Perfect example of why people love government spending

“What Trump Doesn’t Know About Detroit” (nytimes) is an op-ed by a government official who got to spend tax dollars on what he considers to be God’s work: bailing out GM and Chrysler. Here’s my comment on the piece:

Mr. Rattner is impressed with what he was able to accomplish at GM for what he says was only $49.5 billion. Maybe something was accomplished. But he doesn’t look at what else could have been done with $49.5 billion. That’s more than double the total amount of venture capital invested in the U.S. in 2009 (source). The relevant question is not “Was it a complete waste of $49.5 billion?” but rather “Was it the best use of taxpayers’ hard-earned $49.5 billion?”

[Separately, you have to be impressed by Ford. What other company could survive its competitors being handed $billions in government cash?]

There is a good lesson in here for young people. It makes sense to work for the biggest best-funded enterprises. People look at the results and seldom ask what was invested to achieve those results. Certainly few people will ask “Did the investment that you made, combined with all of the effort you put in, outperform putting money into an S&P 500 index fund and then sitting on the beach for five years?” If you’re at a startup company with $100,000 in funding it is very unlikely to accomplish something huge, even if the return on the $100,000 invested is at a rate much higher than the return on the S&P. Government also works well. People celebrate Obamacare for increasing the number of people with health insurance; I have never seen a journalist mention the cost and ask “Could something else have been purchased that would have been a better value?”

(I guess the other lesson for young people is that they’ll be paying higher taxes for at least the next 75 years to pay back the money that was borrowed to give to GM and Chrysler. Let’s hope that they love driving those Impalas…)

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Johnny Depp’s plaintiff gets paid

TMZ says that Johnny Depp paid his plaintiff $7 million. The Independent published the litigants’ statement in full:

“Our relationship was intensely passionate and at times volatile, but always bound by love.

“Neither party has made false accusations for financial gain. There was never any intent of physical or emotional harm.

“Amber wishes the best for Johnny in the future. Amber will be donating financial proceeds from the divorce to a charity. There will be no further public statements about this matter.“

In my first posting on this subject, I wrote the following:

My prediction: When the dust settles the lawyers will have gotten paid a fortune, but Heard won’t net much more from her acquaintance with Depp than what she could have obtained by having quiet one-night encounters with a couple of successful married radiologists and collecting 23 years of child support under Massachusetts law.

If you assume that Heard ran up a $1 million legal bill, which supposedly is to be paid from the $7 million, she netted $6 million. This will be tax-free and therefore via a year of marriage she has more than doubled her estimated net worth of about $4.5 million. On the other hand, as noted above, if she had sex with two married radiologists or Medicaid dentists in Massachusetts she would have been entitled to collect roughly $2 million from each via child support, a total of $4 million. However, if she could have persuaded the judge that the defendants were not fit to take care of the children at least 30 percent of the time, she would have been entitled to more. Also, her defendants might have voluntarily paid a supplement over the guideline amount to keep the extramarital encounters from becoming public. Finally, sticking within the guidelines, she could have had sex with a third physician or dentist to realize a total of $6 million and/or found an unusually high-income defendant to have sex with.

[Note that Depp’s attorney, Laura Wasser, has two children of her own, each with a different father, married neither father, and lives with neither father. (Bloomberg)]

Let’s look at the statement, above: “Neither party has made false accusations for financial gain.” As California is a no-fault divorce state and therefore Amber Heard was automatically entitled to her freedom, what motivation other than financial gain could she have had for making what were, apparently, false statements regarding “intent of physical or emotional harm”? I had been looking forward to what kind of expert witnesses would be called to testify regarding Johnny Depp’s Ninja-style iPhone throwing skills. I had asked a divorce litigator about the case and she said “The truth of a domestic violence allegation is seldom relevant in divorce litigation” (see “The Domestic Violence Parallel Track” for how a domestic violence allegation dovetails with a typical divorce lawsuit).

The most curious part of the statement is “Amber will be donating financial proceeds from the divorce to a charity.” If she had wanted to donate money that Depp earned to a charity she could have written a check from a joint account during the marriage, then filed a straightforward “I want to be divorced but don’t need alimony or seek a share of the defendant’s savings” petition. Why go through all of that litigation if the goal was to enrich a charity? And is Amber Heard actually going to donate more than half of her net worth to charity?

