Philip Greenspun’s Weblog

“Airlines’ Rising Labor Costs in Focus Ahead of Earnings” is a January 16, 2016 WSJ article making some of the same points that I made in “Unions and Airlines” back in 2010. Labor rates tend to be set during times of high profit:

As fuel prices have plunged, employee pay and benefits have returned as airlines’ biggest expense item. Because the industry—which not too long ago was mired in red ink—appears to be minting money now, its pilots, flight attendants, mechanics and other workers are demanding to be rewarded for aiding in its turnaround. They also want to recoup concessions they made when companies went through bankruptcy-court protection.

This leaves nothing for investors if the good times end. Right now the good times are mostly a result of a lack of competition (the government approved every conceivable merger; efficient competitors such as Ryanair are prohibited from offering their services to American consumers for domestic flights). Perhaps the oligopoly won’t end, but profits for investors could end if the next round of labor negotiation transfers the profits from lack competition into employees’ pockets.

My recommendation: Don’t buy stock in any U.S. airline!

A reader comment is interesting:

And the regional airline pilot’s/crewmember’s pay?? Too funny. Nothing like contacting tower for takeoff, knowing the pilots in front of your airplane are making 4-6 times more money for the same job. Interesting to see how the industry looks 10 years from now!

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“Negotiating the Whirlwind” (New Yorker, December 21&28, 2015) celebrates John Kerry, but it is interesting even for folks who are not John Kerry fans due to the examples of what goes on within the State Department.

What kind of achievements can be specifically celebrated?

With the King gone, the Saudi advisers, despite their ritual expressions of distaste for Iran, agreed to be in the same room with Zarif at future meetings in Vienna. This would not be first-level news around the world, necessarily, and the war went on, and the waves of refugees kept arriving in Jordan and Turkey and on the shores of Lesvos. But, for Kerry, these were the kinds of moves—a pawn seizing a center square—that just might lead to an endgame.

(Note that Saudi Arabia and Iran severed diplomatic relations a few weeks after this magazine was printed.)

What are the results when the government spends 8X as much operating an airliner than do the airlines? (See TIME article from 2013 on the $43,000/hour operating cost to the taxpayers for a 757)

As Secretary of State, however, Kerry spends much of his life onboard a worse-for-wear government jet, a Boeing 757. Both Kerry and Clinton have often had the humbling experience of the plane breaking down: a blown tire, a leak in an auxiliary fuel tank, “electronic problems.”

The article contains some bonus material. Are you unsure how to think about the reign of King Bush II? About the achievements of Hillary Clinton? The New Yorker will tell you what to think:

In 2004, when Kerry lost the Presidential race to George W. Bush, who is widely considered the worst President of the modern era, he refused to challenge the results, despite his suspicion that in certain states, particularly Ohio, where the Electoral College count hinged, proxies for Bush had rigged many voting machines. But he could not suffer the defeat in complete silence. He was outraged that Bush, who had won a stateside berth in the Texas Air National Guard during the Vietnam War, used campaign surrogates, the so-called Swift Boat Veterans for Truth, to slime his military record. [2nd paragraph, emphasis added]

As a diplomat, Hillary Clinton wins credit inside the Administration for visiting a hundred and twelve countries and helping to transform America’s image in the world after the catastrophic Bush years. She led efforts to open relations with Burma, brokered a 2012 ceasefire between Israel and Hamas in Gaza, and drafted economic sanctions on Iran.

The article agrees with one of the attorneys we interviewed for Real World Divorce, that “there are easier and quicker ways for an American to make money than by working”:

[Kerry] married twice into substantial fortunes.

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“The Siege of Miami” is a New Yorker article about flooding in Miami. Here’s one point that seems worth discussing..

“I believe in human innovation,” Levine responded. “If, thirty or forty years ago, I’d told you that you were going to be able to communicate with your friends around the world by looking at your watch or with an iPad or an iPhone, you would think I was out of my mind.” Thirty or forty years from now, he said, “We’re going to have innovative solutions to fight back against sea-level rise that we cannot even imagine today.”

