Philip Greenspun’s Weblog

Folks:  I’m planning a little airplane trip starting on Friday.  The itinerary is New York City, Atlanta, Florida to fuel up, out to the Bahamas, back to Charleston, SC, Washington, DC and home.  The goal is to visit some interesting places that are hard to reach on commercial airlines, snorkel, and add some good recommendations to http://philip.greenspun.com/flying/caribbean 

I’ve already been to Andros and Exuma.  I was thinking maybe Cat Island and Eleuthera.  Thoughts/ideas?

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First they came for the ob-gyns and I did not complain because I wasn’t an ob-gyn (see John Edwards channeling the voices of dead babies).

Now the trial lawyers have come for my new helicopter (IFR trainer; had been scheduled for February 15).

Here’s how it happened. Once there was a little company called Precision Airmotive making aircraft parts. One product line was carburetors and they were the only company left in the U.S. making aircraft engine carbs, including the carb that goes in a Robinson Raven I helicopter.

A couple of guys in Florida went out for a night training flight in 1999 in a Cessna 150, produced between 1958 and 1977, which is probably the very cheapest training airplane available (this one had 12,878 hours total time; the NTSB did not report the number of hours since the engine was overhauled). Flight schools in Florida are renowned for skimping on maintenance. An exhaust valve stuck open, taking the rest of the engine with it. They crashed on a road and were injured. A trial lawyer managed to convince a jury that the design of the carburetor was defective, leading to overly rich fuel/air mixture, and causing valves to stick. Precision argued that this carburetor design dated from the 1930s and was installed in tens of thousands of airplanes, many of which were flying at flight schools all day every day. The jury sided with the badly injured pilots and awarded $38 million against Precision, a 43-employee company (story).

Precision’s next liability insurance quote exceeded their total annual revenue from selling carburetors. They decided to stop making carburetors and sold the business to another company. The new company is setting up a production line in another state and, in the meantime, there are no carbs to be had. Robinson is sitting on helicopters that are 99 percent complete but that cannot be delivered to customers. That is the kind of thing that could bankrupt a lot of companies.

As a layperson, I can’t understand how Precision had any liability at all. The fuel/air mixture is controlled by the pilot. The richness of the “full rich” setting is controlled by the manufacturer of the airplane and the engine. In any case, the plane flew safely for 12,878 hours with the allegedly defective carb design, as did 24,000 other Cessna 150s. In this case, I believe that Cessna could not be held liable because Congress gave airplane manufacturer’s an 18-year limit on lawsuits. Presumably the carburetor and/or engine were newer than 18 years or had been overhauled within the preceding 18 years. The NTSB did not investigate this crash very intensively. “Ancient little Cessna maintained by a discount flight school in Florida loses its decades-old engine” is not an uncommon or surprising story. There is a brief factual report and a probable cause report. The NTSB does not mention the carburetor design as a potential source of any problem.

King Bush II visited Robinson Helicopter on January 30 (photos) to congratulate them on being such successful exporters and celebrating American engineering ingenuity. Robinson won’t be exporting any Raven Is for a while. Maybe Bush should visit some personal injury lawyers and congratulate them on being more ingenious than our engineers…

[For some background on the 1980s shutdown of the small airplane industry, blamed partly on litigation costs, check out this story on the General Aviation Revitalization Act.]

[For some technical background on the correlation between rich fuel/air mixture and valve stickage, check this Lycoming service letter from 1988 and this Continental service bulletin from 1977.  The engine in that old Cessna 150 was probably designed for 80/87 fuel, which has been discontinued in favor of a higher lead content fuel, 100LL.  Most of these engines would actually run better on unleaded car gasoline, but you can’t buy that at most airports.  And of course it is a shame that the industry and FAA have not been able to come up with modern piston engine control systems that would keep the mixture at an optimum level at all times (as does the system in the cheapest new Kia or Hyundai automobile).  But I’m not sure it is fair to fault the carburetor company for continuing to sell its 1930s design if the customers can’t find anything better…]

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With Windows Vista continue to disappoint users and PC hardware designers continuing to produce ugly oversized desktops, Microsoft has apparently decided that Internet applications are the path to more revenue. It has offered $44 billion to Yahoo, which the Yahoo Board apparently rejected on Friday, despite the fact that the $31/share bid was higher than Yahoo has typically traded since mid-2006 (see http://finance.google.com/finance?q=YHOO and click on “1y” to get a chart).

The interesting question is why a company that claims to know how to program would pay anything for Yahoo, much less a P/E ratio of more than 60.

Google unseated Yahoo at a cost of about $20 million in financing, simply by being effective software developers and tasteful interface designers. We can infer from this offer that Microsoft expects its own programmers to be only 1/2000th as effective, dollar for dollar, as Google’s. In comparing Vista to XP and dividing by the amount of coding effort that went into Vista, it would be tough to argue with this conclusion.

[If I were a Yahoo shareholder, I would be looking at purchasing an old battleship right now, sailing it into San Francisco Bay, and lobbing some 16″ shells on the Board members’ houses in Atherton. The chance of a Yahoo shareholder ever getting more than $31/share, adjusted for inflation and risk, seems remote.]

[Additional thought… this could be a good new analogy question for the SATs… Microsoft is to Yahoo as Time Warner is to (correct answer) AOL.  I recognize that it was AOL that purchased Time-Warner, but it was AOL that collapsed in value shortly afterwards, demonstrating that Internet giants can fall almost as fast as they rise…]

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I’ve written up a page on the new Robinson R66, a five-seat jet-powered helicopter due out in 2010.  Probably of interest only for die-hard aviation nerds.

