lot more conversations allowed between the manager and his pitcher, than would be allowed in an American park.   It was a fun evening.

The last picture in the set here is retouched, while I was waiting for the plane to Sacramento I had the chance to work with a new APP that allows different effects on photos.




Technologically Naked

Last Wednesday I started a trip to Aguascalientes to work with the Instituto Technol√≥gico de Aguascalientes.   My wife dropped me at the airport and after she had left I realized I had neither my cellphone nor my wallet (they are connected).    I tried to call her but the pay phone in the airport (which now costs 50¢ for a local call) but could not connect.   I had gotten there early so then pulled out my iPad and texted her.   I got her too late to go home and return the stuff.   So I made the decision to go - my Passport (and only ID) was in my briefcase.  I also had a stash of pesos and some dollars.  I had a very quick connection in IAH so if I missed it I might have some real issues but this was important so I decided to try my luck.   As luck did have it, I made the connection and arrived in AGU on Wednesday night.  

I figured out a couple of things.  I could call home using Skype.  Most of the things I was going to be doing were going to be paid for by my clients (hotel) - those that were not (for example I went to the Reileros baseball game last night) could be paid for out of pocket change.  The only hitch would be that on the return I could not visit the United Club.   But as I said connections were close.  So all in all I got along well with this break which I calculated was the longest period without a cellphone for me in the last 15 years.

There was one major consequence of this experience.   Yesterday afternoon I visited with the rector of the Autonomous University of Aguascalientes, who is an old friend.   We met in his downtown office and I found a pretty courtyard.   Like many of you I use my phone for a lot of pictures - but I did not realize that it is a bit harder to snap a photo with your iPad - even a mini.

Friday, July 26, 2013

The New Fed Chair

In an ideal world we might think about abolishing the role of the Federal Reserve.   Since they were founded their assistance in reducing the fluctuations in the business cycle have been uneven at best.  That belief comes in part from Hayek who argued that the economy is so complex that individuals are unable to reconcile the innate complexities of the sum of human behavior.   Simple here is better.

From my perspective the policies adopted by the current Fed have been less than effective.   I am not a fan of creating fiat money and then paying the banks to hold that dough in their reserves, which is fundamentally what has happened over the last couple of years.

That being said the current Fed Chair Ben Bernanke will step down and a new chair will be chosen.   In the last few days there seems to have developed a fight between supporters of Larry Summers and Janet Yellen.

Yellen is generally a greater supporter of using fed policy to reduce unemployment rather than holding inflation down (called by some a dove).   But she is a first rate economist.   She is married to George Akerloff, the former UC Berkeley professor who wrote among other influential papers the market for lemons - where he argued that the price of used cars is discounted from optimal levels because of the sleaze in the ranks of used car lots.   Nancy Pelosi said it would be "nice" to have a woman.   Yellen can stand on her scholarly record, her gender should be irrelevant.

Summers is one of those Washington cockroaches that seems to resurface in every administration of a democrat.  He is arrogant, and quite willing to twist positions as winds change.   In some ways he has been much better on at least talking about reducing the levels of deficits (although his role as Fed Chair would have a minimal role in that).  Wonkblog described the potential choice of Summers in very clear terms -he "has a track record of being supremely confident in his own intellect, to the point of being dismissive of those with whom he clashes."  Churchill once described Chamberlain as a very modest man with a great deal to be modest about.   Unfortunately the former Harvard president does not fit the first half of the statement - any fed chair should fit the second half.

Summers, in a statement to Senator Murray's budget committee said in June of this year

"I am increasingly optimistic about our economic recovery. Indeed, I believe our economic prospects now look as sound as at any time in the last 15 years. The late 1990s saw the emergence of a major stock market bubble which was followed by recession in 2001 and slow recovery giving rise to fears of deflation. Soon enough bubbles recurred, this time credit and housing markets, leading me to observe in 2006 and 2007 that again, “The main thing we have to fear is lack of fear itself.” In August of 2007, the financial crisis began with profound distress overtaking the economy in late 2008. Recovery since that time has been real if inadequately paced.

I think it is now reasonable to expect the pace of recovery to accelerate if sound policies are pursued. "  The statement mixes hubris with odd policy judgements - exactly what we do not need in the position.

About a third of the democratic caucus in the US Senate sent a letter to the President this week urging Yellen - which was a clear slap at Summers.   Some commentators are arguing that the discussion going on between both sides will doom both candidacies.

I began to grow tired of the Greenspan years where he would go to Congress and spin words to the enthrallment of members of congress who wanted to look like they understood economics.  Bernanke, at least on that point has been better.   The illusion that the fed has a set of levers that will make the economy sing is quite silly.   Whoever is the next chair should take a hippocratic-like oath, to first do no harm.

My ideal candidate would be someone who could implement something like the Taylor rule - which would stabilize fed policy.  But in this administration that is not likely to happen.   Thus, while I am not a fan of Summers, I am not sure that this choice actually makes a lot of difference in long term economic policy.

