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Back in December I wrote a post about some economists who remind Americans that, after adjusting for population growth, our economy is not in fact growing and that our expenses for healthcare, housing, and education are “soaring”.

A friend recently shared Scott Alexander’s “Considerations on Cost Disease,” which is along similar lines.

On our public schools:

Costs really did more-or-less double without any concomitant increase in measurable quality.

So, imagine you’re a poor person. White, minority, whatever. Which would you prefer? Sending your child to a 2016 school? Or sending your child to a 1975 school, and getting a check for $5,000 every year?

On universities:

Inflation-adjusted cost of a university education was something like $2000/year in 1980. Now it’s closer to $20,000/year. No, it’s not because of decreased government funding, and there are similar trajectories for public and private schools.

I don’t know if there’s an equivalent of “test scores” measuring how well colleges perform, so just use your best judgment. Do you think that modern colleges provide $18,000/year greater value than colleges did in your parents’ day? Would you rather graduate from a modern college, or graduate from a college more like the one your parents went to, plus get a check for $72,000?

(or, more realistically, have $72,000 less in student loans to pay off)

My uncle paid for his tuition at a really good college just by working a pretty easy summer job – not so hard when college cost a tenth of what it did now.

On health care:

The average 1960 worker spent ten days’ worth of their yearly paycheck on health insurance; the average modern worker spends sixty days’ worth of it, a sixth of their entire earnings.

Countries like South Korea and Israel have about the same life expectancy as the US but pay about 25% of what we do.

On building a subway system:

[the original cost of building New York City subway lines] looks like it’s about the inflation-adjusted equivalent of $100 million/kilometer today, though I’m very uncertain about that estimate. In contrast, Vox notes that a new New York subway line being opened this year costs about $2.2 billion per kilometer, suggesting a cost increase of twenty times – although I’m very uncertain about this estimate.

Maybe this is all fine because we’re paying ourselves more?

health care and education aren’t paying their workers more; in fact, quite the opposite.

Conclusion:

If some government program found a way to give poor people good health insurance for a few hundred dollars a year, college tuition for about a thousand, and housing for only two-thirds what it costs now, that would be the greatest anti-poverty advance in history. That program is called “having things be as efficient as they were a few decades ago”.

Right now the standard of living isn’t just stagnant, it’s at risk of declining, and a lot of that is student loans and health insurance costs and so on.

Readers: What do you think of Scott Alexander’s analysis? He admits that he has no solutions to offer (though perhaps returning education and health care to the market economy would be a start?).

Related:

• my health care reform article from 2009 where I asked “Who Voted to Spend All of Our Money on Health Care?”

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Continuing my report on Eccentric Orbits: The Iridium Story, one of the Wall Street Journal “20 books that defined our year” for 2016.

The central figure in the book is Dan Colussy, a former Coast Guard officer who ran Pan Am for 10 years and then did a rollup of government contractors called United Nuclear Corporation, sold to GE in 1997.

The central villain is Motorola. They had insurance against their satellites falling out of the sky and hitting people but it wasn’t of unlimited duration. When Iridium went bankrupt, after paying out most of the funds raised to Motorola itself, the Motorola executives desperately wanted to de-orbit the $6 billion worth of satellites, thereby insuring that their investors and partners (the gateway owners, the handset manufacturer Kyocera, et al.) would be left with nothing.

Who was partying with the bondholders’ cash during the Chapter 11 proceedings that started in August 1999?

The legal profession was very happy to assist in the demise, restructuring, and rebirth of Iridium, and by one estimate the lawyers were burning through $4 million a month in fees approved by the bankruptcy court. You had lawyers for Iridium, lawyers for the creditors, lawyers for Motorola, lawyers for Boeing, and lawyers for every gateway. You had lawyers on staff and outside lawyers for specialized matters like licensing and insurance. The White House counsel was involved, as were the employees of the biggest lawyer of them all, Attorney General Janet Reno. There were lawyers from the Departments of Commerce, Defense, State, and Treasury, including one—David Cohen—whose title was Senior Counsel to General Counsel in the Office of the General Counsel. Colussy hired lawyers to deal with the FCC, the various aviation insurance companies in Paris and London, and the International Telecommunication Union in Geneva.

What was the risk? The good news for fans of climate change fans is that the “science was settled.” After all, the formulae for orbital mechanics go back to Isaac Newton, 1684-7. Estimate #1:

[NASA] said the chances of being hit by falling debris would be 249 to 1, with the chance of an actual death at 40,000 to 1. The NASA analyst believed that, in addition to the titanium fuel tank, five other parts would survive reentry: the battery, three structural brackets, and the electronic control panel.

Estimate #2:

Risk assessments carried out by aviation insurance experts hired by Boeing estimated the probability of personal injury from de-orbiting the Iridium satellite system at 1 in 1.063 trillion.

Nobody ever figured out how to reconcile these apparently conflicting results.

