Uncommon Cents

Skybridges to nowhere

2010-06-08T15:01:00.003-04:00

Apparently the Seattle City Council doesen't like skybidges, and thus is trying to make it so cost prohibitive to license them that stores will abandon them.

When the Bon Marché skybridge opened in 1960 in downtown Seattle, city officials established a $300-a-year permit fee and OK'd the walkway for 15 years.

The Seattle City Council renewed the bridge permit again last week — for two years. And the annual permit fee? $31,185.

Permit fees for skybridges across the city are expected to rise dramatically under a new city formula that weighs adjacent land values to determine how much the owners of skybridges should pay the city. In the case of Macy's, the Bon's successor, store officials in talks with city staff say they are evaluating whether the cost of the skybridge is worth the use it receives.

And what rationale is used for such obstruction by our local government?

"What a skybridge does is it takes people off of the right of way and puts them
up in the air, and leaves usually the people who aren't good enough to go in the
buildings down below," City Councilmember Jean Godden said. "It's really not
very friendly."

Skybridges also block views. A decade ago, the expansion of the Washington State Convention Center included two skybridges that blocked views of Pike Place Market. Councilmembers Nick Licata and Peter Steinbrueck opposed the design so loudly that it nearly derailed the entire project.

"The goal is to have people actually on the street," said Sally Clark, chair of the
council's Committee on the Built Environment. "Our highest priority is making
sure that the street is a place that is safe and convenient."

This is the nanny state we have to deal with today. Pedestrians want sky bridges to be able to cross streets faster and be sheltered from the elements. Businesses want them because they provide an attractive feature to their store. The only two people who should matter in this decision - the businesses who will put up the money for the bridge and the customers who will reward the company with their business - are thwarted by people who are not impacted by the decision simply because it offends their social justice or environmental sensibilities. All of this is non value added work at a time when we're bleeding jobs and debt. Yet none of these council members will ever think that it is their idiocy that is preventing the creation of jobs.

Embracing the Creative Destruction of Recessions

2010-05-13T14:26:00.003-04:00

The NY Times has a nice piece today about the fact that some jobs aren't coming back no matter how good the economy gets.

For the last two years, the weak economy has provided an opportunity for employers to do what they would have done anyway: dismiss millions of people — like file clerks, ticket agents and autoworkers — who were displaced by technological advances and international trade.
The phasing out of these positions might have been accomplished through less painful means like attrition, buyouts or more incremental layoffs. But because of the recession, winter came early.
The tough environment has been especially disorienting for older and more experienced workers like Cynthia Norton, 52, an unemployed administrative assistant in Jacksonville.
“I know I’m good at this,” says Ms. Norton. “So how the hell did I end up here?”

This is how poor our education, government, and familial systems are in this country - no one thinks dynamically and instead thinks statically. We don't need to go very far back in our nation's history to find many professions that employed thousands and now are non-existent. In fact, NPR has a nice snapshot of many such industries. Yet the world didn't come crashing down when these jobs were eliminated. Quite the contrary - life got better.

Does anyone seriously believe we should have kept copy boys, ice men, lamp lighters, milkmen, or switchboard operators just to have a job for them? Should we not listen to the voice of the marketplace, which is telling everyone that if it can be automated or done cheaper overseas it will be done so? Why should we be worried about preserving less efficient work classifications, and not be more concerned about a mindset that doesn't embrace constant learning, improvement, and adaptation to the world? And why are we not embracing change, job destruction, and reinvention? Do so many people forget what came with such labor intensive jobs - work place injury, paralyzing strikes, gender and race discrimination, and more.

Progress, automation, and freeing workers from laborious tasks to perform more intellectual or service oriented ones have been key enablers to greater liberty, equality of opportunity, and quality of life. The creative destruction of recessions shouldn't be feared - it should be embraced as a mechanism for making the tough decisions and an opportunity to unleash creativity and efficiency that have been delayed by fat times .

The Rantings of a Delusional Person

2010-05-10T22:02:00.002-04:00

This is what the Greek debt crisis represents to a young Greek.

Hundreds of protesters rallied in Athens on Sunday as the government sought to rein in social tensions while pressing ahead with drastic austerity measures aimed at avoiding a debt default.
"I feel angry that my right to dream has been denied and it's mainly the government's fault," said Penny, a 19-year-old student demonstrating on a square in front of the parliament building -- the scene of riots last week.

Is there any rationalizing with a person so delusional that they feel a completely necessary course of action is "denying them their right to dream?" How is one to negotiate with someone who feels it is the government's responsibility to provide them everything?

Why I am a religious Libertarian

2010-04-10T13:36:00.002-04:00

The recent revelation of a six year correspondence between then-Cardinal Ratzinger and local Catholic church officials casts serious doubts on the Church's ability to meet its basic charge of being Christ's witness to the most vulnerable of our population.

The future Pope Benedict XVI resisted pleas to defrock a California priest with a record of sexually molesting children, citing concerns including "the good of the universal church," according to a 1985 letter bearing his signature.
The correspondence, obtained by The Associated Press, is the strongest challenge yet to the Vatican's insistence that Benedict played no role in blocking the removal of pedophile priests during his years as head of the Catholic Church's doctrinal watchdog office.

This displays the most basic reason why Libertarians are opposed to such large institutions. The institution itself takes on a life of itself with little regard for those within it. In this case, the Church cared more about the political fallout of defrocking a priest than the children he could potentially harm. The fact that the local diocese did not have the power to remove an obvious threat to parishioners is exactly what is wrong with the Catholic Church's hierarchical structure and why I am a member of a Protestant denomination.

I have nothing against the Catholic faith itself. As a Christian, I can't. My troubles come in the structure of the Church, and the crimes it allows to continue within it.

New Blog: The Beautiful Numbers Game

2010-04-09T09:25:00.004-04:00

In a desire to separate the political from the soccer-related, I have started a new blog. It will deal with all things soccer and statistical. If you interested in either topic, I would recommend you check it out. You can also follow soccer and statistics related tweets at my new twitter account.

I will keep posting to this blog as well. You may see some change in post format (i.e. more concise posts), but I will continue to deliver the same analysis I always have. Brutally honest, not sugarcoating any of the real challenges our country faces on the political and economic front.

Time to Prove Them Wrong

2010-04-07T09:08:00.003-04:00

The United States should consider raising taxes to help bring deficits under control and may need to consider a European-style value-added tax, White House adviser Paul Volcker said on Tuesday.

Volcker, answering a question from the audience at a New York Historical Society event, said the value-added tax "was not as toxic an idea" as it has been in the past and also said a carbon or other energy-related tax may become necessary.

Remember that statement, and many others, when you go to the polls in special elections this spring and in the 2010 mid-term elections this fall. Remember that Obama got elected in part by promising all kinds of new benefits and no new taxes on families making less than $250,000 per year. Don't throw them out of office because they made a campaign promise they couldn't keep - all politicians do that. Throw them out of office because they planned on doing the exact opposite from day one - jack up spending, jack up deficits, jack up taxes, and be more like Europe - and bald face lied to the American public about it. Throw them out because they don't believe in a future of America based upon freedom, capitalism, small government, and personal responsibility. They believe in a future America of government control, mixed economies, high taxes, and low opportunity for every American.

They are un-American in the most basic of ways because they believe in a future that is European. One where we common citizens fight over the scraps that politicians and big companies protected by government regulations happen to throw from their table. A future where the majority of us won't discuss what houses we're looking at buying, what job opportunities are opening up for us, or what wonderful lives our children have in front of them. It is a future where we fight with each other over which politician will give us a bigger piece of the government pie. It's a future of not working for ourselves, but waiting for the passage of laws to solve our problems and then continually finding out they don't not provide for us what we thought they did. In short, it is a future where we become slaves to the state and the politicians who run it.

It's time to prove Volcker, Obama, Pelosi, Reid, and the rest of them wrong. It's time to turn them out at the ballot box, and replace them with people who don't view the citizen's job as working for the state's benefit. It's time to prove all of them wrong.

A Good Start for Old Media

2010-04-06T23:56:00.002-04:00

The Daily Beast has a good article about the friction between the White House press corps and social media outlets used by the White House. In general, it sounds like a lot of grousing by old media types who don't want to adapt to new media methods. There is, however, one good point made by one of the reporters (emphasis is mine).

“With Twitter, Gibbs doesn’t send a note to the press—it’s sending a note to anybody that follows him,” [CBS Radio's Mark] Knoller told me. (Gibbs has around 52,000 followers.) “I’ve got no problems with him using Twitter. I’m on Twitter, too. But I never retweet his tweets. I rewrite them and I put them in context, because it’s not my job to give him access to all of my followers. [Knoller has 23,600 followers.] I’m not a retweeter, I’m a reporter.”

I like his last point, and I wished more of the media took his view. Too often the media hides behind the idea of literally reporting whatever is said at an event, spending little time to fact check what they are parroting. When this happens, they serve no more of a service to the public than Twitter - they are simply being a bullhorn for politicians who have a fast and lose relationship with the truth.

Perhaps there is a future for the media if they get serious about their jobs, and stop taking the easy way out when it comes to reporting.

Why Wages Are A Bad Metric

2010-03-29T09:13:00.004-04:00

I bet these guys never dreamed of making $100k in a year.

(HT: Colin for blog post title)

Seattle area garbage haulers have voted to go on strike if their contract terms cannot be met. Why are they so upset?

The Teamsters want assurances that their wages won't be cut to make up for
shortages in their pension funds, Gonzales said. "I have seen language on the
table from both companies we can't agree to — language that allows them to cut our wages in unlimited fashion," he said.

[Waste Management spokeswoman Jackie] Lang said Waste Management's proposal does not include wage cuts and is worth more than $100,000 annually in pay and benefits for the average worker. "We think the union's demand is unrealistic given the economy," she said.

Does this story sound familiar? A unionized workforce with an excessively generous pension plan that is unsustainable is arguing against a possible future cut in wages to maintain overall total compensation, and is willing to hold a city hostage to get what they want.

The real issue this story presents is how poor a metric wages are when looking at a company's total operating expense for employees. Wages are only one part of the equation. An employer certainly understands that total compensation - wages, health insurance, life insurance, pension, 401k, and more - is the true cost of employing someone. These features of employment can make one employer more desirable than another, but they can also make one employer more fragile than another. Employees who don't understand their total compensation is the best metric the compensation for their labor are a liability. In the case of the Teamsters at Waste Management and other Seattle area trash haulers, they don't seem to understand the commitments made by the company and the legal obligations they have made to keep the pension fully funded at the expense of take home pay. In the case of other employees, not understanding their own total compensation may lead them to choose an employer that is over- or under-generous - a classic case of market failure due to imperfect information.

In the specific case of the trash haulers, Jackie Lang hits the nail on the head. In 2009, the average US worker averaged $27.42 per hour in total compensation, or $54,840 in a 40 hour per week 50 week per year work year. A whopping 30% of that compensation came in benefits, while the remaining 70% came in take home pay. That means the Teamster's total compensation of more than $100,000 is 82% higher than the average worker they are serving, and likely 20%-30% of their compensation is tied up in benefits.

I am lucky enough to have an employer who is very transparent in their total compensation. Each year I receive an 8 page breakdown of my personal compensation - the company's and my contributions to my health insurance, 401k, life insurance, wages, and more. I know the total dollar amount, as well as the percentage of my total compensation delivered in benefits and take home pay. I wonder if the Teamsters working at Waste Management get the same information, or if they even care if they do. I would hope that they would realize how generous Waste Management has been if they did have visibility to such data.

Lessons From Soccernomics

2010-03-21T17:57:00.003-04:00

I just got done reading this outstanding book, which talks all-things-soccer and uses common econometrics statistical methods to find some of the deeper truths within the game. I highly recommend it to anyone interested in the past and future of the beautiful game. Some of the highlights for me were:

Consistent reference to Arsene Wenger, Arsenal's longstanding managerial genius, and the players he has been able to find and develop based upon his background in economics. The book is littered with Arsenal success stories, even mentioning a budding Andrei Arshavin's roll in Russia's recent success under the management of Guus Hiddink.
Proving in Chapter 2 that England actually outperforms its peers when statistically significant factors like population, GDP, and international experience are taken into account. This is very different from the press' perception, which is that every England tournament flameout is a national travesty of underachievement.
Similarly, I am in good company. The most frequent "second teams" of soccer viewers, after their first team of their home country, are Brazil and England (Chapter 9). And which team is one of the few to not be the most popular in its home country - the US men's team, of course!
Statistically proving that racism did exist in English leagues well into the early 90's. Banana-throwing, ape-mimicking idiocy allowed intelligent clubs to get good deals and outperformed their peers of similar expenditures who stocked their clubs full of white players (Chapter 5).
As I pointed out in a previous post, money rules only in terms of your current payroll. The amount you pay in a transfer fee has little bearing on how well your team will finish in the table. The authors of the book spend Chapter 4 explaining why this situation, along with the ability to drop down a league and rebuild under new ownership if a team goes into administration, makes soccer a bad business investment (hello, Portsmouth?).
Finally, as a Libertarian I enjoyed Chapter 13 that statistically proved that the real reason to host a big tournament (Euro, World Cup, etc.) is to simply make your nation "feel better". There is zero real financial benefit - in fact, these tournaments are often money pits. When a typical host is a Western democracy that is sitting pretty high on Maslow's Hierarchy of Needs, the feel good nature of a tournament is far cheaper than the equivalent rise in GDP required to generate such a similar response. However, this does mean that South Africa's desire to host the 2010 World Cup is actually a massive misapplication of resources given their relative poverty and greater satiation via true economic, rather than sports, stimulus.

There are so many other good chapters to this book: why soccer prevents rather than increases suicides, which country loves soccer the most, the reasons for different eras of domination (totalitarian capitals, small provincial towns, and a coming age of democratic capitals) in Euro competitions, and the statistically insignificant roll penalty kicks play in altering the predetermined course of a match.

I highly recommend this book to anyone attempting to learn about the reality of soccer today, and not just the "way things have been". Putting numbers to these discussions proves liberating, and the coming wave of acolytes - managers who obsess over data and not just anecdotes - will continue to utilize similar methods to revolutionize the game. Don't believe me? Check out a friend who has combined his love for sport with his college degree to produce an affordable statistical analysis program for any coach down to the high school level. If you can get this for high school competitions, imagine the data guys like Wenger are looking at!

I Told You So

2010-03-20T11:58:00.004-04:00

I don't want to here a single Obama voter ever gripe about the size of government or how much it is impeding their life goals. NEVER. All of us who didn't drink the Kool-Aid told you this was going to happen. To those who didn't drink the Kool-Aid and knew what you were voting for, I respect you for at least being honest with yourselves. The Libertarian in me knows that under McCain it would have just been a slower march, but it's also hard to deny that on the year-long battle over health care reform McCain largely had it right during his campaign. His proposal to eliminate tax exemptions for employer-provided care was the right first step. Greater use of health savings accounts was the correct second step. At least on one major issue we would have started moving in the right direction. He largely embraced what Democrat and businessman (a rarity, indeed!) David Goldhill recommended back in September 2009. Combine McCain's vision with Paul Ryan's, and you have a shot at avoiding national bankruptcy.

Along those lines, Mark Steyn has an excellent column today explaining why Obama voters can't gripe (note: some of the material is NSFW as it uses California's proposed regulation of the porn industry as a nice parallel). The whole piece is worth the five to ten minute read, precisely because it makes one back up and see the messed up forest from the political process tree we've been staring at for nearly a year. I found the following excerpts the most poignant.

Investor’s Business Daily argues that the “health” debate is really a proxy fight on the size and role of government. According to their poll, 64 percent of people think the federal government has “too much power.” Correct. But a big chunk of that 64 percent voted less than 18 months ago for a man and a party explicitly committed to more government with more power, and they’re now living with the consequences. Obama is government, and government is Obama. That’s all he knows and all he’s ever known. You elected to the highest office in the land a man who’s never run a business or created wealth or made a payroll, and for his entire adult life has hung out with guys who’ve demonized (deemonized?) such grubby activities. Many of which associates he appointed to high office: Obama’s cabinet has less experience of private business than any in the last century. What it knows is government, and government’s default mode is to grow, and grow...

Look around you, and take it all in. From now on, it gets worse. If you have kids, they’ll live in smaller homes, drive smaller cars, live smaller lives. If you don’t have kids, you better hope your neighbors do, because someone needs to spawn a working population large enough to pay for the unsustainable entitlements the Obama party has suckered you into thinking you’re entitled to. The unfunded liabilities of current entitlements are $100 trillion. Try typing that onto your pocket calculator. You can’t. There isn’t enough room for all the zeroes, and, even if they made a pocket calculator large enough, and a pocket large enough, you’d be walking with a limp. To these existing entitlements, Obama and his enforcers in Congress propose to add the grandest of all: health care, on a scale no advanced democracy has ever attempted...

It isn’t difficult. We need less government, with smaller budgets, fewer agencies, and vastly reduced numbers of public-sector union employees on less lavish remuneration...

Obama and Pelosi are strong-arming swing-state congressmen into taking one for the deem. It’s appropriate that it should take banana-republic maneuvers to ram this through, because it’s about government so powerful it can make up the rules as it goes along. Maybe regulators should roll a giant condom over the Capitol before it fatally infects the rest of us.

A Great Interview

2010-03-20T11:40:00.005-04:00

I am no fan of Fox News "analysis programming" (O'Reilly, Hannity, Beck), but I do like their hard news coverage. Bret Baier, Brit Hume, Mara Liason, and Juan Williams are quality journalists with decades of experience showing that they only care about one thing - asking tough questions and getting direct answers to them. To that end, I would like to see more reporters do what Bret Baier did this week - hold the president accountable for the content and process behind his policy efforts and not let him filibuster his way through the interview. Baier's interview is below, and after watching it I have to say I agree with Peggy Noonan's assessment.

They Can't Even Get Bake Sale Regulation Right!

2010-03-19T14:58:00.004-04:00

This is actually healthier than

pre-packaged junk.

I heard a fascinating story on NPR's morning edition that detailed some New York City parents' fight to sell their own goods in their school-aged children's bake sales. That's right - the nanny state that is the New York City school system has banned the sale of homemade treats at bake sales out of concern for children's health. So what are the students allowed to sell?

So parents and students can fundraise anytime they want with Cool Ranch Doritos or whole-grain Pop-Tarts or Quaker Oats granola bars. The packaged food just as to have fewer than 200 calories and not more than 35 percent fat.

WHAT?!?!? Processed food like Pop-Tarts and Cool Ranch Doritos are the "healthy" alternative to home made bake sale items? A number of parents aren't taking this intrusion laying down.

PTA parent Leanne O'Conner held up one of her banned chocolate chip cookies, which she says is made with "organic butter, brown sugar, eggs, flour, cinnamon and chocolate chips." By contrast, the label on a Linden's chocolate chip cookie — Department of Education-approved — lists flour, soybean oil, chocolate chips, maltodextrin and partially hydrogenated cottonseed oil. "I didn't put any [maltodextrin] in mine," she says. "There's no partially hydrogenated anything in mine."

These rules are so stupid, so arbitrary, and so counterproductive when it comes to kids' health that not even the school district spokesperson can defend them.

These people - who seem to have the complete inability to read the most basic nutrition books to realize it's not just the calories you put in your body but where they come from that matters - are not only infringing on these kids' and parents' rights. They're miseducating them when it comes to nutrition, and filling their bodies with junk food in the process. The same type of nanny-state mentality that believes it can engineer kids' diets is what fuels the idiocy that Washington, DC can engineer a medical system that adequately addresses the needs of 300M+ unique Americans.

It started with a concern for trans fats. It's now spread to bake sales, and may soon spread to salt. When the government becomes responsible for providing your basic needs and it must inevitably work within cost constraints, it will come to dictate every aspect of your life to minimize that cost. Whether you like it or not, whether you're at high risk or not. Think about it the next time you advocate a well-meaning, but likely flawed, policy that involves the government telling someone else what to do.

Losing the Battle for Microsoft Employees' Hearts

2010-03-14T22:07:00.003-04:00

Who knew such a little device

could get inside such a big head?

A friend who works at Microsoft posted this story to their Facebook page. The story talks of how Steve Ballmer is leading a charge at Microsoft to shame employees into not openly using their iPhones at work. This kind of activity by a CEO is dumb, but it's not unprecedented. Ballmer grew up in a household that followed such arcane rules.

[Ballmer] told executives that he grew up in Detroit, where his father worked for Ford Motor Co., and that his family always drove Fords, according to several people at the meeting.

Having just come from Ford in late 2007, I can provide some insight into this line of thinking. First, I don't necessarily disagree with it when thinking about it from the common employee's perspective. The worst impression someone can get from of a car company is when that company's employees won't buy its own product. A car is the second largest purchase someone will make in their life - the cost of screwing up a new car purchase is pretty large compared to screwing up a cell phone purchase. No matter how many JD Power awards or Consumer Reports' Best Buy awards a car has, an employee who bad mouths the product by preferring a competitor's product will carry more weight with the neighbors. This choice to not buy your employer's automobile offerings is even more powerful when the neighbors realize you gave up a 10%-20% employee discount to buy a competitor's product.

