A posting every day; an interesting idea every three months…
My brother, who got all of the genes for looking good, dressing well, and speaking diplomatically, appears here in a TV interview about the next scene in the U.S. health care harlequinade.
[Harry is the Chief Medical Officer at Dell Services, acquired in from Perot Systems.]
Full post, including commentsI was chatting today with an executive from an Internet media business that collects tens of millions of dollars in advertising fees annually. He has invested as much as possible in direct salespeople because of the heavy commissions extracted by Google and Yahoo. Google won’t say exactly how much of a rake they are taking from Adwords, but he estimated that as little as 20-25 percent of what advertisers pay flows through to the sites where ads appear and that Google adjusts this number in order to meet quarterly earnings targets. Google thus collects a 75-80 percent commission. How does that compare to the bad old inefficient pre-Internet world? Standard ad agency commissions were 15 percent.
[Google has itself apparently divulged some accounting figures and claims that they rake off only 32 percent (source), which means that in the best case they are taking twice as much as the bricks and mortar ad agencies.]
Full post, including commentsBoring but maybe important: Barack Obama has proposed one element from the economic recovery plan that I published in November 2008: allowing businesses more flexibility in capital expense depreciation (nytimes story). Note that this doesn’t change the amount of the deduction that is allowed, just when the deduction is taken. Fewer businesses will have to face the risk of owing a significant tax to the federal government in a year when their operations are cashflow-negative. This is especially important in the U.S. because we have among the highest corporate tax rates in the developed world (Forbes says that we are at about 40 percent state/federal and Europe is at 23.5 percent).
[Consistent with the U.S. plan to cheat its way to prosperity and with the idea that the Collapse of 2008 was not indicative of any structural problems, Obama suggests that this change in the tax code apply only in 2011. After that, things go back to the way they were and somehow the economy is not supposed to go back to the way it was. The change therefore may make the U.S. less efficient economically, since companies may buy stuff in 2011 that they wouldn’t have needed until 2012 or 2013. Lawyers and accountants will benefit, as they do any time there is a change in the law.]
Full post, including commentsIf you have a kid and are trying to get him to move to China and get a job rather than hanging around your basement with a camcorder and a copy of Adobe Premiere, make him read The Reel Truth: Everything You Didn’t Know You Need to Know About Making an Independent Film
The book is interesting in the same way that a train wreck is interesting. You’ll be amazed that any U.S. movie ever gets made outside of a studio, given the tangle of laws and the difficulty of getting so many loosely affiliated Americans to cooperate.
Is your kid a great storyteller? A wizard with lighting and videography? A brilliant video editor? A good director? That’s wonderful. He or she has all of the skills necessary to make a wonderful movie that can be shown to the rest of the family, albeit possibly in violation of the DCMA and other statutes. The book will convince him that he has less than 5 percent of what it takes to make a movie and show it legally to a group of fellow Americans.
Full post, including commentsPresident Obama is asking Congress to give $50 billion of our grandchildrens’ money to America’s least efficient industries: highway construction and the FAA (nytimes). First, let’s think of the scale of the spending. As U.S. adults seem to have no intention of funding current federal spending or paying off debt, Obama’s spending plan will be paid for by the 50 million or so children who are aged 12 and under. That’s $1,000 per child.
Let’s look at the track record of the sectors of the U.S. economy to which Obama proposes to give this $50 billion. One is highway construction. This is an industry that has developed so few new efficiencies and innovations since the time of the Panama Canal that Americans can no longer afford to maintain the highways that we have, much less build new ones (see the book Traffic: Why We Drive the Way We Do
Much as I love aviation, as a taxpayer it pains me to see money being shoveled into the mouth of the FAA. Obama promises that some of the $50 billion will go for a “next generation air-traffic control system”. The last time the FAA tried to produce an update for some of its ATC software the result was a project that was more than a decade late when the plug was finally pulled. It cost the taxpayers $9 billion and every line of code had to be thrown out. The agency’s latest project is a change to the way aircraft are registered. For the past 80 years or so, aircraft registrations have not had to be renewed. Owner and pilots notified the FAA when an address change was required. The FAA has decided now to send out U.S. mail reminders to every aircraft owner every three years asking “Do you still live at the same address?” A paper form will be returned by the aircraft owner. (FAA’s official explanation of the process) Figure it costs $300 of owner time and FAA time to work both sides of this paper-intensive transaction, including handling a physical check for $5. There are 357,000 aircraft out there, so that’s about $36 million wasted every year.
How would a private company do this? The FAA already pays contractors about 50 cents every time a pilot connects to a weather briefing service such as DUATS. These services are limited to folks whose pilot certificates have been verified. Nearly all aircraft owners, other than airlines, are pilots who use weather briefing services periodically. If Amazon wanted to get some information out of a customer every three years it might put a note on the Web site saying “Would you mind visiting this link and updating a form?” A private business whose Web site was visited at least monthly by nearly all of its customers would only use paper as a last resort, but the FAA apparently never considered using the Web services that it is already paying for to do the job.
An MIT Civil Engineering professor and I once visited the head of Boston’s Big Dig project, an executive at Bechtel. We showed him some software. He said “Wow, this stuff could save 15 or 20 percent of the cost of the project and a lot of time also. I’m not interested in it.” Why not? “I’m getting paid cost-plus on this project. If we build this highway using the same methods used by the Romans to build their roads, that’s fine with Bechtel.” (The project ended up costing nearly $15 billion or $22 billion when interest paid on bonds is considered. Estimates of the return on the investment range from $0 to $167 million per year, i.e., an ROI of between 0% and 1.1%.)
