Month: October 2015

“The Law That Makes U.S. Expats Toxic” is a Wall Street Journal article by a former U.S. State Department diplomat. It covers what happens to American who want to earn a living in the global economy but get caught up in the 2010 Foreign Account Tax Compliance Act. (Personal story: A friend from Europe gave up his Green Card and moved back to Europe because his job was money management (of a small foreign fund) and the costs of compliance with Fatca ended up exceeding his total compensation.)

The author concludes that “The best solution is for the U.S. to join the rest of the world in taxing based on residency rather than citizenship.” I’m not sure that is practical given the uncompetitive tax environment of the U.S., e.g., compared to Switzerland (negotiable rates) or Singapore (top marginal rate of 20%), and how comfortable a Gulfstream G650 is. But on the other hand this will become an ever-larger issue as an ever-larger percentage of the world’s good jobs are outside of the U.S.

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Flight of Passage, by Rinker Buck, is a 1997 account of a 1966 trip that the author took with his brother Kern. The boys, age 15 and 17 at the time, were hailed as the youngest pilots ever to fly cross-country. They flew from New Jersey to California in one of the least capable airplanes of the day, an 85 horsepower two-seat Piper Cub with a cruising speed of about 75 mph. The first portion of the book is an interesting account of the boys learning to fly from their father, a larger-than-life former barnstormer and aerobatic T-6 pilot, while sharing a house and their parents with 9 additional siblings (11 kids total in an Irish-Catholic family).

The boys pay $300 for the Cub ($2,270 in 2015 dollars; a similar airplane would sell for $25-30,000 today), trailer it home, and spend the winter re-covering and otherwise sprucing it up (unclear what the legality of this was back then; today they would need to have been working under the supervision of an FAA-certificated A&P mechanic (probably the rules were the same back then but Buck glosses over who might have been supervising their work; perhaps the father)). The plane had no electrical system and therefore no radios, no navigational equipment, no lights for after-sunset operation, and no intercom for front-to-back communication. Without radios they had to avoid the biggest airports and, presumably, make advance phone calls whenever preparing to land at a towered airport (but mostly they went to uncontrolled fields, then as now in the majority).

According to the FAA’s online airmen registry, Charles Rinker Buck earned his Private pilot’s certificate in 1979 and never earned an instrument rating, Commercial or Instructor certificate. Nonetheless he is able to explain the aeronautical aspects of the trip fairly well. There are a few technical errors that the CFI in me feels compelled to point out. Buck asserts that landing a light airplane in a crosswind stronger than the manufacturer’s “demonstrated crosswind component” is illegal, but this is not true. Max demonstrated is simply what the manufacturer happened to demonstrate when the airplane was being certified. It might be the case that the airplane has sufficient additional rudder authority to be operated in a stronger crosswind and the FAA leaves the ultimate decision up to the pilot (more from AOPA). More substantively, Buck describes a North American continent that requires climbing to approximately 11,000′ to cross. In fact, as ferry pilots of feeble Robinson R22 helicopters know well, if one follows Interstate 10 the country can be crossed without climbing any higher than 5,000′ (and even the I-80 route requires a climb only to about 10,000′ to clear all of the passes comfortably). The Guadalupe Pass, which Buck describes as having crossed at 11,600′, was crossed just this month by a Robinson R22 pilot who said that he never went above 7,000′.

The boys added a huge amount of challenge to their trip by (a) rushing, and (b) ignoring the most important principles of mountain flying. Instead of waiting an extra day or two for clear dry weather in which to depart New Jersey or Indiana, the boys plunge ahead into low clouds, strong headwinds, and turbulence that literally shakes some parts of their plane apart. Instead of waiting an extra day in Carlsbad, New Mexico before going through the Rocky Mountains to get to El Paso, Texas, the boys cross during the worst heat and turbulence of a summer afternoon. (In my opinion the most important rules for crossing mountains in a light aircraft are the following: (1) pick a low altitude route so that airplane performance is at a maximum, (2) wait a few days if necessary for calm winds so that one does not get caught in strong downdrafts on the lee side of the mountains, (3) cross in the early morning so that temperature is at a minimum (maximizes air density and therefore airplane performance), (4) cross in the early morning when winds are typically at a minimum. By following these rules I have crossed quite a few mountain ranges in low-performance aircraft (albeit not quite as low as a Piper Cub!) without facing any real challenges or surprises.)

