Philip Greenspun’s Weblog

If you’ve given up on The New Yorker‘s coverage of business management due to excessive Gladwellization (the latest work by North America’s greatest thinker asks “Is football any better than dogfighting?” and uses 9 full pages to show that in both activities there are likely to be injuries), reading “Not So Fast” may restore your faith in the magazine. This piece by Jill Lepore covers the early days of management consulting and business education. The most interesting part is the second half, which concerns the life of Lillian Gilbreth, mother of 12 children, Ph.D. in Psychology, author of several pioneering books on scientific management, and inspiration for the movie “Cheaper by the Dozen.” She had done a lot of her work under her husband’s name and when he died in 1924 found that businesses would not pay for advice from a woman-run enterprise. Despite her lack of any experience or competence in the kitchen, she remade herself into a home economics expert and died at the age of 93 in Scottsdale, Arizona in 1972  (before Phoenix sprawled out to swallow it!).

More: read the full text of the article

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A friend from graduate school visited this weekend with his three kids. Before they departed, I began to feel my throat getting sore. Yesterday the parents called to say that one of the children had tested positive for strep throat. I called my primary care physician to find out what I should do. His assistant returned my call three hours later, referring me to a lab affiliated with a local hospital. I visited the lab, handing over a health insurance ID card (required by law now in Massachusetts). I would have expected the hospital’s IT system to be able to grab my address and phone number from the insurance company’s IT system, but instead I was asked to hand-write a one-page form with this information. Meanwhile the clerk searched among a stack of 30 or so FAXes that had come in that day, trying to find one from my doctor with my name on it. After she’d found the test order, she started entering my contact and insurance information into the hospital’s IT system. She made multiple transcription errors, necessitating two reviews by me. I was presented with a full page of fine print in which I signed away various legal rights to privacy. The clerk said that without this they would not be able to disclose the test results to my doctor. Nor do they ever disclose test results to a patient. So a patient who refused to sign the form would end up getting tested and the results would never be useful to anyone. The paperwork took about 30 minutes to complete.

The strep test itself was done fairly quickly after the paperwork was done and I walked out, having been told to call my doctor’s office the next day for the results.

I called the doctor today and the phone menu said “Press 1 if you are having a medical emergency or need to talk to your doctor’s office”. I pressed 1 and got a busy signal, then was disconnected. I called again and repeated the process. I was disconnected again. I called a third time and pressed 0 for the operator and explained the situation. She said that my doctor was out today and I should call again the next day. I explained that I had been told to expect this and that anyone else in the office should be able to retrieve the test results and read them. She said that someone would call me back. About 20 minutes later, a different physician’s assistant called me back to say that the “quick strep” test was negative but that they were still waiting on the throat culture test, which had been started in parallel. I asked how long the quick strep test actually took. She said that she had no idea. I looked it up on the Web and the answer turns out to be less than 15 minutes. So it took 21 clock hours to get the results of a test that takes 15 minutes. Two FAXes were sent and at least three additional pieces of paper were consumed; six voice phone calls were placed.; roughly 60 minutes of patient time was consumed, not including driving to/from the lab.

I would say that this incident demonstrates one point from my health care reform plan: “As the health care industry has never been competitive, nor had any incentive to control costs, we have no idea how much American health care could or should cost.”

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Today New York Times carries an article on the failure of America’s public schools to teach math to kids. In schools that are among the most expensive in the world (for taxpayers), only 34 percent of 8th graders are “proficient” in math, and 39 percent of 4th graders. One major theme of the article is to beat the dead horse of the Bush Administration, by pointing out that No Child Left Behind does not seem to be working. The taxpayers are doing their part, paying up to $200,000 per year for each teacher (including pension obligations incurred). The students are doing their part, presumably, by showing up to school every day for 6 hours. If things aren’t working, it can only be due to incompetence on the part of the government at this fairly straightforward task.

Let’s contrast teaching K-8 math with managing health care. Instead of compliant 4th graders who show up to school every day, you have clever providers who will figure out where the gaps are in thousands of pages of federal rules and regulations and use those gaps to extract tens or hundreds of billions of dollars in extra profit. Instead of a fixed subject that has not changed substantially since the death of Brahmagupta in 668 A.D., health care presents a moving target of new procedures, drugs, tests, and fees. In the school system, the interests of the students and taxpayers are aligned. Both groups are better off if math is learned. In the health care system, there is a substantial moral hazard. If improved diabetes and heart disease therapies become available, people may indulge more in super sized meals.

