The Staggering Administrative Bloat of Universities

This chart is from a recent state audit report of Janet Napolitano's office at the University of California, an audit I already wrote about here.

Obviously Napolitano's office is particularly bad as compared to peers, but she has 1667 staff and spends over a half billion (billion with a B) just on the office of the President!  This is not in any way shape or form the total administrative size of the system - each university has its own administrative staff, for example.  This is just her central office.  This is a staggering number.  It equates to every student in the system paying over $2500 a year just for the central headquarters staff that they will never see, this is before the first dollar is spent on their individual campus -- or God forbid -- on teaching or academics.  To my mind this is way more of a scandal than her hiding a money reserve in various accounts.

This begins to get at a conflict I keep expecting to happen, but doesn't.  Time and time again, particularly in places like California, we find examples where agencies that are supposed to be serving the public are in fact diverting much of their resources to maintain the staffing levels, salaries, and rich benefits and pensions of their employees.  For years I have expected some sort of civil war on the Left, where Progressives figure out that providing things they care about (e.g. education, parks) is being limited by the huge resources that are being diverted to government employees.  Just look at the chart above -- California Democrats have twisted themselves into knots trying to find an incremental $50 or $100 million of funding for the California public university system, and here it is -- I can see an easy $400 million one could easily pull out of Napolitano's office.  Unfortunately, government employees and their unions are a big force in electing Democrats, and so they are reluctant to challenge these folks.  It is a classic example of "do you care about the things you say you value or do you care about power" and so far in places like California the answer has been "power."

Your Academia, At Work -- See What the March on Science Types Consider Science

The same sorts of folks who are smugly marching to promote their strange, religious version of "science" are producing academic studies like this (abstract):

A Semiotic Landscape analysis, whereby a community or environment’s signage is photographed for linguistic and visual analysis, is a useful means of discovering power relationships within that community’s language use. While Semiotic Landscapes and their predecessor, Linguistic Landscapes, are traditionally used to explore differences between dominant and minority languages in a community, this research extends the concept to analyse hegemonic masculinity at a CrossFit gym. It also shifts the analysis from an outdoor landscape to an indoor, more private setting. Using an autoethnographic approach, the author argues that while many of the CrossFit signs are designed to appear as humorous entertainment or motivation, they simultaneously encourage the subordination of women and certain men, and the naturalizing of a particular view of hegemonic masculinity, as embodied by the ideal CrossFit male.

I wonder if the real point was to get her gym membership paid for through a grant?  By the way, for those not in the know on the words used here, "autoethnographic" means "I didn't do any actual research or study or anything one would traditionally consider scholarship, I just sat around and thought about it and then started writing whatever came into my head."  There is little actual difference between autoethnographic research and posting rants on Facebook, except one has to go to school for years and years to be able to drop grand-sounding but essentially meaningless terms like "linguistic landscapes".

I would love to see a study attempting to count the percentage of academic papers in the humanities nowadays that are autoethnographic.  I am trying to imagine having some of the economics professors I know acting as a thesis adviser and trying to sell them on the idea of writing my thesis as autoethnographic research based on how bummed out I am that I keep running out of money before payday.  Hegemonic masculinity is forcing me to dine on two-year-old cans of Spaghetti-Os I found in the back of the pantry!

If you enjoy this sort of thing in a kind of black humor sort of way, I recommend to you @RealPeerReview on twitter.

How The Left Is Changing the Meaning of Words to Reduce Freedom -- The Phrase "Incite Violence"

A surprising number of folks on the Left of late seem to be advocating for restrictions on free speech -- Howard Dean is among the latest.  One of the arguments they use is that, they say, it is illegal in one's speech to "incite violence".  Folks like Glenn Reynolds and Eugene Volokh have responded with legal analyses of this statement, but I want to point out something slightly different -- that in the way the Left is using this phrase, the meaning has been shifted in very dangerous ways.

First, some basic legal background, and on First Amendment issues I find it is always safe to run to Eugene Volokh for help:

To be sure, there are some kinds of speech that are unprotected by the First Amendment. But those narrow exceptions have nothing to do with “hate speech” in any conventionally used sense of the term. For instance, there is an exception for “fighting words” — face-to-face personal insults addressed to a specific person, of the sort that are likely to start an immediate fight. ....

The same is true of the other narrow exceptions, such as for true threats of illegal conduct or incitement intended to and likely to produce imminent illegal conduct (i.e., illegal conduct in the next few hours or maybe days, as opposed to some illegal conduct some time in the future). Indeed, threatening to kill someone because he’s black (or white), or intentionally inciting someone to a likely and immediate attack on someone because he’s Muslim (or Christian or Jewish), can be made a crime. But this isn’t because it’s “hate speech”; it’s because it’s illegal to make true threats and incite imminent crimes against anyone and for any reason, for instance because they are police officers or capitalists or just someone who is sleeping with the speaker’s ex-girlfriend.

So it is illegal to "incite violence" though this exception to free speech is typically very narrow.  As I understand it, a KKK speaker who shouts from the podium, "look, a black guy just walked in, everybody go beat him up" would probably be guilty of inciting violence if the crowd immediately beat the guy up.  A BLM speaker who shouted as part of his speech that the crowd needed to fight back against police oppression would likely not be guilty of inciting violence if, some months later, one of the audience members assaulted a police officer.

But what all of this has in common is speakers telling their supporters to go out and commit violence against some other person or group.  The violence incited is by the speakers supporters and is specifically urged on by the speaker.  But this is not how the Left is using the term "incite violence".  The Left is using this term to refer to violence by opponents of the speaker attempting to prevent the speaker from being heard.  For example,  when folks argue that Ann Coulter cannot speak at Berkeley because she will "incite violence", they don't mean that she is expected to stand up and urge her supporters to go do violence against others -- they mean that they expect her opponents to be violent.

This is a horrible newspeak redefinition of a term.  It is implying that a speaker is responsible for the violence by those who oppose her.  By this definition, the socialists of 1932 Germany were guilty of "inciting violence" whenever  Nazi brownshirts tried to brutally shut down socialist meetings and speeches.

I am not sure why the Left is so good at this - perhaps because most of the media is sympathetic to the Left and is willing to let them define the terms of the debate.  The Left has successfully performed a similar bit of verbal judo with the claim that Russians "hacked" the last election.  By calling leaks of Democratic private correspondence "hacking the election", they have successfully left the impression among many that the Russians actually manipulated vote totals, something for which there is zero evidence and really no credible story of how it might have been done.