Americans, and therefore news media, didn’t have as strong an appetite for bad/depressing news in those days. In fact, according to Buck, the country was hungry for news about wholesome heroes. Therefore the trip turned into something of a media sensation despite the fact that the boys hadn’t planned it that way. Reporters were never interested in any technical aspects of the trip, nor what had transpired in the plane, but rather how the boys “felt.”

Despite the wholesome nature of the country, the U.S. Border Patrol was apparently on high alert in 1966. A swarm of government vehicles and armed agents surrounded the Piper Cub at a small airport in Arizona, wanting to take apart the airplane, which they believed had arrived in the middle of the night from Mexico. The boys’ fuel receipt and the testimony of the airport manager and local pilots did not convince the Federal agents to back off, at least at first. (See AOPA for what it is like today.)

Students of economics will appreciate that the budget for the entire trip was $300 (food, lodging when sleeping under the wing was impractical, gas for the Cub, etc.). That’s $2,270 in 2015 dollars. If the Cub were burning five gallons per hour and achieved an average ground speed against the typical west-to-east headwind of 60 miles per hour, that’s about 50 hours of flying times 5 gallons = 250 gallons of fuel to be purchased. If we assume $5/gallon as a typical small airport price, that’s $1250 for fuel and therefore it does seem as though the boy’s trip could be replicated for somewhere in the same cost neighborhood.

Pilots will appreciate this book, especially the audiobook version read by the author. A pilot today with a smartphone has a much easier time navigating than did these kids. Buck was the primary navigator for the journey and anyone who ever went through Private training will appreciate the challenge that he faced in keeping track of their position, especially when scud-running. Due to the family dynamics aspects and Buck’s writing, I would also recommend this book to non-pilots.

Highly recommended.

Related:

• AOPA story on Rinker Buck (erroneously states that Buck is one of 9 children; Wikipedia accurately states that he is one of 11)
• my own writing about flying

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Given the financial incentives presented to doctors I have always wondered why Americans aren’t getting surgery on a weekly basis. This New York Times article answers the question: at least in some parts of the U.S., we are!

Related:

• posting on American Economic Association conference (scroll down to the paragraph starting “Are doctors with their Hippocratic Oath immune to financial incentives? “)

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The killjoys at dxomark.com have put the iPhone 6s through its paces and its camera scores the same overall as the iPhone 6’s camera. More megapixels from a sensor of the same physical size turn out not to be useful.

The top-performing camera phone, according to dxomark, is the Sony Xperia Z5, which has a 1/2.3″ sensor. This corresponds to 6.3×4.72mm (about 30mm^2). Apple relies on a 1/3″ sensor, 4.8×3.6mm in size (17mm^2). Thus the Sony has roughly twice the sensor area.

Readers: Who has traded an iPhone 6 for a 6S? How does the real-world camera performance compare?

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light.co offers a $1,700 camera with 16 crummy little sensors and software to combine output from 10 of those at a time into an image that purportedly can compete with a full-size digital camera’s output.

I have a tough time imagining how the output from this little Silicon Valley miracle could be better than from a standard pocketable camera, e.g., the SonyRX100. Wouldn’t one good sensor be better than 10 tiny/noisy/bad sensors? On the other hand the Smartphone folks have shown that remarkable achievements are possible with tiny sensors, at least in bright daylight, and the L16 camera should tolerate water and dust exposure much better than the RX100, whose lens is pushed out with a motor every time the camera is turned on.

Perhaps this will be a great camera for casual use in a harsh environment. It doesn’t have the weight and size penalty of a sealed professional grade DSLR.

What does that leave us with? Burning Man!

Readers: What else is an exciting application for this new camera?

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The Weather Experiment: The Pioneers Who Sought to See the Future is not my favorite book but it does contain some interesting history.