No technology is so beautiful that it couldn’t be ruined by software developers:

Each country billed its Iridium phone service in local currency, and each customer had a choice of four different service plans. That meant that a call could originate in a country licensed to use Zambian kwachas, go through a gateway priced in Brazilian reals, and terminate over landlines priced in Peruvian nuevo soles. If the phone had been purchased in, say, Oslo, then all of this would have to be fed into the Reston computers, where it was converted into South African rands for the originating gateway and Saudi riyals for the gateway owners, translated into American dollars for Iridium, and summarized in a monthly bill denominated in Norwegian kroner. The diciest part of the whole system was the terminating leg of the call—the part that continued on land after the satellites passed it down. These “tail charges” could be as low as 4 cents a minute or as high as $2.50 a minute, depending on where the call ended up, and that was on top of the already exorbitant Iridium per-minute charges—anywhere from $3 to $7. Iridium had hired Andersen Consulting to program ten million lines of computer code for the billing system, but the system was unstable, functioning so erratically that Leo Mondale eventually developed an in-house Excel system that worked just as well. Naturally the customers were annoyed by the unpredictability of it all, and one of the first decisions Colussy made was to change all billing to one price and one plan. Iridium would get 80 American cents per minute, period. Service providers could charge whatever they wanted—most charged around $1.50—but the wholesale price was 80 cents. (Ten years later, that was still the Iridium price.)

The U.S. government was an important future customer, but because hadn’t yet invaded Afghanistan or Iraq, people in Washington and at the Pentagon didn’t feel a huge urgency. The U.S. government was also critical for dealing with Motorola, which insisted on a total release of liability above and beyond what any commercial insurance policy might cover.

The Washington bureaucracy fully deserved its reputation, and any agency with the word “license” or “permit” in its charter was bound to be staffed by an army of people whose deliberately measured passive-aggressive voices threatened to put you to sleep at any moment. The goal of the process seemed to be the collection of bulky brown folders full of data.

Colussy hires the right lobbyists, though

… senior partner at the vast Sidley Austin firm, to carry his case before the FCC, the insurance companies, and any other regulatory agencies that cropped up and to ensure that all the licenses were transferred. In the rarefied world of “regulatory enforcement law,” Carter Phillips was king, having been an Assistant Solicitor General before going into private practice, and currently holding second place on the all-time list of cases argued before the Supreme Court (in excess of fifty)—cases touching such obscure and complex parts of the federal bureaucracy that, if placed end to end in a bound volume, would render the most dedicated law student comatose.

Eventually he gets to the right person in the Pentagon:

In many ways a meeting with the Deputy Secretary had an air of seriousness that meetings with the SecDef lacked, mainly because you knew that, at the end of the meeting, the decision was likely to be made one way or the other. The SecDef was the person you talked to at the beginning of a process. The DepSec was the last person you talked to.

“I have a message for your CEO,” said [Rudy] deLeon. “Tell Mr. Galvin that if I hear one more fucking threat to bring these satellites down, then his corporation is going to have a really hard time doing business with the Pentagon in the future.” The room went still. “I will give him that message,” said Schaffner. “All right,” said deLeon, “we should all now work together to get the constellation indemnified so that we can move forward without destroying it.”

More than a year after the bankruptcy filing, the Pentagon wakes up a bit:

in October [2000], USS Cole, a guided-missile destroyer out of Norfolk, Virginia, was going through a routine refueling stop at the port of Aden, in Yemen, after coming through the Suez Canal. It had pulled up next to a “dolphin” platform—the equivalent of an offshore gas station—… Forty-eight minutes after refueling began, an inflatable small craft manned by Ibrahim al-Thawr and Abdullah al-Misawa was seen pulling alongside the Cole by the duty officer. Al-Thawr and al-Misawa both stood at military attention and saluted as they approached. What was impossible to see from the deck was that the two men were standing on top of 250 kilograms of composition C-4 plastic explosives, and once they pulled alongside, they used a detonator to blow a sixteen-hundred-square-foot gash in the side of the Cole, directly opposite the mess hall, while most of the crew was at lunch. The two al-Qaeda bombers died instantly, and the Navy casualty toll would end up being seventeen dead and thirty-nine injured. … But the communications center aboard the ship had been disabled by the explosion, so his only contact with the Cole was through a single phone, borrowed from the U.S. embassy—an Iridium phone.

Colussy was trying to get a contract from the Feds for $72 million for 20,000 phones, to be used worldwide, and unlimited minutes over a two-year period. (That’s $150 per month per user.) The military’s proposed alternative was going to cost at least $10 billion to construct. The repair of the Cole alone cost $250 million (source). Despite the comparatively miniscule cost of the Iridium contract, it seemed that the government had endless file cabinets full of bureaucrats who needed to look at it. This gave competitors time to poke around and lobby as well (it seems that senators were cheaper to buy than satellites):

Unfortunately, Senator Ted Stevens and Representative Jerry Lewis were not going away. Keith Bane, newly energized by the prospect of McCaw owning Iridium, had Motorola lobbyists in Washington working on Stevens, and even volunteered to make a call to the senator himself. The grassroots efforts in Stevens’ home state were starting to work as well. Sam Romey, a rough-and-tumble mountain man and service provider in northern Alaska, was so infuriated by the Stevens-Lewis letter that he had rounded up a contingent of Alaska State Troopers to talk to Stevens. But Bernie Schwartz wasn’t defeated so easily. One of the most powerful Democrats in the Senate—Ted Kennedy of Massachusetts—was now lobbying for Globalstar, calling the Pentagon to ask questions, but even that was not as surprising as the fact that one of the most powerful Republicans in the Senate had jumped onto the Schwartz bandwagon as well—Trent Lott of Mississippi.

