Author: philg

After a slight contraction in 2009, Singapore’s economy is roaring back with GDP growth of close to 15 percent in 2010 (nytimes). How did people there manage to achieve this success? By U.S. standards, the government of Singapore is almost non-existent, consuming just 12.5 percent of GDP (source). If you scroll down to the bottom of this chart, you’ll see that the U.S. federal deficit is, at 10.5 percent of GDP, nearly equal to all government spending in Singapore. (Local, state, and federal spending combined in the U.S. is now at a non-WWII record of 44 percent (source).)

One would think that any debate about the likely effectiveness of increased government expansion here in the U.S. would include a discussion of how Singapore is succeeding, but I have not seen that in the news. Why would Americans not look to more successful economies worldwide for inspiration?

[As a side note, the CIA factbook for Singapore shows that the per-capita GDP of this once-poor country is higher than that of the U.S.: $50,300 compared to $46,400. The data have been tweaked for “purchasing power parity”, so it isn’t exactly clear who would find a Honda Accord more affordable, but it is nonetheless impressive that a country with no land and no natural resources could have surpassed the U.S., which has been gifted with (or stolen from the Indians) almost an entire continent to exploit.]

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A dermatologist friend sent me “I am Tier 1”, a story about how the insurance commission in Massachusetts ranked one doctor (Alan Rockoff).

[Note that in my health care reform article, I propose that we let consumers in a market vote with their spending as they do in the market for automobiles, for example.]

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It turns out that the Port Authority of New York and New Jersey has been operating two Sikorsky S-76 helicopters mostly for “security” at a cost to taxpayers of $4 million per year (nj.com story). Most of the 258 annual flights were weekday flyovers of airports to look for unusual activity (aero-news.net; the implication is that terrorists could do whatever they liked on weekends). If we assume that each flight was for one hour (more than enough time to visit all NY-area airports) and hug the docks), that’s a cost of $15,500 per flight hour.

The S-76 was designed for flights of 200 nautical miles through clouds, e.g., getting 12 oil rig crewmembers out across the North Sea. No private company would consider using a $10+ million S-76 for flying short trips in clear weather with just one or two passengers. Aside from the crushing capital and operating costs, the S-76 is notorious for poor visibility compared to simpler cheaper helicopters.

The operation is being shut down because it turns out that the flights have no value at all. So it is kind of an academic exercise to wonder how much it would have cost if they’d used a Robinson R44, which would have offered superior visibility and more than adequate performance to carry two observers (one on either side) plus a pilot. Nonetheless, let’s run the numbers. Various local flight schools would have been delighted to rent out an R44, with pilot, for $400 per hour (East Coast Aero Club charges $379/hour). So the mission could have been accomplished for approximately 2.4 percent of the cost that the government agency actually spent, resulting in saving approximately $4 million per year in operating costs and $12 million in capital expense.

This may be part of the problem with government stimulus. The government spends 40X more than it needs to in order to accomplish a task in an inferior manner (in this case using the wrong helicopter for the job).

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One of the things that I learned in Seattle is that an Intel SSD drive can speed up a personal computer by 3-10X, depending on the task. An SSD boot drive is apparently becoming standard for employee desktop computers at Microsoft. The question therefore is why isn’t it easy to order a desktop PC pre-configured with the operating system and applications on an SSD drive? Neither Dell nor HP, for example, tries to sell consumers machines that boot from an SSD drive (though Dell will sell “workstations” that boot from SSD and XPS laptops that boot from SSD). Given the huge performance boost that the Microsoft experts report from using the latest fancy Intel drive, why isn’t it something that almost everyone wants? (If the answer is that people need an extra terabyte or two for storing video, the PCs in question all contain enough room in the case for a $150 traditional hard drive in addition.)

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Folks interested in a Seattle get-together: Let’s meet at www.andaluca.com any time between 8 am and 10 am tomorrow morning (Thursday). The restaurant is downtown in the Mayflower Park Hotel and features free valet parking. Stop by for a coffee at least and a conversation about any of topics discussed in this blog.

[I apologize for having to move the time from afternoon to morning, but it turns out that we must depart tomorrow afternoon for beautiful and exciting Billings, Montana. There we will overnight in a Best Western before cranking up the little airplane at first light in hopes of getting a passenger back to the East Coast in time for a 3 pm wedding.]