You would think that the evidence of failure of trillions of dollars of tax money spent on math education in the period covered by the article (1996-present) would be a sobering reminder of the limits of government power, but none of the 50+ people commenting in the New York Times made that connection.

More: On my non-profit ideas page, I propose teaching math in the context of doing an engineering project, such as designing and building a bicycle.

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I met with my accountant last week. I learned the following:

• advertised marginal tax rates should be ignored by upper middle class taxpayers; the alternative minimum tax (AMT) is the real tax rate and it is substantially higher. Even in a state with an average income tax rate, such as Massachusetts (5.3% on most income), taking a deduction for state tax paid will trigger the alternative minimum tax
• contributions to charity have very little effect on the total tax paid by someone subject to alternative minimum tax; a charitable deduction lowers one’s standard tax, but does not lower one’s AMT. The IRS forces you to pay the AMT if it is higher. So… give to charity if you feel as virtuous as Elvis Presley, who never took a deduction because it “took away from the spirit of the gift”, but don’t expect it to lower your tax bill.
• we do indeed live in a nearly perfect welfare state for health insurers. A self-employed person who pays $5000 for health insurance can deduct part of that. A self-employed person who pays $5000 directly to doctors and hospitals cannot deduct any of that (except the part that exceeds 7.5 percent of income).
• the costs of complying with the Massachusetts requirement to purchase health insurance are substantial; the state had no idea how many people were uninsured so they are using the tax system to figure it out. The accountant calls customers to obtain their proof of insurance certificates. The customers call their insurance companies to obtain these documents in hardcopy. Then they have to be re-mailed. Then someone at the accounting firm has to open the mail, put the document in the correct file and inform the accountant to stop nagging the client. These costs imposed on taxpayers are in addition to the billions of dollars in direct costs for additional policies purchased and for state subsidies to insurance companies for customers who aren’t wealthy enough to afford what are now the nation’s highest cost policies. (more: see my health care reform plan)

The tax code is becoming ever more complex. If you buy business equipment, for example, you have to calculate depreciation both for regular tax and for AMT. This calculation is done every years for 5 to 10 years. If you rent out an apartment, you pay tax on any income. If you lose money, though, you can’t deduct the loss. You are supposed to accumulate any loss years and subtract the total from whatever you get when you sell the apartment, so the operating loss turns into a reduction in capital gain. (Unless you’re a Congressman in charge of the committee that makes tax laws for commoners; in that case you don’t pay tax on your rental income and you don’t pay market rent on the four apartments that you occupy in Manhattan (see Charles Rangel)).

My taxes are pretty simple because I don’t trade individual stocks. All of my investments are in mutual funds. I do have some self-employment income and I rent out an apartment that I own. The number of pages of filled-out forms and schedules, for both state and federal taxes, that the accountant sent me for review is 124.

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Barack Obama has won the Nobel Peace Prize because of his sincere expression of a desire for world peace. I’m excited first because I’m hoping that he will use part of the $1.4 million proceeds to take his Aunt Zeituni off the hands of the taxpayers of Massachusetts (more). Second, I’m predicting that the next prize will go to Sandra Bullock due to her expressed wish for world peace in the movie Miss Congeniality (preceded awkwardly, as cinema fans may recall, by a desire for “harsher punishment for parole violators”). Ms. Bullock will likely have to share her prize with current and former Miss Americas and therefore may not be in a position to relieve the citizens of Massachusetts of the burden of paying for President Obama’s aunt’s apartment.

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Now that teenage unemployment has reached 25 percent among those still actively seeking work (source), it seems like a good time to look at regulations that might discourage companies from hiring teenagers. Economists have traditionally said that the minimum wage law is the primary weapon wielded by older workers against the young. With a high minimum wage, companies won’t want to hire the inexperienced so the next generation will be hobbled in their attempts to build a sufficiently strong resume to unseat the current generation of workers.