As the U.S. population trends up to between 600 million and 1 billion (range of estimates for 2100), won’t we need more roads? We can’t afford them so we won’t have significantly more, regardless of what Obama promises. How about public transit? New York City is reducing its public transit offerings; it can’t afford to run trains and buses as well as pay pensions previously agreed to (see nytimes and this article on New York state pensions). The future for Americans may be a combination of walking and videoconferencing. It will make a lot more sense to build dense cities where folks can walk to work, shop, and see friends, rather than trying to create enough additional sprawl for 700 million more Americans. What could we private businesses and citizens do with $50 billion if the government did not take it from them and hand it over to our least efficient industries? At $100,000 per conference room, 500,000 businesses could be set up with amazingly high quality videoconferencing/telepresence systems, thus reducing the need to travel for business meetings. At $1,000 per desktop, 50 million American homes could be set up with moderately high quality videophones, thus reducing the need to travel for social meetings. Given a free choice, it seems inconceivable that private citizens would decide to give their money to highway contractors rather than Cisco, HP, and other innovative companies.
[Comments on the nytimes piece seem rather negative. Apparently people aren’t excited when the government buys stuff that they themselves wouldn’t want to buy. Given that Obama and his advisors are famous for political savvy, I’m wondering why they thought that anyone other than a highway contractor employee would be happy to hear about this proposed spending.]
Full post, including commentsJust finished The Anthologist
[if you’ve been to the doctor and gotten some antidepressants] you might think to yourself, Oh boy, I am one of these great depressive figures. But you’re not. Just because a doctor has scribbled a half-legible prescription on a piece of paper and given you some pills, you’re not depressed. Not the way a real poet is depressed. You don’t even come close. True poet’s depression is a rigor mortis of agony. It’s a full-body inability to function. (page 54)
[after jamming a finger] I held my hand in the air, and I kept testing my finger, wondering whether the bone in it was broken. I really didn’t want to go to a doctor and have them say, Ah-hah, we’ll X-ray it and give you a bone scan and a barium enema, just to be sure. No thank you. I have no health insurance. Death is my health insurance. (page 123)
The book flows nicely and can be read in a couple of hours continuously.
Full post, including commentsFolks:
I’ve posted a review of the Icon A5 light sport seaplane, including a derivative-but-perhaps-funny shopping video. Comments would be appreciated.
Full post, including commentsI attended a housewarming on Sunday and met a guy who had founded and run a software company that employs nearly 1000 programmers, some here in New England and some in India. He is now retired and looking for new investments to make. How does he feel about the U.S. as a place to do business? “I think that the U.S. is going to blow up due to the expansion of government obligations. I’m not sure if the government will default on its debt, stop paying pensions, or generate hyperinflation, but I know that the current situation isn’t sustainable.” Due to fears of dollar devaluation and inflation here, this guy did not want to hold any additional dollar-denominated investments. As far as programmers went, he would prefer to hire them in India rather than take on the obligation of payroll taxes and health care expenses here. He had enjoyed a positive experience with his team of programmers in India (this is somewhat unusual in my experience; the folks I’ve talked to at multinationals have been impressed with their Chinese colleagues, but not with departments in India).
It is possible that the best minds of economics are doing exactly the right things with the U.S. economy, e.g., indulging in massive deficit spending, tossing in stimulus spending on top of the usual trillions in federal spending, having the Federal Reserve buy up Treasury bonds (i.e., print money), borrowing from our grandchildren, sweetening public employee salaries and pensions, ladling out subsidies to government-favored industries, etc. But even if these are the right things to do, if they scare business people away from investing in the U.S. the result will be economic stagnation (which actually means “decline” from an individual perspective, since the population continues to grow even as the economy does not). Maybe federal and state governments should invest education and PR to explain to folks how they are not going to default (to explain why reports such as Morgan Stanley predicting government default are wrong).
Full post, including commentsHere’s a Boston Globe article about the opening of Newton’s new high school, after 10 years and $200 million spent. It replaces a school built in the 1970s that looks a lot more solid than most of the buildings and houses in Massachusetts. I found it interesting that the journalist did not take the time to put the cost into context. A simple calculation and Google search reveals that the Newton school cost about $500 per square foot to build against a nationwide average of about $170 during the period of major construction (source).
Full post, including commentsAn electronics/software glitch in communication with a remotely piloted Navy helicopter led the federal government to violate its own restricted airspace over Washington, D.C. (story)
John and Martha King, the world’s best-known flight instructors, were held at gunpoint by four police cruisers full of cops. Their Cessna 172 had the same tail number as a Cessna 150 that was stolen nearly a decade ago. The old tail number was still in a database at the El Paso Intelligence Center, which keeps America safe from drugs and terrorists. The police got excited when they saw the tail number pop up in an IFR flight plan and had the Santa Barbara airport staked out. The cops never asked themselves “If I had stolen an airplane, would I file IFR flight plans using the stolen plane’s actual tail number? And then go into a busy Class C airport?” Nor were they able to tell the difference between a Cessna 150 (two seater) and a Cessna 172 (four seater). Full Story: AOPA.
The British Airways Boeing 747s apparently have the ability to play a recording to passengers: “This is an emergency. We may shortly need to make an emergency landing on water.” Folks on a Hong Kong to Heathrow flight did not appreciate hearing this message while over the North Sea in a perfectly functional aircraft. (more)
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