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I suggest reading this interesting New Yorker article on the authentication of oil paintings.

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Web Operations: Keeping the Data On Time, a new O’Reilly book, arrived in last week’s mail. I have reviewed in http://philip.greenspun.com/book-reviews/web-operations

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I’m helping a friend get to Boeing Field on Wednesday, departing for a return trip to Boston on Friday morning. He’ll be enduring some meetings in the exurbs, which puts me in Seattle for two nights and 1.5 days with very little to do. I would appreciate suggestions for where to stay (neighborhood or specific hotel) and what to do (museums, concerts (anything from Bach to Stravinsky), etc.).

Also, please email if you’re interested in meeting up. I’m thinking that a coffee shop on Thursday late afternoon would be good.

Update: I’m staying at the Mayflower Park Hotel (the FBO has a good rate with them) and it is just for one night. That means the meeting-up time needs to be breakfast/coffee on Thursday morning. I was thinking 8-10 am so that people who need to be at work by 9 can show up and also people who like to sleep in can show up at 9 or 9:30. Suggested places? A quick search of Google Maps and Yelp reveals… librarybistro.com, eatatlowells.com, andaluca.com (in my hotel), cherryst.com (which location has the best seating and quietest acoustics?).

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On average, Americans who work in the private sector are struggling financially. Millions are unemployed and the rest may be looking at an additional decade of toil before they can retire (since their houses and 401ks are worth so much less). Should we feel sorry for these folks in the same way that we might feel sympathy for Zimbabweans or other victims of an incompetent government?

Arguing in favor of sympathy is the basic fact that these folks are suffering, albeit not as badly as a lot of Africans.

Arguing against sympathy is that we Americans voted for politicians who promised to (1) continue fighting two very expensive wars, (2) ladle out fantastic raises and pensions to public employees, and (3) spend most of society’s wealth on the world’s most expensive health care system. The politicians delivered exactly what they promised. If the economy isn’t growing and public employees must be continually enriched, that necessarily means that folks in the private sector must be gradually impoverished. We got what we voted for, so how can any of us aged 30 or older be deserving of sympathy? [younger folks didn’t have a chance to vote for the current batch of politicians so they arguably deserve sympathy for having to share a country with so many shortsighted old folks]

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A very smart friend was visiting from Manhattan this weekend. His proximity to Wall Street gives him a window into the world of finance. His tendency to be out of sync with the average American protects him from the herd instinct. Despite having a demanding academic science job, he has been a successful individual investor for a couple of decades. In the spring of 2008, with the Dow at 13,000, he moved all of his family’s investments into bonds.

When conversation turned to the latest sag in the stock market, he opined that much worse was yet to come and that the Dow might get back down toward 7000. He cited the moribund U.S. economy and the profligate U.S. government (people who argue for stimulus spending tend to underestimate the government’s ability to waste money, e.g., putting a 6-year-old girl on the no-fly list (story)).

I have trouble letting go of the Efficient Market Hypothesis. If the Dow is at 9700 right now then that is the best estimate of where it will be a few years from now (plus whatever the yield on a TIPS bond is, i.e., 1-2% per year). With the U.S. state and federal governments amping up taxes and handing out the money to the retired, the world’s least efficient health care system, and political cronies, and 15 million Americans unemployed, how can the S&P 500 not be dragged down? My argument is that most of the companies in the S&P 500 aren’t dependent on the continued prosperity of working Americans. General Electric can build factories in and sell products to customers in any part of the world that is thriving economically. Intel can sell processors to families in Turkey, Brazil, and India. Walt Disney can welcome visitors to its Shanghai theme park. Admittedly many of the companies in the S&P 500 would appear to be dependent on American consumers, e.g., Southwest Airlines or various insurers. But even these should still produce good profits. The U.S. economy may end up with big shifts in wealth, e.g., from workers to retirees, from the private sector to government employees, and from competitive industries to government-sponsored industries. The per capita income of the U.S. may fall, as the population increases and the GDP remains constant. But as long as GDP does not fall, the same amount of money is there circulating for a company to collect as profit. [In January 2009, I wrote a posting about how the U.S. economy does not need to crash or boom; it can simply slide sideways as England’s did for decades.]

What do readers think? What plausible scenario causes the multinational companies in the S&P 500 to become worth significantly less than they are now?

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