Back in Washington, Dave Oliver called Colussy to say, “I have neutralized the Democratic side in Congress”—but now Globalstar had a new ally in the form of the Office of Management and Budget (OMB). For weeks Oliver and deLeon had been coordinating all the approvals Iridium would need through a group of twelve agencies and departments, and there had been dozens of e-mails, memos, and PowerPoint presentations as they got ready for the showdown meeting in the Situation Room. (Dannie Stamp called it “organizing the circle jerk.”) But that debate had occurred without involving OMB. Now OMB had announced its intention to oppose the Iridium deal. Bringing OMB up to speed was like starting the whole process all over again, with every policy wonk in the city now alerted to a unique situation that read like a case study at the Kennedy School.

And then, as if the story couldn’t get any stranger, word came from Isaac Neuberger that weekend that President Clinton and [Motorola CEO] Chris Galvin were playing golf together in Vietnam. What he didn’t say was that on the golf course earlier that day, Galvin had spent most of the round telling Clinton that it was better to let the satellites be destroyed, because they had a life span of only five years anyway and some of them had already been flying for three years, so it was silly to go through all these machinations in Washington just to keep a constellation alive that couldn’t be replaced as satellites went out of commission. After all, who was going to throw another $6 billion after the $6 billion that had already been spent? Clinton was “spooked” by the remarks, according to Neuberger, and passed them along to Sperling.

Sperling was still jet-lagged from his 3:00 a.m. touchdown from Vietnam when he arrived at the West Wing to chair the Situation Room meeting on November 20. Keith Bane’s de-orbit deadline was two days away, and the battle lines had been clearly drawn. There were twenty-eight people present from nine departments and agencies, but only two mattered. The Office of Management and Budget was determined to change this deal or get rid of it entirely, and the Pentagon was determined to make it happen.

All of the alternatives to Iridium were technically inferior or still on the drawing board, so no matter how many politicians they bought the competitors couldn’t quite kill Iridium, e.g., Ted Stevens had to back off when Alaska State Troopers and natives told him that Iridium

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My black diamond-capable host in Beaver Creek broke his rib falling face-down on a cat track about two weeks before I arrived. Conversation one morning:

• “I rolled over in bed and heard a crack. I think I broke my rib again.”
• “That’s terrible. I’m sorry to hear it. What can do you to help it heal?”
• “There are really no medicines. You just have to give the bones time to knit together. What I need is something to keep me from rolling over in bed.”
• “You could take a Viagra every night at bedtime.”

[Some credit due to Kevin Fitzgerald, the world’s funniest veterinarian.]

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My cold wasn’t getting any better after two weeks so I went to the doctor. The receptionist asked for my insurance card. This is a “silver” Obamacare policy that costs $8,460 per year. I noticed that the co-pays are now higher than what the corresponding services typically cost not that long ago (and therefore higher than the market price today in a lot of rich countries). A generic prescription is $20; branded drugs will be $60 or $90 if they are covered at all. An office visit is $30 or $50. A few stitches at the “ER”? $700 co-pay.

My appointment was right after the lunch break so I was seen almost as fast as a dog would be seen at a vet. A sinus infection was diagnosed. “I used to prescribe Erythromycin for this,” the doctor said, “and it was a couple of pennies a pill. Now it is $200 for a course so I’m going to give you a Z-pack.” How was it possible for a generic to cost $200? “I think the generic manufacturer was acquired.” (Medscape says that “For example, erythromycin in 500-mg tablets had three increases of more than 100%. Its price increased from 24 cents per tablet in 2010 to $8.96 per tablet in 2015.” while Wikipedia gives the wholesale price at 3-6 cents in countries not subject to U.S. government regulation.)

[Separately, I posted this story on Facebook and a passionate Hillary Clinton supporter living in the Bay Area responded with

I know it’s crazy. Just this week I slightly scratched my back bumper on my car, but because my car insurance has a $500 deductible, I had to pay the whole thing myself. And to think I pay $1700/year in car insurance for me and my wife… clearly I’m losing money on this deal!

(or, you know, that’s how insurance works.)

Is the analogy apt? I haven’t had any health problems in the last two years nor changed my plan or vendor yet the cost of insurance has doubled while the emergency room deductible went from $100 to $700. I haven’t seen car, home, or aircraft insurance rates rise. In fact, my Obamacare policy now costs about the same as what a private owner would pay for insurance on a $2 million turbine-powered aircraft in which as many as 11 people might be killed if the single non-professional pilot should make a mistake. Thus it now costs as much to insure someone against the hazard of falling into the hands of the world’s least efficient medical system as it does to insure 11 people against the hazard of flying through the air at 300+ mph.]

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I returned to Beaver Creek this season, visiting friends who rented a townhouse at Arrowhead for six months. Here are some tips that I garnered.

First, although the altitude is not as high as some Colorado resorts (e.g,. Breckenridge), it is still a killer for most folks who live at sea level. Livestrong.com tells fit runners “It takes your body about three to six weeks to fully acclimate to high altitude” and “Dehydration and acute altitude sickness symptoms are more likely to occur within the first one to two weeks of altitude exposure.” The New York Times reports that “among visitors to Colorado’s Summit County — location of the ski resorts Breckenridge, Copper Mountain, Arapahoe Basin, Loveland and Keystone — 22 percent of those staying at 7,000 to 9,000 feet experienced [acute mountain sickness]”.

