Philip Greenspun’s Weblog

Back in 2008, I wrote up an “Economic Recovery Plan” for the U.S. that suggested, as part of a plan to achieve vibrant GDP growth, “corporate governance that relieves investors from worry that profits will be siphoned off by management”:

Right now the shareholders of a public company are at the mercy of management. Without an expensive proxy fight, the shareholders cannot nominate or vote for their own representatives on the Board of Directors. The CEO nominates a slate of golfing buddies to serve on the Board, while he or she will in turn serve on their boards. Lately it seems that the typical CEO’s golfing buddies have decided on very generous compensation for the CEO, often amounting to a substantial share of the company’s profits. The golfing buddies have also decided that the public shareholders should be diluted by stock options granted to executives and that the price on those options should be reset every time the company’s stock takes a dive.

If current trends continue, the CEO and the rest of the executive team will eventually have salaries that consume 100 percent of a public company’s profits and they will collect half ownership of the company via stock options every few years. Who would want to invest in that?

“State Street: corporate governance has grown up” (Financial Times), an interview with Rakhi Kumar, points out that things have gone in the opposite direction since 2008:

Top of the 43-year-old’s list of concerns is the move by many of the world’s biggest technology companies, including Snap, Facebook and Alphabet, to adopt controversial voting structures that limit the power of their shareholders. The issue came to the fore in February when Snap became the first US company to issue shares at its initial public offering that gave investors no voting powers.

With $2.6 trillion in assets under management, State Street has been able to achieve some of its goals:

State Street has also taken a tougher approach to companies that have failed to appoint women to their boards, vowing earlier this year to vote against company directors that do not commit to improving the gender balance in their boardrooms. … “[Our push against all-male boards] has been a great success,” she says. “Some companies have proactively called us and asked us not to take action against them. We will keep voting against those that don’t [improve], and we hope other investors will join us.”

A quota system for women on corporate boards will apparently make State Street happy, but what will it do for ordinary investors? If the CEO and pals on the Board are stealing from shareholders via fat salaries, stock options, etc., does an ordinary shareholder care about the gender IDs of the thieves?

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A fit 68-year-old friend recently tripped over a laundry basket and broke her hip. She needed a replacement hip installed (at nearly 4X what it would have cost in France or the UK; see also nytimes for price comparison) and then a couple of months of rehab. This led me to wonder “Why don’t all of us wear hip pads all the time?”

A study from 2007 found that there was no benefit to simple pads (see also ABC News article: many fractures don’t even occur as a result of impact but from the unnatural rotation of the hip in a fall. “Fractures often occur prior to impact,” [the doctor] said.).

ActiveProtective is a company that has a great TED talk, but it doesn’t seem as though their airbag-based hip protector is available.

Will exoskeletons to improve stability be available before reliable protections against the consequences of falling are?

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The Trumpenfuhrer’s pronouncement that he would like to get transgender-related medical costs off the military’s books has apparently changed the opinions of journalists:

• CNN, July 31, 2015, “The high cost of being transgender”: “the Philadelphia Center for Transgender Surgery posts cost estimates for different procedures. Its price list mentions estimates of $140,450 to transition from male to female, and $124,400 to transition from female to male.”
• CNN, July 26, 2017: the cost to provide transgender-related services to active military personnel would amount to 0.004-0.017% of the Defense Department’s total health care spending

(I’m not sure that the accounting in the second article is correct, incidentally. The “total health care spending” may include retirees and not simply “active military personnel.” (Forbes provides a breakdown of the $52 billion total that was spent back in 2012; note that this number is in the same ballpark as the entire military budget of Russia.) Also, the military historically has rejected recruits based on the possibility of being on the hook for long-term medical costs. “Long-Term Follow-Up of Transsexual Persons Undergoing Sex Reassignment Surgery: Cohort Study in Sweden” says that ” Sex-reassigned persons also had an increased risk for … psychiatric inpatient care.” A Guardian article from 2004, “Sex changes are not effective, say researchers,” suggests that long-term psychiatry costs could be significant.)

[Since I’m not in the military and haven’t had gender-related surgery I don’t have a personal opinion on the merits of Trump’s proposed policy. I just think it is interesting that a statement by Trump has the power to effect such a dramatic change in point of view.]

 

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Four of us, including two pilots, went to see Dunkirk last night. Since the historical story is well-known I won’t worry too much about spoilers.

Massive navy ships sink almost immediately after being hit by small bombs or torpedoes. Airplanes without engines, on the other hand, have near-infinite glide capability.