Take the Pledge: Let's Take A Year Off From Giving To Our Universities

I have written both here and here about my issues with my own University. Many folks are frustrated with the state of college campuses nowadays.  Your issues may be different, but mine include:

  • Lukewarm support for, or even opposition to, free speech
  • Substitution of posturing, virtue signaling, and even violence for dialog and rational discussion
  • Unwillingness to teach students the need to engage opposing points of view
  • Utter lack of intellectual diversity in faculties and administration
  • Absurdly low standards for scholarship in many of the humanities and social sciences, where regurgitating the "right" politics is more important than doing good research
  • Outright discrimination against Asian-Americans in admissions
  • Diversity cultures that have gone beyond nurturing tolerance for all into promoting intolerance against new groups

Despite years of mounting criticism on these issues, the response of many universities to such criticism has not been reform but a doubling down on their illiberal policies.  Shaming is not working and not going to work, for the simple fact that the smug, elite culture that dominates Universities does not consider you and I to be woke enough to credibly criticize them.  The very failing of universities that we are trying to criticize -- that they are promoting a culture of ignoring, no-platforming, and even doing violence against anyone who disagrees with them -- makes them simultaneously immune to criticism.  Anyone who criticizes their actions is automatically someone not worth engaging.

So I am suggesting another approach.  Hit them in the pocketbook.  I know my University carefully monitors alumni giving - both dollars and percentage participation.  Even a five or ten percent drop in a year is going to get their attention.  So just take the pledge -- this year, I am not giving to my school.  Give the money to someone else.  I gave mine to Teach for America, but there are an almost unlimited number of good causes out there that could use your money, likely more productively that your University (which will probably just use your money to add a nicer television to the men's football locker room).

This pledge is carefully crafted both to have impact and not to ask folks for more than they are willing to give.  For example, it stops short of asking folks to stop giving forever.  For a really long time, I loved my alma mater and would like to love it again, and so I couldn't pledge never to support it.  The pledge also stops short of asking folks not to send their kids to such and such school.  College admissions tend to be a one-time shot at age 18, and deferring that chance for a year might close off opportunities forever.  Besides, if your son gets into Yale and can keep his head down for four years (maybe stay celibate?) and avoid the worst of the social justice craziness, the Yale diploma is still really valuable even if he does not learn a thing.

Arizona and the Case For School Choice

From the Arizona Republic:

Five of the nation's top 10 high schools are in Arizona — and they're all branches of the same charter school.

According to U.S. News and World Report, Basis Scottsdale is the nation's top-performing high school, followed by Basis Tucson North and Basis Oro Valley. Basis Peoria and Basis Chandler were ranked fifth and seventh, respectively.

The rankings consider students who exceeded state standards, graduation rates and college preparedness, according to U.S. News.

Two additional Arizona charter schools, along with two "special function" public schools, made the top 100.

Arizona was one of the earliest adopters of charter schools in 1994, and it continues to be at the forefront of school choice. However, the state has some of the lowest school funding and teacher pay in the U.S.

I love that last line.  Makes one question if the obsession on teacher pay and funding for bloated school administrations really is the key to education improvement.  I wonder if when the Arizona Republic writes their inevitable next article on Arizona having lower teacher pay they will add a clause that says "However, the state has five of the nation's 10 top charter schools".

This is a fascinating article and I encourage you to read the whole thing.  The article gives plenty of space to opponents of school choice and charter schools:

[Arizona Education Association President Joe] Thomas said any public school district in Arizona could replicate the Basis model if they were also allowed to work only with a small number of high-achieving students and "force the rest out of your school."

This inference that Basis gets its results by carefully cherry-picking students is undermined by facts from the same article:

There are no entry requirements or exams to get into a Basis school — just a game of luck. An annual lottery determines which new students are accepted.

Already, Basis schools have received 15,000 applications for 1,000 open spots for next school year, Bezanson said.

To be fair, since Basis does not participate in the free school lunch program and the city school bus program won't deliver kids to Basis, there are kids that probably are not able to apply, but again, this is far from a case of cherry-picking.  It is a case of setting very high expectations and expecting kids to achieve that.  Thomas's comment on this reflects the different philosophy of teachers unions vs. school choice folks:

Thomas said Basis schools are great for the small minority of kids who can succeed in the high-pressure environment. But most students don't — and public schools have the expectation to teach all students.

This is partially true, the Basis approach is not right for all kids, but given they have 15 applications for every 1 open lottery spot, it is right for a lot apparently.  But the difference in philosophy is that public school advocates want to force the Basis kids that are able to achieve at a high level into dumbed-down, plodding schools, moving no faster than the lowest common denominator.  School choice advocates, on the other hand, also acknowledge this difference, but rather than enforcing a one-size-fits-all public solution, advocate for a thousand flowers to bloom with many different school solutions.

There are many other charter schools in town that do a great job with kids of different needs.  My wife and I support a Teach for America teacher at a charter school in South Phoenix.  The kids in her class are mostly all Hispanic, many have parents that do not speak English and a high percentage are on the school lunch program.  These kids may not be quite at the Basis level, but they out-achieve most of the Phoenix public school system and are well beyond what kids from similar demographics are doing in local government schools.

Janet Napolitano Could Be In Big Trouble

Audit shows Napolitano's office hiding funds from the legislature

The University of California hid a stash of $175 million in secret funds while its leaders requested more money from the state, an audit released on Tuesday said.

The San Francisco Chronicle reported that the audit found that the secret fund ballooned due to UC Office of the President overestimating how much is needed to run the school system that includes 10 campuses in the state. Janet Napolitano, the former Department of Homeland Security chief, is in charge of the school system.

Napolitano denied the audit’s claim. She reportedly said the money was held for any unexpected expenses. Her office also denied the amount in the fund.

Pretty much the entire management team of California Sate Parks got fired for doing almost the exact same thing, with the exact same excuses

California state parks Director Ruth Coleman resigned and her second-in-command was fired Friday after officials discovered the department has been sitting on "hidden assets" totalling [sic] nearly $54 million.

The money accumulated over 12 years in two special funds the department uses to collect revenue and pay for operations: $20.4 million in the Parks and Recreation Fund, and $33.5 million in the Off Highway Vehicle Trust Fund.

The money accumulated, state officials said, because the parks department had a pattern of under-reporting the actual size of the funds in its regular dealings with the state Department of Finance.

Ms. Coleman (who I worked with a few times and liked) was frankly an easier "kill" because, while long tenured in the state parks job, she really did not have a lot of political muscle.  Napolitano does.  Relying on consistent standards would say Napolitano should go, but government has never been about applying consistent standards, only power.  So we shall see.

As a Significant Potential Beneficiary of Trump's Tax Plan, I Will Say It Makes No Sense

Trump's tax plan makes little sense to me, and much of what I have seen written about it today is so full of misunderstandings about taxes and small businesses, I thought I would try to supply a bit of context for my contention that the plan makes no sense.  As a caveat, Trump is seldom careful when he chooses words, so it could well be that I am working off of a media misinterpretation of his proposal.