Peer pressure is very different than management pressure and de facto edict. When I worked at Ford from 2001 to 2007, I never saw a single supervisor or manager ever harass or joke with an employee who bought a competitor's product. When the company did start reminding everyone that they had four discounted family purchases per year and four additional discounts for friends, it reeked of desperation. It wasn't, "Buy our product or sell it to your friends because it is great!" It was, "Please help us sell the product because we're losing market share and don't want to have to do another round of layoffs." It's the same with the iPhone - Microsoft can't compete in the marketplace where the iPhone dominates, so their executives have resorted to shaming employees into not using their preferred devices.

The article also goes on to show how some Microsoft executives view the Microsoft/Apple rivalry.

For many top Microsoft executives, seeing so many iPhones around the office is a bit like how a Coca-Cola Co. manager might feel seeing underlings drink Pepsi—especially since Microsoft makes its own operating system, Windows Phone, that powers handsets.

This is a false analogy. In the case of Ford, all they make is automobiles. In the case of Coke or Pepsi, all they make is soda. Microsoft has dozens of products - the Windows operating system, the Office productivity suite, and the XBox 360 just to name a few. Losing on one front does not present a threat to the complete existence of the company. It should recognize that it can't be the best in every market, and that its Windows Mobile software may appeal to a different subset of the mobile device market than the iPhone.

It amazes me that Ballmer and others inside Microsoft have let a little device like the iPhone, and more importantly who makes it, get so inside their heads that they are willing to handicap their mobile device and OS development team. If they weren't blinded by rivalry, they'd look to leverage the iPhone's success as an opportunity for insight. In fact some of his own management team is suggesting just that.

According to several people present, Andy Lees, a Microsoft senior vice president who oversees development of the mobile-phone software business, and his boss, Robbie Bach, explained that Microsoft workers often use rival products to better understand the competition.

Space Lunacy

2010-03-11T15:24:00.005-05:00

Here is the reaction to President Obama's plan to scale back investment in NASA in the face of trillion dollar deficits.

"As with all great human achievements, our commitment to space must be renewed and encouraged or we will surely be surpassed by other nations who are presently challenging our leadership in space," Democratic and Republican members of the U.S. Congress from Florida wrote to Obama last week.

What's the real reason for this outrage?

Obama's move for a greater private sector role in space launches -- as he seeks to keep ballooning federal deficits in check -- has generated fears of job losses among thousands of NASA employees who provide an important economic base in Florida, a state usually crucial in presidential elections.

Only those who have no clue about balancing a budget and long term national economics would advocate that we should be spending money on 100% optional things like NASA when we have a $1T annual deficit to eliminate. We should always be leery of someone who cannot win their argument on facts (i.e. NASA is a good investment in the face of runaway deficits), and instead must resort to nationalism, fear, and economic nativism to justify their fiscal idiocy.

The worst part is that the NASA budget actually goes UP under President Obama's plans. Why is everyone really so fearful of this plan?

"There's a larger issue here," [NASA Administrator Michael] Griffin said. "Does the United States want to have a real space program? Do we actually think we can have a robust, exciting, world-leading space program by hiring private enterprise to furnish it?"

This is really about preserving NASA's monopoly and federally funded jobs, and ensuring expenditures are not rationalized against tangible future financial benefit. Michael Griffin deserves to be ridiculed as much as any teacher union leader who argues against school choice. How easily he forgets that it was private enterprise and competition that led to the invention and proliferation of the bicycle, the automobile, and the plane that all preceded space travel as a form of transportation.

Why The MLS Owners Are Fighting The Union So Hard

2010-03-08T15:09:00.011-05:00

Figure 3.1 from Soccernomics, which shows a substantial

correlation between wage expenditure and where a team
finishes in England's top two soccer leagues.

I mentioned in a previous post that I am reading the book Soccernomics, which is chock full of statistics that clarify or challenge conventional sports wisdom. The authors do a very good job of not only comparing differences in soccer leagues, but also across other sports with a special emphasis on baseball given it's similarly lenient financial rules. One of the more interesting aspects of international soccer versus traditional US sports leagues is the financial and transaction rules governing the game.

Most US professional sports leagues are governed by some form of salary cap to prevent runaway spending by big market teams that translates to widening disparities in competitiveness. The most successful model of this behavior is the NFL salary cap and it's resultant goal of "league parity". Transactions between teams nearly always involve player trades, and are often executed as much for salary cap management as for overall team improvement. This is due to the fact that the teams are often required to assume the terms - both financial compensation and duration - of the contract. This model minimizes costs, and provides a predictable and somewhat stable source of revenue and cost for owners.

International soccer, governed by FIFA rules, is completely different. Largely, there are no salary caps - although that may change as an emerging soccer debt bubble may cause governing bodies like UEFA to place "break even" financial requirements on clubs. Teams are free to spend what they want, where they want. When it comes to transactions, player swaps do not take place. Rather, a "transfer" will take place where the club and player are paid a one time compensation for the transferring of rights from one club to another. Transfer fees can be huge, as speculation plays a big part when rival clubs are bidding for a player's talents. They can be the difference between profits and losses for clubs.

The authors of Soccernomics have found out some interesting things related to transfers and team payroll.

First, there is very little correlation between the money a team spends in the transfer market and their success in the league.

But much of this [transfer] money is wasted on the wrong transfers. In fact, the amount that almost any club spends on transfer fees bears little relation to where it finishes in the league. We studied the spending of forty English clubs between 1978 and 1997, and found that their outlay on transfers explained only 16 percent of their total variation in league position. By contrast, their spending on salaries explained a massive 92 percent of that variation.

What's interesting is that even given this data, clubs still go out and blow huge sums of money on transfers. Soccernomics goes into many reasons why transfers largely fail to improve a club and why clubs continue to pursue them, but I will save readers from me regurgitating all of Chapter 3 of the book. Rest assured - transfers present a bad ROI, and you need to read the book to get the full story why.

Second, there is a good bit of correlation between the money a team spends on annual total player payroll and their success in the league. The graph at the top of this post shows the author's regression results when studying payroll and club success. While there is a substantial correlation, the graph must be deconstructed to understand the true magnitude of the trends given that logarithmic functions had to be used to get the linear fit. If one is to look at what it takes to move from mid-table on average to the top 4 positions, we could examine points that correspond to 0 and 1 on the x-axis. Adjusting both the payroll data and the finishing position data by their logarithmic functions, one finds that a club must spend about 3 times more money than the league average to achieve an average finishing position 5 places higher than the average club. Given a table of 20 teams, that means one must spend 300% more than the average team to move up 25% of the table - diminishing returns indeed! Given that finishing in the top of the league effectively means promotion - either from the Championship to the Premier League or the Premier League to the Champions League - and ever growing revenue, there is huge pressure on team finances to compete for those top few spots.

And thus, we get to the rub of soccer in the United States. The MLS player's union and ownership is locked in a stalemate over the terms of the next collective bargaining agreement (CBA). Players are asking for fundamental changes to the way the league manages their contracts - they are asking for free agency, terms closer to the rest of the world's players when it comes to transfer terms, and for an eventual dissolution of the league's single entity structure so that players can sign contracts directly with teams. The league's ownership is steadfastly refusing these terms - and for good financial reasons. No one expects MLS to turn into the Premier League overnight, but the failure of the NASL looms large as the cautionary tale of what happens when US soccer leagues don't run a conservative financial house. Given the expectation of US sports franchise owners that they should run their team like a business and make a profit (an assumption Chapter 4 of Soccernomics ultimately destroys), the owners can look at results like those from the English leagues and see what the end game is - large sums of money, often spent irrationally, producing unpredictable results and destroying the financial health of the league's teams. Teams like the Seattle Sounders, with deep pocketed owners and fans who set the league record for attendance in the team's first season, would look to use that financial position to build a permanent place at the top of the league for themselves.

As a Libertarian, I can't say I agree with the owners' position. There's a legitimate point to be made for workers' rights and against the business collusion of a single entity. But as a growing soccer fan that wants the MLS to be a stable, long-term venture I also can't disagree with the owners' approach of limiting the financial commitment required of teams. They are doing the rational thing of following the statistics, and recognizing that the league can't support such an arrangement at this time.

What Health Care "Reform" Really is About

2010-03-08T15:03:00.002-05:00

This post could also be titled "Why I am a Libertarian, Pt 346." Mark Steyn has written an excellent piece (HT: To Get Rich Is Glorious) as to what this "reform" really means to Democrats and why they continue their suicidal march in passing it. The whole piece is a must read, but the highlight for me is the quote below.

Once the state swells to a certain size, the people available to fill the ever-expanding number of government jobs will be statists – sometimes hard-core Marxist statists, sometimes social-engineering multiculti statists, sometimes fluffily "compassionate" statists, but always statists. The short history of the post-war welfare state is that you don't need a president-for-life if you've got a bureaucracy-for-life: The people can elect "conservatives," as the Germans have done and the British are about to do, and the Left is mostly relaxed about it because, in all but exceptional cases (Thatcher), they fulfill the same function in the system as the first-year boys at wintry English boarding schools who, for tuppence-ha'penny or some such, would agree to go and warm the seat in the unheated lavatories until the prefects strolled in and took their rightful place.
Republicans are good at keeping the seat warm. A bigtime GOP consultant was on TV, crowing that Republicans wanted the Dems to pass Obamacare because it's so unpopular it will guarantee a GOP sweep in November.
OK, then what? You'll roll it back – like you've rolled back all those other unsustainable entitlements premised on cobwebbed actuarial tables from 80 years go? Like you've undone the federal Department of Education and of Energy and all the other nickel'n'dime novelties of even a universally reviled one-term loser like Jimmy Carter?

My sentiments exactly. This bill either gets killed now, or we make the same mistake Europe did 60 years ago and likely never look back. The simple fact that we seemed to have learned nothing from the 60 years of failure in European socialized medicine and general statist economic policy speaks volumes to the naked power grab going on right now.

We Can't Cut Compensation Because We've Monopolized The High Paying Jobs

2010-03-07T10:08:00.007-05:00

Is this employee really worth $60k in base

pay and $70k in travel expenses? (HT: Jeremy)

The Washington state government is more than $2B in the hole this year, and is attempting every way possible to close that gap. One of the suggestions made by many voters is to have state employee pay and benefits take a hit similar to that seen by many of the voters at their private sector jobs.

Our local paper, the Seattle Times, attempted to answer whether or not state employees were really overcompensated versus their private sector counterparts. It declared in a story this morning that:

... an analysis of statewide wage data by The Seattle Times shows that claims about state workers earning higher pay than others are in many cases incorrect or oversimplified.

Out of nearly 200 standard occupational categories analyzed by The Times, representing most of the 149,000 or so state employees, median pay last year was higher for state workers than for all other workers in only 74 categories. (Median means half earn more, half less.)

This claim is made in the third and fourth paragraphs of the story, which was preceded by two paragraphs setting up the popular "logical fallacies" of overpaid government employees. It's a nice rhetorical trick, but if one digs further into the story they see that many of the simplifications throughout the Times' research likely biased the study's outcome towards the wrong conclusion.

One only needs to read to the fifth paragraph to see the first breakdown in their analysis.

The Times did not compare state health-care plans and pensions to the private sector. Such benefits are a major part of total state employee compensation — about 30 percent, on average — but are difficult to put present-day dollar values on and even harder to compare across different employers and job categories.

Oh really? Where I come from, I have to do one of two things when up to one third of my data is unquantifiable. Either I decide on an alternative methodology for gathering the data, or I assume a range of best- to worst-case values and look their impact on the total data set. The Times did neither. They simply ignored the benefits packages and only looked at pay, thus making a conclusion of "equal- or under-paid state employees" more likely.

The sad fact is that they didn't need to try too hard to get alternative data. The next two paragraphs in the story show where another group has found such data for Washington State, and it shows average total compensation of state employees to be about 10% higher than private sector employees.

A personal note on this subject - I am marrying a state employee this summer, and she has one of those "unquantifiable" health care packages. It's so unquantifiable that I know it is a good enough deal for me to drop my current employer's health care and switch to my future spouse's. Why? I am no dummy - it's cheaper for me. How do I know that? My employer publishes an annual total compensation summary that explains in plain English how much both they and I paid for wages, health care, pension, 401k, vacation, and other benefits. It seems my employer can provide this information (indeed wants to) while the State of Washington can't do the same for their employees. The key difference is that my employer wants me to know my total compensation, as it is a key selling point for the company retaining my services. The State of Washington doesn't want anyone knowing its employees' total compensation, as the tax payers would be very angry if they did know.

The Times then seems to go on to make its coup de grace of an argument for higher state employee compensation.

However, such analyses don't tell the whole story because the government and private-sector work forces are composed very differently. Washington state's payroll, for instance, includes relatively more high-earning occupations, such as educators and finance specialists, and relatively fewer low-earning occupations, such as wait staff and retail clerks.

The argument is thus: the state has co-opted a higher share of higher paying professions than the private sector, so don't blame it for needing more tax payer money. Never mind the fact that study after study shows kids in public schools aren't keeping up with kids in private schools, nor public schools overseas. Never mind that competition for employees and buyers in the private sector provides an efficient balance between compensation and cost. We are just asked to accept that we need to keep these high paid individuals on the state government employee roles rather than privatize them.

I could go on, but I won't. The simple fact is that this Times "news" piece is really just a hit piece defending state employees who receive better total compensation than those in the private sector who pay their wages. Instead of debating ways to further trim government costs, we have a state government that directly ignores the will of its voters on tax law, wants to institute a myriad of new taxes on perfectly legal substances, and now practices blatant class warfare in proposing "an income tax on the wealthy" (gee, where I have I heard that argument before?). This has nothing to do with serving the people, and everything to do with not giving power back to the people who pay the bills. The Times' shoddy reporting is aiding and abetting this effort.

One final thought. Even if we're to accept the Times' analysis, there is a key takeaway from it - there are 74 categories of jobs where the state should be looking to cut pay. Every dime helps when you have a $2B budget gap to close. Get to it, Olympia!

Another Arsenal Victory, Another Arsenal Player Injured

2010-02-28T14:48:00.002-05:00

In what seems to be an awful Groundhog Day experience for Arsenal supporters, the Gunners won another pivotal game in a bittersweet fashion. Stoke City's Ryan Sawcross decided to judo kick Aaron Ramsey's leg.... er, challenge him for the ball. The result: a broken tibia and fibula, an ended season, and likely a less glorified career for Mr. Ramsey. Meanwhile, Ryan Sawcross got a red card and will likely ride the pine for a few matches for a "rough tackle'.

I am new to soccer and the EPL. Far be it from me to advocate for a no contact league or sport. Teams should be able to pursue different strategies - from finesse to physical - and should be forced to adapt to defenses that play to their weaknesses. Many of the injuries to the Arsenal side this year have been of their own making or from clean defense. But 7AM Kickoff provides some good insight into a troubling string of season ending tackles that goes well beyond this season's spate of injuries.

Dear FA -
In light of the fact that Arsenal have suffered three leg-breaking tackles in four years at the hands of teams who publicly state that they are going to use violence against the Arsenal side, I would like to submit a selection of teams for your referees to watch out for as the 2009/2010 season winds to a close. These teams and their players are not “just good lads” nor are the tactics they deploy “accidents.” These teams intentionally deploy dangerous and reckless tackles on Arsenal because you and the media perpetrate the myth that Arsenal don’t like rough play.

Let me make this clear, I’m not asking you for special treatment, rather just some clarification. If your desire is to have games such as this year’s Merseyside derby, or Stoke v. Arsenal define English football, then so be it: good luck winning the World Cup with players like Ryan Shawcross.

But since the unveiling of the Football Association’s multi-million pound National Football Centre and the public pronouncements that this means a sea change from the old “lump and crunch” football to a modernized game, I suspect that you too understand the problems in the English game and want to stamp them out. So, I’m not asking for special treatment, but rather that you simply instruct the referees to call a foul a foul and put an end to this pernicious lie that only Arsenal don’t like getting kicked.

EPL Talk comes to the same conclusion, but in much less incendiary manner.

I hope the FA does take such a look at their rules regarding such tackles. When I am not rooting for the US Men's National Team, I am pulling for England. The EPL's and FA's ignoring of the rough play against their top flight teams and English talent only handicaps the English national team. It's stupid, and it needs to stop.

Ultimately, Arsenal showed impressive resolve in the face of the injury and won the match late. Only 3 points separate the top three teams in the Premiership. EPL Talk makes a good point, suggesting this may be the moment this team turns the corner in the manhood department and makes a push for an improbable championship. If Arsene's men end up winning it, it would be against all odds with all the injuries this season. The fact that they are even close speaks volumes to the depth of the team and Arsene's management skills.

Soccernomics

2010-02-26T22:25:00.003-05:00

What a bankrupt soccer club looks like.

I have been home most of the week with a pretty nasty flu, but I have been able to catch up on some good reading. It seems the theme of the week for me has been the intersection of soccer and economics.

The week has been filled with all kinds of nasty news from the Premiership. It turns out that the majority of debt within UEFA is owned by Premier League teams, with Chelsea and Manchester United taking top honors. The staggering debt load UEFA-wide, but especially in the Premiership, will lead to some hefty new regulations regarding club finances. The bankruptcy of Portsmouth - a first for the Premiership - is just the beginning of what will be a massive re-alignment in expenses, especially player salaries. Meanwhile, my Gunners and their Zen-master of a manager are sitting pretty financially. Now we just need Arsene to spend a bit of that money in the offseason to shore up a team full of kids.

Meanwhile, back here in the US we are facing a crisis in our own league. Major League Soccer and its player's union can't come to a compromise on the next collective bargaining agreement (CBA). There are some pretty thorny issues, with the players feeling that the success of the Seattle Sounders and other newer franchises mean now is the time to push for greater player rights. They may have a case to be made, but a strike would kill all good will that MLS has built up over 15 years. Part of the appeal of US pro soccer is that these guys don't behave like the spoiled babies of our four major pro leagues. That appeal would be vaporized in days with a strike, no matter how legitimate the grievances from the union.

For the life of me, I can't understand why the owners have drawn a line in the sand over free agency. First, there will still be a salary cap in place to limit total team expenditures on players. Second, MLS already has the designated player (DP) rule that allows teams to spend as much as they like on any one player. This is how guys like Beckham and Ljungberg avoid taking too big of a haircut in playing in the US. Third, only five of the 16 MLS teams are choosing to use the DP rule, showing that a good number of them have found better places to use their money. Fourth, the owners just seem like jerks in not offering a basic right that any other employee has whether it's in an office or in another sports league. This one issue - free agency - seems to be a big enough sticking point that it could lead to a strike. It's a big enough threat that I am not buying tickets to the second Sounders home match due to fears of it being cancelled.

Finally, I have started reading a book titled Soccernomics. Think of it as Freakonomics-meets-soccer. I am only in the first few pages, but it came recommended by several blogs that I read. I'll post my thoughts once I am done with it.

A Defining Moment for the GOP: Embrace Being the Party of No

2010-02-22T23:01:00.004-05:00

HT: Mark Perry

Sometimes being the "party of no" is the right thing to do. When the opposing party offers you nothing in terms of the ideas you have proposed for their landmark legislation, it is time to say "No". When the core of the legislation is the polar opposite of your party's espoused values, it is time to say "No". When the leadership that is proposing the legislation has the bulk of public opinion against it, it is time to say "No".

President Obama has finally unveiled his version health care "reform", and it fits the descriptions above. It embraces NONE of the excellent ideas offered by the GOP, a nice summary of which was offered by Minnesota Governor Tim Pawlenty. As George Will pointed out in his CPAC address, this Administration and Democratic Congressional leadership are committed to a culture of dependence on government and not freedom. The President's health care proposal, built around more government dictate's on insurance rates, minimum coverage, and approved insurance levels, is but just one piece of this strategy of creeping statism. It is diametrically opposed to the supposed ideals of a party built around minimal government size and intrusion, personal responsibility, and economic freedom.

This is a defining moment for the GOP. Nothing can be gained from voting for the President's proposal other than lending their voices to what will be a failed policy. The GOP can begin to regain its fiscally conservative reputation by declaring, in unison, that they will not support such a health care reform and coalesce around something like Governor Pawlenty's proposal. They will certainly take their lumps in the press for being obstructionist, but that will be the short term pain. The long term gain will be in the eyes of voters as the single voice of reason advocating for common sense values like personal responsibility, economic freedom, and choice when it comes to health care options. Standing for those values is not only right for the country, but it will also lead to electoral success this fall and well into the future.

In the Wrong Direction

2010-02-21T22:06:00.002-05:00

So he won't knock down the barriers to interstate health insurance competition that allow cost-escalating monopolies to exist, but he'll centralize the states' more arbitrary behavior like denying health insurance companies the ability to charge what they require to run their business. Why are Republicans and Libertarians expected to be bipartisan when they are dealing with an unashamed statist? How is one supposed to be bipartisan when the leadership of the opposite party doesn't share a single core value with your political or economic outlook?