What do readers think? I tend to be optimistic about technology for improving electric motors, batteries, windmills, and other items associated with cutting CO2 emissions. But flood control and pumps would seem to me to fall into the same category as building bridges, which Americans are getting worse over at over time (see “Longfellow Bridge repairs will now take about as long as the original construction” and “U.S. versus German infrastructure spending and results“).

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Haeir is supposedly going to buy GE’s appliance business for $5.4 billion. The Wall Street Journal says that “GE Appliances and Lighting, of which appliances is the lion’s share, were $8.4 billion in 2014.”

One thing that I can’t figure out is if the sale is of a division that makes and sells appliances only in the U.S. or if it is a division that makes and sells appliances worldwide. Let’s assume that this is a U.S.-only division. I still don’t see how it can be worth only $5.4 billion.

The Census Bureau says that there are approximately 134 million households in the U.S. Thus the appliances division is selling for $40 per U.S. household. How can it be the case that GE can’t extract at least $40 in profit over the next 5-10 years from each American household? We bought a house that came with a GE refrigerator. When something went wrong with the icemaker it was about $450 to fix. Isn’t there $40 of profit just in that one repair?

GE seems to have roughly 20 percent of the U.S. appliance market (source), which would make the $5.4 billion acquisition equivalent to something like $200 in profit per household with GE appliances, but that still seems low.

[Separately, just two months after the ice maker repair, the same five-year-old side-by-side GE fridge stopped cooling, thus ruining everything in our freezer and refrigerator. It is running continuously and yet only about 32F in the freezer compartment and 50-55F in the fridge part, with frost all over the back plate of the freezer. I have unplugged it for an overnight rest in hopes that the problem was a frozen evaporator coil and it will start working again by itself. But maybe GE will get to make another profitable service visit?]

Related:

• Now I get to pay some of GE’s bills
• The bad old days (of two refrigerator doors)

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Back in 1998, I published “Tuition-free MIT” and noted various benefits of structuring a college to live off endowment rather than tuition. Nearly 20 years later, it seems that at least some folks at Harvard are taking up the idea: “A Push to Make Harvard Free Also Questions the Role of Race in Admissions” (nytimes; as a sign of the zeitgeist it is mostly about race rather than $$ and academic performance).

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A Boston Globe story on an upgraded GPS system caught me by surprise. Apparently by the year 2022 we’ll have the “GPS OCX” system that, in theory, won’t let a 10-year-old from China send all of the cars in a major metropolitan area in the same direction at roughly the same time, thus causing massive traffic jams.

[The Globe reports that the upgrade is taking longer than it took to build the original GPS system,  consistent with our local Longfellow Bridge project, and will cost 3-4X what was originally budgeted. But that would make it above-average for a military program, according to John Lehman, the Reagan-era Secretary of the Navy (WSJ article: “With so many layers and offices needed to concur on every decision, it now takes an average of 22½ years from the start of a weapons program to first deployment, instead of the four years it took to deploy the Minuteman ICBM and Polaris submarine missile system in the Cold War era. … it takes only seven years for Chinese and Russian procurement systems to produce the advanced ships and fighters of the so-called fifth generation … Today’s procurement consists of beauty contests to see who gets a 30- to 50-year competition-free monopoly.”).]

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Our elected officials have given us Massachusetts taxpayers the opportunity to pay some of General Electric’s bills. “GE confirms it’s heading to Boston” (Boston Globe, January 13, 2016):

General Electric Co., one of the most storied names in corporate America, said Wednesday it will relocate its global headquarters to Boston.

The decision marks the end of a high-stakes competition to woo GE from its longtime campus in suburban Connecticut, besting New York, Providence, and other cities, and further solidifies the region’s reputation as a magnet for innovation.

GE said it will have roughly 800 people in Boston: 200 from corporate staff and 600 digital industrial product managers, designers and developers split among various divisions.