I own an S-Corporation, which is the source of nearly all my personal income.  In an S-Corporation, there is no corporate income tax per se.  The corporation fills out an (extensive) set of tax forms, but the corporation does not write a check based on the corporate return.  Instead, whatever amount is on the bottom line as taxable income in the corporate return passes through to my personal income tax return, where it is added to any other income I have (e.g. I pay myself a salary from the company, I get some interest income, etc) and I am taxed on that total based on my personal income tax rate.

For an individual owner, this structure makes a lot of sense, and this can best be understood by looking at the alternative, which is a traditional C-corporation.  In a traditional C corporation, the corporation has a tax return just as in the S corp but, and this is a big difference, the corporation actually pays taxes based on this return on a corporate tax schedule.  But the income is still sitting in the corporation.  If the individual who owns the corporation wants this money, and presumably she does as why else be in business, then the corporation must dividend this money to the owner.  The dividend triggers a second taxable event -- that dividend of the after-tax profits of the C corporation is then taxed again in the individual's tax return.  I read today in the Wall Street Journal that "the appeal of becoming a pass-through business jumped after a 1986 U.S. tax overhaul set the top rate for individuals lower than the top rate for corporations."  I don't think this is at all true -- the appeal was never one of differential rates, because to get income in an owner's pocket always has required it be taxed at individual rates.  The appeal of the S corp is that the income does not need to be taxed a second time, at the corporation level.

In being the owner-operator of a C corp, one has to constantly worry about the double taxation problem.  A popular solution is for the owner to simply pay himself the entire expected income of the corporation as a salary, this effectively eliminates the corporate level tax as there is no income left to tax, and so all the income is taxed on the individual's return as salary.  Another popular dodge has been to lend rather than dividend the corporate income to the owners.   This eliminates it being taxable on the individual return at the time the income is passed over, but this merely defers individual taxes until the loan is forgiven or until the company is sold or liquidated and the loan netted out.

S-corp owners like myself don't have to worry about all this mess -- the decision as to how much I pay myself in salary vs. how much I get paid in dividends is largely irrelevant to my taxes.  If the company has income, before owner's salary, of $100,000 then my taxes are essentially the same whether I take $95,000 in salary or $5,000 in salary -- all $100,000 is going to get taxed at the individual rate on my 1040 whether I call it salary or corporate income -- this is true because on the income statement, the owner's salary is a deduction from income, so income goes up by the same amount that the owner's salary goes down.  (Note that this is not exactly correct -- there is a small difference in that a higher salary increases payroll taxes somewhat that are not incurred on dividends).

I can't totally figure out how the Trump plan is intended to work, in part because one can argue that the S-corp corporate rate is already zero, so what does it mean to "lower" it to 15%?  But my best guess is that he is saying that for pass-through entities like S-Corps, pass through income would only get taxed on the individual 1040 at a maximum of 15% while the rest would get taxed at the regular rate, whatever that is.  There is a lot that is unclear - for example, for purposes of computing tax brackets for the rest of my income, does the pass-through income count?  But assuming all this is sorted out, owners like myself would find ourselves with a strange set of new incentives.  For example, depending on my tax bracket, my incentive would likely be to pay myself nothing in salary.  Anything I pay myself in salary would be taxed at a higher rate, apparently, than anything that passes through as income.

My guess is that someone is confused here, either in communicating or putting together this plan (given Trump's haphazardness and lack of precision in communication, I would bet on the communication error).  The WSJ described the pass-through rate being dropped to 15% in parallel with the C-C0rp max rate dropping to 15%, but those two rates are not at all parallel.  The C-Corp rate is part of a double taxation chain.  For that income to be useful to anyone, it has to pass through (either as dividends or higher equity prices) to individuals who pay individual taxes on the income as well.  So in this plan as described, income in C-Corps that are then passed on to their owners as dividends are taxed at 15% + individual rate.  But the income tax for S-Corp income passed to its owners about be 15% total.

Look, I will happily take this, but if this plan is really being described well, it is stupid and senseless.  Someone doesn't really understand pass-through entities.

My alternative is still to get rid of the corporate tax code completely.  Forget all the costs spent on corporate tax lawyers and all the distortive things corporations do to manage taxes.  Tax everything once, when it reaches the 1040.  Here is my plan I have proposed on a number of occasions (pass-throughs would be kept as-is, this is for C-Corps):

So here is my simply two-point plan

  1. Eliminate the corporate income tax.  Entirely
  2. Tax dividends and capital gains as regular income on individual tax returns

Done.  All corporate profits get taxed but only when they pass through to individuals as capital gains or dividends.  I think this would actually raise more money but rates could be adjusted (or better yet deductions eliminated) if needs to keep it neutral.

I Don't Think Gillette Would Complain If You Used Their Blades Without Their Razor

Apparently it is some kind of scandal surrounding Juicero, who I must admit I have never heard of until the recent spate of coverage.  In an emulation of Keurig, which I also know little about since I am not a coffee drinker, they have this juice-press thing that sells for $400 and that takes $7 proprietary bags of fruit or vegetables or whatever that the machine squeezes into juice.  Apparently, the scandal is that you can squeeze the bags just as well without the $400 juicer.

To which I answer:  duh.  I will bet my Harvard MBA that this company's business model really does not anticipate making most of its money from the machine.  The machine itself may actually not have any profit margin at all.  The bags at $7 certainly do.  The machine is the excuse for you to buy lots and lots of their high margin juice bags.  If you buy one a day for a year, that is over $2500 of revenue at a high margin vs. the original equipment sale of $400 at a low or no margin.  Telling this company their machine is not necessary is like telling Gillette you can use their $5 blades without having to use the razor that they pretty much give away anyway.

This is the joy of capitalism:  I absolutely guarantee you that within 60 days someone will be selling hand-squeezed juice bags for $5 each.

It Turns Out We Introverts Are Racist

I am, depending on the day, a moderate to strong introvert.  Nowadays, basically no one understands what this means, because they use it as a synonym of social awkwardness or occasional social discomfort, and everyone will answer "I am introverted too" even when it clearly is not the case.   I can interact socially but only with a great expenditure of energy -- the few people I call my friends are the ones whom I can hang out with without it costing me energy.  I cross streets to avoid interacting with neighbors, and frequently avoid eye contact with most everyone because every instance of eye contact could potentially lead to a social interaction I am trying to avoid.   Like a manic depressive, I go through times that are better and worse -- in times of extreme introversion I will hide in the bathroom for hours rather than even attempt to make conversation with people at some function.   If I am not in the bathroom, I sometimes go on talking jags, which is another way not to interact if you think about it.  Also like many introverts, I love public speaking, the larger venue the better.  Despite it being the #1 reported fear in the general population, I have never feared public speaking -- in fact, I often seek it out.

I don't avoid social contact because I hate people.  I like people, and I am not a misanthrope (except maybe when I watch MSNBC too long).  I don't avoid social contact because I dislike myself or lack confidence -- folks around me can tell you I have an over-abundance of self-confidence.  If this does not make much sense, neither do a lot of phobias to folks who do not have them.  The closest I can equate it is that I can get a feeling similar to claustrophobia when interacting with people.

