Philip Greenspun’s Weblog

A woman who was afraid of flying on commercial airliners spent some weeks working with a therapist to get over this paralyzing fear. The therapy culminated with a flight, about a week ago, in an 11-year-old Piper Warrior with our flight school’s most mild-mannered instructor. After an hour of ground instruction, the instructor, fearful person, and therapist were all on the ramp getting ready to sit down in the Warrior. Meanwhile, a  60-hour Private pilot had rented an identical Warrior from the school. Using his new noise-canceling headset, he thought that the engine was making an unfamiliar sound. He then removed the headset and heard a terrifying cacophony of sounds from the engine. He looked at the gauges, all of which were normal except for the fuel pressure, hovering almost at zero. Expecting imminent engine failure, he declared an emergency. The airport fire department raced out to the runway with two trucks. The pilot of the emergency aircraft made an uneventful landing and taxied the still-running plane to the ramp, with two fire trucks trailing behind, their lights flashing. The emergency pilot then parked the Warrior right next to the folks preparing to embark on the therapy flight.

[The minimum fuel pressure in a Warrior is 0.5 psi and it registers on an old analog gauge, which is accurate to perhaps +/- 2 psi. As it is a low-wing design, if the engine is running by definition there is sufficient fuel pressure to pull fuel up from the wings into the carburetor or fuel injection system. The owner of the flight school needed to go to New Hampshire later that afternoon and he took the emergency Warrior up there and back without incident.]

This reminded me of a woman I worked with about ten years ago. Her fear of flying prevented her from going to Los Angeles to see relatives. She spent months in therapy and had finally gotten over her fear to the point that she purchased a Boston to LAX ticket… for September 12, 2001.

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After digesting all of the helpful reader suggestions in a recent posting about a compact PC, I decided to forge ahead and buy an HP and an extended warranty for when the heat build-up causes it to fail. The HP site offers “50% off 1GB NVIDIA GeForce GT 220 graphic card upgrade ($65 savings)”. I tried to configure a machine with that graphics card, but it wasn’t available (so you get 50% off a card that you can’t buy). I tried the Live Assistance button and was helpfully connected to “Irene G”. The form to request Live Assistance asks for one’s name, email address, and question. One of Irene’s first questions back to me was for my name, email address, and phone number. She needed this for “security and verification purposes”. I had used “Philip Greenspun” in the initial form, but experimented wth “Barack Obama, 202-456-1111, and president@whitehouse.gov”. Irene had no trouble verifying that I was indeed Barack Obama and helpfully answered that the GT 220 graphics card was out of stock. I called the phone number that HP lists for PC sales and punched a few buttons through the phone tree after which the automated system disconnected me.

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I’m a shareholder in a handful of public companies and packages periodically arrive in the mail encouraging me to vote for boards of directors that are ladling out billions of dollars in money and stock that otherwise would have been retained by shareholders. I’m surprised to see that stock options are still mentioned in these proxy statements rather than restricted stock. This 2003 article discusses how restricted stock would be the next big thing for corporate looters because the stock market was then perceived as too risky for managers. This survey says that options are still the most popular way to transfer ownership of a company from public investors to insiders, but that restricted stock is making a comeback.

Corporate executive stock options were almost never tied to the overall stock market. If a company’s stock underperformed the index and competitors, an executive could still cash in with options simply because the market had gone up. What can make the market go up? Inflation, for one thing. So options were an almost guaranteed winner from 1970 through 2007 (and they got repriced in the cases when the options proved not to be winners). Now that inflation is low enough that the S&P 500 could be stuck indefinitely below its value of 1550 reached in March 2000 (the index is 1147 today, which means an investor at the peak has suffered a 26 percent loss of value after holding for more than 10 years), I’m wondering why we haven’t seen even more popularity for restricted stock. Perhaps it is because it is not tax-efficient compared to options.

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I want to stick a desktop PC into a cabinet that is about 7″ high, 13″ wide, and 24″ deep. I want the computer to be capable of AVCHD video editing and also of driving a standard 30″ LCD monitor with 2560×1600 pixel resolution. After the last big PC discussion, I guess it might be nice to build the thing from a solid state drive.