I would strongly recommend the following procedure for adjustment:

• Day 1: arrive Denver and sleep in Denver
• Day 2: drive rental car up to the Vail Valley and sleep as low as possible, e.g., at the Westin in downtown Avon (gondola to the lift), or at Arrowhead (a separate mountain that has been integrated into Beaver Creek). These options are at 7,400′ above sea level rather than 8,100′ in Beaver Creek or at the Bachelor Gulch Ritz.
• Day 3: snowshoe from Bachelor Gulch ($40, leaves at 10:30 am) or poke around the various towns.
• Day 4: ski, but try to stay on the lower part of the mountains

If you’re a beginner by Western standards (maybe doing the blue “intermediate” trails in Eastern resorts), look at the Sawbuck trail from Bachelor Gulch (top = 9,560′) and also perhaps Little Brave from Arrowhead (top = 9,100′). By Day 5 or 6 you might be sufficiently adjusted to the altitude that you can do the beginner trails (substantially easier) at the top of the mountain, coming down from 11,400′ to the top of the Centennial gondola (which you’ll ride down) at 10,200′.

Beaver Creek is a bad choice for ski school in my opinion. It takes about one hour to get organized and actually start skiing in the group lessons. Private lessons are ruinously expensive (about $1,000 per day). Take your lessons at a place like Mt. Wachusett in Massachusetts ($90 for a one-hour private lesson; $160 for a two-hour lesson).

[Note that if you are looking for a good beginner resort with lower elevations, Sun Valley, Idaho is a great choice. The base is 5,920′ and the top of the beginner mountain (Dollar) is 6,638′. Whistler in Canada is even better; you’ll sleep at about 2,000′ above sea level! Just hope that it doesn’t rain and turn the mountains into an ice sculpture… See Why do flatlanders go to Colorado to ski when they could go to Whistler instead? Another idea would be to fly to Salt Lake City and sleep there at 4,200′ while commuting to the various resorts that are less than an hour’s drive away. Finally, there is Banff, where the base is about 5400′ above sea level.]

As last year, I met a lot of interesting people here. My award for “best-planned life” goes to an orthopedic surgeon who lives and works locally. Every time the lift starts up it is generating inventory! I met him as he was coming down Arrowhead at 6 pm. How is that possible when the last lift is at 3:30 pm? He and two friends had walked up with skins on their skis. After a one-hour climb from 7,400′ to 9,100′ they skied down the Cresta trail (marked “blue” for intermediate), with the doctor’s faithful Malamute running behind. This fit doctor is in his early 50s and characterizes the Vail Valley as “a full-time adult playground”. If he gets bored with the local mountains he can move to any ski resort in the United States. If he decides that it is time for some sun, he can work at the beach in Hawaii or Florida. (Opposite end of the spectrum: computer nerd. See, for example, this article by a woman who worked at Uber. She spent a year of her life at a company that she hated. When she is the doctor’s age she probably won’t be able to get a job. She will never earn as much as the doctor and she’ll live in places with much higher costs, e.g., for real estate and taxes.)

In the hot tub at the Westin in Avon I met a Long Island dentist and his teenagers. The boy wants to be an engineer so I suggested Olin College of Engineering. The 13-year-old wants to be a divorce litigator. I suggested that she compare state-by-state family law carefully when she graduates and pick a winner-take-all state if she wants to make $800 per hour (Colorado is a bad choice for a litigator, though still oftentimes a reasonable choice for a plaintiff; on the lift we met a Swedish immigrant whose American wife sued him. He got a rude education in the difference between Swedish law and U.S. law! Now he is sorry that he is stuck in the U.S. as a part-time parent while paying more in child support than would the richest father in Sweden.)

A young woman who works at Dick’s Sporting Goods came up from Denver for the day and said that the one great thing about a retail job was that you have some weekdays off to ski the less-crowded slopes. She had previously lived in Salt Lake City and loved the proximity to the ski resorts, but couldn’t make friends. “It’s very cliquey.”

We had dinner with a never-married woman in her late 50s who runs a business here. She never had children and is “looking for a soul-mate.” She recently broke up with a guy because he was “narcissistic”. Asked for an example she cited that she texted him to break up and he responded with “Let’s talk about this when I’m back from this trip.” Why was it narcissistic to respond to a text with a text? “Instead of calling me he wanted to get together on his schedule.” Hearing about Real World Divorce, she objected to the idea of studying the cash incentives of U.S. family law on the grounds that life should be all about feelings and romance. This despite the fact that most of the guys in her age range that she talked about had been sued by divorce plaintiffs and, in some cases, had been the subject of domestic violence allegations and restraining orders as part of the divorce lawsuit. As a business person, could she not see that it would at least make sense to try to live in a jurisdiction where the prevailing family law did not give a spouse (soulmate?) an incentive to file a lawsuit? The answer turned out to be “no.” It was better to go through life in blissful ignorance of everything divorce-, custody-, or child-support-related.

An Argentine college student working in a Vail shop on what was, to her, summer break, said that she liked almost everything about the U.S. except “the Post Office; I’ve never seen anything so inefficient” and “the portion sizes; one piece of pizza is too much for me here while in Argentina I would eat three. What’s wrong with you guys?”