Thursday, July 25, 2013

Rhetorical Economics

Yesterday the President offered his thoughts (the first we are told of five or six) on how to fix the economy in a speech at Knox College in Illinois.   Evidently, his prescription is to blame the members of the House GOP and to whip up a new batch of rhetoric.  Much of what he said was a restatement of what he has said before.

Here's how he said we got to where we are economically - "Technology made some jobs obsolete. Global competition sent a lot of jobs overseas. It became harder for unions to fight for the middle class. Washington doled out bigger tax cuts to the very wealthy and smaller minimum wage increases for the working poor."   Even in that short paragraph there are some interesting assumptions.   Employees quite joining unions (except public sector unions) well before technology and global competition started changing the workforce.    One might quibble with whether the minimum wage actually helps or hurts the working poor - most economists argue that the minimum wage makes it a lot harder for low skilled workers to get any job.  Indeed all of those things have changed the economy - one cannot make the assumption as he does that all have been destructive of the middle class.


He went on to say "And towards the end of those three decades, a housing bubble, credit cards, a churning financial sector was keeping the economy artificially juiced up, so sometimes it papered over some of these long-term trends. "   The bubble he speaks about and all that "juice" came mostly from federal policies well described in books like Reckless Endangerment which describe the absolute thievery perpetuated by people inside and outside of the government.   Yet, compared to the S&L crisis - almost no one has actually been prosecuted for their misdeeds.

He makes the claim that the economy has recovered (although he does not add that it is the weakest recovery ever) because of health care and "investments" in new technologies (like Solyndra) and the two mega enactments of his Presidency that even he has admitted are too complicated to administer. (Dodd Frank and Obamacare) He seems to claim that his policies (although he has dragged his feet on approving shale leases and things like the Keystone pipeline) have allowed us to reduce our dependency on foreign oil to historic levels.

He then commented "When wealth concentrates at the very top, it can inflate unstable bubbles that threaten the economy. When the rungs on the ladder of opportunity grow farther and farther apart, it undermines the very essence of America — that idea that if you work hard you can make it here.  And that’s why reversing these trends has to be Washington’s highest priority."   Ok, so even if you do not agree with the lead up rhetoric America should be an opportunity society.   So what are his key solutions?  

One of his constant refrains is that middle class incomes have stagnated for four decades but the data (from the Washington Post no less) suggests that is not correct.   The Post Numbers show a growth in both family and household income that is significant in constant (inflation adjusted) dollars.  If the WP can find this trend it is a wonder that the President cannot.

He mentions a couple.   Immigration reform - a very important public policy but not likely to move the needle on growing the economy.  He also lists "America has to make the investments necessary to promote long-term growth and shared prosperity — rebuilding our manufacturing base, educating our workforce, upgrading our transportation systems, upgrading our information networks."   Some of those things could be aided by sound government policies, others less so.

The speech laces in criticisms of the House GOP as engaging in an "endless parade of distractions and political posturing and phony scandals" (I guess the direct involvement of the General Counsel of the IRS - one of two presidentially appointed people in the IRS in trying to suppress political opponents is one of those phony scandals).   As a conservative (and not a member of the GOP) I am tired of the rhetoric on both sides - that accuses the president of every misdeed.  At the same time there are some real problems with this administration that should be examined - that is the oversight function of Congress which it did not do in the build up of the credit bubble.

Ultimately the best way for the president to engage on the issues he cares about is to genuinely engage with his opponents.   But one of the most significant failures of his presidency has been his unwillingness to get off his rhetorical stump and engage the other side.

Wednesday, July 24, 2013

Episcopal Re-education Camps

One of the most infamous parts of any totalitarian regime is the provision for "re-education" camps. Those are the places where people who do not have the appropriate language mastered are sent to learn to "right" ways to address issues. They have some common characteristics. First, they are not designed to solve a problem as much as to eliminate dissent. Second, they often use methods which are odd at best and more likely oppressive to alternative points of view.

When we were in church last Sunday we learned that the 2009 convention of the Episcopal Church mandated that “That all dioceses and provinces receive anti-racism training if they have not already done so or renew training that has been previously taken.” The intent of the resolution was that leaders take anti-racism training "periodically" - so evidently understanding race for these leaders of the church is not something one can master.

I had to go back to Wikipedia to understand what racism is - which is usually defined as "views, practices and actions reflecting the belief that humanity is divided into distinct biological groups called races and that members of a certain race share certain attributes which make that group as a whole less desirable, more desirable, inferior, or superior."

One participant in the Episcopal re-education described her participation in one of the "training" (read indoctrination) sessions. We " listened deeply to the stories we had to share about growing up in a society that is racist, as people who are racist."  I think it is not only wrong but wrong headed to describe this nation as racist.

Do not get me wrong, I believe very deeply that America continue to make progress on establishing the standard that Dr. King espoused "a color blind society."   But I am doubtful that anti-racism training will actually accomplish that goal.   The topic became even more important as a result of the verdict in the Zimmerman case.