GE has not yet picked a site for its new offices, but is focused on the Seaport area. [sort of a new downtown area, across the water from Logan Airport and featuring lightning-quick trips to the airport]

City officials said they are prepared to offer as much as $25 million in property tax relief. The state package could be valued as high as $120 million and could include a variety of benefits, such as grants, tax incentives, infrastructure improvements, and help with real estate acquisition costs.

So we get to buy GE a building because “at nearly $150 billion a year in revenue, GE ranks eighth on the Fortune 500” they apparently don’t have the cash to buy one themselves. It is good to know that we beat Providence (“the economy is so bad in Rhode Island right now that the Mafia had to lay off three judges”), but it seems abusive to tax $21.50/hour workers (our state’s median wage)  to pay $181,250 per job to have some GE folks here.

Those 200 corporate staffers will be doing a lot of flying out of Hanscom Field (currently 368 operations per day) unless their special deal with the state government includes discounted landing fees at Logan Airport.

How about the GE spouses? If they are considering suing a GE executive, should they do it now in Connecticut or wait until the couple is subject to Massachusetts law? The states are similar in that both are among the most favorable in the U.S. for plaintiffs hoping to profit from a marriage and/or custody of children and both states set up a winner-take-all battle in which one spouse will typically get the house, children, and profitable child support. Both states are good from the point of view of a plaintiff who needs a judge to find a prenuptial agreement invalid to unlock savings accumulated prior to the marriage. Both states are good for plaintiffs who hope to get a judge to order a defendant to pay the legal fees on both sides.

If it has been a short-term marriage with children, a lawsuit is probably more lucrative if filed in Massachusetts. From the Connecticut chapter of Real World Divorce:

Connecticut has a similar system to Massachusetts in that the guidelines in theory apply only up to a certain income ($4000 per week or $208,000 per year) but judges routinely extrapolate the percentage to higher incomes. Child support is not nearly as profitable in Connecticut, however, because the amounts are smaller and the percentages are based on after-tax income rather than pre-tax income. For example, the $208,000 per year after-tax top-of-the-guideline defendant would pay 11.83 percent of “net income” or $473 per week ($24,596 per year). To earn $208,000 per year after taxes in Connecticut, a person would have to earn $365,000 per year pre-tax. In Massachusetts, that would yield $40,000 per year at the top of the guidelines plus 11 percent of the income over $250,000 per year, i.e., another $12,650 per year for a total of $52,650. Combining this with the 23-year period versus the 18-year period, the same child has 2.74X the cash value in Massachusetts compared to Connecticut. …

As in Massachusetts, a Connecticut child support recipient need not personally take care of a child in order to profit from child support. Roisman says that judges will separately order a defendant to pay for day care or other commercial child child care expenses.

Despite the penchant for extrapolation, Roisman thought that it would be challenging for a plaintiff to get more than $200,000 per year in child support, no matter how wealthy the defendant.

Connecticut is similar to Massachusetts in the philosophy that a stay-at-home parent is entitled to continue that lifestyle at a former spouse’s expense:

Roisman would expect the mother [following a 10-year marriage] to receive alimony for as long as 16 years (until the 2-year-old is in college). “There is no formula for alimony, but you can’t expect that mother to go to work with a two-year-old. The alimony amount would be larger at first and would give the mother an opportunity for advanced education. The court would look at the father’s expenses to maintain his apartment, the mother’s expenses, etc. There is no limit to the number of years, unlike in Massachusetts.”

As noted in that last sentence, staying in Connecticut may be better for the spouse who hopes to profit from alimony. Massachusetts in theory limits alimony payments following a defendant reaching full Social Security retirement age (not always enforced by judges) and, for a marriage of 10 years plus 1 day, alimony would be for no more than 7 years (statute). [Don’t let GE relocate you to Germany, where it might well be 0 years! Texas is also bad…]

How about those of us who don’t work for GE and aren’t married to anyone at GE? I think that we will end up paying more than the $145 million in subsidies. Once the 800 GE employees come into the heart of the city and drive up real estate prices (since let’s hope that they aren’t dumb enough to try to commute), we’ll be told that there is a housing affordability crises. Taxpayers will need to fund 800 new units of affordable (i.e., more or less free) housing in central Boston at roughly $1 million per unit. Let’s say that the real estate demand from the GE folks drives up rents and purchase prices for other residents (since most don’t qualify for free government-provided housing and it is difficult to get approval to build new projects in Boston). Assume an average of $1000 per year for 50,000 units? So over 20 years this will end up costing us $2 billion plus whatever time and frustration we have to deal with due to the increased traffic and public transit congestion.