[I surveyed a handful of the foreigners working seasonal jobs here regarding “what would happen if you got pregnant with a Ritz-Carlton guest, went home to give birth, and continued to live in your home country.” Their estimates of the total cash obtainable under the Colorado child support guidelines ranged from $0 to $90,000 ($5,000 per year for 18 years) with $0 being the most popular number. None had any clue that there were U.S. taxpayer-funded workers whose job it would be to get them money. (In fact, foreigners residing in a foreign country are just as entitled to receive child support cash as American citizens residing in the U.S. and the total revenue obtainable would be at least $547,560, a sizable sum in Argentina, for example. Profits would be much larger if the pregnancy occurred with a high-income partner at a ski resort in California or Utah.)]

I was happy to see my friends but I do prefer Sun Valley. The Vail Valley has a lot of the services of a city, e.g., cultural performances, restaurants, Costco, etc. It is a lot livelier than Sun Valley but also people seem to come for shorter stays. The pace is therefore somewhat frenetic by comparison. The slopes aren’t crowded by Eastern standards, but the towns have a Harvard Square-like feel.

[How was the skiing, you ask? As I noted on Facebook, Beaver Creek Ski Patrol watched me coming down a green trail and then set me up with Ron, a semi-retired physician:

]

Related:

• Choose a career by working for a season in a ski resort?
• Ski resorts are fat targets for employment litigation?
• How do people mix alcohol and skiing?

 

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Hawaii had a stable society, culture, religion, and language for at least 500 years (Wikipedia). Then the haole immigrants showed up. From Lonely Planet Hawaii:

The missionaries found one thing that attracted avid, widespread interest: literacy. The missionaries formulated an alphabet for the Hawaiian language, and with this tool, Hawaiians learned to read with astonishing speed. In their oral culture, Hawaiians were used to prodigious feats of memory, and aliʻi understood that literacy was a key to accessing Western culture and power. By the mid-1850s, Hawaiʻi had a higher literacy rate than the USA and supported dozens of Hawaiian-language newspapers.

Conversion to a Western-style property system didn’t work out well for the natives:

Amid often conflicting foreign influences, some Hawaiian leaders decided that the only way to survive in a world of more powerful nations was to adopt Western ways and styles of government. Hawaiʻi’s absolute monarchy had previously denied citizens a voice in their government. Traditionally, no Hawaiian ever owned land, but the aliʻi managed it in stewardship for all. None of this sat well with resident US expatriates, many of whose grandparents had fought a revolution for the right to vote and to own private property. Born and raised in Hawaiʻi after Western contact, King Kamehameha III (Kauikeaouli) struggled to retain traditional Hawaiian society while developing a political system better suited to foreign, frequently American tastes. In 1840 Kauikeaouli promulgated Hawaiʻi’s first constitution, which established a constitutional monarchy with limited citizen representation. Given an inch, foreigners pressed for a mile, so Kauikeaouli followed up with a series of revolutionary land reform acts beginning with the Great Mahele (Great Division) of 1848. It was hoped the Great Mahele would create a nation of small freeholder farmers, but instead it was a disaster – for Hawaiians, at least. Confusion reigned over boundaries and surveys. Unused to the concept of private land and sometimes unable to pay the necessary tax, many Hawaiians simply failed to follow through on the paperwork to claim titles to the land they had lived on for generations. Many of those who did – perhaps feeling that a taro farmer’s life wasn’t quite the attraction it once was – immediately cashed out, selling their land to eager and acquisitive foreigners. Many missionaries ended up with sizable tracts of land, and more than a few left the church to devote themselves to their new estates. Within 30 to 40 years, despite supposed limits, foreigners owned fully three-quarters of the kingdom, and Hawaiians – who had already relinquished so much of their traditional culture so quickly during the 19th century – lost their sacred connection to the land. As historian Gavan Daws wrote, ‘So the great division became the great dispossession.’

Haoles weren’t content to overrun the islands themselves:

The natural first choice for plantation workers was Hawaiians, but even when willing, they were not enough. Due to introduced diseases like typhoid, influenza, smallpox and syphilis, the Hawaiian population had steadily and precipitously declined. By some estimates around 800,000 indigenous people lived on the islands before Western contact, but by 1800 that had dropped by two-thirds, to around 250,000. By 1860 Hawaiians numbered fewer than 70,000. Wealthy plantation owners began to look overseas for a labor supply of immigrants accustomed to working long days in hot weather, and for whom the low wages would seem like an opportunity. In the 1850s wealthy sugar-plantation owners began recruiting laborers from China, then Japan and Portugal. After annexing Hawaii in 1898, US restrictions on Chinese and Japanese immigration made Oʻahu’s plantation owners turn to Puerto Rico, Korea and the Philippines for laborers.

Haole immigrants gradually decided that they needed political control:

The 1875 Treaty of Reciprocity, which had made Hawaiʻi-grown sugar profitable, had expired. Kalakaua refused to renew, as the treaty now contained a provision giving the US a permanent naval base at Pearl Harbor – a provision that Native Hawaiians regarded as a threat to the sovereignty of the kingdom. A secret anti-monarchy group called the Hawaiian League, led by a committee of mostly American lawyers and businessmen, ‘presented’ Kalakaua with a new constitution in 1887. This new constitution stripped the monarchy of most of its powers, reducing Kalakaua to a figurehead, and it changed the voting laws to exclude Asians and allow only those who met income and property requirements to vote – effectively disenfranchising all but wealthy, mostly white business owners. Kalakaua signed under threat of violence, earning the document the moniker the ‘Bayonet Constitution.’ Soon the US got its base at Pearl Harbor, and foreign businessmen consolidated their power.