On July 21st. scholar Shelby Steele, pointed out the hollowness of the the current leadership of the civil rights establishment. He said in part "The purpose of today's civil-rights establishment is not to seek justice, but to seek power for blacks in American life based on the presumption that they are still, in a thousand subtle ways, victimized by white racism. This idea of victimization is an example of what I call a "poetic truth." Like poetic license, it bends the actual truth in order to put forward a larger and more essential truth—one that, of course, serves one's cause. Poetic truths succeed by casting themselves as perfectly obvious: "America is a racist nation"; "the immigration debate is driven by racism"; "Zimmerman racially stereotyped Trayvon." And we say, "Yes, of course," lest we seem to be racist. Poetic truths work by moral intimidation, not reason.

In the Zimmerman/Martin case the civil-rights establishment is fighting for the poetic truth that white animus toward blacks is still such that a black teenager—Skittles and ice tea in hand—can be shot dead simply for walking home. But actually this establishment is fighting to maintain its authority to wield poetic truth—the authority to tell the larger society how it must think about blacks, how it must respond to them, what it owes them and, then, to brook no argument."  He went on to conclude "Today's civil-rights leaders swat at mosquitoes like Zimmerman when they have gorillas on their back. Seventy-three percent of all black children are born without fathers married to their mothers. And you want to bring the nation to a standstill over George Zimmerman?"

The harder work that Steele describes,which is to alter public policies which have created the positions he describes or to reduce the uncertainty between Black Americans and others, takes a lot more than indoctrination, it takes a conscientious commitment to social engagement.   But like the current civil rights establishment it is much easier for the Episcopal leadership  to engage in politically correct nonsense like anti-racism training.

Monday, July 22, 2013

Does being there first and staying for a long time make you a trailblazer?

Long time White House correspondent Helen Thomas died on Saturday and a lot of the commentary about her has hailed her as a "trailblazer."

The end of Thomas' career was marred by a set of remarks that were anti-Israel.   The NYT ran a front page OBIT on Thomas with tons of laudatory comments.   Eleanor Clift reported that among Thomas' scoops was the news that during the Kennedy presidency that Caroline Kennedy's hamster had died.

But at least two reporters took a contrary position.  Jonathan Tobin of Commentary said "anyone who watched her use her perch in the front row in the White House press room as if it were a platform for political opposition to administrations whose policies she didn’t like must understand that, along with her symbolic importance, we must also give Thomas her share of the credit for the creation of an ugly spirit of partisanship that characterizes much of the press."   James Taranto in the WSJ commented "She was an ideologue rather than a partisan."  He also argued that some of her supporters mistook "belligerence for toughness."

Thomas certainly was there for a long time.   And she was dedicated to the profession as she saw it.  But like Strom Thurmond, who lasted very long in the US Senate, I am not sure what she actually did for all that time.

I remember Thomas in the White House - both when I worked there and when I saw her on TV.  I think the Taranto characterization is about right.

I had an aunt who was also a groundbreaker in journalism - she was the first female sports writer.  In the last two decades of her life - there were a lot of awards.   When you went to visit her in her home town in North Carolina - she was a local celebrity.   But what my aunt valued most was the opportunity to report sports.  She was addicted to scores and games and players.   She did not much care for her rep.   In one sense my aunt spent her working life covering small news - but as one oft repeated story about her commented she was important because she made small accomplishments a bit bigger.   So the kid who scored in a high school basketball game could get some recognition in the local paper.  For an African American kid in a southern town - getting your name in the paper for an accomplishment was important.  I cannot tell you how many people came up to us when we were out and pulled a wrinkled up news story that she had written that the rest of the world had forgotten.

Thomas played on a bigger stage but I always got the feeling that she was impressed with her status.  She played a lot of inside baseball in a town where inside baseball skills are valued by many.

My aunt's accomplishments were often accompanied by mention of her gender.  But the real demonstration of her accomplishments were not because of her gender but in spite of it.   One cannot make the same claim about Thomas.

Sunday, July 21, 2013

Intentions and the NEA of the new economy

One of the odd things about the new economy is some changes in the way we understand how markets work.   I was prompted to think about it in an Econtalk podcast with Doc Searls.  Searls is an odd collection of skills.  He is a guy who has written about a lot of topics including something he calls the intention economy, where he makes the case that consumers should be able to signal a lot better on things they want from suppliers - in essence he is proposing what Chris Anderson wrote about in the Long Tail only not only that people should be able to define their markets into smaller and smaller units but that suppliers should be guided by the individualized need of consumers.   The bargaining, that economics textbooks tout, should be carried out in all things.  The podcast is interesting because he offers a series of ways to accomplish those kinds of individualized markets.

What struck me most about his discussion was his idea of NEA.   He discussed an economy where Nobody owns it, Everybody can use it and Anybody can change it.   At the end of Walter Isaacson's long and somewhat interesting biography of Steve Jobs - Isaacson makes the case that Apple is a closed system.   At the time I read the book (see my review of it here) I commented that Isaacson really did not understand closed versus open systems.   Searls helped me think about the differences in some new ways.   Many writers compare Apple (supposedly closed) to Android (supposedly open) to describe differences.   But as I listened to Searls I think there is a better typology. 

Android is mostly an open system.   Nobody owns it, Everybody can use it, and Anybody can change it - within limits.  There is still an insider's group which makes sure that the Android platform continues to function - so while anyone can change it - some changes become dead ends.