When it comes to taxis, Seattle could learn something from Ireland

2010-02-18T14:46:00.004-05:00

A scourge on Seattle taxi customers...

The Port of Seattle is embroiled in a number of legal disputes regarding it's recent awarding of the city taxi contract to Yellow Cab. Like most American cities, Seattle creates a sanctioned taxi monopoly, and does it all in the name of customer cost and safety protection. Here are some of the highlights.

Lawsuit #1

STITA, which has picked up arriving passengers at the airport cabstand for two decades, lost a recent bid competition in December to Yellow, which offered millions more in payments to the Port district for a five-year contract.
Yellow Cab offered the Port $18.3 million in fees, compared with the $14 million that STITA says it offered. From 2004-2008, STITA paid $10.6 million, the Port says.

STITA claims the Port illegally set off a bidding war instead of basing fees on the
drivers' operating costs. Yellow had sweetened its bid by offering to reduce
"deadheading," when empty cabs return to Sea-Tac from downtown Seattle.

Lawsuit #2

This case involves a losing, joint proposal from Farwest Taxi and Yellow and Orange cab. The suit by Farwest, filed Friday, alleges that Yellow's consultant, Chris Van Dyk, gleaned information from other firms to help Yellow write its own
separate, winning proposal, as the Port of Seattle ignored the alleged collusion.

The solution to all of this is obvious: let all three cab companies compete for business by eliminating the exclusive contract with the city! And the benefits aren't just theoretical - Ireland has proven the benefits of such an arrangement in practice (HT: Mark Perry).

As a result of liberalisation, the cab market in Ireland is highly competitive and contestable and has no significant barriers to entry or exit.
Liberalisation of the cab industry has brought profound changes in the relative market share of hackneys and taxis in Ireland. Since liberalisation, taxi numbers have increased rapidly. This suggests that prior to liberalisation, there was a substantial imbalance between cabs serving the street and call-out markets, with the former being undersupplied.
Estimates for cab trips by residents of the Dublin area suggest that, since liberalisation of the market, demand in the Dublin market has increased from 22 million trips in 1997 to 40 million in 2008, or by some 82 per cent.
Liberalisation of the market has resulted in significant benefits to consumers. The value of the post liberalisation reduction in waiting times to Dublin cab users is estimated to be €300 million at a minimum.
On a proportionate basis, the benefit of waiting time reductions to consumers
throughout the country is estimated at €780 million.
There is no evidence that the increase in cab use and reductions in waiting times has been at the expense of the quality of the services provided. The general perception of consumers is that the overall level of cab service provided in Ireland, as well as vehicle quality, vehicle cleanliness and the helpfulness of drivers, is good.
As a result of liberalisation, new entrants to the cab market have also benefited from the opportunity to earn a livelihood through participation in the industry.

Better and more frequent service at a cheaper cost? Why does the city of Seattle not see the light? Instead of trying to engineer a solution for deadheading, cost overruns, or undersupplied sections of town, why doesn't the city just unleash the creative solutions available through competition? All the while, they would have the added benefit of avoiding these costly lawsuits. Perhaps it has something to do with the fees each company is offering to pay the Port for the privilege of the monopoly...

Beyond that, we should recognize that a large number of taxi drivers in the city are recent immigrants. To the last bullet point from the Irish taxi study, creating a monopoly not only screws customers - it also largely screws immigrants who have come to the United States in search of a better life built upon their own efforts. It's not just economically wrong - it's morally wrong too.

Multigenerational Financial Theft

2010-02-17T15:00:00.005-05:00

The two biggest reasons I am

a Libertarian and deficit hawk.

"Habitually spending more money than you make is irresponsible," said Walker. "Irresponsibly spending someone else's money when they're too young to vote or not born yet is immoral."
Future generations of Americans will largely foot the bill for the present financial predicament, economists say.

AMEN! I am not one to post public pictures of my kids due to all the internet trolls out there, but there is simply no better way to emphasize the point above.

Given that no one would accept less for more money from a business, I suspect that exact scenario for the federal government laid out in the linked article is a non-starter. Thus, the choices are:

Choose the option of more services for money, and go down the path of European statism and eventual national bankruptcy, OR
Choose the option of less services for less money, and unleash the creative destruction and life enhancement of true capitalism to solve the nation's biggest issues - energy, health care, education, etc.

I am generally pessimistic that #2 will happen give the course of national history, but my two daughters, their quality of life, and their basic freedoms are why I fight the Libertarian fight on a daily basis.

Maybe, Just Maybe, The Graduation Requirements Are Too Easy

2010-02-17T08:23:00.005-05:00

Why am I being shoved out the door

without the best education just to

save adults some money?

I stumbled upon this story the other day, where Utah legislators are debating making 12th grade optional and encouraging a greater number of students to graduate after 11th grade. The real reason for doing this is to save the state and local government money in tough economic times, but I wondered how so many kids would be eligible for graduation in three years instead of four.

The answer, like in my home state of Washington, is that the Utah state requirements for high school graduation are pathetic. If Utah is like Washington, where kids go to school for at least 6 periods per day and have the opportunity to earn 24 credits over four years, students can fail up to 1/3 of their classes and still have enough credits to graduate over four years. Try doing that in your job - miserably fail 1/3 of the major projects you work on over four years - and see how long your employer waits until firing you! Meeting Utah's minimum graduation requirements (16 total credits) means a student can graduate over 3 years with only a C or better in 89% of their classes. Meeting Utah's graduation requirements in 3 years is also a breeze as no one subject area requires more than 3 credits (Language Arts) while the rest require 2 or fewer (Math, Science, etc.). Gee, that doesn't sound like the education one needs to compete in the world described by Tom Friedmann in "The World is Flat".

Does anyone believe those requirements will encourage students to be adequately prepared to meet the challenges of a global economy? How about gaining admission to a college to get a four year degree? Or do we suspect these requirements were set to allow a state-monopolized education system to show they're successfully meeting graduation targets, and treating children's education more like an assembly line that generates revenue for the operators than the beginning of a life of wonderful learning and liberating career earnings?

As a Libertarian, I have consistently argued for greater school choice and competition to allow parents and students to work with teachers and schools that better meet their needs. This would replace a public school system that seems built around a race to the bottom for all students, regardless of their educational goals. As John Stossel has said, education is too important to leave to a government monopoly. While I certainly believe cost savings could be realized elsewhere through the efficiencies of market competition, there is something disgusting about the way Utah is cutting costs from its education monopoly. Instead of looking to make taxpayers pay more for the other services they want or look to cut things like tax loopholes, welfare-for-the-rich, or funding to programs other than education, the state of Utah is looking to balance its budget by shoving kids out the education door before they are prepared for college or careers. If an individual parent chooses to do that, it only affects the individual child. If the power of the education monopoly is being used to encourage every child to take that early exit, it's affects tens of thousands of vulnerable Utah children who need all the encouragement possible to get a good education. The last message parents and students need to hear from the education establishment is "Get out of here! You're costing us too much money!" This is what happens when we have an education monopoly - it doesn't care one bit for the individual, but rather only for the education machine and it's parts (administrators, unionized teachers, state regulators, etc.).

The next time you talk about school choice, make sure it's not just about allowing parents to choose where their kids go to school. Make sure you also recognize it's about taking power away from the state to arbitrarily decide how much education your child should receive, and giving that power back to the parent.

How Bad Is This Administration's Budget?

2010-02-14T12:02:00.002-05:00

This bad.

It may be tempting to assume that a balanced budget is the natural benchmark. Certainly, the Obama budget comes nowhere close to achieving that goal. But there are reasons to think that this standard is far too strict.
Sometimes, a budget deficit, even a large one, is called for. War and recession are the two classic cases. Wars lead to temporary surges in government spending, and recessions lead to temporary declines in government revenue. It makes sense for the government to borrow to make it through these tough times.
President Obama, like his immediate predecessor, is dealing with both war and recession. A transitory surge in the government’s budget deficit is natural under these circumstances and need not be a cause for alarm.
Moreover, even in the long run, a balanced budget is too strict a standard. Because of technological progress, population growth and inflation, the nation’s income and tax base grows over time. If the government’s debts grow at or below that pace, servicing the debt will not become a major problem. That means the government can run budget deficits in perpetuity, as long as they are not too large.
Recent history illustrates this principle. From 2005 to 2007, before the recession and financial crisis, the federal government ran budget deficits, but they averaged less than 2 percent of gross domestic product. Because this borrowing was moderate in magnitude and the economy was growing at about its normal rate, the federal debt held by the public fell from 36.8 percent of gross domestic product at the end of the 2004 fiscal year to 36.2 percent three years later.
That is, despite substantial wartime spending during this period, budget deficits were small enough to keep the debt-to-G.D.P. ratio under control.
The troubling feature of Mr. Obama’s budget is that it fails to return the federal government to manageable budget deficits, even as the wars wind down and the economy recovers from the recession. According to the administration’s own numbers, the budget deficit under the president’s proposed policies will never fall below 3.6 percent of G.D.P. By 2020, the end of the planning horizon, it will be 4.2 percent and rising.

I guess I should defer to the learned Prof. Mankiw, but it's telling that even someone okay with deficit spending in "a time of need" sees huge problems in this long term budget released by the Administration. I do take issue with his classification of this time being one of need - the wars we are funding were completely optional, as is most of the deficit spending up to this point and into the future. This isn't WWII or the Depression - it's American imperialism and an inability to deal with (relatively) minor economic hardships run amok. Either way, even those tolerant of deficit spending say this budget is troubling.

A Night at the Emirates

2010-02-14T10:21:00.004-05:00

A Night At The Emirates from Rohan Blair-Mangat on Vimeo via the MLS_Insider.

From The Offside Rules:

I'm no Gooner --not that there is anything wrong with that-- but this is exquisite stuff that deserves the highest of praise. It also deserves 5 minutes of your time and a repost or Tweet if you have one to spare.

According to the filmmaker "A Night At The Emirates is a unique and immerssive documentary. Shot with a single camera on the 10th February 2010 during the game against Liverpool, the film is about the Arsenal matchday experience from the perspective of the fans." I would agree with that description but would add that it's pretty bad-ass as well; Mr. Blair-Mangat may wish to be modest but I will gladly behave immodestly on his behalf.

The whole thing is a beautiful view of an experience I hope to have some day, and the high point of the video comes from the first person view of the beautiful Diaby header to win the match for Arsenal. I agree with The Offside Rules and the MLS Insider - if you're a soccer fan, take 5 minutes to view one of the ultimate experiences for a fan.

Good News for Consumers, Bad News For Automakers

2010-02-13T23:09:00.005-05:00

My friend James found this interesting post regarding auto owner's increasing desire to extend the life of their current vehicle and delay the purchase of their next one.

An online survey of car owners conducted in December and January found that about 77 percent plan on driving their current vehicles a total of 50,000 miles more than their previous vehicles. Considering the annual average for U.S. drivers is something like 12,000 to 15,000 miles, that means drivers today expect to hold onto their cars for an extra three or four years. Paying for repairs is apparently preferred to springing for a new set of wheels.

While I don't doubt this trend in consumer preferences is true in the face of a horrible recession, I somewhat doubt the magnitude of auto owners that will actually follow through on this plan. My experience with customer surveys suggests otherwise.

When I was working at Ford, my group was looking at offering a new product in a market segment that had no one offering such a product. To gauge customer interest and potential durability requirements of the product, we looked at a similar offering in another market segment. We used customer survey data from that second market segment to try and understand how the product may be used in the first segment. Luckily, the survey data asked the same question several times, but with a different structure to not be apparent in its repetition. This allowed us to understand which customers were honest in their answers, and which were not. What we found was the more the customer was expected to use the product a certain way, the more dishonest their answers as they conformed to what they thought the surveyor wanted to hear.

I suspect there is some of this behavior with customers who were asked questions about when they would ditch their current vehicle. The trend is likely correct - a higher percentage of people waiting to buy their next automobile - but I don't expect we will see anywhere near 77% of customers waiting an additional 50,000 miles before they purchase their next vehicle. Either way, automotive companies that are built upon new car purchases every 4 years are definitely in trouble if this trend does occur. It is good news for consumers though, as the increased insurance rates and resumption of car payments that come with a new purchase would be avoided for several additional years.

Pushing a Solution for Which There is No Market

2010-02-13T22:51:00.003-05:00

It looks like the Obama Administration is interested in using part of the stimulus package to "provide IT for health care providers and train workers." While the goal is laudable, it won't be one realized nor sustained. The reason is that there is no market need for IT in the health care and insurance monopolies that the Administration seems content to maintain via their "reform" effort.

As David Goldhill reminds us in his superb piece in the September 2009 issue of The Atlantic (emphasis mine):

What amazed me most during five weeks in the ICU with my dad was the survival of paper and pen for medical instructions and histories. In that time, Dad was twice taken for surgical procedures intended for other patients (fortunately interrupted both times by our intervention). My dry cleaner uses a more elaborate system to track shirts than this hospital used to track treatment.

Not every hospital relies on paper-based orders and charts, but most still do. Why has adoption of clinical information technology been so slow? Companies invest in IT to reduce their costs, reduce mistakes (itself a form of cost-saving), and improve customer service. Better information technology would have improved my father’s experience in the ICU—and possibly his chances of survival.

But my father was not the customer; Medicare was. And although Medicare has experimented with new reimbursement approaches to drive better results, no centralized reimbursement system can be supple enough to address the many variables affecting the patient experience. Certainly, Medicare wasn’t paying for the quality of service during my dad’s hospital stay. And it wasn’t really paying for the quality of his care, either; indeed, because my dad got sepsis in the hospital, and had to spend weeks there before his death, the hospital was able to charge a lot more for his care than if it had successfully treated his pneumonia and sent him home in days.

Of course, one area of health-related IT has received substantial investment—billing. So much for the argument, often made, that privacy concerns or a lack of agreed-upon standards has prevented the development of clinical IT or electronic medical records; presumably, if lack of privacy or standards had hampered the digitization of health records, it also would have prevented the digitization of the accompanying bills. To meet the needs of the government bureaucracy and insurance companies, most providers now bill on standardized electronic forms. In case you wonder who a care provider’s real customer is, try reading one of these bills.

Encouraging IT in the medical field will do nothing until the medical profession must compete for the hard earned dollars of who they serve - the patients.

Picking the Right Battles and Tactics

2010-02-09T08:17:00.004-05:00

Locutus ain't got nothin' on Obama.

In his recent speeches the President used the word "fight" many times, but the mark of a good fighter is knowing when to lay back and when to strike. The same goes for good politicians. One of the more irritating qualities of Obama, and indeed many politicians, is their inability to keep themselves out of any squabble that will raise their political profile.

The latest example of this is the Obama Administration's attacks on Anthem Blue Cross in California. They are trotting out the usual "insurance companies vs. the insured attacks". The Administration complains that health care costs are escalating, but they don't want insurance rates to rise at the same time (HT: Colin). They complain about a $2.7B 4Q09 profit for Anthem's parent company, but fail to state that the company only had a 7.30% net profit margin in 2009 and 20% ROE. This did place them at the top for health care plan ROE and net profit margin, but ignores the reality of a challenged sector. More importantly, health care plans rank far down the list for ROE, and don't even crack the top 25 for net profit margin (HT: Mark Perry). No matter how you cut it, the medical insurance plan industry is not where "excessive profits" are located, if you believe in such a term.

The more important question is this: why is this ANY of the president's business? He has steadfastly refused to break down the state insurance regulatory monopoly, which means he should be quiet and allow the State of California to deal with this matter. If President Obama were truly serious about allowing the insured to seek out the most affordable insurance plan for their needs, he would break up the state-by-state insurance monopolies by knocking down state-based insurance commissions. That would be a good first step that could be followed by many other competition-inducing mechanisms.

Ultimately, I don't expect him to do this. As gifted a speaker as he is, he seems to be unwilling to adjust his tactics to the political reality that faces him. He is unable to keep his mouth shut, completely unable to refrain from commenting or attacking anything that offends his sensibilities. Ultimately, it makes him a mediocre to bad politician that comes across as one trying to control ever greater parts of our lives.

The Parable of the Switchboard Operator

2010-01-30T19:18:00.007-05:00

Signs of higher profit margins to come.

S350 made the following comment on my last post regarding layoffs being integral to Ford's 2009 annual profit.

Of course, now your unemployment goes up. So what's the important item to address--the federal deficit, or unemployment (or that unemployment that has been SAVED OR CREATED through stimulus)?

His comment reminded me of this excellent column by Walter E. Williams of the George Mason University Economics Department. He remarked:

In 1900, 41 percent of the U.S. labor force was employed in agriculture. Now, only 2 percent of today's labor force works in agricultural jobs. If declining employment is used as a gauge of an industry's health, agriculture is America's sickest industry.
Let's not stop with agriculture. In 1970, the telecommunications industry employed 421,000 workers in good-paying jobs as switchboard operators. Today, the telecommunications industry employs only 78,000 operators. That's a tremendous 80 percent job loss. What happened to all those agriculture and switchboard operator jobs? Were they exported to China and India by rapacious businessmen?
The easy and correct answer is that our agricultural sector has seen massive gains in productivity as a result of advances in farm machinery, innovation and technology. There have also been spectacular advances in telecommunications. In 1970, those 421,000 switchboard operators annually handled 9.8 billion long-distance calls. Now 100 billion long-distance calls a year require only 78,000 switchboard operators. What's more is, the cost of making a long-distance call is a fraction of what it was in 1970.
Here's my question to you: Should Congress do something to restore all of those jobs lost in agriculture and telecommunications, and what might that something be?

The answer to this question, with the benefit of hindsight, is "of course not!" We know those jobs were lost, but we didn't lose the employees. Most of them found work elsewhere, in industries where profit margins could support their employment and found a much better use for them than arbitrarily continuing with jobs that required inefficient and outdated skills.

Humans don't cope with change very well, and it is very difficult for us to think in a dynamic rather than a static frame of reference. This is what makes economic or weather forecasting so difficult - we have trouble developing models for such tasks, and even then they often break down due to uncertainty or unpredictability. It is far more comfortable to believe in linear, static relationships - i.e. the loss of a manufacturing job due to labor efficiency is a net negative instead of thinking about the cost savings passed along to the consumer and the fact that the laborer is re-employed at a more stable and profitable employer elsewhere.

It is understandable that facing such steep job losses as we have the last few years is frightening for both those involved and those simply observing the carnage. We need to remind ourselves, however, that enacting policies that try to avoid this natural process of "creative destruction" end up robbing us of the needed signals and resources to move on to more fruitful endeavors. We would be better served learning from Parable of the Switchboard Operator, and letting jobs that are no longer needed in the short- or long-term go by the wayside.

The Roadmap to Detroit Prosperity: Cut Operating Costs With A Vengeance

2010-01-28T14:37:00.011-05:00

The Ford rally continues.

Ford said today it earned a profit of $2.7 billion, a stunning improvement over its historic, $14.7-billion loss in 2008, especially for a year that saw industry sales drop to their lowest level since 1982.
It also marks the company's first full-year profit since 2005.

How did Ford do it?

Ford’s performance also offers more evidence that its a reorganization plan that began in 2005, and was accelerated by Ford President and CEO Alan Mulally, is gaining momentum.
Ford, the only U.S. automaker that didn’t file for bankruptcy in 2009, gained favor from the public last year for being able to stand on its own.
Ford has closed 14 assembly and parts plants in North America and slashed its hourly workforce in half to just over 50,000 since 2005.
“Clearly, their market share gains in 2009, the surge of the goodwill … and their ability to avoid bankruptcy and government aid are all flowing really nicely into their operating results,” Mark Oline, managing director for Fitch Ratings said in an interview last Friday.
“And probably the more surprising aspect is their ability to manage production and inventories and pricing. All of that obviously starts on the pricing side with good competitive products,” Oline said.

It's not magic - outstanding product and perception, sweating the details on inventory, and aligning the company's costs (i.e. headcount) with sales. This last point can't be lost - in spite of all of the talk in Washington about jobs "created or saved", it took the destruction of 50,000 UAW blue collar jobs over 4 years to make Ford Motor Company profitable. Who knows where those workers were re-employed, but they couldn't be supported by Ford Motor Company's business model. Saving their jobs would have meant the destruction of the entire company.

The reality of cost impacts on the auto industry is embodied in the following quote from an excellent book I am reading right now.

"This is a nickel and dime business all the way through," Ford vice president Lewis Crusoe said. "A dime on a million units is $100,000. We'd practically cut your throat around here for a quarter."

We hear the joke about politicians saying "a billion here and a billion there, and you start talking about real money." We hear environmentalists and others talk about the "green jobs and technology" that will be the profit centers of the future if someone was just bold enough to take the plunge. None of these people is actually responsible for the businesses they lecture. Those who are responsible know how business works. It's not rocket science - align your operating costs and capital budgets with what your current and future customers can afford to spend so that you make a modest profit. Ford has provided the clearest example of how to achieve this in a tough automotive environment. Imagine how well positioned they are for the coming economic recovery...