At the time of the American Civil War people were only speculating about the size and function of the Earth’s atmosphere:

People still lived in general ignorance about the state of the upper atmosphere. No one knew for sure just how far the atmosphere extended. In the 1840s Edgar Allan Poe had written a story about a balloonist who had ascended to the moon, and although few thought this possible no one had actually demonstrated it was not. Over the century various estimates had been made of the height of the atmosphere. John Dalton had suggested about fifty miles, while FitzRoy thought the limit was more likely ten. The highest a balloon had reached was Gay-Lussac’s world record of five miles, and breaking this was one objective in the British attempts.

[James] Glaisher was in a perilous position [in a hot air balloon ride]. Mammoth had reached what is today called the ‘death zone’, a realm of atmosphere where the concentration of oxygen is not sufficient to support animal life. On the edge of the stratosphere, Glaisher’s body was shutting down. At 1.56 p.m., at an altitude of about 29,000 feet, the height of the newly triangulated tallest mountain in the world, Deodunga, or as it was later to be called, Everest – Glaisher’s mind went blank.

At roughly the same time people began looking into carbon dioxide:

On 7 February 1861, the evening before FitzRoy issued the first ever British storm warning to the north-east ports, John Tyndall, Professor of Natural Philosophy at the Royal Institution, stood to deliver the prestigious Bakerian Lecture at the Royal Society. Forty-one-year-old Tyndall was an Irish scientist and one of the rising stars on the London scene. He was a gifted experimenter, communicator and popular author, well known for his written accounts of his climbing exploits in the Alps, where he had summited many of the hardest peaks. Already he had been at the Royal Institution for about a decade and his reputation as a lecturer was well established. In a year’s time he would be invited to serve alongside FitzRoy, Glaisher, Herschel and Airy on the British Association’s Balloon Committee, but this night he had other things on his mind. Tyndall’s lecture was titled ‘On the Absorption and Radiation of Heat by Gasses and Vapours’, the latest update on a scientific enquiry that had been occupying him since 1859. Like Glaisher, Tyndall had developed an interest in the transfer of heat throughout the global system. And just as Glaisher had tracked the flow of radiation through solid bodies, Tyndall had resolved to do the same – but this time with gases. His interest was born of the realisation that for the earth to be hot enough to support life some of the gases had to trap and retain some of the sun’s heat. This seemed obvious but, as Tyndall realised, the question had been almost completely ignored by science. It was, he announced, ‘perfectly unbroken ground’. For two years Tyndall had sought to answer the question, testing which gases were the strongest absorbers of radiant heat – what we today call infrared radiation. He had constructed his apparatus at the British Institution, a rig which let him pass heat through tubes of gas and monitor the amount of absorption. The task had been difficult but he had stuck at it and from 9 September 1860 until 29 October he had ‘experimented from about eight to ten hours daily’. Now Tyndall was ready to reveal his results. He told his audience it seemed that a negligible amount of heat was soaked up by the typical atmospheric gases: oxygen, hydrogen, nitrogen. Other gases, however, had dramatic absorptive powers, as did water vapour. One of his discoveries related to carbonic acid (carbon dioxide). He was eager to correct a misapprehension: In the experiments of Dr Franz, carbolic acid appears as a feebler absorber than oxygen. According to my experiments, for small quantities the absorptive power of the former (carbonic acid) is about 150 times that of the latter (oxygen); and for atmospheric tensions, carbonic acid probably absorbs nearly 100 times as much as oxygen.

In the late nineteenth century the Swedish meteorologist Svante Arrhenius dabbled with the riddle, producing calculations on the correlation between carbon dioxide levels in the atmosphere and surface temperature on earth. It was not until 1938 that the subject was revisited again, this time by G.S. Callendar, a British steam engineer, who wondered what the consequences of a high-carbon atmosphere would be. By then Britain was producing about 250 million tonnes of coal a year, the burning of which along with other hydrocarbons was emitting increasing volumes of carbon dioxide into the atmosphere. Callendar calculated the upshot in temperature that should result from a 20 per cent rise in carbon dioxide levels and concluded that it was probably a good thing: rising temperature helping to stave off another ice age.