Dell doesn’t seem to offer anything that is simultaneously cheap, compact, and powerful. HP has the s5580t which a shopping review says is “dead quiet”, does not run hot despite being confined in a cabinet, and is happy living on its side (sadly another customer says it is noisy and hot). It is about $1000 when loaded up with four CPU cores (Intel i7-960), a 1 GB Nvidia GT 220 graphics card, 8 GB of RAM, DVD writer, and a 1 TB hard drive. Plus I can feel good knowing that I am helping HP save up to give their next CEO a $35 million goodbye present after he is caught falsifying expense reports (gawker).

Other ideas?

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My favorite working woman pointed me to “Fair Pay Isn’t Always Equal Pay”, an Op-Ed in the New York Times arguing against a proposed new federal law that would create new ways for women to sue their employers. I thought the article, by Christina Hoff Sommers, was weakly argued. She did not point out that if women could be hired more cheaply than men, any profit-minded employer would have a 100 percent female workforce. President Obama called it “a common-sense bill”, apparently. I wonder if this reflects the fact that he has never held profit-and-loss responsibility in a private business (he did spend one of his 49 years working an entry-level job at a for-profit corporation, but the rest of his working life has been in non-profit or government jobs). I’ve found that folks who never had P&L responsibility anywhere are simply unable to imagine what it would be like to start or operate a business. People who’ve been employees or managers all of their lives tend to focus on employees and managers rather than customers or the financial health of the enterprise.

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Today I was asked two questions about the Tea Party: Am I afraid of it? Do they propose to cut spending or only to cut taxes?

My answer to the fear question was “How much worse could they do than the established parties, which have started (and continue to choose to fight) two expensive wars and strangled the nation’s economy?”

My answer to the second question was “I’m not sure”. A big of Googling brought up http://www.thecontract.org/the-contract-from-america/, which seems to me to be the closest thing that there is to a “tea party platform”. The “contract” implies some serious spending cuts by including both “Demand a Balanced Budget” and “Stop the Tax Hikes”. The federal government now spends approximately $1.5 trillion more than it takes in and the U.S. economy isn’t growing. Therefore, a balanced budget without tax hikes would require eliminating a lot of popular government programs, such as the military, Medicare, Medicaid, and huge cuts to others, such as Social Security. The Tea Partiers have left this inconvenient truth out of their contract, so it is hard to say what the Tea Party is actually advocating.

Taking it down to the household level, imagine a person saying loudly “We are going to cut spending so as to achieve a balanced budget” but won’t say whether the cell phones are to be ditched, the cable TV service terminated, or whether he or she proposes to move to a cheaper apartment.

[The other question government-related question I was asked this evening regarded Social Security. I said that if the current generation of retirees got more back from Social Security than they put in, necessarily some retirees in the future would have to get back less. The only way to avoid that would be a permanent Ponzi scheme in which we grew the U.S. population to be larger than the Earth’s (so that there was always an expanding number of workers to pay off promises to retirees). That said, it has proved difficult for me to substantiate the actual return on investment for current Social Security recipients. This 1996 article says that an average male retiree in 1980 got back 3.7 times more than his contributions would have earned if they’d been invested in bonds; an average female retiree got back 4.4 times due to longer life expectancy. A more nuanced perspective comes from this Cato Institute article, which shows that medium earners got only a couple of percentage points better than in government bonds (though a slight premium adds up over a 40-year career and this article is from the mid-1990s, before the “lost decade” for investors in U.S. securities).]

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On Tuesday I helped a friend pick up his airplane from a maintenance shop in Newburgh, New York (KSWF). The FBO in Newburgh had a stack of local papers, the Times Herald-Record and I picked one up to see how life in New York was 60 miles from the TARP bubble that protects Manhattan. Newburgh’s airport should be a significant source of income for the community. It is home to a fleet of C5 cargo airplane that cost nearly $50,000 per hour to operate; this results in hundreds of jobs for pilots, mechanics, and administrators in the New York Air National Guard. The FBOs at Newburgh are doing well this week because so many foreign governments have flown in enormous Boeing and Airbus planes so that their dignitaries can attend a United Nations conference. There is no room to park these planes at JFK, so they reposition up to Stewart and then tank up with jet fuel.