UPDATE: Using the well cited Mark Perry at Carpe Diem, the average UAW employee's total hourly compensation is around $73 per hour. For a 2,000 work year (8 hours/day x 5 days/week x 50 weeks per year of work), that equates to $146,000 in total annual compensation. This means that Ford is saving $7.3B per year by eliminating those 50,000 blue collar jobs. Keep in mind this doesn't account for all the infrastructure - computers, machinery, heating, electricity, parts inventory, etc. - that come with operating the equivalent of the 14 plants that housed these employees. Add on top of this the white collar work force that has been cut in half, and one starts to understand that there was a LOT of fat to cut. As I said here, Ford is producing its best vehicles in several decades and doing it with half the work force.

Keep all this in mind when the union inevitably uses this small 2.3% profit to justify their continued resistance to adopting modern, flexible work rules or downsizing to meet the challenges of the next decade. Whether they like it or not, this is still a nickel and dime business and they are the human equivalent of a quarter.

Become the Woman YOU Want to Be

2010-01-24T23:25:00.004-05:00

As a Libertarian father of two daughters, I face the interesting task of raising them to be strong, independent women. Whether they become Libertarian in their political outlook is of their own choosing, but I do want them to be able to rely upon themselves and their loved ones in adulthood. I encourage them every day to figure out what makes them happy, what satisfies them, what makes them feel complete. In the end, it is how they should live their life - one where they make their own lives complete.

At some point in their childhoods, my daughters will be confronted with the PC, education establishment nonsense about rampant discrimination against women in this country. I don't claim that it has been eradicated, but I would say that claims of institutional sexism are ludicrous when squared with the facts. One man who helps provide those facts is Mark Perry via his Carpe Diem blog. Just recently he linked to a University of Chicago and Harvard study of male and female MBA students and their subsequent careers. Here's the major findings per the study's abstract.

"Although male and female MBAs have nearly identical labor incomes at the outset of their career, their earnings soon diverge, with the male annual earnings advantage reaching almost 60 log points at ten to 16 years after MBA completion. We identify three proximate reasons for the large and rising gender gap in earnings: 1) differences in training prior to MBA graduation; 2) differences in career interruptions; and 3) differences in weekly hours. These three determinants can explain the bulk of gender differences in earnings across the years following MBA completion.

The presence of children is the main contributor to the lesser job experience, greater career discontinuity and shorter work hours for female MBAs. It appears that many MBA mothers, especially those with well-off spouses, decide to slow down within a few years following their first birth. The pecuniary penalties from shorter hours and any job discontinuity among MBAs are enormous."

What this comes down to is a difference in priorities for men and women. The difficulty in any wage gap study is that is uses money, and the ability to earn it, as the primary gauge of success for those being studied. What if half of those being studied don't place such a high value on money? What this study confirms is that much of the wage gap is explained by women making different decisions than men, and valuing their time doing something else than earning a bigger paycheck.

I hope that someday my two daughters will become feminists in the true sense of the word - women who can explain to anyone of either gender why they have made the choices they have, whether that is to be a professional earning tons of money or a stay at home mom. Ultimately, I hope they're strong enough feminists to not put up with insults dealt by people - sexist men or liberal women with an agenda - and instead be the women they want to be.

The Lessons From Massachusetts

2010-01-20T00:21:00.009-05:00

The Daily Show With Jon Stewart

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HT: Jon

Here are the lessons I glean from the Massachusetts special election for the remainder of Senator Kennedy's term.

Democrats have proved, without a doubt, their complete ability to politically "Coug It". Besides the fact that this race should have been a gimme if Coakley had any political sense about her, lets take stock at the macro level. What it took the GOP 12 years to complete (1994-2006), Democrats have managed to do in 3 (2006-2009). That is to say, they have gone from an overwhelming majority to a party on the ropes. They have completely sacrificed all political good will with the ever important centrists in this country by misreading why they were swept into office.
Contrary to Dick Cheney's thoughts on the subject, deficits do matter. Brown's campaign was all about independence, shrinking the size of government, delivering tax breaks, and generally opposing DC business-as-usual. Private citizens, who are going bankrupt and having their homes foreclosed upon by the millions, know the end game of uncontrolled debt. They also know our leadership knows, and can't understand why they don't make different decisions.
No matter the macro issues, the blame for this loss must lay with Coakley. She ran a HORRIBLE campaign, allowing Brown to define her and himself rather than the other way around. She seemed like she believed she was entitled to the position, and that there was no way the Bay State would go any way but Democrat. When that turned out to be fantasy, she reacted with indignity. Had she not behaved in such a manner she would have been able to both see the changing attitudes of the electorate earlier and minimized the amount of change in public opinion.
Now I will somewhat contradict myself. This election became all about the macro issues. Exit polling suggests this election turned on the current health care reform bill - both its content and the method it was being passed. As Jon Stewart points out, Democrats couldn't even get this passed with 60 votes. It was precisely the fact that they had 60 votes, and felt ZERO need to forge a bipartisan bill, that created the reaction contained within this election. Smart politicians see the writing on the wall, and we'll hopefully see a more moderate reform that is less difficult to modify if it fails. They'd be wise to not listen to the nut-roots, and instead listen the voters in the Frank Lutz focus group below.

It's now time for the GOP to offer a credible alternative to the Democrats on many issues. The first stage, becoming the party of resistance to single party rule, has worked and has re-framed the debate. It is not a sustainable model though. I am hoping the GOP takes the lessons they learned in this election, and comes out early with a conservative Second Contract With America. Define the debate early, and offer concrete counter proposals, much like the shadow governments in the UK.

In all, it's an earth shattering development. I am still skeptical that the GOP will actually return to true conservatism, but that wasn't what this election was about. The point was to stop the creation of yet another entitlement that can't be undone later - one that the American public now opposes. I will enjoy the evening, and then go back to advocating Libertarian principles tomorrow.

UPDATE: Colin at To Get Rich Is Glorious has a post that serves as excellent compliment to mine, especially in a number of areas having to do with future implications. One of my favorite observations was this one.

Scott Rasmussen, whose polling actually underestimated the Republican
performance in the Virginia and New Jersey governor races last year, also was
the first pollster to detect the shifting momentum in Massachusetts. At some
point Democrats are going to have to start respecting the man's polling,
especially in the presidential daily tracking poll.

As a lay statistician, I am always amazed at the willingness of politicians to not separate the message from the messenger. All that should matter is the integrity of the data. Not following that rule leads to delusional beliefs in one's popularity, the consequence of which is debacles like Martha Coakley's campaign. I will be interested to see if the Administration and DNC wises up, or is content to keep wasting resources fighting a stupid war with FoxNews and Rasmussen's polling organization.

So Much for Hope & Change

2010-01-16T14:06:00.006-05:00

Coakley's closing argument: Scott Brown is the pro-rape candidate

I found out about the flier above via my friend Colin, who had re-tweeted the original post from PatriotinMA. You can contrast it with the far more focused and positive flyer the Brown campaign sent to voters like PatriotinMA. Let's take a trip down memory lane, and remember what the first Democratic president to be elected to multiple terms since FDR told us about politics and voting.

Now I am not one to actually believe the master of the politics of personal destruction actually practiced what he preached. He just look like he did to those who cared not to notice the political corpses of Clinton friends and foes that surrounded the administration. He can, however, provide guidance when politicians clearly go too far in ad hominem, fear mongering tactics within a campaign. I don't think politicians will ever be saints - they're not called to be. They are called to be attendant to the issues of the day, and the Coakley mailer betrays the real reason why she's losing - she's debating the issues of yesteryear (even UPS and the Teamsters can't stand the W insinuation).

Scott Brown and his supporters are talking about deficits, the government take over of 1/8th of the nation's economy, and the role of government and de-facto monarchies ("It's not the Kennedys' seat..."). They're putting the state of Massachusetts clearly ahead of a national political machine's agenda. They are asking voters if they want someone actually willing to speak to the citizens he represents, or do they want one who feels so entitled to the seat because of her party affiliation that she's willing to spend more time taking money from health care lobbyists in DC than campaign in the closing days of the election.

As Michael Medved notes, this election and many others are about real issues. The Democratic representatives are burdening each child born today with hundreds of thousands of dollars in debt because we refuse to pay for what we want now. The Democratic majority are destroying our nation's chief economic competitive advantage, it's entrepreneurship and value of individualism and risk-taking innovation, in a warped desire to create a European utopia of burdensome high taxes for decades to come. Republicans have been far from perfect, and as a Libertarian I want them to be more true to their supposed conservative values. Scott Brown, however, will not only stop Obamacare and other Democrat outrages, but he will also speak with authority from the state of Massachusetts as to what works and doesn't work in health care reform. At the worst, he helps kill a horrible bill that will make things far worse - the status quo is clearly preferable given the Democrats' alternative. At the best, he helps turn the tide in DC, and we get real health care reform based on economic principles to solve the core problem of sky high medical costs.

Coakley's attempt to scare people is beyond the pale of normal politics. If nothing else, she should be rejected for not engaging in principled debate about real issues of concern to Massachusetts voters. She clearly isn't there to represent the people of Massachusetts as she had zero desire to get to know their desires throughout this campaign for the next Senator. I hope the voters see through this charade of a candidate, and elect Scott Brown the next senator from Massachusetts.

UPDATE: More evidence of the disconnect in Democrat circles with what people are really pissed about. Martha Coakley 's entire closing argument is "it's not my fault, it's George W. Bush's", who Martha Coakley never had the pleasure of serving with.

Taking Stock: Nine Years of Powertrain Engineering

2010-01-15T22:37:00.005-05:00

The 7.3L Powerstroke in production when I started Ford

in 2001, and the 6.7L Powerstroke ready to start production

Most people wait until they are 10 years out of college to start taking stock of the early part of their professional life. It is far more appropriate for me to not wait until then, as 2010 represents a significant waypoint in my professional life as it is a significant design evolution in diesel engines. Thinking back, here is all that has changed in the nearly 9 years since I left Carnegie Mellon.

I have worked on successive 2003, 2007, and 2010 diesel engine emissions programs that have lowered NOx emissions by 96.5%, PM emissions by 80%, and HC emissions by 89% from when I started in the industry. I have designed components critical to those engines, including fuel systems and EGR. To put it graphically...

While reducing emissions, the medium duty engines I have worked on have increased torque and power output. This means more towing capability. The 7.3L made 275 hp and 525 ft-lbs of torque. The rumored numbers for the 6.7L engine are 390 hp (42% increase) and 725 ft-lbs of torque (37% increase). Anytime anyone tells you that "we're just using the same engine technology since the days of Henry Ford", inform them they don't know what they are talking about.
The entire automotive industry has gone through a gut wrenching 50% reduction in employment level since I started in 2001. Ford, as an example, is now turning out its best vehicles in a decade with half the heads. Go figure.
When I started working in 2001, we calibrated vehicles with RCON - essentially a full desktop tower in the backseat of a vehicle with a dedicated keyboard and greenscreen display. All commands were done in command line, and all data analysis had to be done offline via 3.5" diskettes and Excel on a desktop computer. Both Ford and my current employer now use ATI Vision, which is contained on a laptop and has all the calibration, visualization, and analysis tools required.
Chrysler is on its third owner since I graduated college in 2001. GM is on its third CEO in a year.
Ford's sales are 50% of where they were when I started in 2001, while losing tens of billions of dollars in the process.
What was recognized as a problem when I started work in Detroit in 2001 - a lack of focus on core brands and the need to diversify platform portfolios - is still being worked on nearly 9 years later. Some, like Ford, are further along than others, like Chrysler.

It has been an interesting 8.5 years. I can only hope that the remaining 30 are just as interesting.

NAIAS First Impressions

2010-01-12T08:47:00.005-05:00

"I swear, we have no interest in running GM"

Unfortunately this week is too busy to provide daily highlights from the North American International Auto Show (NAIAS) in Detroit. The first day was pretty big though, so I will provide my first impressions.

Continuing the run they had in 2009, Ford is clearly the big winner on Day One of the show. They swept the Car and Truck of the Year Awards, with the Fusion completing a two-fer by winning Motor Trend's Car of the Year for 2010 late last year.
Ford continued to show their social media savvy. The first day of the show is a typical media-heavy day, and Ford certainly entertained the media. They used this opportunity to also allow citizen journalists to get involved via Twitter, and made their executives available on such services. Yet again I got to ask Alan Mulally a question, with a quick reply regarding the EV Focus. Personally, I am awaiting a plug-in hybrid version of any vehicle as I think it is the best mix of EV operation and combustion engine range.
A few of the new, big product announcements or unveilings were the 2012 Ford Focus, the Toyota FT-CH concept that foreshadows and entire Prius line of vehicles (rather than the current single car), and the Chevy Aveo RS. Small is big this year, and I am happy to see it. Being a 2002 Focus owner, I am especially interested in the 2012 Focus. I wouldn't buy the current Focus due to its boring styling, but I would seriously consider a 2012 Focus with what Ford calls "kinetic styling."
I have to say the major stumble of the day was made by GM. I can't believe they actually invited Speaker of the House Nancy Pelosi to their booth, but rather I have to believe she invited herself. If GM did invite her, such an action displays they are still out of touch with the buying public. If she invited herself, it shows she can't seem to think of what's best for GM and only think of herself. GM's biggest non-automotive liability right now is the moniker "Government Motors" that they earned by taking bailout money. Inviting someone with her low approval ratings does nothing but reinforce the worst perceptions about GM right now. GM needs as little camera time with government officials as possible, and more camera time with average Americans in their cars and up GM's bottom line.
Finally, I have to recognize the great live coverage from Adam Barrera. The guy is phenomenal - great pictures, great insights, great questions for the automakers. He's getting RT'd all over the place, and honestly loves car culture about as much as anyone right now. He sees the simple beauty in compact cars, and can appreciate the luxury of Cadillac. If you have a twitter account and are interested in cars, follow this guy. You'll be much smarter for having done so.

Ford has the trophies to go with the outstanding vehicles.

Ford's President of the Americas Mark Fields hoists the Car

and Truck of the Year Awards at the 2010 NAIAS

The Future of US Politics

2010-01-06T14:27:00.002-05:00

Yes, you read it right. This is from the Conservative Party.

This is the future of US politics if the country begins down the path towards socialized medicine with Obamacare. Not even the Conservative Party of the UK can advocate for overhauling the NHS, even though the British government faces a ₤178B deficit while the English NHS gobbles up nearly ₤100B per year and employs nearly 1.3M people (5th largest employer in the world). The NHS is the untouchable third rail of British politics.

Watching the "Conservatives" and Labour argue over nothing substantial in the UK, and agreeing on the necessity of the NHS, reminds me of one of my favorite Braveheart quotes.

Why? Why is that impossible? You're so concerned with squabbling for the scraps
from Longshank's table that you've missed your God given right to something
better. There is a difference between us. You think the people of this country
exist to provide you with position. I think your position exists to provide
those people with FREEDOM. And I go to make sure that they have it.

If we start down the path of socialized medicine, our elections will further devolve into squabbles over the meaningless scraps politicians are content to throw us.

Soccer Protectionism

2010-01-04T21:41:00.005-05:00

Englishmen only, please!

Two of my favorite topics - economics and soccer - came together today. It turns out Sam Allardyce, manager of the Blackburn Rovers, doesn't like the fact that the Premier League is full of players from places other than England. In fact, he sees it as a threat to the future of the English Men's National Team. What's his solution? Mandates for more English players, even greater than the current Premiership regulations.

From the start of next season, [Premier League] clubs will have to name at least eight "home-grown" players in a squad of 25 but nationality will in practice not be an issue as the provision is that a "home-grown" player must have been registered at an English or Welsh club for three seasons between the ages of 16 and 21, meaning, for example, that Cesc Fabregas would qualify for Arsenal.

Such "Train Englishmen" mandates are as idiotic as "Buy American" mandates for manufactured goods. The beauty of the Premier League, along with North American sports leagues like the NHL, NBA, and MLB is that they attract international talent. The professional leagues are made better by attracting top talent, and the national teams are made better by having their players participate in the best league. Does anyone believe that teams like Argentina's men's basketball team would be better served by not having Manu Ginobili play in the NBA and instead in the Argentine or European leagues? Does anyone believe a young English boy is discouraged from striving to play for Chelsea because Didier Drogba hails from the Ivory Coast? Does anyone believe that Wayne Rooney is not better off playing the best international players in the world on a weekly basis? And let's not get started on the disgusting effect of denying stars like Drogba and Ginobili the ability to earn the money they rightly deserve...

Such calls for soccer protectionism amount to no more than the usual appeal to individuals insecure enough in their nation's talents that they would engage in bigotry - this time in the sports variety. It's disgusting, and I hope Sam Allardyce's is an isolated opinion.

Disclaimer: Given that I am a recent Arsenal fan, I must say that such a "train Englishmen" rule would devastate the club. As the ESPN article points out

[t]he continued expansion of the top flight's foreign contingent is a hot topic once more after Arsenal's 4-1 win over Portsmouth on Thursday night became the first ever Premier League game to start without an English player on the pitch.

A Mixed Year in Review

2010-01-03T12:39:00.010-05:00

Farewell to a good year, viewed from the Big Island.

It would be very easy to adopt Dave Barry's funny-yet-pessimistic view of macro-level events in 2009. Indeed, I think his view of the year is spot on for the events that it covers. While it stunk on a macro level and the full effects of its awfulness will take years to arrive, I must say it was a personally rewarding year for me.

A photo series of the highlights listed below can be found here. Among the better experiences were:

We encouraged the kids' natural sense of discovery with annual memberships to the Seattle Aquarium and Woodland Park Zoo. We also got them out to a few cultural festivals, including the Cherry Blossom and Japanese Cultural Festival.
Erin and I spent a wonderful week and a half on the Big Island of Hawaii in February.
My family got to experience what I do for a daily job by attending my employer's technical center's open house during the Skagit Valley Tulip Festival in April. Watching engines get tested, chassis bounce around in test cells, and climbing all over trucks is far more entertaining than hearing me talk about them.
Clarissa played t-ball this year, and I got to see her not only get on base but also score a few runs. She also got to experience her first professional baseball game, including getting to walk the field prior to the game's start.
Erin had a very special 27th birthday this year, which included us getting engaged.
Erin and I traveled to Whistler, BC in early July for my 30th birthday. Some of the cooler experiences there included traveling on the new Peak2Peak gondola, as well as touring the ski jump Olympic Venue.
Clarissa performed in her first play, and did an outstanding job in the Aristocats.
I got to see a bunch of my extended family in Vegas due to my grandfather's death. Grandpa Joe led such a wonderful life, and it was awesome to see the family he was able to bring together because of that life he led.
I got a wonderful business trip to the Netherlands in late-September. Amongst other things, I toured the Heineken brewery that my grandfather visited so many times for being one of the top Heineken salesmen in the United States. I also got to meet a number of British WWII vets back to commemorate the 65th anniversary of their liberation of the Netherlands. It was nine days of awesome cross-cultural experiences.
Erin and I closed out the year with many sporting events - Seahawks opening game (one of the few games they won), as well as two Sounders matches and MLS Cup 2009. Erin and I followed the Sounders all season, but it was mind-blowing to witness the success of the Sounders and MLS first hand. Who knows what 2010 holds for the league, but I am now a committed soccer fan.
Via Twitter and this blog, I got to know some pretty cool people. Having my brain picked as an auto expert by Adam Barrera at the Seattle Auto Show and occasionally partnering up with Colin at To Get Rich Is Glorious were two of the more outstanding examples.
As always, we had phenomenal daily experiences with friends. Whether it was game night with the guys, happy hour with our favorite Texan, grabbing beers and watching soccer with my two favorite running addicts, hanging with our favorite Seattle PD officer, going on Sonic roadtrips with our favorite school teachers, hanging with everyone at a school-aged friend's wedding, or visiting our favorite Swedes in Portland, Erin and I were always looking for a fun time. We are blessed to have the coolest, most diverse group of friends.

Those are just some of my highlights from 2009. Here's hoping yours was as blessed, and all the best in 2010.

Why Professional Engineers Make Good Libertarians

2009-12-26T12:16:00.005-05:00

There is no way a professional engineer would design a health

care overhaul this complex, nor expect it to deliver predictable,

good results.

Megan McArdle had a fine column (HT: To Get Rich Is Glorious) regarding the process used to pass the health care reform bills, and contained this gem within it (emphasis mine):

Libertarians are process people, something that our political opponents find impossible to believe can be real, rather than disingenuous. So when I say that I think Lawrence v. Texas might be the right result morally but the wrong result legally, it must be that I secretly want sodomy to be illegal, or at the very least don't care. Or when I am troubled by government intervening in the Chrysler bankruptcy process, it's because I hate unions. And of course, when I am against post-hoc legal judgments against bankers or their bonuses, it's just because I'm an apologist for rich people.

But to a libertarian, process matters. Having a good process is better than getting a good outcome, because a good process is one that maximizes your chances of getting good outcomes over time.

Which is why the process for generating a health care bill has been so disturbing for me.

I could literally substitute the words "professional engineer" for "libertarian" in the bolded section and it would work without further modification. Now I specifically use the adjective "professional" because "academic engineers" who stay in the university system or R&D divisions often do not face the factors I list below. Nonetheless, Megan McArdle's column got me thinking as to the many areas where libertarian and professional engineering thought processes overlap.