The movie is good at portraying the simple and non-redundant nature of the planes of the day, e.g., the Spitfire. But when a pilot is about to ditch in the English Channel, why doesn’t he take advantage of the near-infinite glide time to pull back the canopy and facilitate egress? There is also a pilot who has such great control of his aircraft that, after running out of fuel and thereby losing the engine, he can shoot down a German plane. After this heroic deed, however, he is unable to make a few turns such that he can land on the beach near the still-evacuating British and French soldiers. Instead he lands on a German-held beach (except that you wouldn’t know that the beach is held by “Germans” per se from watching the movie; the opposing forces are always “the enemy” and never “the Germans” or “the Nazis”).

The movie is about the individual experience of being in the midst of Dunkirk. There are no maps and there is no context provided. Nor is there the rolling text wrap-up at the end of the movie telling you what happened in real life. One friend complained that she was “confused” during the movie, but maybe that is the point. Being in the midst of a war is confusing, according to every first-person account that I’ve ever read.

Readers: what did you think?

[Separately, one member of our group had recently seen Valerian and pronounced it “the worst movie ever made,” based on the plot and acting. Who has seen Valerian and wants to comment?]

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If we ask the average person “Why don’t you want to take a long bike ride?” I would bet that two big concerns are the following: (1) lack of sufficient fitness, and (2) fear of being hit by a car.

I wrote Business idea: Luxury bike tours with electric bikes about how the latest generation of electric bikes, combined with a sag wagon full of spare batteries, could completely address Point 1. What if the sag wagon were a self-driving van, though? Could it address Point 2?

Suppose that the sag wagon follows 10′ behind the cyclist. The sag wagon has some big flashing hazard lights on the back. Approaching traffic has to slow down and swing wide to get around the sag wagon and therefore can never be in a position to hit the cyclist. The self-driving sag wagon contains spare batteries. The sag wagon is immediately available in case of mechanical failure, rain, fatigue, etc.

Readers: What do you think? Will self-driving minivans revolutionize bike touring?

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“Greece Looks to Turn a Corner After Years of Economic Pain” (nytimes) is interesting for what it tells us about how modern humans think about economic success:

The proposed bond sale, the details of which were released on Monday, offered hope…

Dimitri B. Papadimitriou, the economy minister, said his country was “getting out of a rut,” adding: “There’s an opportunity for Greece to become a normal country.”

The bond offering does not mean that Greece is out of the woods. It is just the first of several steps that Athens must take to test whether it can raise money in international markets to support its economy and government operations when the latest bailout, worth €86 billion, expires in August 2018.

Greece continues to stagger under a mountain of debt, which is now worth €314 billion. [As is typical for American media, the journalists can’t be bothered to put information into context. With a population of 10.75 million, this works out to about $29,200 per resident of Greece. Compared to GDP of $195 billion, this is just shy of 2 years of GDP.]

Quick summary of the article: “This country has been so successful lately that it will be borrowing money in order to pay its bills.”

(Maybe in fact the money is going to be borrowed to redeem old bonds that are coming due? But the article makes it sound as though simply borrowing is a sign of robust economic health!)

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Latvian immigrant Angelika Graswald is on track to be released from jail by the end of this year: “Woman Pleads Guilty in Fiancé’s Kayak Death on Hudson River” (nytimes). Ms. Graswald came to the U.S. as an au pair, married and divorced twice at a profit, and was on track to receive $250,000 in life insurance proceeds from the death of her fiance and kayaking companion.

Perhaps one of the New York tabloids will use this headline idea: “Immigrant to re-join the labor force”.

Readers: Can she now collect the $250,000? She pleaded to “criminally negligent homicide.” Is there an exception in a typical life insurance policy that would bar her from collecting? Also, what will her match.com profile say?

Related:

• Angelika Graswald Life Insurance versus Child Support net present value calculation
• Is Angelika Graswald’s purported confession a little too convenient for prosecutors?
• Atlantic article on Americans who don’t work: “Technically, the 1.1 million prime-age men in prison aren’t hurting the participation rate among men, because they aren’t being counted as participants or non-participants. The government omits prisoners before it makes labor-force calculations.”

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Who has used Dropbox with a large number of files?

I recently added 761,765 files of Android source code to my Dropbox (accepting a shared folder from a friend). This is only 60 GB (out of a 1 TB quota), but Dropbox has been unable to push any of my own new files up to the cloud. Currently it says “Indexing 463,243 files” and seems to be stuck there (though the number of files fluctuates so I know that it is still running).