Microsoft Office is a closed system.   The company indeed listens to customers a bit but ultimately the company decides what will happen in that product.   Many of us who have quit using Microsoft have grown tired of the bloated software that is offered in Office - when you want to do a simple document there are much better alternatives than the ones in the Office Suite.

So where does Apple fit into this paradigm?   Isaacson argued that it is a closed system just like Microsoft.  That is wrong.   What is fundamentally different is the environment of the IOS for Apple.   The underlying operating system is closed but the developer's toolkit is fundamentally open.   Thus, were I a programmer I would have very little influence on how the operating system functions.  At the same time I would have the ability to use both APIs (application programming interfaces - those little parts of the program that can connect you and your computer to a larger world in specific ways - for example using your Facebook ID to log into a site unrelated to Facebook) and the toolkit to build new functionality to the device.    So if I want to develop something which will allow my laptop and phone and tablet to synch together on a set of documents - I could write the APP called Evernote (which works across platforms) to do that.   I could then use an IOS phone, and Android Tablet and even a Window's based laptop to allow me to have all that information anywhere I go.   I happen to like the integration of look and feel so I stay in the Apple environment.   But you are not restricted to it.

One other comment that Searls opened on but which I think could be even more important.   The late Garrett Hardin, who was not an economist, wrote a paper in 2003 which has contributed to a mighty debate about the appropriate role of the government sector in protecting areas and populations in the economic literature.   The paper has always bothered me because Hardin's inescapable conclusion is that the only way to solve the misallocation of resources is to encourage more government regulation.  But Searls discussion of the Intention Economy - blows a hole in that line of reasoning.   The more people can actually bargain on issues relatively efficiently, the less there will be a need for massive government interventions.   A good friend of mine, John Kirlin, once said that governments should be looking for opportunities to steer not row.   Searls promotes the idea that this kind of person to person relationship is made stronger as technology grows.

Friday, July 19, 2013

The Tea Partiers are not the only ones who think sound bites in echo chambers are a substitute for policy....

On Tuesday Thomas Friedman published an OPED in the NYT called If Churchill Could See Us Now - arguing that the conservatives in the House of Representatives were acting like idiots on immigration reform.  And indeed, I think Friedman is correct, partially.


Indeed, some members of the House GOP have no sense on immigration reform.  I thought the Bush proposals were pretty good and while I have some concerns about the Gang of 8 proposal - everyone who cares about this country should be working very hard to figure out a way to reduce the obvious problems of our current system.   Over the last two decades I have done a lot of work in Mexico and have an appreciation for the country and its possibilities.   Mexico is an important trading partner.   The perceptions held by some of the people on the right are wrong on a number of fronts; for the last couple of years, at least in California, Mexican immigration has slowed if not reversed.   Part of that is a result of our immigration policies and part relates to a better economic choice - real GDP in Mexico is more robust by a factor of 2X compared to the US.   In addition, the last numbers I saw showed that US immigration for the last couple of years has been dominated by Asians.   We should be a welcoming country and our current system is idiotic.

That being said, where I think Friedman is wrong is on a host of other issues where Senator Reid and some of his colleagues and Pelosi and some of her colleagues on the democratic side of the aisle have been as intractable as the GOP right front has been.     The ACA is a complicated and expensive idea which will worsen not improve our health care system.  The President's unilateral (and I believe ultimately unconstitutional) suspension of the employer mandate is a good indicator that even the supporters of the program understand that this Rube Goldberg like solution is seriously flawed.   Dodd Frank adds layers of complexity to the financial system and at the same time improves the possibility that the next time Jaime Diamond or one of the other geniuses in the too big to fail banks screws up that we will get caught paying for their idiocy.   Neither of those bills was created with any GOP support - and that was intentional.  

A special interest of mine is the tax system.  Our income tax (both personal and corporate) are absurd.   Baucus and Hatch have an interesting idea about how to reform the code - or at least begin a discussion and much of the left and right have refused to consider it seriously.

The TARP and Stimulus were examples of bipartisan idiocy.  We spent close to two trillion dollars paying off credit cards of arrogant SOBs who haven't a clue about either economics or ethics.    I just listened to a podcast of Jeffrey Sachs (who is about as far away from me on economics as it is possible to be) who argued that all of that debt we created to fund nonsense like Cash for Clunkers was a tremendous waste of dough.   Contrary to what former Enron Advisors like Paul Krugman says deficits do matter and if you buy the Keynesian idea of stimulus we should only be creating deficits for things that have long term benefits.   So sure, we should be working for fundamental reform of our flawed system of immigration but we should also be holding all elected officials to the fire when they believe their job is to create soundbites for echo chambers of their own narrow base of supporters.   And in that instance it is not just the conservative members of the House that are at fault.




Benefits of Civil Discourse

I am a regular on ECONTALK - which is a podcast hosted by Russ Roberts of George Mason University and the Hoover Institution.   For the last couple of months I have been listening to the podcasts I missed in the last couple of years I was working full time.

Roberts is a very skilled interviewer and while his economics and mine are very close he has a wide range of guests from both the ranges of the economic spectrum and from other areas of intellectual pursuit.