The projects that professional engineers work on are determined by market demand, and the budgets for the project's development are based upon what the company feels it can charge for the feature or product. We are relentless on delivering the customer the best return-on-investment possible to attract repeat business. Unlike government, we can't arbitrarily take another person's money to pay for something they don't want or a project that escalates in cost. I can also guarantee you that if we are way off in the total cost-of-ownership estimates and the customer experiences year-over-year increases in operating costs due to our design, we won't earn their repeat business. That never seems to constrain Congress when they "project" the cost of their plans (see Medicare, Social Security, and the Iraq War as examples).
Professional engineers worth their salt spend far less time thinking of how a new product will satisfy a customer's want, and spend far more time thinking about how it could NOT satisfy a customer's want or provide some other unintended consequence. They use tools like an FMEA to spend months thinking about "error states" and design against them. They recognize many engineers could design the product's or process' basic function, but what will separate them from the pack will be reliability and durability. When is the last time you heard government doing this?
Professional engineers spend months, if not a year or two, in the concept generation phase before selecting concrete design paths to travel down. They use tools like QFD, Decision Matrices, and FEA to generate data to narrow down a wide list of design criteria to the critical few and simulate the performance of designs before they are ever produced for physical testing. Engineers and their employers also do this because they recognize they can't possibly know, nor address, every single consumer's issue. Government doesn't use such rigorous, customer-driven processes - it simply allocates resources and sets goals based upon narrow political goals.
When obvious engineering solutions are not present for complex problems, professional engineers use rigorous, data-driven, statistical methods like Six Sigma to quantify the issue. Rather than leap to a convenient solution, professional engineers use these tools to find the hidden answers in data and management reacts accordingly. That's right - unlike decision making in government, tools like Six Sigma empower the ground-level engineer over the manager. The manager, however, is knowledgeable enough in the subject to be able to call out the engineer if they try to baffle everyone with statistics that don't comport with the basics of the field in which they work. Somehow I don't think that will happen on any topic other than law with the professions represented in Congress.
Good professional engineers work mainly on smaller, incremental changes rather than earth shattering products. This is because professional engineers recognize that failure modes are always tied to the unintended consequences of whatever change they are making. The larger the change, the greater the number and impacts of failure modes from unintended consequences. Thus, to keep a product on the cutting edge one must continually invest in small, robust changes. Over time, these incremental changes provide a huge payoff in separating one firm from the others - much like good investment strategy. Game changing products typically only arise under two conditions - a new player in the marketplace looking to gain a foothold who is less concerned with reputation, or an existing player with no other choice due to product or financial distress. In the case of the latter, far more time is spent doing things I highlighted in (2) and (3) to ensure the existing firm minimizes the risk of such massive change. The recent debate about health care reform reinforces that government does the opposite - they look for the big changes and ignore the huge failure modes associated with them.

Keep in mind that points (1) through (5) apply to businesses that range from several million dollars in revenue per year to those like Toyota or GE, who are $100+ billion a year companies. The federal government, depending on which issue it is trying tackle, is at a minimum a GE-sized company and at it's maximum 10 times bigger (see the health care debate). If my engineering career has taught me points (1) through (5) above, how can I not expect an even larger organization with a potential for much larger impacts to either follow them even more rigorously or look to minimize the scope of its impact and decision making? Given that I have no expectation that politics will do the former, I instead ask that it do the latter.

A New Entry In The "Blame Bush" Lexicon

2009-12-24T11:25:00.003-05:00

Perhaps Maureen Dowd has this fine Jill Greenberg piece

hanging in her home office?

Maureen Dowd contributes this bit of nonsense via her NY Times column.

A couple of times, during floor speeches on health care this month, the Arizona senator noted “that a fight not joined is a fight not enjoyed.”
It seemed to be an inadvertent recognition that he was fighting for the sake of it, not to help the country get past some of the hideous problems left by the man McCain failed to stop in 2000.

I don't know if Maureen Dowd took the time during the 2000 primary to climb down from her crumbling ivory tower at the NY Times, but there was little ANYONE could do to stop W's pre-selection in the GOP primary. Unlike Dowd, my family was involved in the primaries and backed the experienced McCain over the inexperienced, handpicked Bush. Turns out we had great foresight, but little power to stop the W freight train.

What Dowd is really angry about, if you choose to waste your time with her column, is that McCain has finally had enough. He's tired of auto company takeovers that violate established bankruptcy laws and disproportionately benefited the unions who helped drive the companies into the ground not being called what they are: socialism. He's tired of rampant borrowing from future generations to pay for things we don't need today not being called what it is: generational thievery and bankruptcy. He's tired of "stimulus" being sold as "jobs creation" instead of being called what it is: corruption and socialism. He's tired of hearing about health care "reform" that will only raise costs for consumers and solidify the grip private insurers have over us instead of calling it what it is: fascism. He's done deluding himself or anyone else as to what Barack Obama is: a statist.

What Maureen Dowd is really angry about is that McCain, belatedly, isn't willing to play along with the President, Harry Reid, Nancy Pelosi, or the majority of liberal, MSM columnists who are their lapdogs. She's so angry that she's now willing to play six-degrees-of-George-Bush-derangement-syndrome and blame McCain for the 8 previous years of American leadership.

These are the people that our current leadership share their values with...

Ward's 10 Best Engines List: Downsize, Downsize, Downsize

2009-12-21T09:35:00.003-05:00

Indicative of this year's awards: V8 power with V6 fuel economy due to down-

sizing and use of turbos and direct injection. Image from Ward's Auto World.

Readers of Ward's got a hint of the downsizing theme in this year's list in last month's Auto World, with Drew Winter declaring "less is more" in a column relating motorcycle engine downsizing to today's automotive trend. They followed through on that theme with this year's 10 Best Engines list:

Only one V8 made the list, which was the Hyundai 4.6L Tau engine in the Genesis.
In a nod to powertrains that burn fuels other than gasoline, two diesels and two hybrid powertrains were in this year's honors.
Of the five remaining engines, three were boosted DI gasoline engines, one was a naturally aspirated DI engine, and one was a boxer engine. For those unfamiliar with these engine technologies, here are primers on DI and boxer engines.

The magazine summed it up well in this piece, where they argued change is in and change in the engine's fundamental design is a must for it to make the list. This round of engine awards, during one of the most brutal years in the automotive industry, continues to reward those companies who invested in engines that addressed rapidly changing consumer desires. New, innovative product is key to capturing market share, especially in a market where consumers are looking to get their exact needs met with the few dollars they are capable of spending. Pay attention all you companies who simply cut cost and didn't invest enough in product in 2009 - these companies and their winning engines are set to blow you away in 2010 when the economy begins to recover.

Congratulations to Ford (x2), Audi (x2), GM, Toyota, BMW, Subaru, Hyundai, and Volkswagen on their awards! You have truly beautiful engines that are leading the powertrain revolution going on in North America right now. Thank you for designing and manufacturing such wonderful product in the middle of a tough automotive market.

We Can Only Hope The President Is Correct

2009-12-15T14:09:00.003-05:00

It depends on what you mean by "afford"

So much for hope and change. Fear is now in as the President tries to scare... er, sell people on passing ANY health care reform package.

In a provocative argument designed to rescue his foundering health care plan, President Barack Obama will warn Senate Democrats in a White House meeting Tuesday that this is the "last chance" to pass comprehensive reform.
Obama will contend that if it fails now, no other president will attempt it, aides
said.
White House Communications Director Dan Pfeiffer told POLITICO: "If President Obama doesn't pass health reform, it’s hard to imagine another president ever taking on this Herculean task. For those whose life's work is reforming health care, this may be the last train leaving the station."

I can only hope that the President is right. Let's hope that if they can't cram through a bloated, cost-escalating, special-interest laden, disaster of a reform bill when they have 60 votes in the Senate, they never will be able to do so. Obama's team sees the 2010 mid-term election outlook, and it isn't good. They are at risk of losing the seats held by the President and Veep just last year. Senate majority leader Harry Reid may get unceremoniously thrown out of his seat just like Tom Foley did from the House in 1994. The fundamentals aren't good for Democrats, and they are only getting worse. It's now or never, because their hijacking of the nation's economy and fiscal health of the government ends in 2010.

KILL THE BILL, and then let's start over with one based on economics, markets, and consumers and not some 50 year old European dream of John Dingell's.

The DNC And UAW Thank You For Your Donation!

2009-12-09T09:53:00.003-05:00

The UAW and Democrats - laughing all the way to the bank

with your money.

Now we know why commercial and private lenders wouldn't give any money to GM and Chrysler during their bankruptcies.

The Obama administration will tell Congress Wednesday that it expects to lose about $30 billion of the $82 billion government bailout of the auto industry.

What's the good news?

"The real news is the projected loss came down to $30 billion from $44 billion," Sperling said, noting that auto sales have improved ahead of what many analysts had forecast. The administration still holds out hope that if things improve, the administration could still recover more.

If that's their measure of success, I hate to see what they consider a success when health care "reform" is passed. Of course, the administration trots out the tired and unmeasurable "jobs saved" line to justify such a horrible -36.25% return-on-investment, but ignores the jobs that weren't added at more efficient and profitable firms like Ford, Honda, Toyota, VW, Hyundai, and others that would have gobbled up the lost GM and Chrysler sales volume in the anemic 10M car per year market we are in right now. Or the jobs lost due to the $440 paid per actual taxpayer to cover the loss (that means half of the 138M people who pay taxes, as the bottom half hardly pay any taxes). It also ignores the fact that Chrysler is still posting huge double-digit drops in sales even when compared to the months of crisis in the Fall of 2008.

Don't worry though - the DNC, the UAW, and their re-election campaigns thank you for your de facto donation! They'll look out for your interests as long as you keep paying them some patronage.

When you can't compete, lobby and legislate instead!

2009-12-07T09:52:00.002-05:00

DISCLAIMER: My employer has a vested interested in FedEx's success. Really, all of us who ship parcels have a vested interest in FedEx providing competition to UPS and the USPS, but my employer has a more direct motive as we sell them trucks.

I am currently enjoying the January issue of Reason Magazine (my personal highlights are coming in a few days once they post content online). I noted in my summary of their October 2009 magazine the fine article by Veronique de Rugy detailing the UPS thuggery-by-legislation actions against FedEx. In skimming their website this morning, I stumbled upon the golden-oldie (i.e. less than 1 month on the web) of a creative YouTube video they put together. Enjoy!

Michigan Auto Insurance Shenanigans

2009-11-30T14:25:00.003-05:00

Whose fault is it? It doesn't matter if you live in Michigan.

I lived in Michigan for 6 years, and suffered under their "No Fault" insurance system that locals referred to as "my fault". That's because in nearly every accident, no fault is determined beyond what's required for the first $1000 in damages. This usually equates to an auto insurance deductible, and then the individual parties and their insurance providers are expected to pick up the tab for the cost to repair the vehicle. That's right - you could be sitting in your car at a stop light, some drunk guy doing 60 plows into the back of you, and he is only responsible for the first $1000 and then your insurance picks up the rest. Predictably, everyone's rates are higher to insure against such risk.

In order to make this system work, the state forces everyone to buy into a minimum level of insurance and also forces everyone to pay into an overly expensive uninsured motorist fund. What does all of this do to Michigan's auto insurance rates? They are some of the highest in the nation. I can vouch for that - my annual premium was cut in half when I moved to Washington State in 2007.

Things are about to get a whole lot worse in Michigan. State legislators, sensing a red meat issue, are set to pass highly restrictive new laws on auto insurance policies within the state.

The legislative plan would require insurance companies to offer low-cost auto insurance to low-income drivers with good driving records.

Democrats, joined by state Insurance Consumer Advocate Butch Hollowell, accused the insurance industry of unfair pricing practices that result in excessive profits at the expense of motorists.

They say Michigan has the second-highest auto insurance rates in the United States, behind New Jersey, while Michigan accidents and auto thefts have declined.

The 10-bill Democratic package also would:
• Prohibit insurance companies from using some factors to set rates, such as drivers’ level of education, their occupations and personal credit ratings.
• Prohibit auto insurance rate increases for those with good driving records who are not at fault in accidents.
• Allow the state insurance commissioner to deny rate hikes by insurance companies before the rates take effect, and order refunds for consumers who are charged too much.

Keep in mind that this is, outside of polling data, the least data-driven profession telling one of the most data-driven, risk-quantified professions how to run its business. This is being done under the mantra of "more coverage for less cost". Does this sound familiar? Does anyone really think it will happen the way government says it will, or the way the insurance industry says it will?

Insurance companies say lowering rates in Detroit, where accidents and auto
thefts are more frequent, would result in higher rates for other drivers.

And why are insurance costs such a concern?

Auto insurance rates have long been a sore point for Detroiters, whose rates are
the highest in Michigan. Critics say high insurance costs cause many drivers to
drive illegally without insurance.

Oh, so even though there is a mandate to buy insurance, with criminal penalties to back up the mandate, there are still many who go without it? Shocking. I am sure that the mandate itself, or the fact that overall rates are higher due to the no-fault structure, have absolutely nothing to do with the high cost structure driving such illegal behavior.

A couple of notes for our regular readers:

For those of us who jokingly use "post accident auto insurance issuance" mandates or flat rates regardless of driver history as demonstrative analogies to the insanity of the health care reform debate, know that these are less hypothetical and more real every day. States like Michigan, unfortunately, are at the forefront of this economic insanity.
Like the Massachusetts health care debacle, the Michigan auto insurance disaster should be a giant warning sign to those who believe government mandates for economic solutions are the best way to go. Sadly, too few heed such warnings.

The Ward's AutoWorld Monthly Roundup: November 2009

2009-11-29T19:37:00.002-05:00

The key to 2010 European automotive sales. No joke...

GM's and Chrysler's losses are Volkswagen's gain.
No matter the technological and environmental superiority of diesels, the Germans can't resist the market demand of hybrids.
On the diesel front, the powertrain's future is uncertain given forthcoming California LEV III emissions standards. Never mind that diesel solutions can produce a 55+ mpg car that helps address CO2 emissions.
I lived near the Automotive Hall of Fame for 3+ years, and never saw anyone come or go from it and knew no one who visited it. Apparently, the attendance numbers confirm my impressions, yet the staff there thinks it would be a tragedy to let the thing go out of business.
Europe is set to see a sales drop of 1M vehicles in 2010 if more corporate welfare... er, vehicle-scrappage incentives aren't offered.
Does anyone believe Delphi could have made the wrenching changes that it did without going through bankruptcy? Does anyone believe it would have been better if the government had completed a fast track bankruptcy like they did with GM and Chrysler?

British Leyland, revisited

2009-11-27T11:26:00.002-05:00

This is what a successful Leyland brand looks like.

Colin at To Get Rich Is Glorious linked to a wonderful story about the fall of British Leyland. I commented on this topic several times over the last year, using a New York Times story that came out in November 2008. I posted some insights on Colin's entry, and I thought they were worthy of being re-posted here.

Combine that with some of the numbers from a similar story in the NY Times a year ago, and you start to get the complete, awful picture of British Leyland.

http://bit.ly/6V9p6m

I wrote two pieces over the last year using that story as a backdrop.

http://bit.ly/6EZiKs

What's funny is that I have now worked for two companies that have owned remnants of the Leyland brand. First it was Ford, who owned Jag and Land Rover. Now it is PACCAR, who owns Leyland trucks out of their true bankruptcy (http://bit.ly/6wbbhH). The outcomes couldn't be more different. Ford threw so much money at Jag and Land Rover until they had enough and sold them at a fraction of their cost. PACCAR bought Leyland Truck and immediately focused on business plans that made a profit. Ford has seen highly cyclical business cycles. PACCAR is ready to report its 71st straight year of profit.

And that's the lesson here. The danger in bailouts isn't just an immediate one. It's also a prolonged one, in that hiding the true state of the company behind artificial cash infusions delays critical restructuring and sucks good capital in from other companies that could be spent elsewhere as they incorrectly believe the company is a better buy than it really is. Bankruptcy properly prices the company's assets, and allows the new management team the leverage to make the necessary, painful changes required for future profit.

Ford CEO Alan Mullaly's results via the "One Ford" focus he has instilled in the company, and it's direct opposite of a shotgun brand approach that included Jag and Land Rover in previous decades, should convince all of us of the pitfalls of bailouts and misallocated capital.

There is a similar danger in the US when GM and Chrysler are publicly traded again. How many investors will lose a total of billions of dollars on sickly auto companies that are around only because the government decided they were "too big to fail"? How many great ideas or outstanding employers will lose out on the desperately needed capital? Sadly, we will never know.

The Reason Monthly Roundup: December 2009

2009-11-26T13:01:00.005-05:00

Readers might notice that I skipped the November 2009 issue of Reason magazine. That's because Amazon made an error and didn't deliver the magazine to any of their subscribers. It's a shame, as I am sure I would have really liked their retrospective on the 20th anniversary of the Fall of the Berlin Wall. I will go back and read it sometime in the coming holidays. In the meantime, here is a summary of my favorite articles from the December 2009 issue.

Matt Welch continues Reason's dissection of the attempt by the paranoid center in this country to marginalize legitimate opposition to statist policies by labeling tea party attenders as racists. He finds the hyperbole from the center to be rich, but lacking in actual evidence.
Peter Suderman comments on a new report from the American Academy of Actuaries that shows cost reductions of between 4 and 15 per cent when those who need health care receive it from a "consumer driven health care plan". Of course, no such plan is under consideration by Congress. Link forthcoming, as Reason hasn't posted their complete December issue yet.
Katherine Mangu-Ward talks of how some innovative individuals are untangling the spaghetti soup that is the federal court document system - PACER. The challenge is that the government wants to charge every user to pay 8 cents per page. The way they are getting around this is a distributed network of users willing to post their results on another network. Of course, the federal government hates citizens taking the initiative when their own efforts are massive failures.
Jacob Sullum shows how idiotic drug policy drives people into completely legal, but apparently unattractive drug named Salvia. We need to decriminalize all drugs immediately. If you aren't convinced after reading how drug policy is formed in this story, I don't know what it will take.
Shikha Dalmia, Paul Krugman's mentor and far more deserving of a Nobel Prize in economics, puts a "human face on globalization". Dalmia is a committed social liberal looking to empower individuals worldwide, and convincingly explains the best way to do this is to engage in more, not less, global trade.
Finally, Veronique de Rugy explains why the CPI is hiding signs of the inflation that is to come. But don't worry... if Obama's team can figure out the miracle method to deliver tax hikes and create jobs, I am also sure they can print more money and not cause inflation.

On a related note, I think I will finally read Atlas Shrugged after I am done with Einstein: His Life and Universe. I don't expect it to change my life like it has done for others, but I have read enough about Ayn Rand and her seminal work to interest me in the 1000 pages within its covers.

More Students Whining About Student Loans

2009-11-24T10:02:00.006-05:00

Is that student loan debt or your

increased lifetime earnings?

I posted here in August about the spoiled babies we have for college students. Only people so selfishly blind to the benefits of a college education would gripe about owning a part of its cost. Part of the problem about the "drowning in debt" meme seems to be the entitlement mentality recent college grads have regarding prospective jobs (HT: @nprnews).

Samantha Green graduated from Indiana University in May with a $50,000 debt, a degree in journalism and a burning desire to start her career in Chicago.
So far, the only job offers she has gotten are temporary or minimum-wage sales jobs.
"It's just not something that's a good fit for me," says Green, who is
doing odd jobs to earn some money.

So instead of taking a more steady minimum wage job until a better one pops up, Samantha has decided to take odd jobs and the less steady income that comes with them. What I didn't quote here is the fact that Samantha's parents are subsidizing her choices by pulling money out of their savings to support her decisions. It's their choice, but it doesn't seem like an intelligent choice to indulge their spoiled child's choices. Sadly, I personally know a family doing this EXACT same thing with their kid.

[Greg] Cendana was the first in his family to attend college, and his parents could not contribute much to his education. Even though he received the maximum amount of federal assistance, he still worked three jobs during college. He graduated from UCLA with $40,000 in loan and credit card debt.

With an annual salary of $35,000 and monthly loan payments of $350, Cendana doesn't have much left over to live on in pricey Washington, D.C. He doesn't have a car or cable TV, and buys only the "bare minimum" of food.
"It's difficult, and I feel like I shouldn't have to live paycheck to paycheck, specially with a UCLA degree," says Cendana, president of the United States Student association.

When I went through my divorce, it was difficult. I didn't want to have to give up my daughters during the week, I didn't want to give up part of my paycheck, and I didn't want to have to give up my job to move closer to family in the Northwest. Then I sat and thought for a while, and realized my life is still blessed compared to the rest of the world's population. More importantly, I realized these were the consequences of decisions I was making about my future that, overall, were the best decisions I could make. I wish more college students saw the good deal they were getting and stop griping so much about some of the smaller consequences related to how those benefits are paid for. Or, simply don't take the deal in the first place.