[Courts are reluctant to look at money transferred prior to a lawsuit being filed. In a Massachusetts case that we looked at, a stay-at-home wife was having sex with a carpenter while the husband was at work. She transferred money from a joint account to her boyfriend, including transfers to offshore accounts in the boyfriend’s name. After a year or two of these gradual transfers she sued her husband and the judge awarded her 50 percent of the remaining assets. The defendant was unable to persuade the judge to look at dividing the assets based on the total before she started her offshore transfers and counting the transferred funds as already having been divided in her favor. The judge said that during the marriage the wife had legitimate access to the joint funds and could do whatever she wanted with them. Adding up the pre-lawsuit transfers, the lucrative alimony that the wife obtained via litigation, and the profitable child support that she obtained via the Massachusetts guidelines, the non-working plaintiff in this case ended up with substantially more than 50 percent of the savings accumulated from the working defendant’s earnings.]

A handful of friends on Facebook have taken a break from expressing hatred of Donald Trump and those Americans who would consider voting for him to discuss this case. One interesting assumption, expressed explicitly, is that Amber Heard could not have had a financial motivation to sue Johnny Depp because “she was a successful actress for years”.

Related:

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Intergenerational perspectives on immigration (and Clinton v. Trump)

One bonus of spending two weeks on a cruise ship is that one meets a wide array of people. The roughly 2,400 guests on our Serenade of the Seas Baltic Sea cruise came from 52 different countries. Among these were Americans from every region of the U.S. and with a much wider range of political views than are typically aired in Massachusetts.

Due to the upcoming election and perhaps the media’s frenzied portrayal of the Clinton v. Trump decision as a momentous one that will affect all Americans’ daily lives, there was a lot of political discussion. On the immigration issue, one pattern that I noticed was that at least some people tend to vote their checkbook. Some older Americans expressed positive attitudes toward immigration. They were done working and therefore wouldn’t be competing with anyone for a job. They typically own property that will increase in value if the U.S. population is expanded to 600 million via immigration. Asked what the advantages of immigration were to an average existing American citizen they talked about how immigrants would do jobs that “Americans didn’t want to do,” such as prepare and serve food in senior citizens’ housing. In other words, prices for consumers of unskilled labor would be lower. On the other hand, some young people, including college students, were negative about immigration and therefore positive about Donald Trump. They cited traffic jams, competition for jobs, higher taxes to pay for welfare benefits and other handouts to immigrants, and costs and security hassles related to Islamic violence at public events or gatherings.

The ship itself is a good example of why working-age Americans might rationally vote to obstruct a free worldwide labor market (one method of obstruction being blocking immigration to the U.S.). There were workers from 64 different countries on the ship (flag parade video that I captured). The ship itself, a magnificent machine that has been kept in near-perfect condition, was built in Germany in 2001-2003. It is a floating town of about 3,500 passengers and crew and includes most of the businesses and municipal functions of a town: retail, restaurants, hotel, electricity generation, water desalinization, sewage treatment, legal and regulatory compliance, health care (doctor and two nurses), repairs and maintenance, cable TV, Internet, live entertainment, etc. All of this is accomplished to a higher-than-typical-American standard at a lower-than-typical-American cost by a crew that includes very few Americans. Americans would find work in a free labor market, of course, but we wouldn’t be sought-after. (Economists would say that in a truly free labor market the unemployment rate is always close to 0% because eventually the market will clear with workers accepting jobs at low wages, but this isn’t relevant in the modern welfare state because living on government handouts may yield a better material lifestyle than working at a market-clearing wage (and working at a market-clearing wage may be illegal due to minimum wage laws; see Puerto Rico)).

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What will Verizon do with Yahoo?

The decline of Yahoo! has long fascinated me. Here are some earlier postings on the subject:

What happens next, though? Verizon could conduct an experiment by letting a $200,000/year manager handle the Yahoo! division. Then see how this person’s performance compares to what Mayer was able do in exchange for hundreds of millions of dollars in personal compensation. But that still leaves the question of what the manager would actually change?

Personally I’m sticking to my theory that there are still a huge number of useful applications that nobody is providing to Internet users. I think that Yahoo! could code its way out of the pit. But Verizon is not known as a software company. In the late 1990s I was telling everyone who would listen (i.e., mom and dad) that mobile phone companies would be the vendors of all kinds of services, e.g., hotel room and restaurant reservations, because the phone company knew where you were and the phone had a web browser on it (well, a WAP/WML browser anyway). Like other U.S. carriers, Verizon hasn’t done anything like that.

Readers: What strategy would you pursue if you were running Yahoo! on behalf of Verizon?

[Separately, Marissa Mayer is apparently blaming the smoking crater that she left shareholders with on “gender-charged reporting” by the media: “Yahoo CEO Marissa Mayer Accuses Media of Gender-Biased Reporting” (Fortune, July 25, 2016). If Marissa had changed gender ID to “male” during her time at Yahoo! would the company then have been able to add some value on top of their shareholdings in Alibaba?]