Native Hawaiians now face one of the toughest real estate markets in the country:

In 2014 Hawaii was ranked the healthiest state in the nation, with high immunization rates and lower than average rates of smoking. Over 90% of residents have graduated from high school, and nearly 30% have a bachelor’s degree or higher (both above the national average). Unemployment, which dropped to 4.3% in mid-2014, and violent crime rates are also lower than the national average. Despite the mass quantities of Spam consumed in the islands, Hawaii had the second-lowest obesity rate in the US in 2013 – only Colorado, another outdoors-oriented lifestyle state, did better. In 2012 Hawaii’s median annual household income ($66,259) ranked sixth and its poverty rate (11.6%) was seventh lowest among US states. Those last statistics, however, gloss over glaring inequity in the distribution of wealth. There are a large number of wealthy locals and mainland transplants with magnificent estates and vacation homes skewing the average, while a much larger number of locals, particularly Pacific Islanders, struggle with poverty and all the social challenges that come with it. The state is currently trying to control one of the highest rates of ice (crystal methamphetamine) abuse in the US, a problem that leads to illness, unemployment, robberies and violent crimes. Homelessness remains another serious concern: on average, more than 6300 people are homeless statewide. Most telling about the cost of living in Hawaii is the following statistic: up to 42% of its homeless people are employed, but still can’t make ends meet. Sprawling tent communities have popped up at beach parks and other public areas. Every now and then police disperse them, but the problem is never solved – only moved. Hale o Malama, the state’s new strategic plan for ending homelessness, aims to more closely coordinate among city, county, state and federal agencies that offer emergency housing, medical services and social support to Hawaii’s homeless population. At the same time, the state is giving free plane tickets to some homeless people in Waikiki so that they can fly back to wherever they came from on the mainland – a proposal that is politically controversial, not to mention expensive.

[The above excerpt is kind of interesting for the use of the word inequity, “injustice or unfairness”, to characterize an unequal situation. It is a “glaring” injustice that the person who works 80 hours per week running a business has a higher spending power than the person who collects SSDI and relaxes on the beach.]

Haoles don’t seem to feel guilty about having grabbed this prime land and then paving over paradise with Walmart and Costco parking lots They point to Western education and medicine as advantages for the native Hawaiians. Yet the Hawaiians could have gotten everything useful from the West via trade, hosting Westerners as visitors and tourists, and sending Hawaiians out to Western schools. One historian there said that the U.S. was the last country on Earth that the Hawaiians wanted to be part of. Great Britain, for example, would have been much higher on their list of countries with which to ally.

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The latest aircraft industry report (everything but airliners and military fixed-wing money pits) is out with sales numbers for 2016. We keep hearing about how the rich bastards are getting richer, but Gulfstream deliveries fell from 154 to 117 (2015 to 2016). The competitive Global Express suffered a similar fate. Embraer jets was flat from 120 to 117. Total jet deliveries fell 8 percent and the value fell by 16 percent (still below 2008 numbers despite the fact that these numbers aren’t adjusted for inflation). All bizjets combined were worth only $18.5 billion. That aggregates sales of planes made in the U.S., Canada, Brazil, and Europe. By comparison, revenue for Google was $90 billion in 2016.

Life in the somewhat slow lane was good for the Pilatus PC-12, rising in sales from 70 to 91.

What about in the ridiculously slow lane? Cirrus delivered 317 planes, less than half the numbers from 10 years ago, but still more than any other piston manufacturer. Cessna (Textron) is down to one quarter of its former glory. They might be passed by the Italians (TECNAM) soon. Total piston sales were $661 million, a small fraction of the sales of 10 years ago when considering inflation.

Robinson has cut helicopter production to about one quarter of the levels of 10 years ago. Sikorsky is doing okay thanks to sales of Blackhawks to the Federales.

What will it take to revive this industry? My vote goes to scaled-up drones that can carry passengers.

Related:

• NBAA 2015 wrap-up report
• Pilatus news from NBAA 2015

 

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Eccentric Orbits: The Iridium Story was one of the Wall Street Journal “20 books that defined our year” for 2016. It isn’t perfectly edited, but it is rewarding for anyone interested in technology.

The Iridium satellite phone system was developed starting in 1988 by three engineers at Motorola (Ray Leopold, Ken Peterson, and Bary Bertiger). What was unique about the system was that there was a lot of satellite-to-satellite communication, an idea lifted from the Star Wars program.

Bertiger was a veteran of Cold War military systems, having designed most of the microwave communications for America’s spy satellites, and Leopold had been acting director of the Milstar Terminal program at Hanscom Air Force Base in Massachusetts. Milstar was the $5 billion super-satellite warfare system being built by the Pentagon to link bombers, nuclear missiles, submarines, fighter planes, and troops on the ground. Given “highest priority” by President Reagan to support Star Wars, Milstar had cross-links among eight satellites—ten-thousand-pound “switchboards in space” that cost $800 million apiece—so Leopold did know a little about linkage issues.

In theory the whole system could have operated with a single base station for bridging satphone calls into the terrestrial phone system. More than $6 billion in investor money was spent on the system. It went live on November 1, 1998 and bankrupt on August 13, 1999:

It was the biggest bankruptcy filing in the history of the United States—and the quickest. The company had been open for business a little over nine months.

The author attributes the insolvency to (1) slow adoption by customers, and (2) Motorola sucking all of the money out into its own pockets.