Finally, what's the advice for most college students? Align your debt capacity with what your prospective career may pay you out of college in a single year. This is what every other purchase involves - making sure the benefits you will likely realize are worth the cost you will pay. For those who are less certain about their major or career choice there is the option of community college or a lower cost state school to mitigate the risk associated with that uncertainty. What is Samantha Green's plan?

That advice is not much help to Samantha Green in the Windy City. But she says she has a backup plan: applying to graduate school. Of course, that could heap on another $50,000 in loans.

Why should she behave any differently than the federal government or those with credit card debt? Don't worry about paying it off, just keep accumulating more debt and live in the fantasy world of college life until it's too late. We will be in fiscal trouble until this country comes to grip with basic cost vs. benefit economics, and instill those values in each individuals' life choices.

The Only Way It Could Have Been Better: An LA Win

2009-11-23T21:24:00.004-05:00

Congratulations to Real Salt Lake, but a team with a losing

record shouldn't be playing for a league championship.

Simply amazing. That's how I would describe the weekend that was MLS Cup 2009. Here are some of the sites and sounds I saw personally and through the web throughout the weekend.

I am proud of the #MLSCup and #MLSCup09 hashtags on Twitter. We created them and pushed them all week, and by the match we FINALLY got MLS-related material into the trending topics. As I couldn't be at all the Cup-related events do to spending quality time with my daughters, I was able to still help out visitors via Twitter. Also, judging by the traffic on Twitter a number of the usual bars were jumping all weekend with fans and players alike. In all, Seattle played a good host.

The match itself was amazing. Here are a few pictures and videos from it.

The view from our seats

An awesome photo taken by @therealswensi.

Footage of the LA Galaxy supporters we sat by. We had a drum beat the

entire match!

Can you tell the match is in Seattle? No one told the locals that the Sounders

got bounced in the first round of the MLS playoffs.

A really interesting video showing the LA Galaxy post-match.

The Takeaways:

I called this outcome earlier in the week, as much as I didn't want it to happen.
If the commish's desire to play at non-neutral sites isn't realized in the near future, Seattle should play host to another MLS Cup. We just did too good of a job this time to not have a benefit conferred on sites like Los Angeles and Dallas, TX where the stadiums hold half of what we packed into Qwest Field last night. Apparently, it may be some time before we get it again. That's a shame.
Real Salt Lake's win, while impressive, shows why the league's expansion plans in 2010 and 2011 are desperately needed. I understand that the league doesn't want to only break 4 teams for the playoffs, and breaking 6 would necessitate a bye system. Breaking eight teams, when only 15 are in the league, likely means you will have one with a losing record in the playoffs. Real Salt Lake's run was impressive, and suggests they massively underperformed most of the season. I still am not comfortable with a team with a losing record being crowned champions. I will welcome the three teams over the next two years that will allow the playoffs to focus on teams with winning records.
Judging by Landon Donovan's body language after the match, he's gone from the MLS after this season. I fully believe he wanted this to be his crowning farewell to the league, and a launching pad to bigger pay days in Europe.
I will look to go to any MLS Cup in the future in which the Sounders are playing. It was just too much fun, even without my team in the match. I can only imagine how much better it would be with them in it.
I will be satiating my new found love of soccer with English Premier and Champions Leagues footage when time allows. First up - George and Dragon for some Champions League and awesome English food (oxymoron, I know).

No More Anonymous Posts

2009-11-21T23:47:00.002-05:00

I have made the decision to get rid of the ability to post anonymous comments to the blog. Several bots and/or spammers have started posting random advertisements in the last few days. This really shouldn't affect any of the regular readers of the blog, as all serious commenters seem to already identify themselves.

What "Health Care Reform" Really Is About

2009-11-20T08:24:00.002-05:00

"That's a very interesting offer, Senator Reid. Let me get back to you on that..."

Why does Louisiana need $100M in special health care provisions four years after a natural disaster? Is the country going to stand for such a disgusting, blatant pay off (HT: The Drudge Report)? Finally, how long is Louisiana going to be able to milk the rest of the nation's tax payers? When are we finally going to expect them to rebuild their economy on their own, instead of suffer under the crushing, awful burden of a federal and state bureaucracy that has done so little for the people of the state in the four years since the storm?

MLS Cup 2009 shows league's bright future

2009-11-19T08:10:00.009-05:00

Even the Space Needle is getting into the fun.

I posted here about how much I enjoyed my first MLS match, watching the Seattle Sounders FC close out FC Dallas season and improve their position in the MLS Cup playoffs. While the Sounders' season ended a little sooner than we all hoped, the Seattle area is getting into a frenzy as we approach this weekend's MLS Cup final.

Readers of this blog know I am a fan of properly functioning markets where providers of a good or service compete to make the consumers extremely satisfied. I believe MLS does this. Their players are reasonably paid, but aren't prima donnas. They build the sport from the ground up, and find creative ways to engage their committed fans. They are building a league focused on steady growth, not trying to build mega-stadiums or play in half-empty multipurpose stadiums.

MLS Cup 2009 is the culmination of an amazing inaugural season in Seattle. Watching the chatter on the #MLSCup and #MLSCup09 hashtags is amazing (I helped establish the latter). I hope that Seattle proves to be a good host, and maybe the weather will give us a break on Sunday and have a dry match. Either way, I am converted. And I sense that many others are being converted each season the MLS shows the beauty of professional soccer to more Americans.

UPDATE: I will be following all the action online and in person over the weekend. There's simply too much good stuff coming to fast to post it quickly to the blog. I will do a big wrap up on Monday, with more pictures than words.

The Real Danger of Civilian Trials for Terrorists

2009-11-16T14:29:00.002-05:00

Is this really what we want our civilian courts to become?

I spent a good part of the weekend with my kids and at the Seattle Auto Show (forthcoming post on that topic), but I did pay enough attention over the weekend to hear that a number of Gitmo residents will be tried in civilian, rather than military, courts. A number of those on the right have predictably reacted with disdain, especially with the (remote) chance that a few of the terrorists may get acquitted.

I would propose that the biggest danger comes not from an acquittal, but in the rules that will undoubtedly be violated or erected to ensure such an outcome never happens. The judicial system, in a desire for "equal justice under the law", disdains special rules and looks to apply uniformity where possible. This is most obvious in the basic rules of a courtroom - the rights of the accused, the assumption of innocence, the ability to cross examine the other party's witnesses, and many more. The necessity to convict these terrorists will drive the US government to violate or change these laws wherever possible.

This sets up a conundrum for the appeals courts. Do they rigorously enforce judicial precedent, and either overturn convictions on procedural violations and force the government to turn over evidence or witnesses it prefers to keep confidential? Or do they allow these violations to go on, and set up an arbitrary delineation within the civilian court system for how defendants may be treated? The prior makes conviction difficult, the latter makes the average citizen susceptible to a plethora of rights violations.

George Will discussed this very concept several years ago in reviewing the Hague's International Criminal Tribunal for the Former Yugoslavia and the lessons Sen Robert Taft (R-Ohio) tried to impart on the nation in October 1946 regarding the Nuremberg trials.

Taft said he would almost rather the Nazis had been executed by court-martial, or imprisoned, as Napoleon was, as a matter of policy to prevent them from making postwar trouble. Either policy would have been preferable to using "the forms of justice to carry out a predetermined policy."
The trials were, he said, lawless because they "violate that fundamental principle of American law that a man cannot be tried under an ex post facto statute. ...
About this whole judgment there is the spirit of vengeance, and vengeance is
seldom justice."

Will goes on to disagree a bit with Taft, but I find Taft's arguments compelling. We have military tribunals for a reason. War is a messy business, and rarely is it as clean an event as a criminal investigation would require. Criminal trial require norms that citizens agree to by the fact they are a citizen. War is a violent clash of norms, battles waged as proxies for arguments not settled in words. Tribunals recognize the sense of victor's justice, while giving some credence to the idea of documenting the actions against the states or individuals at war.

The real danger in dressing up victor's justice in the cloak of the US judicial system is not just the legitimacy it confers on the terrorists and their actions, but that it will also pollute our justice system with tactics and actions that we find abhorrent and do not want citizens of the United States to face. The best way to deal with the terrorists is to recognize they are at war with us, and to treat them accordingly.

Why More Conservatives Should Be Against War

2009-11-14T23:40:00.002-05:00

President Obama is vowing to cut domestic spending in his next budget, and he has been justifiably lampooned by his critics for laughable claims that stimulus jobs are the best way to spend $160,000 per person. As Democrats seem too willing to spend three dollars to create one dollar of benefit, Republicans and other conservatives have far too long embraced the high cost of war too easily.

Today's NY Times had a story about budgetary pressures impacting the administration's decisions on Afghanistan.

The latest internal government estimates place the cost of adding 40,000 American troops and sharply expanding the Afghan security forces, as favored by Gen. Stanley A. McChrystal, the top American and allied commander in Afghanistan, at $40 billion to $54 billion a year, the officials said.
Even if fewer troops are sent, or their mission is modified, the rough formula used by the White House, of about $1 million per soldier a year, appears almost constant.

This $1 million price tag should cause all conservatives to pause. When we ask our soldiers to head into harms way, we owe them the best weapons and defenses money can buy. That also means that we should be honest with ourselves, and know that wars are long, nasty, costly affairs - in both lives and treasure.

Conservatives should mistrust government because of its ability to confiscate that which it does not create. It can confiscate lives. It can confiscate dreams. It can confiscate money. We conservatives often lament the loss of money to wasteful domestic programs. I wished we cared as much about the monetary and personal waste associated with wars.

The Trouble With a Two-Party System

2009-11-09T23:53:00.003-05:00

I wish our ballots looked more like this, where third parties in Germany

have a shot at representation.

I saw this story posted on the Drudge Report under the headline "Dem Congressman says Obama called pposition: 'Teabag, anti-government people.'" The real story can be found in the second to last paragraph.

Another freshman Democrat from New Mexico, Representative Martin Heinrich, said the president’s comments [prior to passing the House's health care bill] overall were reassuring. “If you want to see a recipe for failure,” Mr. Heinrich said, “don’t do the things you talked about in your campaigns and turn your back on your base. All the independent voters in the world don’t matter if the Democrats don’t turn out.”

That's what most independents or non-party voters face. They're only as valuable as the last election, and then the party they gave their vote to runs to their base at the expense of the views of the independent voter. This is true with health care and many other issues because our political system forces a two party solution through it's winner-take-all, hyper-regional approach. If I were to design our system of governance today, I would look toward a parliamentary approach, and assign representation based upon proportional vote. I would also look to maintain some form of federalism by making the proportional vote at the state level.

The biggest benefit of a system with multiple parties is coalition governments that must take into account the views of the minority party or it walks out on the government and forces a vote of "no confidence". Each party must compete for each vote, making the the individual voter more powerful in the process. It's essentially a competitive market for votes. This would more effectively limit the government's actions, and better ensure that those actions reflect the will of the wider voting population rather than a smaller single party base.

The Lessons of Communism Forgotten

2009-11-09T14:27:00.004-05:00

Simply not funny.

I have a pretty rough sense of humor. I find shows like Family Guy and movies like Blazing Saddles to be hilarious. But I do have bounds, and have always found communist imagery to be disgusting and not humorous.

Usually it's the Western elites who show their affinity for all things Che that irritate me the most. But the "ironic t-shirt industry" has also waided into this, with Threadless Tees and their "Communist Party" shirt. I like a lot of their shirts, but only someone completely devoid of the human death toll of Communism would be as insensitive to make a shirt to profit on the backs of those who didn't have so much fun at "the Communist Party".

Luckily, Colin at To Get Rich Is Glorious reminds us exactly how much death and destruction this ideology imparted on the world. As a Libertarian, I fully recognize democracies have their failures as well and don't agree with a good bit of the Cold War policies pursued by the United States. But democracies have the ability to reform themselves, and they recognize over time the inherent nature of human freedom and try to maximize it to varying degrees. Communism loathes such values, and delivers death and destruction to those who value them.

It is my hope that events like the anniversary of the Fall of the Berlin Wall remind us all how far our world has come, and that we not rely on our short term memories for the source of disgusting jokes or profit-making imagery in the name of a death-spewing ideology.

The Bias Behind the Coverage

2009-11-07T23:41:00.003-05:00

No private company, forced to compete in an open market for labor, would

keep its employees in such squalor.

I heard this interesting story on NPR while driving in to work on Friday morning. In it, the lives of two people in Angola are profiled - an oil company employee who lives in a $20,000 per month apartment, and a local boy who sells this employee gum on the street for income. This dichotomy is used to illustrate "the paradox of oil" - the confusing reality where oil rich nations tend to have some of the poorest, most underdeveloped economies in the world.

At the end of the piece, NPR reporter Chana Joffe-Walt summarizes the comments from Herman Cohen, a retired US diplomat who worked in Angola, in the following way.

Cohen says the Angolan government is behaving like a private company, and as long as that's the case, Gregory [the oil company employee] could produce hundreds of billions of barrels of Angolan oil and Ningeeto [the gum salesman] would still be selling gum on the street.

I don't understand what evidence Cohen or Joffe-Walt have for this assertion. In fact, the assumption that a benevolent government would do better than a private enterprise in building up the Angolan economy is refuted by all of the corruption and underperforming economies on the African continent. Private corporations would look to give back as much to their employees as they could, recognizing that competing in a marketplace means competing for the best employees. They would look to build up their homes, pay them competitive wages, and enhance the quality of life around their places of business.

It is the fact that the Angolan government owns the national oil company, Sonangol, that allows them to behave in this manner. The fact that political allocations where power is monopolized, and not market allocations where power is democratized, are used leads to the current situation in Angola. The assumption of two Westerners - that behaving like a government makes for a better world and not like a corporation forced to compete for labor and profits in a marketplace governed by open contracts and the rule of law - shows how ignorant they are. What enabled the state to become so burdensome in Western nations is the economic success of the markets they originally fostered, and we see the daily penalty we pay in lost efficiencies and freedoms throughout convoluted tax codes, record deficits, and unjust laws. Asking for less "private company" behavior fails to recognize that Angola's oil company isn't behaving like a private company right now, and asking it to behave like a (Western) government by dolling out cash based upon political needs is a bit like putting the cart before the horse.

The story of Angola sounds pretty much like every other oil rich nation. Large corporations and corrupt governments work together to ensure supply of oil is steady, labor cheap, and profits kept be a few politically connected individuals. The consequences of such corruption and denial of workers' freedom can be disastrous. The worst outcome of such conditions, the Wahhabi breeding ground of Saudi Arabia, is painstakingly detailed The Looming Tower. The story contained in that book should serve as a warning to anyone interested in petro-state politics, with the consequences of such big business/corrupt government interaction being a breeding ground for the terrorists that attacked us on September 11, 2001. To not understand the role the denial of free choice and markets for labor's rewards play in such states is to misunderstand one of the key remedies for terrorism. To assume that "private businesses" look to keep their employees in squalor simply exposes the bias of a supposedly business-focused segment on NPR.

The Great Divide

2009-11-06T08:51:00.002-05:00

Washington State just voted on Referendum 71, which would approve "everything but marriage" for GLBT couples. That is to say, it would grant many domestic partner benefits now enjoyed by heterosexual married couples, but would leave the word "marriage" out of the law. We are still counting ballots due to Washington's all-mail-in vote system, but it appears the referendum will pass statewide. This would mark the first time a vote-based approval of GLBT unions was successful - all other steps toward such unions in other states have been achieved at the judicial or legislative level. What's more interesting is to see how it fares county-by-county, which lays bare the Great Divide within our state.

Those of us in Washington State recognize we live in a very diverse, often diametrically opposed state - call it Seattle urbanites vs. Spokane apple farmers. It's election results like these that remind us sometimes how divergent the views are in this state.

Remember, remember the 5th of November

2009-11-05T21:20:00.002-05:00

Sadly, this day will be reminded for a while for the tragic events in Texas this afternoon.

But it is the 5th of November, Guy Fawkes Day, and so I must post this wonderful clip from the movie V for Vendetta (HT: Travis). The movie is one of my favorites - I will be watching it soon! Happy Guy Fawkes Day, especially to all you Libertarians!

Let's Be Honest For a Moment

2009-11-05T20:32:00.002-05:00

This is what they really want.

I have noted here and here what Democratic party leaders really mean when they use the phrase "public option". Now, it turns out, that they were just reflecting the wishes of those who vote for them.

Rasmussen Reports has some good polling data out today. Apparently, 72% of Americans believe that Obamacare will shift people from employer-based health insurance to government-based. Most of those interviewed felt such a move would be bad, while only 25% believe it would be good.

Those who identified as Democrats bucked this trend. A plurality (43%) of them felt such a move would be good, due in part to 67% of them fearing health insurance companies more than the federal government.

Independents more closely aligned themselves with Republican views, where a move towards forced government insurance was viewed unfavorably and government was feared more than health insurers. Hence why Democrats are in trouble at 2010 mid-term elections if they can't change this trend.

So the next time someone tells you they are for the public option, make sure you ask them what their real end goal is in such an option. Otherwise, you're likely only getting half the story.

They Just Don't Get It

2009-11-02T22:52:00.004-05:00

Even the Boeing machinists would

have taken this deal.

Ford reported a $1B quarterly profit this morning, extending a very good year by any measure for the company. While impressive as this was, it still means the company is operating at a 3.2% margin worldwide that could turn negative at any point.

Normally you would think this would be reason for employees to celebrate and work harder to contribute further to the company's earnings. Then again, UAW employees are far from normal. They instead resoundingly rejected a proposal from Ford that would have given the company the same terms as GM and Chrysler got in their bankruptcy restructuring. In return for a limited no strike clause and wage freezes for new employees, the union would have been guaranteed 7,000 new or current jobs (similar to terms that the Boeing machinists would have loved to have taken).

Here's a sample of the logic behind that rejection.

“We are kind of dumbfounded,” said Nick Kottalis, president and chairman of the Dearborn Truck unit of UAW Local 600, who led the fight against the contract changes. “We’re one team, one Ford…but then they tell us they are broke, they tell us we need to make all of these concessions, and then this?”

Let's review the recent facts about Ford.

They have shrunk their workforce by 45% since 2006 to get to this minimal profit they announced today.
Their North American operations were profitable for the first time since early 2005, and such profitability was likely due in large part to artificial demand from Cash for Clunkers.
The company recorded $30B in losses from 2006 to 2008.
The UAW's Canadian brothers, the CAW, approved a similar contract last week.

Ford's surprise profit is both a blessing and a curse. The blessings are obvious. The curse comes in that the UAW is so unreasonable that they look at a single quarter of profit equal to one thirtieth the loss of the previous three years as justification for preserving unsustainable wages and benefits. They just don't get it, and I don't know if they ever will.

UPDATE: Peter De Lorenzo at the Autoextremist has a no-holds barred analysis of the situation (HT: anonymous source). It's a must read. He makes a number of good blunt points, two of which I will take up here.

This behavior can be expected of unions given their cozy relationship with the government that owns the automakers. When the UAW received a disproportionate share of GM and Chrysler in bankruptcy, and the most frequent visitor to the White House is the president of the SEIU, there is no doubt the unions have nothing to fear from their outlandish behavior.
The union leadership is completely disconnected from its rank-and-file. It was the rank-and-file, not the leadership, that rejected the proposal from Ford. The UAW leadership team recommended that the membership approve the deal. It is incumbent upon the UAW leadership team to communicate the necessity of the deal, and if they don't get control of the situation soon they may find themselves replaced with a new group of leaders that more closely identify with the nonsense found within the rank-and-file.

Pay-to-Play, Washington State Edition

2009-11-01T22:05:00.004-05:00

A scene you won't see again any time soon.

A consistent theme from the GOP DC establishment is that Obama has brought Chicago-style politics to the nation's capital. While their are some elements of truth to this, I see this as more of an issue of politics-as-usual, with the real annoyance on the GOP's part being that it is the other party who is doing it. And lest anyone think it is only Obama who is doing his best Blagojevich impression, let me relay on a story from Washington State.

Boeing recently decided to award the second of two 787 production lines to their North Charleston, SC plant instead of the Everett, WA plant that has the first 787 production line. The reasons were fairly simple - the demands of the unionized workforce in Everett, WA were too much, and the financial benefits of the North Charleston plant were just too good to turn down (including a nearly 50% reduction in wages). Predictably, the local press and most people in the Northwest looked down their noses at "those South Carolinians" and still can't believe they got the business.

One local personality who has had enough of Boeing's free market enterprise is Senator Patty Murray. Normally she is a friend of the company that is still nominally from her home state, but she has decided enough is enough. Here's what Senator Murray's spokesman, Alex Glass, said when asked about Boeing's decision.

"She won't be as inclined to work for anything not Washington state-related for this company," Glass said.

While this year, for example, she lobbied hard for Senate votes to get extra funding for California-built C-17s, in the future she'll do that only when it benefits Washington state workers, Glass said.

A few other blogs have asked this rhetorical question of anti-free trade politicians: "If you are against free trade between nations, then you should also be against free trade between states, and perhaps cities too." The obvious conclusion is that the logic of anti-free trade advocates means that we can only consume things made in our own city - there is no benefit to trade with others who may have goods we cannot produce ourselves due to geography, climate, knowledge, etc.