On April 15 he interviewed Jeffrey Sachs from the Columbia Earth Institute.   Sachs' economics and mine are not very close.  He would like a much larger presence of government and for the first couple of minutes in the podcast threw out a series of propositions which he took as fact and which I think are questionable.   Roberts was gentle in probing the differences but after admitting some level of nuance not present in his original premise - he would return to the theology of his statements.

One of the areas that Roberts discussed with Sachs was his grumpiness about some aspects of Keynesian policy.   Sachs would support significant increases in the level of government spending and taxing but he was quick to admit that the spending has to be of the right kind.  During the aftermath of the stimulus debate Sachs parted company with other Keynesians arguing that things like "Cash for Clunkers" and the payroll tax holiday were actually counterproductive to long term growth.   In an ideal stimulus Sachs would have worked to a) spend money on long term projects and b) reduce the deficit.  Sachs called what we got in the stimulus bill as "crude Keynesianism."   Sachs comments in the interview included this (about moving the deficit down)

"And then every time there was an option to start moving it down, until recently--I know the White House view, because I was discussing it with them often, was: We need another year of stimulus. We need another temporary tax cut, another payroll tax cut, an extension of the Bush tax cuts, and so forth. None of which I agreed with because, you know, from my philosophy I wanted more revenues to fund public goods and at the same time to reduce the deficit because I think that this buildup of debt just builds up lots of problems in the future."

I agree with his point and the substance - we would probably disagree about how much should be spent in the public sector.  But unlike others on the left like Paul Krugman ignore the effects of our increasing debt burden.   Sachs described Krugman's position as irresponsible - that we can borrow cheaply at this point does not mitigate the long term consequences of borrowing for foolish things.

Two things came out of the Podcast - first, I was interested to hear Roberts tease out Sachs' point of view.   But second, this kind of civil discourse is critical to solving the gridlock we face in our political system - were some in the media and the political world more attuned to the skills that Roberts exhibits we could be a lot closer to solving some of our long term problems.

Wednesday, July 17, 2013

Just Plain Stupid

As with many people who worked in the non-profit sector or higher education, a substantial portion of my retirement savings was with TIAA-CREF.     Several years before I retired TIAA offered two sets of counseling on financial issues.   The first was actually quite helpful.   I gave them some net worth information and my goals in retirement and they did some projections about whether the resources I had accumulated would be sufficient to keep me going.

But then about two years later, the person who had been my account executive left TIAA and was replaced with another person who I found to be less capable.    They proposed another investment review (mind you this is something I have done on my own for all of my professional life) and this time the account exec came back with a worried tone that I was significantly short of my goal.   When I expressed surprise at the result - the person said something to the effect that the results had been checked.   I asked the account exec to send me the back up materials and when that was done, I found that the calculations had left out one significant asset entirely.   I thought that was pretty sloppy.

After much deliberation I finally decided to pull my assets out of TIAA.   As I began to do that I understood that I would be unable to move all of the assets out into a rollover.   The TIAA portion of the accounts would have to be taken out over a period of time.   I set that process up and when I got the first annuity payment found that the withholding amount had been incorrectly calculated.   So I contacted TIAA and was told how to correct that on the next check.   I sent a fax to TIAA with two requests.   First, I proposed a new set of withholding limits.   At the same time, for their convenience and my own I asked that the annuity payments be direct deposited.

When I decided to withdraw my funds I was forwarded a big set of documents which I had to sign in triplicate.  I called TIAA and asked whether it was possible to fill out the forms electronically.  They said no.   Idiotic.   Every other financial institution in the world has figured out how to fill out forms electronically but not TIAA.

Let me tell you a bit about my banking habits.   The bank I use is primarily electronic.   Since I have had the account I have never used checks.   Those few payments that will not accept electronic payments get a physical check that is created at the bank.  I do it all online.   Likewise, I hate getting physical checks, it is a pain to deposit them.   Thus, all of my clients in my consulting practice use electronic funds transfer to pay me.   So I thought the request to TIAA would be simple.  But they asked for a voided check.

I have run into this request before and so asked my bank to create one counter check with the routing and account numbers. I have a PDF of the counter check in my files.   Every other vendor I use has been able to accept the counter check that I asked my bank to create for me.   I do not want any physical checks - because I do not need them!

But not TIAA.  Some person from my account services team called and said they can only accept either a physical check - voided or a letter from my bank.    I called back and told them to bad I was not going to supply that.

Why should I be so agitated about this?   The reason that financial institutions want a copy of a printed check is to make sure that the electronic transfers do not get routed to the wrong account.  In this case I supplied them with a copy of the visual characters of my account.  (Many vendors ask you to verify the account number, but all except TIAA have accepted the countercheck I had created by my bank.)    There is no legal or financial reason to make this request except that some moron attorney thinks the company is better protected by having physical copies of every document.   In a world where Adobe Verified signatures are the norm - that seems out of date.   If TIAA wants to continue to compete for managing people's money they might think about getting into the 20th Century.  (The 21st is probably hoping for too much.)