At a party here in Massachusetts, I asked a group of comfortable middle-aged folks how they felt about the minimum wage. All were strongly in favor of a minimum wage law and thought that it benefited entry-level workers. I asked “Wouldn’t a minimum wage, of whatever amount, cause companies to refrain from hiring any worker that wasn’t worth the mandated wage?” Absolutely not, the group agreed. A restaurant would need burger flippers and they would pay whatever the government told them to pay. I observed that it would be pretty tough to live on the current $8 per hour minimum wage here in Massachusetts. Wouldn’t it be better to set it at $50 per hour? If $8 is good, surely $50 would be better. “Maybe that is too high,” one person said. They accepted that a $50 per hour minimum wage would discourage hiring, but believed that an $8 one would not.

What about in their own households? Nearly all of these folks employed cleaners, landscapers, babysitters and nannies. Suppose that the government mandated that they pay their helpers more than they were currently paying. “We’d clean the house ourselves,” one couple said. “I’d let the weeds grow,” said another. “We would stay home and watch TV instead of hiring a sitter and going out,” said a parent. Would a business faced with a minimum wage law behave similarly? “Absolutely not, companies are completely different from consumers,” was the response.

Why was it more common in California for households to employ helpers than here in Massachusetts? Was it because immigrant labor is available at much lower prices than here in Massachusetts? That a gardener at $10 per hour is appealing to a homeowner than a $30 per hour gardener? “No, it is mostly because there are more people available and it is easier to find someone.”

“We need the minimum wage for social stability,” one guest asserted. I asked if they considered Norway, Singapore, Switzerland, and Sweden to be unstable, as those countries had no minimum wage law. Then I asked if they thought it made our society more stable to have 25 percent of the young workforce out on the street instead of working at a job.

Not a single person changed his or her mind as a result of my questioning. Support for the minimum wage remained solid at 100 percent.

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I spent a recent Sunday in Washington, D.C. visiting art museums, my favorite white bitch, and family. The big show in town is everything Spanish that could be stuffed into the National Gallery. More in tune with the times, however, are the oil paintings commissioned by the Federal Government during the Depression exhibited at the National Museum of American Art (link). There is some truly great stuff on the walls there (example), a subset of the more than 7,000 paintings, 750 sculptures, and 700 murals created by 3,700 artists at a total cost to the taxpayer of $1.3 million (about $21 million in 2009 dollars). Let’s hope that comparable work will come out of the Collapse of 2008 and subsequent bailouts (are there interesting art projects buried amidst the trillions of dollars being spent on bailouts and stimulus?).

Walking around Northwest D.C. you wouldn’t know that anyone anywhere in the U.S. was hurting economically. The parks are groomed, the monuments and museums are polished and fully staffed, there are very few retail spaces vacant, and everyone looks optimistic (walking) or frustrated (stuck in the heavy traffic that attends growth in a city incapable of implementing congestion pricing). Stopping to pick up some fruit at a Giant supermarket in Bethesda, I parked next to a brand new Bentley convertible. Stepping onto the metro at Friendship Heights, I walked passed a soon-to-be-completed gleaming new luxury shopping mall, complete with $100 per person chain steakhouse. The retailers’ confidence in opening was consistent with a July 2009 report that “Washington D.C.’s most expensive retail submarkets seem to be among the few in the nation that have seen rent growth over the last year” (source). Government workers are more numerous and better paid than prior to the Collapse, but probably the Bentley belongs to a lobbyist (see this article for how returns on an investment in lobbying can exceed 22,000 percent). As the government embarks on its largest expansion since World War II and grows beyond 28 percent of the GDP, lobbyists have become second only to politicians in their influence on our nation’s economy.

I expected long lines and full flights around a 9 a.m. Monday morning departure from DCA, but the TSA staff outnumbered passengers in the security area and there were only 19 passengers on our 76-seat regional jet. One possible explanation is that the federal government has now become so powerful that there is no need for anyone in Washington to leave the city on business. The government regulator who used to go to Indiana to check out a factory can now sit at his desk because the factory has shut down.

After the cabin door was closed, the captain warned passengers not to get up and use the restroom prior to reaching our cruising altitude of 31,000′ , by which time we’d be in Delaware or New Jersey and freed from the special security regulations that govern flights in and out of National Airport. If someone had gotten food poisoning from the bagel shop in the terminal and ran to the bathroom, the airplane would have to be diverted from landing in Boston. We’d be landing at some other airport for a security check and would then proceed to Boston. Note that this would cost the airline approximately $10,000 in fuel, engine reserves, and disrupted schedule.