I don't really discuss this much in the blog because a) it is largely irrelevant to blogging and I am unlikely every to meet 99.9% of you face to face; b) I have learned to function pretty well in most situations; and c) I have no particular desire to be a victim.  In fact, to the latter, it is impossible to escape feelings of guilt about it, particularly for my wife who has to put up with embarrassing things like seeing me stand alone in a corner at some function.

I bring this all up only to warn you that apparently, this all means that I am a racist:

Students who avoid making eye contact with their peers could be guilty of racism, according to Oxford University’s latest guidance.

The university’s Equality and Diversity Unit has advised students that “not speaking directly to people” could be deemed a “racial microaggression” which can lead to “mental ill-health”.

Voting and Freedom

Years ago I wrote a post called "I don't necessarily treasure the right to vote" wherein a discussed a number of individual freedoms that were far more important than voting.

The other day, Don Boudreaux said it more succinctly:

Freedom is not a synonym for the right to vote in fair and open elections.  Fair and open elections with a wide franchise might – might – be a useful instrument for promoting freedom.  But contrary to much shallow thinking, the right to participate in such elections is not itself “freedom.”  Freedom is the right to choose and act as you please, with this right bound only by the equal right of every other peaceful individual to do the same.  (Or to quote Thomas Sowell, “Freedom … is the right of ordinary people to find elbow room for themselves and a refuge from the rampaging presumptions of their ‘betters.'”  I would add that freedom requires also elbow room from the rampaging presumptions – and from the enviousness, ignorance, myopia, and even the good intentions – of one’s peers and, indeed, from those of everyone.)

After the "Science" March, We Will Do Some Science

Many of the folks who participated in the science march this weekend seem to have a view of science seem to have a definition of science that involves a lot of appeals to authority and creation of heretics.  Unfortunately, the video below relies on the old-fashioned cis-gendered white male definition of science, which involves using theory to establish hypotheses which are confirmed or denied through observation.  In this dated definition, there is no such thing as heresy in science.

Let me tell one of my favorite stories about scientific consensus.

Perhaps the most important experiment of the last 150 years was Michelson and Morley's interferometer study trying to measure the aether drift.  What is this?  Think of bullets fired from a moving airplane.  From the perspective of someone standing on the ground, bullets will initially travel much faster when fired forward rather than backwards, as the velocity of the plane is added (or subtracted) from the velocity with which they leave the gun.  Everyone, and I mean virtually everyone in the scientific community (WAY more than 97%) assumed the same happened with light.  M&M's hypothesis in their experiment was that light "fired" in one direction will travel at a different speed than light fired at a 90 degree angle to that, due to the Earth's movement through the universe, filled with some sort of aether (yet another of a long line of imponderable fluids proposed to explain various physical phenomena).   They found no such difference -- the speed of light was identical in every direction.   M&M has been called the most important negative result in the history of science.  Einstein and special relatively explained the result a few years later.

While we are on the topic, I want to mention something that always makes me crazy when you see popular articles about Einstein.  You will frequently see stories about Einstein being turned down for a promotion at the patent office or turned down for a teaching job or that he got bad grades.  The point of these stories is always something like, "ha, ha look how stupid these other folks were to give bad grades to the greatest mind of the 20th century."  But Einstein was never a great mathematician.  One always hears that relativity involves all this crazy math, and that is true for the later general relativity, but one can derive the basic equations for special relativity using nothing more than algebra and the Pythagorean theorem.  Seriously, I had to do it on a test when I was 17, it is not that hard.  Perhaps I will show it in a post one day if I am really bored.  Later, better mathematicians wrote papers cleaning up the math of special relativity and making it more robust, and later Einstein had to get a LOT of help with the non-Euclidean geometry involved in general relativity.

I believe (and this is a personal conclusion from reading a lot about him and not necessarily a widely held belief) that a lot of Einstein's greatness came from the fact that he had the mind of a rebel.  He was willing to consider things the science establishment simply would not consider.  It is STILL hard, even a hundred years later, for many of us laymen to accept that time is somehow non-absolute, that it changes depending on one's frame of reference -- so imagine how hard it was for someone in Einstein's time.  In the 19th century, the world of physics had become split into two worlds that folks had come to think of as incompatible and separate -- the world of physical objects governed by Newtonian physics, and the world of light and waves governed by Maxwell's equations.   Maxwell's equations implied light always had a fixed speed.  Everyone assumed this had to be fixed vs. some frame of reference.  The assumption of an aether or fixed point of reference against which light's speed was fixed was the 19th century solution for uniting these two worlds, but M&M demolished this.  It seemed that light had to be a fixed speed in every direction and every frame of reference.  Eek! Einstein asked himself how to explain this result, and thereby re-united Newtonian and wave physics, and he concluded the only way to do so was if time was variable, so he ran with that.  That is not an act of math, that is an act of a flexible, rebellious mind. And flexible rebellious minds do not do very well in schools and patent office bureaucracies.

 

Orren Boyle Smiles

I just cannot understand how politicians can be called "populist" for favoring a few hundred thousand domestic steel workers and steel company equity holders over 300 million domestic consumers who depend on low-cost steel for their jobs or buy steel products.  But there seems to be something about the steel industry that causes folks who normally would scream about corporate welfare to just roll over.

At noon, Donald Trump will sign an executive order calling for a probe whether imports of foreign-made steel are hurting U.S. national security. The order will revive a decades-old, rarely used law to explore imposing new barriers on steel imports, in this case aimed loosely at China.

Trump will sign the memorandum related to section 232 of the Trade Expansion Act of 1962 at an event in the White House that will include leadersd of several U.S. steel companies; the law will allow the president to impose restrictions on imports for reasons of national security. Trump’s directive will ask Ross to conduct the probe “with all deliberate speed and deliver the results to the president with his recommendations."

An official cited by Reuters sad that there are national security implications from imports of steel alloys that are used in products such as the armor plating of ships and require a lot of expertise to create and produce.

Why do I suspect the national defense argument is a total sham?

Update:  “For every steelworker, there are 60 workers in steel-using industries,” said Lewis Leibowitz, a Washington attorney who has worked on trade cases involving steel in the past. “You need competitive steel prices for those industries to be competitive and to export.”  source:  WSJ

Why Wind Power Does Not Greatly Reduce Fossil Fuel Use

The problem with wind power is that electric utilities have to be prepared at any time for their power production to just stop on short notice.  So they must keep fossil fuel plants on hot standby, meaning they are basically burning fuel but not producing any power.  Storage technologies and the use of relatively fast-start plants like gas turbines mitigates this problem a bit but does not come close to eliminating it.  This is why wind power simply as a source contributing to the grid makes very little sense.  Here is Kent Hawkins of Master Resource going into a lot more depth:

How do electricity systems accommodate the nature of wind and solar? They do this by having redundant capacity almost equalling the renewable capacities as shown in Figures 5 and 6 for two jurisdictions that have heavily invested in wind and solar – Germany and Ontario, Canada.