Who was enough of a systems thinker to wonder if perhaps we could have too much of a good thing?

The issue hit the political mainstream in 1988. That year saw Margaret Thatcher give an anxious address on global warming to the Royal Society, cautioning that humanity had ‘unwittingly begun a massive experiment with the system of the planet itself

[And of course, as with global warming, we have also ignored her expressed concern that “The problem with socialism is that eventually you run out of other people’s money.” (possibly never expressed in this precise form)]

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“Putting Numbers to a Tax Increase for the Rich” is a nytimes article aiming to quantify the richness of America’s rich bastards.

All of the data are misleading due to the fact that the Times uses average rather than media income. So the average after-tax income of someone in the top income quintile is $238,685. The typical person in that quintile is likely earning much less, however, because the average includes people who enjoy $50 million in a good year (perhaps an entrepreneur cashing out of ten years of investment in a startup).

It also turns out that the Times calculates “after-tax income” by looking only at federal income taxes. This makes it easier to conclude that a rich bastard could pay more without being discouraged from working. Thus a person in the 95-99% area, has an average pre-tax income of $405,492, pays federal taxes of about 25 percent, and ends up with an “after-tax income” of $303,273. But what if that person lives in Manhattan? New York state tax is roughly 8 percent of gross and New York City tax is about 3.65 percent of gross. Considering that state taxes are deductible for the purpose of calculating federal tax, let’s call this a 10 percent rake. Now the rich bastard has an average after-tax income of about $260,000. The rich bastard also has to buy some goods and services in Manhattan where sales tax is nearly 9 percent. Suppose that $100,000 is spent each year within the city, including on restaurant meals. That’s another $10,000 to the government, so the after-tax income is $250,000. Finally, if this person owns a condominium he or she will pay perhaps another $20,000 per year in property tax, about $5,000 of which will be refunded in the form of lower federal taxes. So the true after-tax income is $235,000 and the total tax rate is about 42 percent.

Suppose that the high income of this rich bastard did not go unnoticed in the world of romance. After 10 years of Upper East Side boredom, the spouse decided that it would be more fun to start having sex with younger companions and sued the rich bastard for divorce, obtaining custody of two children. Under New York family law, the victorious plaintiff would be entitled to 25 percent of the defendant’s gross income, a non-deductible $100,000 per year. Now the income after child support is $135,000. (Concrete example from the nytimes of a law firm partner earning $375,000/year who can barely afford to survive in Manhattan. This is partly due to the fact that he was mined out for $125,204 per year by a divorce plaintiff.)

Suppose that our example rich bastard is a male. Post-divorce he decides to start dating. His new friend becomes pregnant and decides that she wants to keep the kid but ditch the father. Now he is on the hook for 17 percent of 75 percent of his income (the 25 percent paid to his first plaintiff is deducted for the purposes of calculating child support). That’s a non-deductible $51,700. This leaves our rich bastard, the target of the Democrats’ proposed new taxes, with $82,300 in spending power with which to (1) sustain himself in the New York metropolitan area, (2) provide a place for children to stay every other weekend, and (3) pay whatever additional federal taxes are imposed by Congress.

[Note that, depending on the income of the first plaintiff, the example rich bastard might have less after-tax and after-divorce-litigation money. In addition to child support profits, the first plaintiff might be entitled to alimony of about 30 percent of the pre-tax income. This would be a tax-deductible $121,678 per year.]

Readers: What do you think of the nytimes analysis? Is the U.S. full of low-hanging fruit ripe for the picking by the IRS? Or does looking only at federal taxes grossly distort the data?

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I ran into a divorce and personal injury litigator at a party in Cambridge the other day (background on Massachusetts family law). Her most recent trial concerned the amount of alimony that a defendant who had reached full retirement age (67 currently) should pay. Under a 2011 law characterized by proponents as “alimony reform” (I personally reject that characterization since family law is pretty much a zero-sum game and what looks like a positive “reform” to a plaintiff will generally be a negative for a defendant, or vice versa), the defendant should have been able to stop paying the plaintiff. What did the judge decide?