Getting it


I have hesitated to comment on the Zimmerman case verdict for a number of reasons.  First, I think the tragic aspects of the case are immense; I am not sure how to sort those out.    Second, I am bothered by the talking heads on this.   Having Al Sharpton be given a voice on this case is appalling.    Third, we should be concerned about the political involvement in this case at all levels - from both parties.   Ultimately, this is a legal issue that should have been dealt with in the courts.   All that has bothered me almost since the first news about the case came out.

So my wife sent me a YouTube about a Cheerios commercial and kids reacting to the response to the commercial.  I admit I do not watch much TV - I may have seen the commercial or may not have - but I have seen variations of it.   Evidently, this commercial generated some controversy.  So a group of kids was brought together to respond to that controversy.   From my perspective they cut to the quick on the issue.   Art Linkletter once had a show called Kids Say the Darndest Things - in this instance it might be Kids Say the Smartest Things.

Tuesday, July 16, 2013

The Onion Strikes Again

The Onion has been a mainstay of my mornings for several years.   They parody news issues - recently they have been doing a series of street "interviews" on various topics.    This morning's was on the new laws in Texas restricting abortions.   There are a couple of funny things about the bit - first, they use about six to eight people in the pictures - rotating their occupations and names but using the same picture.   Second, they seem to be designed to mirror what USA Today and some of the other popular news outlets do.

The one above is from today - but you can get it each day through their twitter feed.  I have also included one other to give you an idea about the range of topics - the second one is comments on the Microsoft corporate reorganization and is from a few days ago.   The Onion continues to be a very funny source of the news.



A postscript to the Ron Burgundy post - who got hurt in the story?



Yesterday, Asiana announced that they would try to sue KTVU for the announcement contained in the Ron Burgundy lives post. But for a suit to be successful one needs to understand just who got hurt in the accident and subsequent story.  Asiana has a bigger problem than the prank.

The New York Times describes their bigger problem, namely that there is serious question about the level of competency of the pilots on the plane -

"The South Korean pilot, Lee Kang-guk, who was in training for the 777, was landing the plane at the San Francisco airport for the first time, making a visual approach.

He had logged more than 9,700 hours of flying on Airbus A320s, Boeing 737s and Boeing 747s, but he had only 43 hours of flying time with 777s and had made eight landings with them. A senior colleague with more experience landing 777s sat beside him as co-pilot, but he was flying as a 777 instructor for the first time.

As Asiana prepares to bolster its training, the crash has created a debate among pilots in the United States about training, automation and cultural factors. The crash is the third involving a fatal error by a Korean carrier on American territory in which crew coordination appears to have been a factor. There is also a lingering argument about pilots relying too much on automation. The Boeing 777 crashed on July 6 during a manual landing."

From my perspective, the target of the bad taste joke was not the airline but the "profession" of news readers.  The goof who read the lines should have read the copy before she put it on the air.   But in the 24/7 news cycle news readers rarely do that.

Asiana may think it can divert attention away from the crash by filing a politically correct lawsuit.  But I doubt even in San Francisco that anyone will be diverted from understanding just who was injured here.  What the lawsuit does is make the airline look like it is more interested in CYA than in addressing some more serious problems about their pilots.

Monday, July 15, 2013

The Cats at the All Star Break

For the next couple of days AAA baseball teams are celebrating the All Star Break.  The Cats originally had Michael Choice, Grant Green and Sonny Gray on the roster but Gray and Green went up to the A's.   Gray has pitched two pretty impressive innings in the Bigs (0.00).  In nine at bats Green is still hitless - but he was at .305 with the Cats.

The Cats team ERA is 4.27.  Their team batting (.269) puts them in the middle of the pack.  The team is 50-47 for the season which would put them in last place in two of the divisions but in the middle in our division.   Their three games over .500 are from road wins. (The home record is dead even.)

There are 22 home games left in the season and 25 on the road.  Saturday night's game was one of the largest crowds ever for Raley Field.   And yesterday's win against Fresno was the first walk off win of the season.  (Jemile Weeks single in the bottom of the 10th drove in two runs to win.)  Last year at this point we had a good collection of walk off wins including a streak where we won several in a row. At this point in the season the Cats could still be in the hunt for the division at the end of the season but the team lacks some conviction compared to other seasons.   The new manager,Steve Scarsone, for the team seems to be a bit cautious in his strategy.

The Cats attendance is at 412,000 for the season to date (8243 per game) which puts them ahead of Round Rock at this point and first in home attendance.   Assuming that they keep this pace up the season would be slightly higher than last season (586,000) but well below 2010 and before.   In 2005 the team sold 750,000 tickets.

Two amenities got added in the park this year.   One is called the Cold Box - which is basically a cooler where you can buy canned beer.   There is a good selection, reasonably priced, that claims to be the coldest beer in the park.   It is sort of fun.    The second are two changes in the food stands, both on the right field side.   First, Subway has graduated into one of the permanent food stands and expanded their menu a bit.   Second, near there is a stand which sells Soba noodles.

The Cats are still a great value for family entertainment.   Even if they do not add to their records of divisional championships, it is a great way to spend a summer evening.