Pt I Fig 5

Figure 5 – Duplicate capacity requirements for Germany in 2015.

Source: See note 4, sub point a.

 

Part 1 Fig 6

Figure 6 – Duplicate capacity requirements for Ontario, Canada, in 2018

Source: Ontario Power Authority[5]

In both figures, the left-hand columns are peak demand requirements and include all the dispatchable capacity that is required to reliably meet demand and provide operating reserve. In the right-hand columns, if you look very carefully, you can see the capacity credit for wind by the slight reduction in “Peak Demand + Op Reserve.” In summary, when wind and solar are added, the other generation plants are not displaced, and, relative to requirements, wind and solar are virtually all duplicate capacity.

Wind might make more sense in niche applications where it is coupled into some kind of production process that can run intermittently and have its product stored.  I think T Boone Pickens suggested having wind produce hydrogen from water, for example, and then store the hydrogen as fuel.  This makes more sense because the total power output of a wind plant over a year can be predicted with far more certainty than the power output at any given minute of a day.  This is one reason why the #1 historic use of windpower outside of transportation has been to pump water -- because the point is to fill the tank once a week or drain the field over a month's time and not to make absolutely sure the field is draining at 10:52 am.  The intermittent power is stored in the form of water that has been moved from one place to another.

S-Corps and Faulty Income Inequality Data

In a traditional C corporation, the corporation pays its own taxes, and then income that is passed on it its owners in the form of dividends is taxed again as personal income on an individual's 1040.  The S-corporation was an positive innovation that has corporate income passing through to the tax return of the owners, and getting taxed only once on these individual returns.  Over the last 50 years, there has been a steady shift of small businesses from C corps to S corps.

Over a decade ago, I suggested that this shift may be in part to blame for the rise in income inequality.  Entrepreneurial profits that would have stayed before in a C-corp are now showing up immediately on individual tax returns.  In January, 2007 I wrote

The introduction of the "S-corporation" means that an increasing amount of entrepeneurial income is showing up on 1040's.  With C corporations, the incentive was to delay taking any income from the company for as long as possible to avoid double taxation, preferably taking it at time of the company's sale.  With S-Corporations, there is no double taxation problem so corporate income flows through to the individual 1040.  Business owners are suddenly reporting more income not because they are making more, but because they are recognizing it in a different way in a different tax form.  Much of the rich getting richer is actually just the rich recognizing their corporate income in small businesses in a different way

I am happy to see empirical proof of this hypothesis start to arrive:

Since 2000, different measures of top income inequality have exhibited very different trends. Top income shares based on measures of total income show a continued rise, whereas top income shares based on wage and salary income show no increase in inequality post-2000. The most important difference between these two measures of income is the income that accrues to S-corporations....

But interpreting trends in the S-corporation component is extremely difficult. Feenberg and Poterba (1993), Gordon and Slemrod (2002), and Cooper et al. (2016) warn that much of the recent increase in S-corporation income is income that previously accrued to C-corporations. Such income is not “new” income earned by top earners but is simply income that was previously labeled as corporate income rather than household income.

My Customer Service & Communication Advice to the United CEO

My company serves nearly 3 million visitors a year.  Though we always try for 100% satisfaction, some customers are going to slip through the cracks and be dissatisfied.   Each year, I get maybe 10 visitors who are severely dissatisfied, think they were mistreated, want to call their Congressman, are going to sue me, etc. I would say that these complaints eventually land on my desk but I actually look at every single comment card and letter and review that we get from customers and personally am involved with every single complaint of any sort.  Anyway, 10 or so are severe issues with a very upset customer that get to me without having been resolved in the field.

Folks who are involved in customer service will tell you that of these complaints, there will likely be a range of blame.  In some cases we screwed up.  In some cases no one screwed up but there was a mismatch of expectations.  And in some cases the customer was acting like a total asshole and was entirely to blame for the whole affair.  Sometimes it is hard to parse out after the fact which case is which -- something I wrote about here.  When these major complaints get to me, here is my guide to how I respond:

When we screw up:   "I am very sorry we did a poor job and you had a bad experience.  I am going to personally investigate immediately and we are going to make changes so this does not happen again -- but in the mean time, I want to refund your money and give you a certificate for some free camping so you can come back in the future and give us another chance to serve you well."

When the customer broke the rules and acted like a total jerk:   "I am very sorry we did a poor job and you had a bad experience.  I am going to personally investigate immediately and we are going to make changes so this does not happen again -- but in the mean time, I want to refund your money and give you a certificate for some free camping so you can come back in the future and give us another chance to serve you well."

When the exact situation is unclear:    "I am very sorry we did a poor job and you had a bad experience.  I am going to personally investigate immediately and we are going to make changes so this does not happen again -- but in the mean time, I want to refund your money and give you a certificate for some free camping so you can come back in the future and give us another chance to serve you well."

In any of these cases, if the customer describes poor behavior by my employees, I will tell them that "the behavior you are describing is absolutely unacceptable and, as I said, I am going to investigate personally as soon as we get off the phone."  You don't have to admit the behavior.  It is common that angry customers will dress up a story with a few added descriptions of outlandish employee behavior that may not actually be what happened.  You will try to figure that out later in the investigation.   But give the customer as much as you can.  If the customer said the employee used profanity, then it is perfectly fine to say "you are right, ms. customers, use of profanity by our employees is absolutely unacceptable" even if you suspect the employee did no such thing.

Giving this very positive response to customers who may have been bad actors or may be exaggerating can be hard because my local managers want to get very mad at me -- "Warren, don't you understand, he was a BAD customer.  You can't reward him for being a BAD customer."  To which I will say:  "First, you and I have not talked so I don't know yet if he was truly a BAD customer.  We may be the ones who screwed up.  But second, even if they were bad in some way, I am not rewarding a bad customer, I am trying to avoid a bad Tripadvisor review which will sit there on the Internet forever like a turd you can't flush.  And third, you seem to be trying to teach this customer a lesson, and make them realize they have been bad.  Even if the customer is really a jerk, this is never, ever ever ever going to happen.  You will never ever convince a jerk that they are a jerk, because almost by definition jerks last self-awareness, so stop trying."

We do a lot of training on this.  I tell folks all the time that if we have a customer like this who gets to me, I AM going to apologize and AM going to give them a refund and AM going to give them some free camping.  It doesn't mean that I am undermining the folks in the field, it means that this is smart business practice, particularly in this age of Internet reviews.  I tell my managers that they are letting their ego and pride stand in the way of having a customer walk away more satisfied, and if they refuse to check their ego, they are delegating the task of being humble upwards to me.  And over time, the good news is that most of my managers have gotten the message and have started emulating me so fewer and fewer of these ever reach me, they are solved much earlier in the field.