What's frustrating is that Patty Murray is not an anti-free trade politician. She actually receives reasonable ratings for being a Democrat, and it is most likely due to the fact that Washington State is so dependent upon foreign trade. If she's not against international free trade, why is she then against inter-state free trade? Why does she not understand that lowering company costs via building planes in North Charleston will benefit the total financial health of a company that still has a large number of design and manufacturing facilities in Washington State?

My sense is that Patty Murray is personally offended after having invested so much of her own time and effort in getting the second 787 line for Washington State. And if there's one thing a three term Senator can't allow, it's a personal rejection from Boeing of her efforts to get the second line. Boeing wasn't willing to pay, and now Patty Murray won't allow them to play. Call it Seattle-style politics come to Washington, DC and national defense. I just call it politics as usual.

Who do you trust? Cash-for-Clunkers Edition

2009-10-31T17:43:00.003-04:00

$4000 per sale, or $24,000 per incremental sale?

I am going to start a re-occurring post on the blog, where I simply list two views and pose the question "Who do you trust?" In reality, one should only trust what they can verify themselves so this is a bit of a facetious question. It is intended, though, to get people to comment why they would trust one group over the other based upon facts or prior performance.

To inaugurate this theme, I will focus on the Cash for Clunkers fallout (HT: To Get Rich is Glorious).

Who do you trust?

Edmunds.com, who's sole business it is to provide accurate information on the automotive industry, provides an estimate that only 18% of the vehicles sold under Cash for Clunkers were incremental sales. The other 82% would have been sold anyways, just at a later date in 2009. This means that the incremental cost of each car sold was $24,000 per vehicle to the taxpayers. They even back up their data with their methodology, and commented that October sales would have been even higher than they were if the Clunkers legislation hadn't been passed.
The Obama Administration, whose only response was the paragraph below and no data to back it up:

"It is unfortunate that Edmunds.com has had nothing but negative things to say about a wildly successful program that sold nearly 250,000 cars in its first four days alone," said Bill Adams, spokesman for the Department of Transportation. "There can be no doubt that CARS drummed up more business for car dealers at a time when they needed help the most."

You be the judge. Just realize that this administration's efforts at making unsupported comments about other's attempts to calculate the economic impacts of various stimulus programs doesn't seem to be limited to the Cash for Clunkers programs.

UPDATE: The unseen people who got screwed by Cash for Clunkers (HT: To Get Rich is Glorious). It's "the poor" and "small business owners" who the politicians supposedly care about.

"Burn destroy wreck and kill, Seattle Sounders surely will!"

2009-10-26T00:16:00.003-04:00

The Sounders FC Brad Evans sees the ball go past the FC Dallas' keeper for

the go ahead score in the Sounders 2-1 win on October 24, 2010

My fiance and I attended last night's finale to the Seattle Sounders inaugural season in the MLS. The boys in green-and-blue staged a second half comeback, scoring two goals and moved up to the 3rd seed in the Western Conference playoffs that start this week. The Sounders have gained a fast, loyal following in the soccer-rich Northwest, setting the MLS record for highest season average attendance at over 30,000 attendees per game. Erin and I immediately enjoyed the complete experience, and bought tickets to the home game in the first round of the Western Conference playoffs.

It is not hard to understand why the Sounders FC has done so well this season. First, the city was ripe for a professional sports franchise that was genuinely connected to the city after the debacle of the Sonics' departure. Second, the whole Northwest is soccer rich and by 2011 will have three MLS teams within a 300 mile stretch of Interstate 5 - the Sounders, Portland Timbers, and Vancouver. Third, part-owner Drew Carey understood what makes European soccer clubs so loved by their fans, learned quickly that Seattle is one of the most Euro-centric cities in the US, and adapted Euro-club strategies for the Sounders. Finally, having a great coach in Sigi Schmid and playing a different style of soccer from most MLS clubs helped to provide an unusual spark to a expansion franchise's inaugural season.

It's nice to have a league that isn't full of prima donnas that don't seem willing to exert the effort that their salaries demand. Soccer requires a full 90 minutes of effort, and most players make only as much as the average middle to upper-middle class American. It's nice to have dedicated fans, like the Emerald City Supporters who sing songs with lyrics like those found in this blog entry's title. It's wonderful to have the world's game in Seattle, and I hope it remains this exciting for years to come.

They can see Russia from their house, but they can't get to the US mainland

2009-10-24T14:16:00.004-04:00

They need your help.

Yesterday I drove between Seattle and Mt. Vernon, WA for work, which meant I had a lot of time to listen to the radio. On the way home I heard this story about the 114 people on Alaska's Little Diomede island on NPR's All Things Considered. Apparently the residents have relied upon passenger air service back to Nome (123 miles away) to take care of basic things like health care, and have been unable to get such service for four months now. The story provided many examples to me of what could be improved in this nation.

A helicopter brings in mail to Little Diomede...

Daily mail service to a remote island can't be cheap. And UPS confirms this, charging $51.82 for a 1 lb. envelope to arrive the next day from Seattle. What does the USPS charge? A measly $25.15, and is going broke with such a one-price-for-all, daily-service-for-all business model.

Ms. [Jamie] AHKINGA [City Clerk, Little Diomede]: Since our island is so remote and isolated and our transportation once a week, we don't have the advantage of having regular visits from a medical team. Most of our visits are scheduled when the ice runway is constructed.
[NPR Host Melissa] BLOCK: And what happens if somebody in Little Diomede has a medical emergency?
Ms. AHKINGA: During an emergency situation as to where a patient needs to leave, Evergreen or the National Guard Black Hawk will fly their helicopter to pick up that patient.

That's right - the Coast Guard medivacs those on Little Diomede who have a medical emergency. My fiance asked me if those on Little Diomede were Inuits or other Native Americans, because if they were transplants she had far less sympathy for their situation. I replied that I didn't care. If they were native to the island, they survived there without medivac helicopters for centuries. Either way, their belief that they should be able to live anywhere they want and burden the coastal protection force of this nation and the taxpayers with the consequences of their decisions seems ludicrous to me.

The interview finished up with this comment from Ms. Ahkinga.

Ms. AHKINGA: Thank you and I'm hoping one day the congressional leaders of Alaska will remember that 114 people are out here practically in the middle of nowhere, and find a way for us to have an obligation for passenger service, and just to be able to come home on a space available flight once a week, if that.

And there's the problem with this country: everyone hates Congress, but they love their Congressman. It's not their Representatives or Senators bankrupting the nation, it's those nefarious ones from the other 49 states. I realize that this is a miniscule amount of money in the total federal budget, but it is symptomatic of the wider problem with the deficit. Our elected officials prey upon our desire to have our cake and eat it too, and we buy into it. Even when it comes to 114 people living on a remote island in the Bering Straight.

The Ward's AutoWorld Monthly Roundup: October 2009

2009-10-21T23:36:00.002-04:00

See, I told you I was behind. October issue is already here and has been read. These were the highlights.

Those rich enough to afford super luxury vehicles are holding back on their purchases out of rich guilt. This is NOT helping the economy.
Auto supplier CEO Wilbur Ross wants an EU-wide cash-for-clunkers program, even though Germany's recent experiment showed all it did was pull ahead sales rather than create incremental ones. Yet again this has nothing to do with the environment or stimulating the economy, but more to do with misguided corporate welfare.
John McElroy argues that European and Japanese auto industries are a ticking time bomb for a restructuring like that rippling through the US auto industry.
Porsche owners are gobbling up PDK dual clutch transmissions as quickly as they are made. Automatic transmissions in a Porsche? You betcha! And Ford's getting into the game too.
The magazine sees a massive technological shift in the 2010 and 2011 calendar years. Those shifts include engine downsizing, greater use of 6+ speed transmissions, and more electrification. Not on the list: bio-fuels, fuel cells, and other alternative fuel vehicles.

Mo Money, Mo Problems

2009-10-18T17:28:00.005-04:00

A classic B.I.G. song in graph format.

Like Mark Perry, I am a graph junky. I don't think I have a problem - it's just the nature of engineering work that I do, and graphs help boil down extremely complex data to see the relationships that aren't intuitive from tables of data.

It's in that spirit that I point readers to this nice collection of rap songs in graph form (HT: Erin). Being in nerd love like we are, Erin and I both disagreed with the linear interpretation of the song and with each other as to what the real relationship is. Erin points out that it should be an exponential curve, as the example of the lottery winner shows their problems exponentially multiplying. I use the lottery winner example to support my theory that it should be represented by a step function.

Nerdy details aside, B.I.G. was right.

The Market Always Wins

2009-10-18T11:04:00.002-04:00

"The curious task of economics is to demonstrate to men

how little they really know about what they imagine they

can design."

Nobel Laureate and Economist Friedrich Hayek

Remember all those "biased" and "paid-for" economists who warned that a greater number of credit card regulations would simply result in credit card companies making their money elsewhere? Potential consequences of such regulations were limited credit markets for the poor, arbitrarily limited credit limits for the credit worthy, and instituting unnecessary fees all over the place. It turns out they were right.

"What has been forecast is coming true," says Robert Hammer, chairman and CEO of credit-card advisory firm R.K. Hammer Investment Bankers in Thousand Oaks, Calif. "Those of us that have never been delinquent ... even once, in fact, find our credit lines cut back, annual fees being implemented or raised, rewards programs being cut back or costs associated with them."

If this happened when the government told credit card companies when and where they could make money, what do we think will happen when we do it with health care and insurance companies? Will the costs go down for most consumers as proponents claim, or will they likely go up as insurance companies will no longer be able to ask those who consume the most to pay a little more than those who don't? I think you know the answer...

Of course they are angry...

2009-10-17T19:35:00.004-04:00

During Friday's commute I heard this story on NPR that details the developing world's concerns about emerging climate change talks. The synopsis was that new global warming talks are focusing on jettisoning the Kyoto Protocol framework, and developing nations don't like that.

Lumumba Di-Aping, a Sudanese diplomat who was speaking on behalf of 130 developing nations, expressed the developing world's unhappiness with this turn of events.
"We have witnessed one developed country after the other making a pronouncement, that literally amounts to discarding the Kyoto Protocol. It's like throwing away your baby and saying, 'No, I will have a new one,' " he said.

Now why would developed nations want to create a new framework rather than continue the Kyoto agreements?

The United States never ratified the agreement because it doesn't require any action from the developing world, including China, the world's largest emitter. The Bush administration considered that a fatal flaw. And so does the Obama White House.

After the usual griping about the United States from Europe, NPR explains they have minimal interest in Kyoto as well.

In an interview with NPR this week, European Commission Vice President Margot Wallstrom put it in practical terms. It's been a logistical nightmare for the Kyoto signatories to try to update that treaty while at the same time trying to negotiate an additional treaty that the United States would agree to, she said.

So what this really comes down to is the cartel problem: no one wants to go first because everyone knows there is a penalty in doing so, and everyone wants to cheat anyways. Global warming theory is an opportunity: for developed nations it is an opportunity for the West to practice cultural imperialism, while for the less developed nations it is an opportunity to hamstring the economies of the developed nations. Either way, it is a sham that has very little to do with real environmentalism.

How to shake up [Ford's] corporate structures: a view from the ground level

2009-10-15T23:21:00.005-04:00

Manager Adam Gryglak with the 6.7L Scorpion Diesel Engine

I posted here about the technical merits of Ford's new Scorpion 6.7L diesel engine that will be its latest in the PowerStroke line. The guys at PickupTrucks.com, who got a preview of the 2011 product at the Texas State Fair, concur. So does SAE's Automotive Engineering magazine, saying, "diesel engine OEMs, here comes your new medium-duty benchmark".

The story of the Scorpion program is less about the technology, but how Ford pulled it off in a hierarchical culture that started the project behind schedule and under intense financial pressures company wide. This month's Business Week management and leadership feature attempts to answer that question.

Back in the fall of 2006 I fought my way onto the Scorpion team. I had worked for Adam Gryglak and with Pat Morgan on a previous engine program, and had taken a masters class with Tony Hudson earlier in my career. I knew all of them well, but when I expressed interest in joining the team they made several concepts very clear: we will work hard, play hard, and there will be no victims. The Business Week article is not Ford marketing - this truly was a different engine program.

From day one, I had total ownership of the systems I worked on. If my parts were over budget, I called the purchasing representative across the street and we worked directly with the supplier. If I needed a computer analysis run on my part, I went across the aisle and talked directly with the engineer running the analysis. If the analysis suggested we needed to tweak a design, I went to the next aisle over and worked directly with a CAD engineer that was dedicated only to my components. And if my parts had big enough issues that Bob Fascetti (director of the engine division) needed to pay attention, I was the one presenting the latest status to Bob. This wasn't the way Ford usually worked, where engine programs often fought over limited resources and had layers of management involved. But this new arrangement worked for our program.

Lest anyone thinks the story of the pinewood derby is marketing BS, I would invite you to come to my desk at my current employer where I still display my pick-up truck shaped car I raced that day in 2007. And we not only raced against Ford engineers, but also a number of our suppliers as well. They were invited, and they attended because we were all one team. We built a sense of esprit de corps throughout the entire process with everything Scorpion. We had the scorpion logo highlighted in the Business Week story (I plan on getting it tattooed on me soon), and had magnetic scorpions crawling all over our cubes. We had a mission, and we would realize the goal of outdoing every other diesel engine.

I will always remember this project fondly - after a tough 5 years at Ford we could see things turning around at the working level and all the way to the top with the hiring of Alan Mulally. I was only on the program for a short year, but I could see the monumental change they were making. Adam, Pat, Tony, and the rest of the team deserve all the recognition they get - they have pulled off the improbable due to an incessant focus on the few program goals that mattered and continuously sweating the details that delivered them. Maintaining a rigid corporate structure isn't important - what is important is adapting the management structure to the goals of the program and the unique challenges those present to the organization. Adam's vision, executed by Pat, Tony, and the rest of the supervisors is the supreme example of that perfect match of goals and structure. I only hope that Tony's comment at the end of the article rings true, and that the team's structure is repeated on other programs when necessary.

The Ward's AutoWorld Monthly Roundup: September 2009

2009-10-15T15:35:00.003-04:00

So I am way behind as Ward's AutoWorld comes out late in the month and I was traveling at the time it arrived in my mailbox. Here's the highlights from the September issue.

Drew Winter offers a defensive and lame justification for Cash for Clunkers. He wrote this before the September sales numbers hit. I wonder if he would write differently now that he has seen those dismal sales numbers?
Hyundai has announced it will forgo a V6 engine in its next-generation Sonata, and will instead go with gasoline direct injection I4 engines for high output options.
John McElroy posits that the fall of GM and the rise of VW heralds the day of a new global leader in automaking, and it isn't Toyota. The most frustrating part to GM? The fact that VW may do it with as many brands that led to GM's downfall. It's not the number of brands, but how you manage them that determines the company's success or failure.
The Ford Flex/Lincoln MKT line shows how platform engineering is different than badge engineering.
Lexus turns 20, and must confront the challenges of being an established, rather than a growing, luxury brand.
Ford's new Taurus gets another rave review.

Juvenile Headlines

2009-10-15T14:54:00.002-04:00

of urea SCR.

Working on 2010 emissions compliant diesel engines, I have made my fair share of pee-related jokes when it comes to the urea SCR solutions that the industry is pursuing to meet new NOx emissions regulations. One of them was along the lines of the picture above. This constant joking is likely part of the reason for calling the urea-based fluid by another, more innocuous name - Diesel Emissions Fluid (DEF).

While my jokes are in private, it seems the juvenile jokes know no bounds when it comes to journalism. Australia's the Age proclaims "The car that uses urine to save the planet", and the potty jokes flow from there (pun completely intended!). Now, I don't have thin skin and normally wouldn't mind the jokes as they are good natured. However, I grow a little concerned when a site like the Drudge Report runs the headline next to others mocking global warming and biomass electricity production.

I am a global warming skeptic because the theory has not been correlated to actual measurements, and in fact often flies in the face of actual measurements. This is not the case with criteria pollutants like particulate matter, carbon monoxide, and NOx. Their effects are immediate (death from carbon monoxide poisoning), near term (acid rain and poor ambient air quality due to NOx and PM), and long term (cancer from PM). After lowering criteria pollutant emissions we can measure the improvements in air quality and lowered destruction of forests and man-made structures due to less acid rain. And if one actually cares to get past the headline and pee jokes of the highlighted story, they find that

"[urea SCR] is already widely used in the trucking industry in Europe and Australia and is common in diesel cars in Europe..."

Where did the idea for urea SCR come from? Electrical power plants who have used the technology for several decades. Why was urea SCR chosen over other technologies? Because it was the best technology given the variety of operating conditions under which a vehicle or truck will operate.

Go ahead and make the pee jokes. We all do in the industry. Just don't lump this technology and the problems it addresses in with the "sky-is-falling" global warming crowd who can't even prove the phenomenon, let alone develop a cost effective solution to address it.

Trusting Google

2009-10-15T09:31:00.002-04:00

WSJ's Digital Daily provides an amusing look at the battle between AT&T and Google over control of wireless networks and network "openness":

My God. Google, the company whose business philosophy proudly proclaims “you can make money without doing evil” blocking calls to small businesses? To Benedictine nuns? Don’t be evil?
Don’t be evil, my ass.

I'm not entirely sure what position the author takes, but I hope his tongue-in-cheek comment indicates that he doesn't buy what Google is selling.

The Obama administration seems fully on board with net neutrality. I would describe net neutrality as a theory in which the government intervenes in the private sector to keep broadband companies (and potentially wireless companies as well) from exerting ownership over the broadband infrastructure they have financed and built. The less cynical definition is that net neutrality requires broadband companies to keep their networks open to any content, device, service, etc. Given Google's influence on the Obama administration, is is not why the Administration is on board.

So, what line do I think Google is selling that is less than truthful? It's their attempt to pass off desire for net neutrality as an altruistic quest to better the lives of all humanity. Net neutrality is a business goal of Google, plain and simple . . . it's all about the benjamins. To think otherwise is naive, but more constructively, the debate over net neutrality is a business one and to view it as a moral ideal is foolish and counterproductive.

Google is an internet company, they need the infrastructure that is paid for, and supported by others - the broadband companies - to make money. Google wants the government to step in, and guarantee them access to a private product so they can continue to profit without having to either built their own network or partner with a broadband provider. Essentially, Google has figured it's cheaper to lobby the government (especially this administration) than to spend the money to accomplish their goals through the normal course of business. There isn't anything wrong with this, let's just call it like it is. Google is as out for profit (greedy) as the next company.

Don't Worry, They'll Buy You Off No Matter What

2009-10-14T23:33:00.002-04:00

President Obama's health care plans call for taking at least $200 billion out of Medicare, so he has to keep seniors happy somehow. Here's how: cut them a $250 check that Social Security says they don't deserve.

President Barack Obama called on Congress Wednesday to approve $250 payments to more than 50 million seniors to make up for no increase in Social Security next year. The Social Security Administration is scheduled to announce Thursday that there will be no cost of living increase next year. By law, increases are pegged to inflation, which has been negative this year.

That's right. Cost-of-living is down, and accordingly these seniors aren't scheduled to get increases based upon rules that were agreed to when emotions didn't rule the recessionary day. So even when the law mandates that the government not waste our money, politicians will do so anyways. And you wonder why I am a Libertarian?

The Atlantic Monthly Roundup: October 2009

2009-10-14T21:23:00.003-04:00

Here are the highlights from the October issue of the The Atlantic.

As I went into more depth here, Mark Bowden has an interesting piece on who's really behind the cable news stories we see every day.
Andrew Sullivan has an eloquent and logical piece imploring the one man who can truly restore dignity to American foreign and military policy in the wake of the torture-filled Bush years: W himself.
Rachel Dickinson takes a trip down the original stimulus public works project, the Erie Canal. Special online content of a narrated slide show of her travel can be found here.
Witold Rybczynski makes the case for the greenest way to live: it's in the cities, not the suburbs, stupid! This article is far more convincing than the California pipe dream laid out by Ronald Brownstein.
Megan McArdle uses her personal experience as an intern at Goldman Sachs while pursuing her MBA to start a deeper explanation as to why bankers, wedding planners, funeral directors and others make a ton of money.
Jonathan Knee, Bruce Greenwald, and Ava Seave explain that major media's trouble has less to do with the internet and more to do with failed business strategies that pre-dated the internet.

No Additional Comment Needed

2009-10-14T21:16:00.002-04:00

Okay, so I lied. One comment. I back a national sales tax in lieu of the national income tax, but a VAT on top of the income tax is a non-starter.

HT: Carpe Diem

No Shortage of Buyers

2009-10-13T14:24:00.004-04:00

We got a nice HT from Mark Perry at Carpe Diem today, as I sent him this story about a Seattle scalper suing the city for a violation of his Fourth Amendment rights. Ticket scalper rights are a passion of Mark's, so I thought he might be interested in the story. Sure, there was also a small bit of shameless self promotion involved as well. You caught me...