First, a little background… about 30 years ago the plaintiff sued her husband. As is typical in Massachusetts, the plaintiff prevailed (obtaining the house, kids, cash) but the profitability of the whole enterprise was limited by the defendant’s below-average income. Stripped of daily contact with his children, his domicile, and most of his spending power, the defendant went over the border and moved in with his brother in a neighboring state, thus saying goodbye to the plaintiff and severing his ties with the children (consistent with the research results summarized in http://www.realworlddivorce.com/ChildrenMothersFathers: “Ten years after a marriage breaks up, nearly two-thirds of the children report not having seen their fathers for a year”). The plaintiff eventually learned that the defendant, together with his brother, had won his local state’s lottery and thus 20 years of substantial annual payments. She went back to court and sued for increased alimony and child support payments based on the new cashflow. “We were able to get almost 100 percent of the net lottery proceeds transferred to us,” said the litigator, “in a combination of child support and alimony. But there were a lot of hassles due to the interstate nature of the litigation.” My companions and I at the party congratulated her on winning what seemed like a complete victory. “My client did make one mistake,” she said ruefully. “She should have gone back to court to get her alimony increased when her children turned 23 and the child support payments stopped.”

The latest court proceeding was started by the former husband. “His income from wages was zero,” said the plaintiff’s lawyer, “and the lottery payments had ceased, but he was still under a court order to pay the same amount out of his Social Security and retirement savings.” The former husband sought to have the alimony terminated in accordance with the headline language of the new alimony statute. The former wife, who had never worked and therefore was not entitled to Social Security, sought to have the court order her ex-husband to keep sending checks in the same amounts, regardless of his new lower income or advanced age. The judge split the difference and ordered the man to keep paying the woman indefinitely, but at a reduced rate. (The fine print of all of these laws gives judges discretion to do more or less whatever they want.)

[Note that this is consistent with what a divorce litigator with 40 years of experience told us. “Statutory language changes, but there is no jury in a divorce lawsuit,” she said. “So if the Legislature gives the judge any discretion the outcomes won’t change. The judge has a certain idea of what a fair resolution looks like and, absent removing judicial discretion, the only thing changing the statute does is change what the judge writes to justify that outcome.”]

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We received a hardcopy insurance statement in the mail for our son’s first two days of life at a local community hospital. The “amount your provider charged” was $5,047. Blue Cross got a “discount” of $3,030. The total cashflow was thus $1,945 of which we paid $73 (Blue Cross says “Benefits are not available for routine services” and this was the full amount billed for “Hospital Services”). The printout says to expect a hardcopy bill to arrive in the mail from the hospital at a future date.

Now I’m wondering what function the retail price serves. Does Blue Cross pay attention to the $5,047 that the hospital wanted in order to pay $1,872? If Obamacare makes it illegal for Americans to refuse to purchase health insurance, why have a retail price at all? TIME says that roughly 10 percent of Americans are uninsured (August 12 article; students of government-media partnership will be interested to see that the journalists focused on the accomplishments of the Great Father in Washington: “Nearly 90% of of Americans Now Have Health Insurance”). That’s about 32 million people. But are those 32 million uninsured folks going to schedule a delivery at a private hospital like this one? And then have $5,047 that they are able and willing to pay?

[Note the that hoped-for $5,047 was on top of all of the maternity/labor/delivery costs. This is a bill for the child; the major expenses show up on the mother’s statement.]

• What other industry can afford to mail out a 4-page hardcopy bill for $0?
• America’s Efficient Health Care System: my $15 bill for a checkup (pre-Obamacare)
• An Obamacare Day
• Slam-dunk employment discrimination case against hospital maternity operations?

 

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New Yorker ran a story back in December 2014 about how Theranos, a Silicon Valley darling valued at $9 billion (the same as Sikorsky; Sheryl Sandberg and the New York Times would want us to remember that, had the company been founded by a man instead of a woman, it would be valued much more highly and therefore Elizabeth Holmes would be worth a lot more than $4.5 billion).