Friday, July 12, 2013

Ron Burgundy lives.....

When the Asiana flight crashed at the San Francisco airport one of the local stations (KTVU) got out an up to the minute report on the names of the pilots.   They claim that they confirmed the names from the National Transportation Safety Board.

From my perspective I would have checked the names again - sometimes two sources are not enough.

A video of the newsflub is presented below.  It gives you an idea about how wonderful TV news people actually are.


The Dance Monkey Boy Reorganization



Yesterday, Microsoft announced a reorganization of the company.   Unfortunately, it looks a lot less important than the announcement.  That is because it left the current CEO in full authority of the company.   This is the same guy who has been a joke in the tech community - when the iPhone came out he thought it would not sell well because of the price (85 million phones later).   He presided over the launch (I think it is still be sold in places besides EBAY) of the Zune  which was a pale copy of the iPod (5 million sales from generous estimates versus 350 million sales for iPods).  He dumped on the Mac Air yet it continues to grow in sales and performance.   In short Ballmer has been wrong on most tech issues for most of his tenure.

MSFT has also relied on their leadership in a couple of categories of software - notably Excel and Word.   I've quit using both because they have grown a bit to bulky to be useful.  Powerpoint suffers from a multitude of sins - I shudder many times when I see a speaker turn on a Powerpoint presentation because I know they will violate the simple rules of presentations like 10-20-30.   For a long time Microsoft seemed to argue that they were the dominant provider in key software so one had to accept their view of the world.   Were that ever true, it certainly is not now where IOS, Mavericks, Android and a host of options are available for operating systems and things like Pages, Numbers, and Keynote are available to challenge the Office suite.

What Ballmer seems to think is that bluster and envy are ways to build a company.  They are not.  The WSJ coverage of the change said Mr. Ballmer was changing from a baseball team structure (where players make individual decisions) to a football team (where they go into a huddle) and "individuals get specific instructions to follow."  Yeah, right,  hierarchies have done so well in the tech industry.

But there is another story that were Ballmer not at the helm the company might begin to recognize.  The Windows mobile products have some interesting characteristics and features.   They seem to integrate between and among platforms.   As I noted in an earlier post the first look I got at the Surface seemed to confirm a somewhat clunky device (whose marketing matches the product).  But there are a bunch of devices using the OS that are quite good.  Friends that have the HTC phone and some of the other Windows Mobile tablet - like them a lot.

In an interview with Guy Kawasaki in 2008 Ballmer commented that in the tech arena you either continue to evolve and innovate or you stagnate and die.   Tech has entered into a more mature phase where the antics of Ballmer will serve the company even less well.   This reorganization looks a lot more like moving deck chairs on the Titanic than getting back to innovation.

Thursday, July 11, 2013

Rapunzel's College Financing Plan

The problem of college costs has been motivating politicians for a long time.   It is logical that they would, college costs have been rising faster than the underlying consumer price index for a long time and most families want their children to attain a degree.  

In the 1980s the State Treasurer of Michigan proposed something called the Michigan Education Trust.   Robert Bowman, proposed a plan which would have made Ponzi proud.   It allowed families to pre-pay tuition at a Michigan public university and guaranteed that the money once deposited would cover any changes in tuition.  Trouble was that the internal assumptions on the plan were seriously flawed.   The plan had no control over the price that would be charged in the future AND assumed that a conservatively managed portfolio could generate returns in excess of 8% over a very long time horizon.    After the Michigan legislature bought this scheme, he tried to peddle the idea around the country.

A few of us (I did the numbers in California) actually sat down and did some projections, based on prior tuition increases and reasonable rates of return.   The Michigan plan in its first year was something in the range of $150 million short of being able to pay its obligations.   At one point when (then) Senator Hayden proposed a Michigan like plan I went to the state treasurer (Jess Unruh) and asked him about Bowman's projections - Jess said something like "that guy must be smoking something illegal."   The state's pooled money fund was earning something like 3% at the time and that fund was considerably more successful than similar funds in other states(including Michigan's).   While  a few more states were talked into making this sucker's bet,  eventually wiser heads prevailed and states began to adopt college savings plans - which were more like a defined contribution plan for retirement.  Even the Michigan plan was eventually adjusted and when the prices became real, the demand dried up.

A few years after Bowman had peddled his nonsense, a group of independent colleges figured out a way to develop a reliable way to offer a tuition guarantee (which involves some risk sharing with participating colleges) which is now called the Tuition Plan Consortium.   Its financing assumptions are sound.   A family really can deposit a sum of money today for their children and be assured that amount of money will retain the same ratio to tuition at one of the participating colleges in the future.   So if you buy 1 year of tuition now, it will be worth 1 year of tuition in the future.  
 