The cover story was about a property tax hike for 2011 that would raise property tax rates between 41 and 62 percent (most homeowners would see their rate go up by 62 percent). The tax increases are necessary to make up for years of profligate spending by local government. What have they spent the money on? Page three has an article about a school system administrator collecting more than $400,000 per year. Page four had an article about the DARE anti-drug program in schools, which has consumed more than $1 billion per year in tax dollars. According to the article, the DARE program “has been dismissed as being a waste of time and money by 30 studies and countless individuals. … Other studies have even found that DARE graduates had a higher rate of drug use than non-participants.”

The trip from Bedford (KBED) to Newburgh (KSWF) was conducted in a Piper Warrior of uncertain vintage, worth perhaps $30,000. Against a light headwind, it took 1.6 hours from engine start to engine shut-down. The return was conducted in a $3 million twin-engine jet. With a bit of a tailwind, it took 1.1 hours to reverse the journey.

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The kitchen laptop computer had an unfortunate encounter with a full mug of tea. As it cost $499 about 1.5 years ago, it can probably be regarded as a write-off. Rather than providing retraining and a 709 ride for household members, I was thinking it might be nice to redesign the installation to expose only a monitor and keyboard, with a brick underneath a desktop. One of the uses of this laptop was Skype video chat. So I went shopping for monitors at hp.com and dell.com and found that none of the nicer monitors, e.g., 27″, include webcams. I would think that nearly everyone who has a home PC would want to the option of using it for videoconferencing. I would think that nearly everyone who buys a nicer monitor would want to avoid clipping an afterthought webcam onto the top of the monitor. So how come it is nearly impossible to buy a monitor with built-in webcam, microphone, and maybe even speakers? A competitive market is not supposed to result in 20 different vendors all selling identical products, is it?

In the laptop world, it is almost impossible to buy a machine without a webcam. Similarly in the all-in-one PC world, both Macintosh and Windows; they all have webcams to support videoconferencing.

My one  theory: the standard monitor interface is the DVI cable, which cannot support both the pixels coming up and the USB traffic going back. I don’t think this problem is insurmountable (and I’m not even sure that I’m right about what the extra pins in DVI can do), however, as it is possible to buy a bundled DVI and USB cable. Also, a lot of monitors, including the four-year-old Dell 30″ monitor I’m using right now, have USB ports.

[Update: After drying out for 8 hours, the Toshiba laptop booted up Windows Vista, ripped a CD from its optical drive, pulled Web pages from the Internet with Google Chrome, etc. The keyboard is kind of mushy, but I’m hoping it will revive. If not, I guess I can raise the laptop up on a phone book (more ergonomic anyway) and attach a USB keyboard. I’m somewhat amazed that a $499 computer can handle a full mug of near-boiling tea; hardware engineers are a lot smarter than software engineers!]

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Since I’ve written about some pension funding issues in previous postings (example), let me point readers to a couple of news articles. From today’s Wall Street Journal, “Pension Gaps Loom Larger”, about how public and private pension funds are assuming 8 percent return on investment over the coming decades. And today’s New York Times has “The Illusion of Pension Savings”, about Enron-style accounting gimmicks that enable states to look slightly less bankrupt.

In some ways the WSJ article is more interesting. Here in Boston an 18-year-old hired by the MBTA can retire at age 41 and is entitled to an inflation-adjusted pension from age 41 until death at perhaps age 100. So the pension fund managers need to be looking out for about 80 years. The assumptions that they’ve made are that the U.S. needs to grow about as well for the next 80 years as it did during the years 1920-2000 (and the 2000-2010 period needs to be chopped out!) or the fund and therefore the company or state goes bankrupt. Not only does the U.S. need to continue to be doing great, but returns to investors need to continue to be high. The flood of savings from newly wealth Chinese, Brazilians, and Indians, for example, cannot result in competition that reduces the return to capital below what it was in, say, the 1950s. When you think about it, the risk that these guys are comfortable with is rather breathtaking. Without a letter from God promising that the next 80 years will look like the 1920-2000 period, why do we allow corporate managers and politicians bet the future of their organizations?

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When health care costs, payroll taxes, and wrongful termination lawsuit risk rise while education levels fall, economists say that businesses will tend to substitute capital for labor…

(captured with a Motorola Droid 2 mobile phone that I’m testing out)

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