Karl Marx expressed sympathy for the capitalists who risk a lot of money on a project and then discover that there is no demand or there is too much competition. He thought that everyone would be happier with a centrally planned economy in which if you build it the customers will definitely come.

Iridium was conceived at a time when cell coverage was ridiculously bad and roaming was impractical. The idea was to sell to business travelers. By the time the satellites were up, the European GSM system was in place almost everywhere that rich business people might go. The natural customers were in specialized markets such as aviation, shipping, and military. I’ll cover the rescue out of bankruptcy in a subsequent posting.

As with most revolutionary ideas, the idea was not revolutionary at the time.

And yet creating a constellation of communications satellites that would cover the whole planet was not an entirely new idea. When AT&T launched Telstar in 1962, they expected it to anchor a system of forty satellites in polar orbits, fifteen satellites in geostationary orbits, and twenty-five ground stations positioned around the globe. The system would have depended on ordinary trunk lines to complete calls, but it was still acclaimed around the world as the most sophisticated satellite system ever launched and the future of communications for the planet. That promise was snuffed out by President Kennedy, who was alarmed by the very fact that AT&T was prepared to spend $500 million on the system, and the result was COMSAT, which ended up not being interested in voice communications at all.

Two scientists at Aerospace Corporation, William S. Adams and Leonard Rider, had recently published a theoretical article in the Journal of the Astronautical Sciences called “Circular Polar Constellations Providing Continuous Single or Multiple Coverage Above a Specified Latitude.”

Details matter, however:

When the inventors first talked about using LEOs, they envisioned an orbit of six hundred to eight hundred miles up. Satellites at that altitude would have to fly through the inner Van Allen Belt, a mass of charged particles discovered by Explorer 1. In fact there were two radiation belts at those altitudes, the other one having been created artificially in 1962 when both the United States and the Soviet Union exploded nuclear bombs in space. Once again Aerospace Corporation had the data needed. George Paulikas, the Aerospace engineer who stood by at all NASA launches to describe “solar particle events” in real time, had studied every aspect of radiation belts, and his research indicated that small satellites constantly flying through that plasma would take enormous punishment every day, regardless of what material they were made of. Eventually Leopold decided to go lower—420 nautical miles—using a seven-by-eleven constellation. There would be seven orbital paths converging at the poles, and in each of those orbital paths there would be eleven satellites. This meant that they would need seventy-seven satellites to make sure the entire Earth was covered.

The need for worldwide spectrum allocation and regulatory approval disfigured the project so that there were gateways in various places around the world and all kinds of different pricing plans. The legacy carriers fought hard in the regulatory domain:

The nations of the world were gathered in the neighboring town of Torremolinos [in 1992] to allocate radio-wave spectrum, an event called the World Administrative Radio Conference that is held infrequently—this was the first major one in thirteen years—but has a lot to do with what the electronic future of the world will look like. … A decision had been made in 1990 to “proceed on the assumption that we’ll get the frequency we need,” but the world had changed greatly from the days when big American and British companies could tell everyone else how the airwaves would be used. Almost as soon as Iridium was announced, a chorus of “You can’t do that” had gone up from several other corporations, including every national phone company in Europe. … That’s why Motorola had spent the previous sixteen months lobbying the entire world to make sure it got what it wanted: radio frequency bands that could be used to operate the first point-to-point global telephone system, not to mention the first commercial switching system in outer space. The army of Motorola employees sent to Torremolinos far outnumbered that representing the U.S. government. The United States sent teams from the FCC, Voice of America, Department of Commerce, Pentagon, State Department, NASA, National Science Foundation, Coast Guard, U.S. Information Agency, and FAA—but all of those delegations combined were still smaller than Motorola’s team. Since Motorola had offices around the world, the company was able to identify political allies in advance, but the company’s war plan went one step further and made sure that Motorola employees were named as actual voting members: the United States, Canada, France, and Australia all had Motorola employees sitting in their official delegations. Add to this the fact that Travis Marshall, Motorola’s chief lobbyist, was the U.S. ambassador to the International Telecommunication Union, which administers the conference, and you start to understand why many of the WARC delegates were resentful of the pressure, regarding the Motorolans as crass salespeople determined to hold them hostage, treating them like reluctant participants in the world’s biggest time-share presentation.

Motorola prevailed primarily by getting poorer countries to sign up:

Iridium would be the greatest thing to happen to the Third World since . . . well, since the United Nations was formed. At last every country, and every village in every country, could be connected to the worldwide grid. In actuality the Iridium business plan would not be focused on the Third World at all, but on the well-heeled executive travelers in North America, Europe, and Japan, but for the time being it was better to talk about straw huts in Papua New Guinea, not ski chalets in Gstaad. A promotional video for Iridium featured the President of Mali, his wife, and his staff in acting roles. After a while, Motorola’s incessant statements of love and affection for the outcasts of the world started to wear thin. An observer for the U.S. Office of Technology Assessment drily remarked that the average citizen of the Central African Republic would have to work for four years to earn enough money to purchase an Iridium phone, then work seventeen hours more to pay for a one-minute call.