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When this U.S. presidential campaign began, there was a lot of discussion about race. Could Obama win despite his darker than average skin? The assumption in many news articles was that white voters were prejudiced against blacks and would prefer a white candidate. My personal theory was that voters would ignore skin color. My experience with Americans is that they often have opinions about a racial or religious group but that they are nearly always willing to put those opinions aside and consider an individual. I’m wondering now if maybe both opinions are wrong. Perhaps being black is a big advantage with the average American voter.

Consider the average white guy who has been accustomed to seeing white medical doctors. In his experience, all of the doctors who have treated him have been extremely competent and qualified and all of those doctors were white. Should you present a black doctor to this patient, he might wonder “Is this guy going to be as competent as the white doctors I’m accustomed to? Did he get into med school because he was black, not because he was as smart as other students?” (see this British Medical Association article). Maybe it would be safer to stick with white doctors.

Ask the same white guy who has liked his white doctors what he thinks about the politicians who represent him or govern him. The answers would probably range from “Uninspiring, plodding, mediocre, wasteful” to “Incompetent, corrupt, embarrassing.” What color are these politicians? Almost always white. The less that a candidate physically resembles incumbent politicians, the better he or she should do, all other factors being equal.

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Folks here in Cambridge were euphoric when the hated Mitt Romney was replaced as governor by Deval Patrick, who, like Barack Obama and Cory Booker, falls into the young, gifted, and black category. After a year in office, nobody can point to any concrete achievement by Patrick, who has been in the news mostly for use of the state police helicopter, extravagant spending on redecoration, married gay teenage sex, and advocacy of casinos in Massachusetts.

Now it seems that Patrick is trying to revive the sales tax on aircraft and aircraft maintenance (story). The tax was repealed in 2002 in an effort by a Republican state legislator, Cele Hahn, to make Massachusetts competitive with surrounding aviation tax-free states such as New Hampshire and Connecticut. Companies that had a choice would base their airplane, along with its hangar and maintenance jobs, in a nearby state in order to save $millions in taxes on an expensive plane. Ms. Hahn’s plan has been largely successful.

Maybe “young, gifted, and black” translates to “try to tax things that can move at 500 mph; send jobs to states governed by old, boring, and white people (example).”

[According to www.celehahn.org, Ms. Hahn is no longer a taxpayer here in the Commonwealth. She moved to New Hampshire.]

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Alpha Omega Jewelers seemed to have everything going for it: prime locations, including one in Harvard Square, a Rolex dealership, and a bunch of other fancy watches and other stuff. I walked by the store today, however, to find that they were having a bankruptcy liquidation sale. A sales guy explained that the owner had fled the country, a lender had seized the assets, and the bank had decided that it wasn’t profitable to continue selling $5000 watches to yuppies.

Harvard Square retail seems to be going through a slow patch. Amazon.com and high rents forced Wordsworth books out of business in 2004 and their prime location has yet to be rented to another store.

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I attended an election results party last night here in Cambridge. Most of the attendees were reasonably rich biotechies or computer nerds. Having predicted a victory for Obama, I was gratified to learn that nearly all had voted for him. A recent New Yorker magazine carried an article (abstract) on Cory Booker, the mayor of Newark, NJ. He is often lumped together with Obama in the “young, gifted, and black” category (Nina Simone). The article is not available online, but the magazine does serve a video interview with Booker. Booker was voted in with high hopes, which have been mostly disappointed. Newark remains crime-ridden and poor.

Neither the article nor Booker ever states Newark’s problems clearly, choosing to talk about incremental fixes. It seems to me simplest way to characterize Newark’s problems is that its citizens have a Third World level of education and skill while its city employees are paid a First World salary. With citizens capable of competing only for the lowest wage jobs and public employees drawing above-average salaries, the inevitable result is a crushing tax burden. To some extent welfare payments from the federal government can supplement local income, but that doesn’t seem sufficient to pay a standard city employee bureaucracy, not to mention pensions for city employees hired during the 1950s, 60s, and 70s. Newark sits at a transportation nexus and is close to New York City, but there are plenty of nearby towns with lower taxes and crime that are more attractive to employers and residents.

It seems that being young, gifted, and black is not sufficient when an economy has structural problems…

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The Boston real estate market has seemed immune to the collapse of the real estate bubble.  The asking price for a nice single family house in Cambridge is about the same as an old-but-airworthy Boeing 737.  How can prices be so sticky, friends are asking?

My personal theory is that high housing costs discourage consumption, but the discouragement is much slower than for any other product.  If the local movie theaters put up prices to $20 per ticket, demand would fall within weeks.  If the landlords insist on a huge rent increase, however, they will almost always get it and come to believe that the new high rents will stick.  Moving is a huge endeavor that people will try to put off as long as possible.  If a couple is sharing a house or apartment, they may both need to find jobs in a new location, for example, which could take a year or more.

Eventually, however, people discover techniques for consuming less Boston real estate.  We have bad weather, very old houses (most would be consider slum-grade in newer parts of the country where flat floors, tight roofs, and uncracked walls are standard), and slow job growth.  A lot of my younger friends noticed that apartments in California were about the same price, decided that San Francisco would be a more fun place to live, and found higher paying jobs in the San Francisco area.  Others will discover the virtues of moving back home with mom and dad for a few years.

Real estate does obey the Econ 101 laws of supply and demand, but with such a long delay in response that it seems to defy those laws.

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