The killjoys at the Wall Street Journal today, however, report that getting regulatory approval for the new machine is proving challenging. Even worse, the true enemy might be Biology, that great humbler of scientists and engineers:

In 2005, Ms. Holmes hired Ian Gibbons, a British biochemist who had researched systems to handle and process tiny quantities of fluids. His collaboration with other Theranos scientists produced 23 patents, according to records filed with the U.S. Patent and Trademark Office. Ms. Holmes is listed as a co-inventor on 19 of the patents.

The patents show how Ms. Holmes’s original idea morphed into the company’s business model. But progress was slow. Dr. Gibbons “told me nothing was working,” says his widow, Rochelle.

In May 2013, Dr. Gibbons committed suicide. Theranos’s Ms. King says the scientist “was frequently absent from work in the last years of his life, due to health and other problems.” Theranos disputes the claim that its technology was failing.

The Journal made a disturbing chart showing the results of six tests by Theranos compared to results from traditional hospital tests. For those six tests (out of an unstated larger number), Theranos found that the patient was outside the normal range while the hospital tests were normal.

Perhaps this will end up as a good reminder to investors that when the FDA and Biology are involved, not every company can be a Tesla…

Some interesting reader comments from the Journal:

A woman with zero medical and engineering training claim invented a earth-shattering testing machine that beats all existing technologies and equipment that human race have accumulated so far. So she was born with all knowledge far surpassing human being has possessed. A very good theme for a sci-fi fiction.

Is she married? I’d be willing to take care of mansion and other domestic duties (hire her a fashion consultant, cook dinner, coordinate social calendar, etc.). Prenuptial agreement not required.

All, including the author, are focusing on the wrong issue. The fact is ALL of them: labcorp, quest and theranos are weak on accuracy. Results routinely come back with a HUGE range on the “answer”. The solution is implementing mass spectrometry to whatever test possible This is where diagnostics is moving. And one company, applied isotope tech, possesses the method which makes mass spectrometers more accurate (now testing human blood for metals). They are more accurate by far then all of them, including the reference labs theranos aspires to!

I had a very well respected and well published doctor tell me recently that he and his research team sent 3 tubes of the SAME PATIENT SAMPLE to three different labs, and got back wildly different results on a mass-spectrometry assay (which is supposed to be the gold standard for this particular test, and more accurate than the radioassay). One result varied by 100% another by close to 50%. One reason results have to be always interpreted within the lab provided reference ranges, but even that, do not assume the result you receive is pinpoint accurate. It may not be. Blood tests are good at detecting things wildly out of whack, and within closer thresholds to normal ranges treat cautiously and retest at an interval.

Interesting article, of course what’s driving this want to be IPO is the opportunity to exploit the already ridiculously expensive Lab Corp / Qwest-for higher prices, market. Recent lab script from my doctor produced a quoted 1200 dollar lab corp “cash” price while internet company, Private MD, (using Lab corp drawing center) was 330, herein lies the problem, somebody’s making money at 1200 bucks for, in this case, Male Hormone panel tests. Where is the economy of scale ? It seems the more consolidated these companies become the ore expensive their product becomes, go figure. Anyway, we should all hope the Theranos’s of the world succeed, we need the competition.

I did a medical residence in clinical pathology (lab medicine). I worked in a major hospital lab for 2 years. I practiced medicine for more than 30 years. I have reviewed test results for thousands of blood samples. It is difficult to make generalizations from one test result, but here are ideas for future review. In general, blood test results for calcium are accurate and rarely outside the “normal = reference” ranges. This is because the body carefully regulates calcium in blood. A high calcium far outside normal range is unlikely. It is rarely affected so much by fasting or diet or medications. All results are consistently elevated (WSJ graph). Usually means sample became concentrated during extraction, storage, etc. I agree that now labs draw too much blood. Personally, I require lab drawing on pediatric tubes, and only as much as needed x tests (which I know). However, tiny draws may alter blood chemistry.

[Update, 10/16: “Hot Startup Theranos Dials Back Lab Tests at FDA’s Behest” is a WSJ follow-up story subtitled “Firm has stopped collecting tiny vials of blood drawn from finger pricks for all but one of its tests.”]

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