Does your country have an entrenched phone company that fears Iridium? No problem—we’ll tack a dollar on to the “tail charges” of every Iridium phone call made from your country and send it back your way. If idealism didn’t work, maybe greed would. “The fifty-four African countries were used to getting checks every month from AT&T,” said Mondale, “so we had to agree not to undercut that direct-dial service.” This stratagem would come back to haunt Iridium in later years, as national telephone companies routinely asked for kickbacks disguised as fees—tiny Madagascar wanted $500,000 a year—just to keep the Iridium license in place.

Incumbents such as Inmarsat fought like tigers.

In France it was worse. Heading up the Motorola diplomatic effort there was Leo Mondale, nephew of Walter Mondale, the U.S. Senator who had served as Vice President under Jimmy Carter. Mondale was a talented communications lawyer who had worked in the Paris offices of Fairchild Space and for the aeronautics division of defense contractor Mécanique Aviation Traction (better known as Matra), and he was the first hire at Iridium, partly because Motorola thought his connections could bring the big European telecoms aboard. The initial meeting at France Télécom turned out to be an elaborate farce, during which the French executives affected bonhomie for their frères from across the pond while fishing for competitive information—but that wasn’t the worst part of the experience. Someone had managed to place listening devices in the first-class cabin of the Air France flight that carried the Motorolans to the meeting, so the Paris executives knew exactly what Motorola was trying to do and how they were trying to do it.

At the WARC, France Télécom delegates were telling anyone who would listen that participation in Iridium was a violation of the Inmarsat treaty. Then, after the Iridium system was patented anyway, France launched a complex and expensive legal challenge that resulted in a series of hearings before the European Patent Office in Munich.

After they got the spectrum they still had to build and launch nearly 100 satellites (the constellation plus spares):

He kept reminding Lockheed Martin, Raytheon, and everyone else engaged in the project that the final assembly of a satellite built by NASA or the Air Force took anywhere from nine months to one year per satellite. But since Motorola needed a hundred satellites, including all the spares and demonstration units, “obviously we don’t have a hundred years to build this constellation.” If Iridium had been a government project, for example, Stamp would have had to perform a thermal vacuum test on every satellite, placing it in a chamber that simulates intense radiation and the other brutal elements it would eventually be exposed to in space. The process was time-consuming and expensive, so Stamp made an early decision: they would “thermal-vac” the first one off the assembly line and assume all the rest were sound.

Stamp was also innovative about his assembly line, setting up his factory in Chandler so that the satellites were built horizontally instead of vertically. That meant the assemblers could work at waist level, whereas on military satellites, the technicians stood on ladders and leaned over. He trained Lockheed Martin in the new technique, then later bragged about it to his friends at Khrunichev in Moscow, only to be told, “We’ve done it that way for forty years.”

Stamp started looking at the specs and launch histories of every rocket in the world and eventually told Motorola, “Look, I feel much safer on a Chinese or a Russian rocket than an American one.” All the American rockets were handled by either the Air Force or NASA, all of them had spotty launch histories, few of them had the power he wanted, and he didn’t trust the people in charge.

When he was first hired, Dannie Stamp shared an office with the Iridium inventors and was the only employee of the Space Segment Division. By 1995 he was supervising a hundred people and

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Traveling today from Beaver Creek back to Boston and thinking about “Security Breach Allows Unchecked Passengers on Flights at JFK: Officials” (NBC):

Eleven people walked through an unscreened security lane at John F. Kennedy International Airport in New York on Monday morning and apparently boarded flights, authorities said.

Three of the 11 were later identified through video and were believed to have boarded a flight to California, where they were to be screened upon arrival, the Port Authority said. The eight other passengers remained unidentified, it said.

Here’s my dumb question for today: What is the point of screening these folks after they’ve arrived at their destination? To make sure that they don’t have weapons to use for hijacking their Uber?

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“The End of Employees” (WSJ, February 2, 2017) is an article that my Facebook friends continue to express outrage regarding.

No one in the airline industry comes close to Virgin America Inc. on a measurement of efficiency called revenue per employee. That’s because baggage delivery, heavy maintenance, reservations, catering and many other jobs aren’t done by employees. Virgin America uses contractors.

Never before have American companies tried so hard to employ so few people. The outsourcing wave that moved apparel-making jobs to China and call-center operations to India is now just as likely to happen inside companies across the U.S. and in almost every industry.

The contractor model is so prevalent that Google parent Alphabet Inc., ranked by Fortune magazine as the best place to work for seven of the past 10 years, has roughly equal numbers of outsourced workers and full-time employees, …

The shift is radically altering what it means to be a company and a worker. More flexibility for companies to shrink the size of their employee base, pay and benefits means less job security for workers. Rising from the mailroom to a corner office is harder now that outsourced jobs are no longer part of the workforce from which star performers are promoted.

I’m wondering if the main explanation isn’t a lot simpler than the WSJ suggests. They lead with a story about an airline. In “Unions and Airlines” I explained how airlines are sitting ducks for labor unions to extract all of the profits. Major airlines nearly always contract out regional flying because when one regional’s labor costs rise it can be dropped in favor of a startup regional airline that, by definition, has 100 percent of pilots and flight attendants on first-year pay (and might also be non-union).

Contracting can’t be a way to escape the costs of U.S. labor regulations, health insurance, etc., because the contractor will have to pay these costs. However, if 50 percent of a company’s workers are contractors then by definition at most 50 percent of a company’s workforce can become unionized (if a contractor’s costs rise due to unionization, they can be replaced by a non-union or startup contractor, as happens with regional airlines contracting to the majors).

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