How much of that do we get back in tax revenue? We can assume that these GE folks earn an average of $200,000 per year? And they’ll pay about 10 percent of their income in state and local taxes? (the state’s tax burden is 10.3%). That’s $16 million per year. So after 125 years the folks who already live here come out ahead? That doesn’t seem right but I’m not sure what else is missing. The extra taxes paid due to local vendors enjoying higher sales now that GE is here?

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Erika Christakis made Yale students feel unsafe by suggesting that they could wear the Halloween costume of their choice (previous posting). Now this person (I don’t want to be cisgender-normative and assume that Christakis identifies with a particular gender) is making the rest of us feel unsafe with “The New Preschool Is Crushing Kids” (Atlantic, Jan/Feb 2016). What are we getting for all of the money that we are investing in preschool?

A major evaluation of Tennessee’s publicly funded preschool system, published in September, found that although children who had attended preschool initially exhibited more “school readiness” skills when they entered kindergarten than did their non-preschool-attending peers, by the time they were in first grade their attitudes toward school were deteriorating. And by second grade they performed worse on tests measuring literacy, language, and math skills. The researchers told New York magazine that overreliance on direct instruction and repetitive, poorly structured pedagogy were likely culprits; children who’d been subjected to the same insipid tasks year after year after year were understandably losing their enthusiasm for learning.

The author blames the attempt to teach reading at an earlier age than industrial child care operations in other countries. Yet bright children can read at 18 months (John Stuart Mill could read Greek at age 3! He then went on to learn a bunch more stuff.) and reading unlocks a lot of doors for a child. So perhaps the problem is more the way that American preschools try to teach reading, i.e., at a slow enough pace that even a child in the 25th percentile of ability could follow along.

[Separately, the Yale controversy is the gift that keeps on giving. A Facebook friend was complaining that, due to the increasingly bureaucratic and litigious nature of the U.S., United Airlines was now insisting that children through age 15 traveling solo be signed up for the $150 “unaccompanied minor” handholding service. In his view this was an unreasonable grab for cash. It was immediately pointed out to him that “Perhaps they will need to extend this out to 22 or 23 for Yale undergrads…”]

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Folks:

I’m coming to the horrifying conclusion that we do actually need desktop applications and Microsoft….

I’m trying to print a group of email messages from Gmail. I want these printed to PDF and, ideally, including attachments. I would have thought that I could select the messages in question, e.g., everything with a particular label, and click “print all to PDF” but there is no such option. Yahoo Mail, despite the $365 million paid to the CEO, doesn’t have this feature either. Thunderbird is awesomely easy to connect to Gmail but what it does is offer to print one message at a time and the attachment won’t be opened up and included.

Outlook 2016 is a nightmare to hook up to Gmail. Microsoft doesn’t have an “I am a Gmail-using idiot so set everything up for me” option (you end up having to type custom port numbers and select security protocols by name). Outlook 2016 also doesn’t comply with Google’s latest security requirements so you need to go deep into the Gmail settings and allow lower security clients.  When you’re all done, at least for those of us who have Acrobat Pro installed, you’re rewarded with options to push an entire folder or group of selected messages out to PDF. It isn’t perfect because it seems to make one PDF per message and then gather them all into a portfolio. There is no option to have just one big file. (This third party tool may make it easier to deal with the output.)

Does anyone have a better idea?

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This New York Times video re-enacts part of the deposition of a $940/hour (presumably American-educated) expert witness.

Related:

• Smartest Kids in the World Review

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