Postscript:  The first reaction I get from other business people is -- "don't you get taken advantage of and give out refunds to people who are just posturing about bad service just so they can get a refund?" And my answer is "yes".  But recognize that we have had over $100 million in revenues in this company since I started it, and we have perhaps paid $500 or $1000 is false refunds, or about .001% of revenues. I don't think .001% is very much to pay for the very high customer satisfaction rate we have.  But you would be surprised at the number of people that just can't let it go.  I don't know what this is called psychologically, but I will give another example.  We have a number of sites where the entrance station is not staffed on certain days and payment is on the honor system.  I have people who work for me who really get upset with me, telling me I simply HAVE to staff that gatehouse because some people are not paying.  You are being CHEATED!  I say that I am perfectly aware people are not paying, but it costs, all-in, probably $120-$150 to have a person sit in that gatehouse for 8 hours.  In that time perhaps 15 cars will come in.  At $6 apiece, even if every single one of them is cheating (and they do not, we have very good compliance in most honor system locations) I would be paying $150 to collect an extra $90 of revenue.  That would be insane.  But somehow the thought of lost revenue just makes some people crazy, no matter how expensive it is to chase it down.

No Matter What They Actually Say, the Public Trusts Private Corporations More Than Government, And I Can Prove It

As a libertarian, I find myself constantly saying to folks something like:  "private actors (corporations, businesses, individuals, etc. are inherently more trustworthy than government because they cannot legally interact with you through force or fraud -- the government is free to do both.  If you don't like what a private actor is doing, you can simply refuse to interact with them further, an ability one does not have with the government."  This seems like such an obvious point but few people, particularly on the Left, will ever agree with me.  But I have recent proof that in their hearts, most people understand this perfectly.

What is my proof?  The universal, bipartisan freakout over the man who was dragged off by force from a United flight.  People are focusing on this event for the very fact that this example of a private company deploying force against its customers is so incredibly rare.  The Internet is filled with similar or in fact much worse examples of the government abusing its authority -- false arrests, petty harassment, asset seizures without due process -- but people just yawn and these videos gets 236 views  vs. millions for the United video.  Because, presumably, people have come to expect such abuses from the government but not from private companies.

And to a large extent, this particular example of private violence is the exception that will prove the rule.  Because United is going to experience real accountability.  It is already getting a firestorm of bad press that will cost them current and future business.  They will face lawsuits and possible government action.  But the average police officer or government official (or VA or IRS administrator) who abuses their power retain their jobs for life with no negative consequences from their actions.  Also, we should note that it was a government agent in this case who was the one who actually used force and dragged the passenger off, not a private United employee.  Almost every time one looks deeply at an abuse by private companies, at the end of the day that company is enabled or protected in doing so by so some sort of crony relationship with the government.

So I suppose we should ask, if people really in their hearts understand that private "power" is much less menacing than government power, why do they still support increasing the power of government over private actors?  And the answer must be that they believe (or hope, or expect) that use of this government power will achieve some end they want that they cannot achieve without force.  The problem with this of course is that it is naive -- it assumes that once you give great power to the government, government employees will use this power in the way you would use it, for the same goals and ends.  But this is seldom the case, certainly over the long haul.  I argued for years that the Left under the Obama administration was supporting Presidential power on the assumption they would hold the White House forever and thus get to wield all this power.  Which is why, I suppose, there has been so much freakout over Donald Trump's victory.

Postscript:  Here is an example video of government brutality just from my news feed today.  It will get no real traction because everyone has come to expect the government to act in this manner.

I am Not An Isolationist, But...

US military interventions abroad -- at an absolute minimum -- have got to represent some reasonable path to a better future.  It is amazing how even this simple and obvious test is almost never met by our actions.  Instead, I think many folks substitute some test more like "Is the situation really bad?--if so, rev up the troops."  To this end, Assad is clearly a bad guy.  Assad (or someone) using poison gas on civilians is a bad thing.  Russia providing cover for these bad things is also a bad thing.  But what is the alternative?  Obama's support of rebels in Libya is just a fantastic example we should all remember -- the Libyan regime was bad but we supported its overthrow in favor of a situation now which is clearly worse.  Iraq-style regime change is out of favor for good reasons, but at least regime change advocates had a clear explanation of how they wanted to get to a better future with military action -- they were going to take the whole place over with massive military force and stand on it for a couple of decades until, like Germany after 1945, it becomes a responsible citizen of the world.  The costs are high and I don't think it is in our long-term interests to do so, but at least there was a logical story.

What is the story in Syria?  We kill a couple hundred folks with cruise missiles to avenge a few dozen folks killed with poison gasses and, what?  Do the citizens of Syria really need yet another foreign power lobbing explosives into their country?  The only argument I hear is that Assad crossed a line and now we have to show him what for.  But this sounds like an 18th century aristocrat vowing to defend his honor after an insult.  It's sort of emotionally satisfying -- take that, asshole! -- but where does it get us except further mired in yet another foreign conflict we have not hope of making better?  We look back and criticize the major powers in 1914 for getting involved in the constant squabbles in the Balkans but do the same thing in the Middle East, the 21st century's Balkans.

My Favorite Convenience Tech: The Disney Magic Band

Before discussing the Disney Magic Band, I got to thinking about this from this article linked by Tyler Cowen:

The syringe slides in between the thumb and index finger. Then, with a click, a microchip is injected in the employee’s hand. Another “cyborg” is created.

What could pass for a dystopian vision of the workplace is almost routine at the Swedish startup hub Epicenter. The company offers to implant its workers and startup members with microchips the size of grains of rice that function as swipe cards: to open doors, operate printers, or buy smoothies with a wave of the hand.

The injections have become so popular that workers at Epicenter hold parties for those willing to get implanted.

“The biggest benefit I think is convenience,” said Patrick Mesterton, co-founder and CEO of Epicenter. As a demonstration, he unlocks a door by merely waving near it. “It basically replaces a lot of things you have, other communication devices, whether it be credit cards or keys.”

If you are like me, your immediate reaction is "Yuk, I can't imagine doing this."  But my second reaction is that there is really a step change in convenience here that folks who have not tried it may be underestimating.

The reason I know this is from my experience with the Disney Magic Band, a waterproof bracelet about the size of a small watch.  Here is an example, which includes my awesome customized tiger striping I painted on the basic orange band:

At Disneyworld, this band acts as

  • Your room key, activating the electronic locks on your room
  • Your credit card and wallet, with the ability to pay for anything anywhere in the parks and affiliated stores and hotels with a touch to the reader at every register (most require a 4-digit PIN number to be entered as well)
  • Your park entrance ticket
  • Your restaurant reservation
  • Your ride reservation (Fastpass)

One can easily navigate a multiday trip through Disneyworld without a wallet or keys and just this on your wrist.  It is pretty compelling.