I won't rehash Mark's comments on the topic. I will say that like prostitution patrols, I think anti-scalping initiatives are a waste of cops' time. The moment we solve every real crime - rape, murder, theft, assault - is the moment we have time for such vice patrols. That's the logistical angle without having to get to the procedural objections I have on the matter.

On a related note, Rasmussen Polls released some interesting data on the impact of ticket prices upon buyer's likelihood of buying a ticket. It turns out 64% of Americans say the prices have kept them from buying tickets to an event, but that 54% of Americans also state they would prefer to watch the game from their couch. The bad economy is to blame for 51% of those not attending games. What does this all mean? There are a myriad of reasons to stay away from sporting events, but there is still a sizeable number of people in the Seattle metro tri-county area (King, Pierce, and Snohomish) that would pay to go to a game. Nearly 900,000 people (out of 2.6M) if we use the 64% figure as a representation of those not buying tickets.

How about we recognize there is still a huge demand for sporting event tickets, even at the "high" prices both the teams the scalpers charge. You have more of a right to a cheap ticket than the city has to shut down scalper's legitimate and rightful businesses. Either pay the price for a ticket, move on to another activity, or find another sport (MLS' Seattle Sounders, anyone?) that embraces a lower cost model.

If You Aren't Against This, Senator Snowe, What Are You Against?

2009-10-13T14:12:00.006-04:00

Political philosophies are equally about what one is for and what one is against. Today, libertarians and conservatives got to see what Senator Olympia Snowe (RINO - Maine) is not against when she voted for Senator Baucas' health care bill. Even after listing her misgivings, Snowe summed it up this way:

"When history calls, history calls."

That's what this is about. Her support is not that surprising, given that she is a RINO. The extent to which she will go to support everything conservatives are against seems to have no bounds. But what she has now done is cast her lot with politicians more interested in their legacies than the less glorious job of standing up for limited government and capitalism in the face of statists.

As such, she should be the first GOP target to be thrown out of office by her own party electors. I am sure that list will grow, especially when we get to the House, but Maine Republicans need to set an example that this kind of vote is tolerated by a Democrat they actively opposed but not a Republican they helped to elect.

UPDATE: RINO's unite! Susan Collins now seems willing to also vote for the Senate bills. She now needs to be target #2 for GOP primary voters.

The Conscience of a Capitalist

2009-10-11T12:37:00.003-04:00

My new favorite shirt that I just bought.

I stumbled upon the wonderful interview with the Whole Foods CEO John Mackey regarding the recent controversy around his Op-Ed piece against Obamacare, meant to post it here, and then forgot about it until it re-surfaced at To Get Rich Is Glorious (HT: Colin). It's a must read for anyone interested in the debate over health care reform. The interview is so complete that I won't even change the article's title, and instead just adopted it as my own.

The title is the point of the interview. Do you trust a CEO on a mission to deliver the best total health care for his employees, or do you trust a bunch of politicians/lawyers whose idea of health care includes so much legalese that not even they can tell you what their legislation does? Do you believe in a CEO who empowers his employees because he believes in their basic intelligence and self-determination when it comes to health, or do you believe that people are too stupid to make their own decisions about their own health? Do you trust capitalism, or do you trust statism?

In the middle of the article the author asks Mackey about union opposition to his op-ed, and their anti-Whole Foods sentiment in general. His response to the questions highlights the stark difference in his outlook, his company's outlook, and that taken by the unions and Obamacare advocates.

"I sometimes think that unions don't understand that we live in a free society and people have the right to not select union representation if they don't want it. I oftentimes hear things like 'Whole Foods is preventing people from unionizing,' which is a lie. That's illegal. We can't prevent anyone from unionizing," Mr. Mackey says.

So why aren't they choosing it? "Because it's not in their best interest," he insists. "We have better benefits and higher pay" than Whole Foods' unionized competitors. "We wish the unions would respect people's right to not have a union." Do they keep agitating? "Yeah, they do."

Substitute the word "politicians" for "unions", and the analogy holds true for the Obamacare debate. Embracing free choice will not only maximize health care quality for each individual, but will also do it more cost effectively than Obamacare. And if you think the politicians will stop at the public option in terms of government-funded and/or provided health care, recall the level of respect Mackey sees unions extend to his employees once they have voted whether or not to unionize.

Politics is the art of deception through the violence of taxes and war

2009-10-10T16:26:00.002-04:00

Link (HT: richisglorious)

You better hope that you never have the combination of money and unpopularity to attract the attention of the political class, or else this might also happen to you.

Remember that Evan Bayh was on the short list for the Obama Veep slot - maybe he is still on their short list for 2012 when Biden rides off into the sunset. Then read this nice summary of Obama's overall agenda from Charles Krauthammer. If Krauthammer is even 50% correct, we are headed for European-style politics where the unpopular pay for everything the popular don't want to pay for. Should we suspect anything else when the political leadership advocates as much?

The Intersection of the Cults of Mediocrity and Celebrity Confirmed

2009-10-09T08:22:00.004-04:00

There is sure to be many bloggers out there talking about Obama's Nobel Peace Prize award this morning. By any measure, it is undeserved. The Nobel committee cheapened the Peace Prize award when it gave it to Al Gore for wars never fought, but at least Gore had a long track record of raising awareness on a topic (as flawed as global warming is as a theory). It truly debased it when it gave it to a man who, as SNL pointed ou t, has done NOTHING. This award reeks of wishful hero worship, and yet again makes the Nobel committee look like it is more interested in meddling in American politics rather than rewarding true men and women of peace.

The only thing this award does is bestow the auro of Nobel to the ultimate convergence of the cults of mediocrity and celebrity that is Barack Obama.

UPDATES:
The Weekly Standard has a nice list of those passed over by the Nobel committee so that they can (hopefully) have their last gasp of collective European Bush bashing (HT: @michellemalkin).

A real man of peace, 1983 Nobel Laureate Lech Walesa, points out the obvious: this award comes WAY too soon.

Finally, the Times Online has the best summary: this makes a mockery of the prize.

Rarely has an award had such an obvious political and partisan intent. It
was clearly seen by the Norwegian Nobel committee as a way of expressing
European gratitude for an end to the Bush Administration, approval for the
election of America’s first black president and hope that Washington will honour
its promise to re-engage with the world.

Instead, the prize risks looking preposterous in its claims, patronising in its intentions and demeaning in its attempt to build up a man who has barely begun his period in office, let alone achieved any tangible outcome for peace.
Mr Obama becomes the third sitting US President to receive the prize. The
committee said today that he had “captured the world’s attention”. It is
certainly true that his energy and aspirations have dazzled many of his
supporters. Sadly, it seems they have so bedazzled the Norwegians that they can
no longer separate hopes from achievement. The achievements of all previous winners have been diminished.

The KISS Principle and Paying for Health Care Reform

2009-10-08T09:54:00.006-04:00

"Politics is the art of deception through the violence of taxes and war"
Paradigm Shifter

It seems that Democrats are all for taxes to help pay for health care reform until it hurts one of their constituencies (HT: richisglorious). In this rare case, I can understand the outrage of some unions due to the distortionary effect a tax on "Cadillac" health care benefits would have - those with far more total compensation might see a lower overall tax rate when the two sources of compensation are treated differently. Nonetheless, their desires for health care reform must be paid for.

The simple solution to all of this is to reform the tax code when it comes to employer provided health care benefits, and count them as income and therefore taxable under existing income tax laws. I have called for this approach repeatedly, as it is the fairest way to pay for the stop gaps government must provide to the indigent and best addresses the root cause of health care inflation.

But then again, politicians don't wield power due to their logic. It is their ability to have us taxpayers feast on each other, encouraging us to look to stick another group with the payments for what we want but are unwilling to pay for. And then we end up with election results like this (HT: To Get Rich Is Glorious)...

Bloggers, Journalism, and Politics

2009-10-07T15:01:00.005-04:00

"I am interested in politics so that one day I will not have to be
interested in politics."
Ayn Rand

Mark Bowden uses the Sotomayor confirmation process as the back story to an increasingly politicized field of journalism in this month's Atlanic Monthly. He does provide some interesting insights into the blurring lines of traditional journalism and the bloggers such journalists are increasingly turning to as sources. While he paints a disturbing picture, he seems to miss the larger point.

I would describe their [bloggers'] approach as post-journalistic. It sees
democracy, by definition, as perpetual political battle. The blogger’s role is
to help his side. Distortions and inaccuracies, lapses of judgment, the absence
of context, all of these things matter only a little, because they are committed
by both sides, and tend to come out a wash. Nobody is actually right about
anything, no matter how certain they pretend to be. The truth is something that
emerges from the cauldron of debate. No, not the truth: victory, because winning
is way more important than being right. Power is the highest achievement. There
is nothing new about this. But we never used to mistake it for journalism. Today
it is rapidly replacing journalism, leading us toward a world where all
information is spun, and where all “news” is unapologetically propaganda.

Further reading of the article leads one to conclude that Mark Bowden has an idealistic view of the impartiality of the press. He also seems to ignore their roll in creating the blogs we have today. He seems to ignore the circular nature of the press in this country, and ignores the reasons why bloggers "work for free."

He then goes on to describe what he sees as the consequences of such post-journalistic discourse.

In this post-journalistic world, the model for all national debate becomes
the trial, where adversaries face off, representing opposing points of view. We
accept the harshness of this process because the consequences in a courtroom are
so stark; trials are about assigning guilt or responsibility for harm. There is
very little wiggle room in such a confrontation, very little room for
compromise—only innocence or degrees of guilt or responsibility. But isn’t this
model unduly harsh for political debate? Isn’t there, in fact, middle ground in
most public disputes? Isn’t the art of politics finding that middle ground,
weighing the public good against factional priorities? Without journalism, the
public good is viewed only through a partisan lens, and politics becomes blood
sport.

Bloggers work for free because they are passionate. Is it any coincidence that the passion that accompanied Revolutionary newspapers (that term is used loosely) operating under an oppressive crown is now finding a resurgence in blogging under a smothering federal government? Should we be surprised that bloggers fill the breach when the arbiters of journalism feel they should spend more time asking the President what kind of underwear he has on, or his views on Jesus, or whether or not he has a "Single Ladies dance" for his kids rather than the substance of his policy proposals? Why shouldn't bloggers exist when your options for journalism are uncritical support of statism by simply parroting (i.e. "reporting") what a politician said without any attempt to square it with the facts. Should we be surprised that bloggers exist when the media debate is over a 48% or a 50% effective tax rate, or 30,000 vs. 40,000 troops in Afghanistan, or 99% or 100% deficits as percentage of GDP? Bowden's view of "compromise" is widely viewed as "no real options" by many bloggers, myself included.

My point is, don't be surprised when homegrown alternatives pop-up when the media is so attached those in power that it can't offer an effective debate of real options. Don't be surprised when citizens, in colonial times or today, are angry because they feel like they aren't being listened to, are being taxed to death, are having their money confiscated to support failed corporations, and wars waged in their name to settle the equivalent of an international peeing match.

I too lament the manipulation of the media by political operatives. But it isn't the bloggers who are doing the manipulating - it's the unwitting press. Bloggers seem to be the few people out there asking the tough questions, and demanding tough answers. If Mark Bowden wants the politics out of journalism, perhaps he should follow the Ayn Rand quote above, listen to the bloggers, and take the power away from the politicians. Otherwise, don't be surprised that politics invades everything, even journalism, when politicans can run every aspect of our lives.

The Reason Monthly Roundup: October 2009

2009-10-07T08:43:00.005-04:00

I spent a good bit of time reading on my way to and from the Netherlands, including the October issue of Reason magazine. Here are some of the highlights:

Veronique de Rugy explains how the Teamsters and UPS are teaming up to use arcane labor law distinctions to try and arbitrarily raise Fed Ex's operating costs. Take a wild guess where the consumer fits into this entire mess. [Disclaimer: FedEx is one of the largest single purchasers of my employer's trucks.]
Tim Cavanaugh writes about the consequences of low interest rates, debt, and home "ownership". Many people have focused on those who got into homes they initially couldn't afford, but Cavanaugh goes on to explain the consequences to equity rates of long time owners when the government's only goal seems to be home value inflation.
While not many people's cup-of-tea, Katherine Mangu-Ward explains why payday loan outlets are a preferable alternative to many other debt mechanisms available to the poor. She explains why residents in states that allow pay day loans bounce fewer checks than those in states that don't, and why stand alone pay day loan centers provide a service that large banks can't. At the end of the article, one realizes that no matter how hard government tries it can't legislate behavior that stops indebtedness. If that's the case, the best way to help the poor is to allow them a myriad of options and not arbitrarily ban pay day loan shops like many states who already have done so.
Brian Doherty summarizes Arizona's latest attempt at nullification: the Arizona Health Freedom Act which would allow Arizonans to retain the right to choose their own health care plans as they see fit, regardless if Obamacare passes.
Jesse Walker details the long history of "The Paranoid Center" and its attempt to marginalize any conservative opposition by obsessing over the possibility of right wing violence.
Finally, Tim Cavanaugh shows that sometimes the Fed isn't always so subtle in its love for inflation. This time, the propaganda appears in the form of a graphic novel.

The Failed Chicago Olympic Bid: Blame Bush

2009-10-04T18:32:00.006-04:00

As if the "blame Bush" crowd couldn't find any more ludicrous an example of his failures, they have. Some of those who backed the Chicago 2016 Olympic bid seem to believe Bush-inspired anti-Americanism is to blame for the city's failure.

Some Chicago officials say anti-American resentment likely played a role in Chicago's Olympic bid dying in the first round Friday.

President Obama could not undo in one year the resentment against America that President Bush and others built up for years, they said.
"There must be" resentment against America, the Rev. Jesse Jackson said, near the stage where he had hoped to give a victory speech in Daley Center Plaza. "The way we [refused to sign] the Kyoto Treaty, we misled the world into Iraq. The world had a very bad taste in its mouth about us. But there was such a turnaround after last November. The world now feels better about America and about Americans. That's why I thought the president's going was the deal-maker."

But don't worry, the Chosen One will turnaround those impressions. He just didn't have enough time to turn around the perceptions of those "clinging" to outdated impressions (where have we heard this line of argument before? Oh yeah...)

State Rep. Susana Mendoza (D-Chicago) said... "I travel a lot. ... I thought we had really turned a corner with the election of President Obama. People are so much more welcoming of Americans now. But this isn't the people of those countries. This is the leaders still living with outdated impressions of Americans."

The failed Olympic bid couldn't have anything to do with a bungled proposal, could it? It couldn't possibly be that Chicago-style politics is out of favor at the IOC, could it? It must be Bush's fault.

It is a bit ironic that the king-of-multiculturalism-at-all-costs, Jesse Jackson, is now angry that an ideal such as "diversification" of the Olympic host sites has led to his hometown losing their bid to host the games. Karma, man...

UPDATE: The Europeans concur - it had nothing to do with Bush, and everything to do with Obama. How else do you interpret a fly-in/fly-out pitch from a continent that will have hosted 3 out of 10 Olympic games between 1996 and 2016?

Good News for Josh and Me

2009-10-02T09:12:00.004-04:00

Turns out our hometowns are the best places to get jobs right now. The sad part is that it is for completely different reasons.

Seattle:

[Wall Street Journal] listed “Seattle's combination of a diverse high-tech sector, cultural life, access to rugged natural terrain and a strong university presence” as big draws.

Washington, DC:

Government hiring is projected to grow, and D.C. has jobs in lobbying, aerospace, contracting, and high-tech and professional services. And, of course, the service-minded flock to D.C.--most US nonprofits are based in the city.

Translation: Seattle actually makes a profit and has a diverse, attractive life outside of work. DC pretty much mooches off the rest of the nation for it's life, using taxes and government power to create a job base that wouldn't be there if market fundamentals were allowed to work. No mention of those hot, muggy summers in the analysis of DC quality-of-life.

Sorry, Josh. I couldn't resist.

The Insanity of the Olympic Bid Process

2009-10-02T08:51:00.004-04:00

Jim Caple has a nice column that sums up my thoughts exactly on the Olympic bid process and the 17 days of chaos that accompanies hosting the games.

Each new host city spends billions building facilities that will rarely, if ever, be used again (the famed Bird's Nest in Beijing isn't even being used for sports anymore). A Russian newspaper reported recently that Sochi might spend $33 billion for the Olympics (what, are they using the same folks who built Yankee Stadium?). And while Chicago's $4.8 billion bid more sensibly utilizes many existing structures, the entire Olympic bid process is insane. The investment simply isn't worth the enormous costs and headaches anymore.

To me, what's really destroyed the process beyond the money to win the bid and the indebtedness that comes to the winning city is the concept of the formal politicization of the final push for securing the bid. I say formal because I am not naive enough to believe that politics hasn't always played a part, but the directness of flying Vladimir Putin Barack Obama to overwhelm the Brazilian and Spanish bids is just crass. It smacks of how such nations behave in other aspects of international relations: we're big, we have outsized personalities, and no one else should get to participate.

Caple's suggestion of permanent host cities, and his suggestions for which cities should host, is excellent. The Olympics should be about the athletes, not the host country making a 17 day tourism pitch. Like most things in this economic crisis, it is time we rationalize our expenses and get rid of the unsustainable excesses of the past. I would like us to start at home, and formally jettison the Chicago 2016 bid. Sadly, it's likely the opposite will happen and Chicago will spend $4+ billion on corporate and sports welfare that could be better used for or by the residents of Chicago.

My Sentiments Exactly

2009-10-01T08:42:00.003-04:00

From the StephenatHome [i.e. Stephen Colbert] Twitter account:

"the only time i use recycled paper as toilet paper is when i wipe with paul krugman's new york times column"

Reason Magazine has a good link to the latest Krugman idiocy. After being such a deficit hawk during the Bush years, he seems willing to make any excuse for Obama's policy objectives - even blaming Bush for the continued deficits that Krugman so recently hated.

On the other side, Bruce Bartlet at Forbes makes the argument that "fiscal responsibility requires higher taxes" (HT: Adam). He makes a fair point - since the era of Reagan the GOP has been all too willing to cut taxes and not face the realtiy that spending needs to be cut too. He then goes on to argue that most Americans are unwilling to accept deep spending cuts, and thus raising taxes must be put on the table for fiscal conservatives. While he's right that balanced budgets are a core belief of conservatism to help ensure small government, he is wrong to take such a fatalist approach in the current situation. Times like these, where the average citizen is fed up with bailouts for failed businesses that rely on the common man's tax dollars, are ripe for a return true fiscal conservatism - balanced budgets through low spending.

I've said it a million times - the first party to jettison the identity politics and embrace social libertarianism and true fiscal conservatism will have a sustained majority for some time to come.

Dutch Lessons

2009-09-30T22:59:00.003-04:00

Here are some observations from my recent trip to the Netherlands:

I vastly prefer the older architecture of Amsterdam versus the newer architecture of Eindhoven. It's too bad because Eindhoven is only that way because of the Nazis, but that's the reality of the situation.
I appreciated the matter-of-fact nature of the Red Light District in Amsterdam. It was full of couples, even some children, and no one treated it like the pubescent giddiness an American would except for... well, the American tourists. In my Libertarian dream world, every city would have a Red Light District and free up the cops to go after real criminals instead of johns and pot heads.
The reality of the Anne Frank House was overwhelming. Reading such a great work is no match for experiencing it first hand. There is no way to describe the reality of walking in the same halls, touching the same counter tops, and running your fingers along the same walls as the Frank family. They also do a good job of extending Anne's message - one of religious tolerance and free speech - to a modern exhibit examining the conflicts of our time - privacy versus security, religious expression versus civil responsibilities, etc.
Dutch beer is NOT good. It's a flavorless lager, with Heineken being the best of the lot - which tells you how bad the rest of it is. Coming from a city that prides itself on flavorful beer, I had to find bars that could at least get me a Belgian wheat beer to not feel like I was drinking water.
I'd go back to Amsterdam for an even longer vacation in a heartbeat!

There's No Substitute For Good Product

2009-09-30T08:56:00.005-04:00

Gimmicks aside, there is no substitute for good product. GM has already abandoned it's experiment of selling vehicles on eBay (emphasis mine).

John McDonald, a GM spokesman, said rolling out the eBay program as another nationwide campaign could detract from the other programs. The eBay program, which launched Aug. 11, was the first sales program launched by the new GM as it came out of bankruptcy July 10. It was extended through the end of September.
The program saw 1.5 million unique Web visitors and generated more than 15,000 customer leads for dealers to follow up on, McDonald said. He didn’t know how many vehicles were sold through the program.
“We are calling it a success,” he said.

Only in Warren, MI is an unverifiable, unquantifiable sales campaign that is abandoned two months into its rollout considered a success. Is it any wonder why no private money came forth to prop up GM, and instead tax payers were forced into an unconstitutional bailout of a firm that should have been allowed to fail?

UPDATE: eBay marketing wasn't the only thing GM was dropping like a rock. Saturn is now a dead brand [HT: Jeremy]. Turns out the French guys running Renault-Nissan know a bad deal when they see one. I guess Saturn will have to cancel all those ads talking about "Saturn builds cars that Americans want to buy!"