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Olympics question: Why do humans overestimate human capabilities?

I was watching a bit of the Olympics with a friend. He was awed by the 400m runners. I pointed out that a family’s golden retriever could probably beat them all. He disputed this suggestion so I searched the Web for reference and found that the average dog running speed for all activities is 19 mph, about the same as what the humans do for 43 seconds. Greyhounds are going 40 mph and faster (515m in 28 seconds for a greyhound versus 400m in 43 seconds for the fastest human). I posted this anecdote on Facebook and my friends took a break from their The-Sky-Will-Fall-if-Trump-is-Elected notes to say that perhaps dogs can sprint faster for short distances but humans plainly have more endurance. Most of these folks have seen a family Labrador retriever running around like a demon and/or being unsuccessfully pursued by a group of humans trying to recapture the dog. These are all folks who have seen or heard of the Iditarod, in which a team of dogs will run 1000 miles in 8.5 days… while pulling a sled. Yet somehow in their minds humans have superior endurance to dogs and all other animals as well. “Dogs Versus Humans in the Olympic Games” (Psychology Today) points out, using sled dog numbers, that “in the marathon, after crossing the finish line the dog would have time for a half hour long nap before it’s world record holding human competitor would complete his run.”

There are a bunch of things that we do better than other animals. Why do we insist on seeing ourselves as more athletic?

[I did learn something from watching NBC’s coverage of the Olympics. Sometimes the #1 and #2 competitors in a sport are worthy of attention and comment. However, if they are from China or Russia then nothing that they do is very interesting.]

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Finally a use for those stupid virtual reality goggles: Virtual Hermitage and Louvre Museums?

Summertime Europe has gone far beyond the breaking point in the major tourist attractions. The unairconditioned repositories of treasures are now packed so full of tourists that the works of art are being subjected to substantially more heat and humidity than they have ever previously experienced. Also, I watched in horror as visitors put their greasy paws on everything within reach. Museums have tried to defend their collection against this new generation of touchy/feely visitors by putting everything famous behind glass, sometimes behind glass and then in a Plexiglas bubble that surrounds the frame as well.

If you can survive the crowds and the heat/humidity the result is that you see the works less well than if you’d looked at a well-printed (in China!) book.

How about this idea for virtual reality then: Tour of the Hermitage or Tour of the Louvre. The museums could shut down for a week in the winter, remove all of the protective glass, and then dolly around with a cluster of high-resolution cameras. After that anyone with appropriate VR equipment could get a far better experience of the museum than any real-world visitor. There would be no crowds, no heat, no humidity, no glass over the best paintings. There would be no tired feet, no thirst, no hunting for a bathroom. For the big churches maybe you could fly up and take a close look at a stained glass window or at least climb up as many levels as desired without breaking a sweat.

If Google can map nearly all of the world’s streets surely it can’t cost that much to map the interior of even the largest museum.

Bonus feature… photos of the Louvre, Versailles, and the Hermitage as actually experienced by a tourist today. Note that the Hermitage crowds are smaller than typical due to the fact that we were on a guided tour allowed to enter the museum 1.5 hours earlier than individuals and, as it happened, we were the very first group admitted that day.

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Boring but important: getting rich and staying rich through government regulation in Mexico

As more sectors of the economy become subject to government regulation, young people especially should know about the economic opportunities and hazards that are presented. “Mexico’s Richest Man Confronts a New Foe: The State That Helped Make Him Rich” (New York Times) is about Carlos Slim, one of the world’s richest people.

[Separately, I’m recently back from some of the world’s most competitive markets for telecommunications. In Denmark, if a neighborhood is served with fiber optics it is possible to get a symmetric 1 Gbit/second service for about $80/month (100 Mbit/second service at $50/month is available without fiber). See also this ranking for how countries around the Baltic Sea clutter the top-10 for average connection speed (see also this article on Baltic Internet connection throughput).]

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Stupid EU question: Why is it European?

One of the folks I talked to in Paris is a science writer who lives in Oxford. He bemoaned the stupidity of his Brexiting countrymen (and women). His main argument was that the UK transferred much less to poorer EU states than rich US states did to poorer US states. Thus he couldn’t understand why Brits whined about contributing to, say, the Greeks.

This raises a simple question: why was the EU set up as an inter-country welfare system to begin with? If getting together in a union makes everyone richer wouldn’t the poorer states be happy to join without handouts?

The harder question for me to understand is why the union is fundamentally tied to geography. With container shipping it costs less to send a product from Korea to England than from England to Italy by rail. Did someone in England actually decide that it would be better to be clustered with no-growth high-debt Italy than with high-growth low-debt Korea?

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