Looking for Some Help -- Business Owners with 10-40 Employees

I am doing a paper on labor market regulation which I hope to get published through a prominent think tank.  I run a service business with about 300-400 near-minimum-wage employees, so I am familiar with a lot of labor regulation.  However, to make sure I am not missing something that may seem small to me but might be a big deal for a smaller company, I am looking to interview a few owners of small businesses.  I am looking for folks who run companies from 10-40 employees.  My preference is that most of the employees be average income or lower -- in other words, I don't really need to talk to the owners of 15-person hedge funds about overtime rules.

Interviews will be entirely private and no one will be quoted or referred to by name or even anonymously.  This is just background for me.  If you fit these criteria and are willing to help with a 30-minute phone interview, drop me an email at the contact link above.  I am out for a few days so you may not hear back for a week or so.

Crap, You Mean This is Not A Real Product?

I Never Meet With Young Women Alone

Apparently Mike Pence is being criticized for refusing to meet alone with young women.  Seriously?  Because I have pretty much the exact same policy.   I never meet with young women one-on-one any more.  If I am interviewing a young woman for college, we meet in the Starbucks rather than my office.  I try to meet with sales people via the web rather than face-to-face, but if a young female sales person does show up at my door and I really must meet with them, we do it downstairs in the lobby and not in my office.

Am I being "dudely"?  ( I swear to God this is the world the Atlantic uses).  The explanation is simple, and can best be illustrated with this comment highlighted by Glen Reynolds:

1. Greatly expand definition of sexual harassment.
2. Make any accusation of sexual harassment career-ending.
3. Proclaim that women should always be believed when they accuse a man.
4. Complain that men won’t have 1-on-1 meetings with women.

Postscript:  To clarify, there is in Mike Pence's policy an element of avoiding temptation.  That is not my rational.  After nearly 30 years of testing, I find myself to be immune from temptation (at least in deed if not in thought).  This policy is pure self-protection.

Another Reason to Discuss Government-led Local Business Development

I have written many times about my frustration with cronyist business relocation incentives handed out by most local and state governments.  I have always considered these government incentives to be insanely unproductive spending, often taking taxpayer money to move a company as little as a few miles to get it over some artificial border.  One issue I have not considered in these critiques is whether the sorts of companies selected for relocation are really in the long-term interest of the local community at all.

Almost by definition, most relocation subsidies go to large, well-known companies.  This is for a couple of reasons.  First, large companies have the clout to lobby and demand such subsidies, clout smaller businesses do not have.  Second, politicians are handing out these subsidies in order to get re-elected.  The actual product of these subsidies is a press release and a blurb on the politician's campaign website.  A press release saying that your faithful governor has gotten Joe Smith's Widgets to move to Arizona is a lot less powerful than saying he got a branch of General Electric to move to Arizona.  In fact, the sexier the name the better, which is why politicians fall all over themselves to get Google and Apple and Tesla to come to town (despite the fact that in my observation, it is the staid old companies like Honeywell and Wells Fargo and such that tend to invest a lot more in their local communities).   We have a plant in the Phoenix area that has already had two subsidized sexy companies in it (First Solar and an Apple screen manufacturing partner) and now is empty yet again waiting for the next sexy crony.  Apparently, the state has agreed to subsidize Apple again to use it for a data center, though the move-in may be delayed as there was a large fire at the building when the solar panels on the roof caught fire.  Three sexy press releases for Arizona politicians for the same building!

Anyway, I was thinking about this when I read the piece below from Scott Sumner

This reminded me of a very interesting study that compared two cities in Michigan, Flint and Grand Rapids:

In 1946, sociologist C. Wright Mills and economist Melville Ulmer concluded the fortunes of two of Michigan's largest cities, Flint and Grand Rapids, were headed in opposite directions.Seventy years later, their predictions are getting new notice from academics.

The researchers warned Flint was overly dependent on its big employers even though its workers made 37 percent more than the national average at the time.

The warning seemed out of place. By 1950, Flint was labeled "the happiest city in Michigan" and the "epicenter of the American Dream," thanks to its thriving auto industry.

Grand Rapids, whose economy was defined by its numerous small businesses, was less flashy. But it offered its citizens more mobility and opportunity for its middle class that would help it survive tough times, the researchers concluded.

Flint was still booming in the late 1960s, so it looked like this 1946 prediction was wrong. But then the prediction suddenly came true. Flint's metro population fell from 445,589 in 1970 to 410,849 in 2015. In contrast, Grand Rapids has been booming, with its metro population soaring from 539,225 in 1970 to 1,038,583 in 2015. And both of these places are in the rustbelt state of Michigan.

Why I Quit Recruiting for Princeton

Princeton, like many top Universities, requires a face to face interview of every candidate.  They do this mostly through their alumni network.  I volunteered for this effort for well over a decade, and it was fun to meet and talk to a lot of bright kids.

However, it was becoming clear to me that Asians, with the same qualifications, had a much worse chance of getting in than other similar kids of other ethnicities.   I started getting Asian kids asking me about this and I had some canned answer from the University to give them, but that answer looked like BS to me.  I felt like I was being asked to lie if I told Asian kids they did not face discrimination in the process.

So I quit.  Princeton is a private institution (though it accepts a lot of public money) so I suppose it can pick candidates any way it wants, but that does not mean I have to act as an agent for them if I disagree with what they are doing.

The WSJ has a follow-up today on a couple of cases being made by Asians against Princeton and Harvard admissions:

In 2006 Jian Li filed a complaint with the Education Department’s Office of Civil Rights after he was denied admission to Princeton University. Mr. Li, who emigrated from China at age 4, had a perfect score on the SAT and graduated in the top 1% of his high school class. He alleged that Princeton violated civil-rights laws banning discrimination on the basis of race, color and national origin. The complaint was initially rejected, but Mr. Li appealed and the government reopened the investigation in 2008. Seven years later, in 2015, the Obama administration, which strongly supported the use of racial preferences in college admissions and obviously took its sweet time reviewing Mr. Li’s case, issued a report exonerating Princeton.

Last year Mr. Blum’s organization filed a public records Freedom of Information Act request with the Education Department to gain access to the same documents that the federal government used to clear Princeton of any wrongdoing. Mr. Blum’s organization represents a group of Asian plaintiffs who are suing Harvard University over its admissions policies. The judge in that case has ordered Harvard to turn over six years of admissions records, and Mr. Blum suspects that the data will show that Harvard is unlawfully capping Asian enrollment.

America’s Asian population has exploded in recent decades, and Asian attendance at highly selective schools with colorblind admissions, such the California Institute of Technology and the University of California, Berkeley, reflects this demographic trend. At Harvard, however, the percentage of Asian undergrads has remained remarkably consistent for an institution that claims race is not a determining factor in who is admitted. Mr. Blum suspects that Princeton engages in similar shenanigans, but the school has been pressuring the Education Department to deny him the information that he requested more than a year ago.