But politicians still want to spin gold out of flax.   The current iteration of this fairy tale is a variation of an early attempt in the independent sector that came from Yale that allowed students to repay their loans on an income contingent basis.   The new proposal offers students the chance to go to a public university in Oregon for free but but then pay a percentage of their income back to the state  for 24 years after graduation.   The Oregon plan was described by the Atlantic as "very radical and very terrible."    The Atlantic argued that it could do all sorts of negative things.  First, because students don't just borrow for tuition costs, students would still have student loans to repay - plus 3% of their income.  (1.5% for community college students) Assuming that living expenses still constitute a significant percentage of college expenses, graduates could be hit with paying out a significant percentage of their income to cover college expenses (indeed they are now with the rate of borrowing in traditional programs - but this would exacerbate the problem).  Second, any student with a reasonable expectation of earnings would opt out of the plan understanding that their "bargain" could turn into a loadstone if they made a decent salary after graduation.   The experience on income contingent loans is not promising, what you would expect (that students in high income fields opt out) mostly happens.   What might well happen is a brain drain out of Oregon public universities.  The best students, with the best earnings prospects, would choose to go elsewhere.

Let's face it - the college cost issue involves many complex issues.  And we do need to have some continued careful thinking about reliable ways to make college more affordable.   But things like the Rapunzel Plan in Oregon will continue to pop up as long as politicians have a notion that P.T. Barnum was right.

Tuesday, July 09, 2013

What Constitutes Democracy versus Democary

George Skelton is a long time reporter on politics for the LA Times.  He does not have much use for Proposition 13.   On the 3rd of July he proposed that the two thirds requirement for raising taxes and for approving local public works projects be lowered to 55%.   Skelton's real views are contained in the following quote - "Any supermajority vote requirement is illogical and contradictory when compared to the mere 50% plus one needed to pass statewide bond issues. But at least 55% gets much closer to majority rule."  Skelton has been around for a long time - he started in the Capitol about the time I did.  

Skelton's column amused me because it is so bereft of any understanding of voting theory and logic.   For him, the 55% rule, which he proposes has no basis in logic it is only justified because it is lower than two thirds.   The reporter could benefit from understanding some basic theory about voting.

In the American experience there was special concern paid to the potential errors of majority rule.  During the Eighteenth Century there was a lot of concern about the excesses of "democratic" revolutions - Edmund Burke wrote his reflections on the French Revolution and expressed that point of view -  the risks of not protecting the rights of the minority were well understood when the Constitution was adopted.  During the Nineteenth Century many states and localities used simple majority rules to do exactly what Skelton proposed in his article.  The result was a series of financing disasters.   Many of the rules for financing that limit the ability of entities to take on any debt and some of the voting requirements for adopting bond issues came about from the kinds of scandals that happened when a majority pushed through things without proper care.

When the fraction for school bonds was lowered to 55% I went back and looked at school bond issues which passed and those that did not after Proposition 13.  The ones, until the 55% rule was adopted, that explained why bonding was necessary and made a clear case for what the money would be used for - passed overwhelmingly.   The ones which were justified on some amorphous notion that if we just spent a bit more dough the schools would be better did not pass in as high a number.   The voters are not dumb.

There are other reasons for keeping the voting requirement high for adding taxes or spending money into the future.   First, it helps to recognize that future voters will be a part of the decision.   A higher voting requirement puts some brakes on those who would spend for almost anything.   Higher voting fractions also slow down the tendency to "cycle" - in pure majority votes the losing side will constantly be trying to get that extra one or two percent to their side and overturn a decision with which they disagree. 

For Skelton, neither the theory of protecting the rights of the minority nor the benefits of higher fractions for some decisions are important.  Were he pressed he would have a hard time demonstrating the pain inflicted by these requirements - except for those who think the public sector should be mostly unbridled.   But for voters who care about stability and rationality in public decisions, the theory and practice are quite important.

Monday, July 08, 2013

A name that should get more coverage than Edward Snowden

Evidently, Edward Snowden will be granted asylum in either Venezuela or some other similar regime. What as onces a reasonably compelling story of a "whistle blower" seems to have evolved into a story about a not so selfless individual who cares more for personal safety than in confronting and enabling real change. Compare Snowden's current situation with that of Alexei Navalny, the Russian dissident who on Friday heard his prosecutors ask for a six year prison sentence. I first became aware of Navalny in March in a WSJ interview He is not the leader of a party but has stood up and fought for extending the benefits of democracy to the Russian system. Putin is a new "czar" in the way that he uses both authority and secrecy. Navalny is quoted as saying "Not one of us has the right to be neutral. Not one of us has the right to shirk from doing what's necessary to make our world better. Each time someone thinks, 'Why don't I step aside and simply everything will happen without me and I'll wait?'

Snowden has spent the last couple of weeks sitting in the holding area in Moscow having some of America's least favorite foreign leaders use him for publicity or to embarrass the US.   Lord knows that some of the issues raised by Snowden should get better coverage.   But the way to improve the situation, in both instances is to not step aside - and yet that is exactly what Snowden seems to be doing.   If he ultimately goes to that delightful garden spot of Venezuela - I say good riddance.  But were he committed to having a substantive discussion about the role of surveillance in a free society he might not be searching for a loft in Caracas.   Somehow his projected new address (the capitol sounds a lot like the English word for BS - Crock) seems to reflect on his commitment to the principles he talked about when the Guardian first made his story public.   The last time the LA Times had a story about Navalny was in April when his trial opened.   But they certainly have devoted a lot of column inches to Mr. Snowden.