Once home in Boston I was able to renew my struggle with the exciting challenges of suburban living. The Waltham Home Depot was virtually empty at 6 pm. Helpful employees converged to assist in my quest for appropriate technology to water grass that is hundreds of feet from the nearest tap. I asked one of the workers, a fully licensed but young plumber, how the store was doing since the Collapse of 2008. He said “I can’t compare to what it was like before the downturn because the crash is one of the reasons that I am here. I work three jobs now and earn less than I did at just one job.”

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My favorite economist (never understand what she says, but love to hear her talk) sent me “Possible Macroeconomic Consequences of Large Future Federal Government Deficit” by a Yale economist under a subject line “fodder for your bleak outlook”. She summarized my recent Weblog postings on the economy as “bleak”, which to me means “pessimistic”. Yet I’m actually very optimistic about U.S. economic prospects in an unfettered market. Here are some reasons for optimism…

• The average American worker is better educated and more capable than the average worker worldwide. There are, of course, many excellent workers in countries such as China and Mexico, but on average a U.S. worker is more useful to a business.
• We have a better-than-average infrastructure of transportation, communications, electric power, and legal system.
• We have a lot of natural resources, including the basics of land and fresh water.

How come we are having trouble growing our economy? Part of the problem is that the products and services that people want to buy aren’t available. Let’s look at a top-of-the-head list. We’ll exclude products that require a huge amount of scientific and engineering innovation, e.g., a house-cleaning robot.

• A basic city car, gas or electric, priced similarly to the Tata Nano (i.e., $2500)–I would buy one tomorrow
• A dock for using a smartphone as one’s home computer  (see this 2005 article)
• A compact motorhome, sort of like the old VW camper van (see this article on making recreational vehicles in China)
• A home aquarium hood combining lights,  filter, heater, UV sterilizer, and automatic fish feeder (see this posting; I would buy one tomorrow)
• A floor lamp consisting of an upright fluorescent tube covered by a paper shade (see this posting; I would buy one tomorrow)
• A prefabricated one-room house, for someone who wanted to have the industrial loft experience in the suburbs (see this design)
• Mobile phone software that would, based on its knowledge of your location, show you a list of nearby hotels and how much they were charging for rooms at the moment, with the opportunity to reserve a room through the phone (useful for travelers; I used this as an example of the lack of innovation at phone companies back around 1997 when it became technically straightforward (Expedia was up and running by then)–it never occurred to me that we still wouldn’t have this 12 years later)

It is true that the same old products aren’t selling quite as well at their same old prices, but that’s partly because people already have the same old products. It is a lot easier to sell new products for which no competition exists.

So that’s my optimistic posting about the economy. All that we need to do is design and produce a few things that aren’t available already.

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… but we’re still trying to do it in Kabul.

Let’s consider the case of Najibullah Zazi, who speaks English and has lived in Flushing, Queens (New York City) and Denver, Colorado. Subsequent to Mr. Zazi’s first trip to Pakistan for terrorism training, it took the FBI at least two years to figure out that this guy was planning to attack his neighbors here in the U.S.

We’re going into our ninth year of war in Afghanistan, attempting more or less the same task: sorting out the Afghans who want to kill Americans from those who don’t. We don’t speak the language, we don’t know the terrain, and yet we’re trying to do what we were barely able to do in Queens.

[Zazi is a good example of why we might want to consider changing our immigration policy along the lines suggested in my economic recovery plan. He was a legal immigrant to the U.S. at the age of 7. He would have been educated in the New York City public schools, some of the most expensive in the world. Let’s say 10 years times $15,000 or $150,000. He filed for bankruptcy earlier this year, costing U.S. creditors $52,000. His career as a would-be terrorist will probably cost at least $5 million in FBI salaries and legal process. Fear of similar activities by Mr. Zazi’s colleagues should result in security costs and reduced economic activity running into the hundreds of millions of dollars.]

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This year’s Nobel Prize in Physics goes to the guys who developed the CCD sensor that enabled the first tubeless video cameras and consumer-priced digital still cameras. Please add comments with examples of how either cheap video cameras or digital still cameras have changed someone’s life. I will lead off…

A friend of mine is a working mother. Her toddler’s nanny, a Mexican woman in her late 30s, carries a small digital camera with her all day every day. When Mom gets home she can review the photos and see the fun that her kid was having all day. Doing this in the film era would have required a trip to the one-hour lab every evening and a cost of $20 and therefore would never have happened.

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