Did I launch a denial of service attack on myself?

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In response to Government makes health care more expensive and therefore it is unreasonable to withdraw subsidies, a commenter wrote

Is the government responsible for Baumol’s Cost Disease?

Is the government responsible for extreme concentration of wealth?

The bulk of the problem is a lot simpler than you, Vance, and most others in the public square make it out to be.

Baumol’s Cost Disease says that industries with no productivity growth, such as string quartets performing live, have to compete for workers with industries that have high productivity growth and hire workers to write code for sticking ads into Facebook or press the “start” button on a fully automated factory.

“Drivers of health care expenditure: Does Baumol’s cost disease loom large?” is a 2012 paper by economist Carsten Colombier. He concludes that the effect is minor and mostly spending on health care has been “quantity-driven” (i.e., people are getting more tests and procedures, taking more drugs, etc.).

What about an informal analysis? “Obamacare Isn’t Stopping Doctors’ Incomes From Soaring” (Fortune, June 10, 2016) says

Far from flattening, as some Obamacare experts predicted, or even waxing in low-single digits like salaries for contractors, lending officers, beauticians, and most other workers, pay for doctors is surging.

Dermatologists, cardiologists, urologists, among others, are reaping double-digit increases that lift their salaries to the $500,000 a year range, and that’s not including substantial performance and signing bonuses, relocation allowances, and even full payment of their med school loans.

A system that fuels demand with huge subsidies, yet systematically restricts the supply, is a textbook formula for fast-rising costs. No illustration is more vivid than the problem with doctors’ pay, a category that accounts for 22% of all U.S. healthcare spending.

On average, family doctors got a $27,000 raise in the past year, from $198,000 to $225,000, for a 13% increase. Doctors in the two other primary care categories, internal medicine and pediatrics, also had great years. Each garnered 15% bumps to $237,000 and $224,000 respectively.

… general surgeons at $378,000 up 12%; dermatologists at $444,000. also up 12%; urologists at $471,000, up 14%; OB/GYNs at $321,000, up 16%; otolaryngologists at $403,000, up 21%; and non-invasive cardiologists at $493,000, which have seen their pay rise more than 30% above what they have been paid on average over the past three years. Orthopedists and invasive cardiologists also got inflation-beating increases of 4% and 5% respectively. On average, both specialties pay well over $500,000 year in salary alone.

[Note the spread between primary care and specialists. An American who has sex with a specialist earning $500,000 and collects child support should have close to the same after-tax spending power as an American who goes to medical school and works as a primary care doctor (works better in Massachusetts than Minnesota, though!). (The American (or foreign visitor) who has sex with two or three different cardiologists can have the same spending power as a cardiologist, if the state is chosen correctly.)]

If a fresh-out-of-training specialist can earn $500,000 per year by going to an “underserved” area of the country, how can we attribute this to competition with manufacturing employers? Intel gets tremendous productivity per worker out of its fabs, but how many Intel workers get $500,000/year?

If high salaries for people working in health care are primarily due to competition with other industries, why are those salaries going up at a faster rate than what other industries pay?

Nurses at one of our local hospitals are preparing to strike (Boston Globe):

Both sides agree that nurses wages’ at Tufts are below those of other Boston hospitals. Tufts officials say that they want to rectify that by offering a 10.5 percent raise over about four years to nurses at the top of the pay scale.

All other nurses would receive a 5.5 percent pay hike over four years, in addition to 5 percent annual step raises, which are already built into the contract.

The average pay for a full-time nurse at Tufts at the top of the pay scale is $152,000, according to the hospital.

Nurses are able to unionize and strike for higher pay, something that is unusual in the market portion of the U.S. economy. If patients would go to a cheaper non-union hospital rather than pay for these higher union wages, it wouldn’t be possible. So plainly there is some non-market factor in operation that makes consumers indifferent to the prices that this hospital charges and/or unable to go elsewhere.

Finally there is the patient experience. If we’re old we remember the days when seeing a doctor meant actually seeing the doctor and possibly a receptionist or nurse. Now the “doctor’s office” is stuffed with non-doctors embroiled in various paperwork tasks.

Readers: Can we relax and not worry that we spend 4X the percentage of GDP compared to Singapore or 2X compared to Europe on health care?

Related:

• my personal Health Care Reform article, in which I ask “Who Voted to Spend All of Our Money on Health Care?”

 

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