Concerned that the government was finally going to fulfill the FOIA request, Princeton sued the Education Department on March 17 to block the release of the admissions documents. The suit argues that the material being sought is exempt from FOIA, a claim that the government has rejected. The school also maintains that releasing the data would compromise student privacy, and it likened its admissions process to “trade secrets” that, if exposed, would put Princeton at a competitive disadvantage in attracting students.

Don’t believe it. Admissions officers switch schools all the time, presumably taking knowledge of admissions procedures with them, and the criteria used by elite institutions to evaluate applicants is not the equivalent of an iPhone patent. Nor is student privacy an issue since names, addresses and other personal information can be redacted. Mr. Blum’s organization simply wants the number of Asians who have applied to Princeton, their SAT scores and grade-point averages, and other information that the school used to analyze applicants academically.

What really concerns Princeton is a potential discrimination lawsuit. What ought to concern the rest of us is the apparent determination of elite colleges to punish Asians students for their academic success. Asians have long been the forgotten victims of liberal affirmative-action schemes, subject to unwritten “just for Asian” admissions standards that recall the treatment of Jews in the first half of the 20th century. Princeton wants them to shut up about it. Let’s hope they don’t.

I will say that the act of turning down a perfect SAT is not limited just to Asians, so I don't take that as necessarily proof of discrimination.   Harvard and Princeton (and I suppose other Ivies but I really only know something about these two) seem to take a perverse pleasure in turning down perfect SATs.  I don't have the facts, but I wouldn't be surprised if the admit rate for kids with SAT's one notch short of perfect is better than those with perfect SATs.

My evidence of discrimination is based on years of actually meeting the kids, seeing their scores and resumes, and talking to them about their activities and passions -- and comparing who gets in and who does not.  And, of course, one merely has to look at the percentage of kids with Asian heritage at Princeton and compare it to universities like Berkeley that have color-blind admissions systems.

What A Disaster Nationalization of the US Oil Industry Would Have Been!

Back in the 1970's, there were serious proposals in Congress to nationalize US oil companies.  My dad, who was an executive at a major oil company, was being constantly dragged to DC to testify in front of Congress to try to explain what a bad idea that would be.  This was a time of incredible economic ignorance in Washington, perhaps even more than average, when a Republican President had recently instituted wage and price controls and Congress was looking for ways to "fix" problems with oil supply that they themselves had caused with price control rules and other restrictions on exploration.

Think about what we know about state-run oil companies in Venezuela, Mexico and even Saudi Arabia:

  • They always under-invest capital in well maintenance, preferring to route cash flow to social spending that helps maintain shaky governments in power.  Many folks don't understand this, but production from a well starts falling off almost from the moment you drill it.  Well's must be expensively reworked and maintained and upgrade to keep flowing over their life.  This has gotten so bad in Venezuela that the country with the world's largest oil reserves is running out of gas.  I worked with Pemex for years and, at least in the 1990's, were about 1 step away from Pemex looking just like Venezuela's state oil company
  • They have missed most of the recent revolutions in technology, and do no technology development of their own.  If not for technology developed by private western oil companies, they would barely be ahead of Edwin Drake.
  • They deal with price downturns by forming cartels and attempting to fix prices and reduce output.

Private oil companies at the same time:

  • Reinvest massively in both new and existing fields, often with 20-30 year time horizons
  • Continue to revolutionize technology - the shale boom is just one example
  • Respond to market price downturns with innovation and efficiency improvements.

The link above is gated so here is an excerpt:

Now, with oil currently trading near $50 a barrel, these producers are trying to unleash fracking 2.0, the next step in the technological transformation of the sector that is aimed at extracting oil even faster and less expensively to eke out profits at that level.

The promise of this new phase is potentially as significant as the original revolution. If more producers can follow EOG’s lead and profitably ramp up output from shale drilling even at lower prices, the sector could become a lasting force that challenges OPEC’s ability to control market prices.

For a sector in which the previous era’s success was tied to the rapid expansion of output, the shift toward finding more cost-effective ways to get to that oil and gas is full of challenges. When oil prices dropped, critics wondered if the shale industry—rife with heavily indebted companies that had never turned a profit—would collapse.

EOG, with its longtime focus on low-cost production, is the producer many hope to emulate, thanks to the iSteer app and dozens of other homegrown innovations. Dubbed the “Apple of oil” by one analyst, EOG made its name as a pioneer in horizontal drilling and in finding ways to get oil out of shale—often dense layers of rock that hold oil and gas in tiny pores—a feat many once believed impossible.

Can you imagine people like Gina McCarthy running our state oil company?  Good god, we would have $10 gas and import 80% of our oil.

New York Museum & Restaurant Recommendation

Large museums can be overwhelming.  I remember a while back, one of the writers at Maggie's Farm blog suggested that the best way to see large museums is to pick one limited section and plan to visit just that section.  I have tried that a couple of times and it is an enjoyable approach, though as a completionist I have trouble walking away when I have not conquered every room (I am that guy, for example, that has to reveal every single square inch of dark space on a Diablo III map).

However, another alternative is just to visit a smaller museum.  Sometimes smaller museums can be disappointing, because the average quality (or at least name-value) of what is being displayed may be lower than in the large museums.  Not so the Frick Museum in New York City.  This is probably my favorite small museum.  The building itself is marvelous, the Fifth Avenue mansion of Henry Frick, Andrew Carnegie's right hand man (among many other ventures).  I first went to the museum years ago because it houses one of my favorite paintings, the Comtesse d'Haussonville by Ingres.  In addition in just 7 or 8 rooms, it has a virtual who's who of western art history, including Rembrandt, Monet, Manet, Renoir, Degas, Gainsborough, Turner, Holbein, Goya, Gilbert Stuart, Whistler, and many others.   The ratio of big names to also-rans is just amazing.  Walking the halls is like watching the actor list in the opening credits of the movie "A Bridge to Far".  My only complaint on this visit is that the Comtesse has been moved to a poor spot for viewing.

Another nice small museum nearby we also went to this weekend was the Neue Gallery, which focuses on German and Austrian art.  My wife loves Klimt, which is the reason we went.  The museum has a very good collection of Klimt and Egon Schiele, neither of which are really my cup of tea but for those who enjoy these artists it is a nice destination.  The third small museum we saw as the Museum of Arts and Design, with a great location on Columbus Circle.  We saw an exhibition of American 60's and 70's age-of-Aquarius style clothing.  There are also a few craft studios where one can watch designers work.  It was fun but probably overpriced for what it was.  However, on the 9th floor we went to the restaurant Robert which was really good -- very good food and drop dead gorgeous views of Columbus Circle, the park, and the rest of Manhattan.  We had a window table and this was the view:

On the far left, 4 or 5 floors up, is Per Se, one of the top restaurants in Manhattan and perhaps the country.  Given how hard it is to get a reservation, this is probably as close as I will come to eating there.