A Reminder: Why the US Rail System Is At Least as Good As the European System if You Care About Energy Use

In an article about the French railroad SNCF, Randal O'Toole makes a point I have screamed to the world for years:

Meanwhile, French trains carry less than 11 percent of freight, as more than 86 percent of freight is transported on highways. Those numbers are in sharp contrast to the U.S., where at least a third of freight goes by rail and less than 40 percent goes by truck (and I suspect a bad model has erroneously exaggerated the role of trucks).

American railroads are a model of capitalism, one of the least-subsidized forms of transportation in the world. They are profitable and do far more for the national economy than Europe’s socialized railroads, which mainly serve narrow elites.

Most of the intellectual elites and nearly all the global warming alarmists deride the US for not having the supposedly superior rail system that France and Germany have.  They are blinded by the vision of admittedly beautiful high speed trains, and have frittered away billions of dollars trying to pursue various high speed rail visions in the US.

I know that the supposedly pro-science global warming alarmists sometimes are not actually very focused on science, but this is pretty simple to think about.

First, consider the last time you were on a passenger train.  Add up the weight of all the folks in your car.  Do you think they weighed more or less than the car itself?  Unless you were packed into a subway train with Japanese sumo wrestlers, the answer is that the weight of the car dwarfs that of the passengers it is carrying.    The average Amtrak passenger car apparently weighs about 65 tons (my guess is a high speed rail car weighs more).  The capacity of a coach is 70-80 passengers, which at an average adult weight of 140 pounds yields a maximum passenger weight per car of 5.6 tons.  This means that just 8% of the fuel in a passenger train is being used to move people -- the rest goes into moving the train itself.

Now consider a freight train.  The typical car weight 25-30 tons empty and can carry between 70 and 120 tons of cargo.  This means that 70-80% of the fuel in a freight train is being used to move the cargo.

Now you have to take me on faith on one statement -- it is really hard, in fact close to impossible, to optimize a rail system for both passengers and freight.  In the extreme of high speed rail, passenger trains required separate dedicated tracks.  Most rail systems, even when they serve both sorts of traffic, generally prioritize one or the other.  So, if you wanted to save energy and had to pick, which would you choose -- focusing on freight or focusing on passengers?  Oh and by the way, if you want to make it more personal, throw in a consideration of which you would rather have next to you on crowded roads, another car or another freight truck?

This is why the supposedly-green folks' denigrating of US rail is so crazy to me.  The US rails system makes at least as much sense as the European system, even before you consider that it was mostly privately funded and runs without the subsidies that are necessary to keep European rail running.  Yes, as an American tourist travelling in Europe, the European rails system is great.  Agreed.  I use it every time I go there.  I have to assume that this elite tourist experience must be part of why folks ignore the basic science here.

My original article on all this years ago was in Forbes here.

Postscript #1:  One could argue that what matters is not the weight ratios of freight vs. passenger rail but how those compare to the road alternatives.  I would have to think this through, but it gets way more complicated because you have to start worrying about average occupancy and such since that also differs.  At full capacity say of 4 people, the typical 4000 pound car (US, rest of the world is less) would passenger weight around 12% of the total, higher than for the passenger train.   But average occupies could change the comparison and I don't have the time to work it through.  But for a full analysis we would have to take a lot of other things into account.  For example, trains are a poor fit with customer travel time preferences for longer US distances, even for higher speed options.  In the same way freight pencils out worse for rail in Europe because the last mile transport problems become a bigger percentage in a shorter haul.  I am confident though that for the US, the freight-dominant system is the right solution and it amazes me how hard it is to get anyone to recognize this.

Postscript #2:  Thinking about the SNCF, I actually did a consulting project there 20+ years ago.  I remember two things.   First they had 25% more freight car repair people than they had freight cars.  Which led me to making the tongue-in-cheek suggestion that they could give every one of these folks their own tool bag, assign them their own car to ride around on, and still cut a fifth of their staff.  I have never, ever, ever seen bloated staffing like I did at SNCF.  My other memory was lunches with executives that took place in palatial dining rooms with waiters in white gloves.  We ate for like 3 hours and drank a case of wine and all I could think about doing after lunch was going to take a nap.

Postscript #3:  This is really going to be a random aside, but if you want to bring science to the table, monorails are the dumbest things ever.  The whole advantage of rail is the friction reduction of a metal fanged wheel rolling on a metal rail.   Most monorails (and people movers) are just tires on a concrete beam (e.g this is how the Disney monorails work).  This is no more efficient than a bus and actually less because the train jacks up the vehicle to passenger weight ratio over a bus.  Because of certain geometry issues, monorails also have limited capacity.  Disney has been struggling with this for years at the Magic Kingdom in Florida and their ferry boats seem to move a lot more passengers than the adjacent monorails.  Monorails do look awesome, though, and their tracks are airier and more attractive than traditional elevated rail tracks.

Our Response to GDPR

I have been reading all the articles (and the storm of emails in my inbox) on European GDPR privacy rules implementation with some dispassion.  After all, it does not affect me, right?  I run a camping business all in the US.  But then I got to thinking about it and realized that I had three avenues of exposure  -- my blogs, my jobs mailing list, and my company web site.  I will preface this by saying that I am no expert and I am not really hugely at-risk, but perhaps this will be useful to someone.  More importantly, if you ARE an expert and see something I am screwing up please email me!

The blog exposure strikes me as pretty narrow, particularly since we do not serve up advertisements (except in the comments via Disqus) and do not have a mailing list.  I don't store or have access to any user data (though I wonder if server logs count?) so I assess my main liability as secondary if Disqus screws up something.  I have been reading Disqus's updates and I would evaluate them as working on it but not done.  I suppose if the EU wants to come after me for "up to 4%" of this site's revenue they are welcome to do so.  Sort of like when I was unemployed being told to spend 2 months salary on my wife's engagement ring  (which in fact I did exactly, since it was my mom's ring given to me as a gift for the purpose).

Similarly, I think my liability surrounding the mailing list we maintain for job openings is pretty limited.  First, it would shock me if more than 0.0001% of the people on that list are in Europe, since I can't really legally hire Europeans in most cases and it is unlikely they will drive their RV over here to work in a campground.  More importantly, all the names are there through what I would call extreme opt-in -- they have to click on a special link and go sign up on a dedicated page just to join the mailing list.  The email provider is Constant Contact so again my liability is likely limited to whether they screw anything up in their compliance, but this is probably unlikely in my case.  Again there is no advertising and all people on the list ever get are notifications of new job openings and links where to apply.

Which brings me to our business web site.  There is no log-in or user information entered or advertising on our web site, so we are mostly fine.  With one large exception -- we have our own reservations site that gathers and stores customer reservation information.  Eek!  That sounds like it could be a problem.  The most dangerous piece of data we could potentially have in our hands is a credit card number, which is why our system was set up so our company never has the credit card number in our possession.  Customers are passed over to Stripe (highly recommended company, by the way) who handle all that dangerous stuff on their servers, and just pass us back a confirmation.  But we do have customer name, address, email, and camping stay dates on our server.  Maybe we are compliant already -- we treat that stuff with a lot of care.  Maybe we are not.  But since we really don't get any reservations at all from Europe, it was easier just to go black there, so right now my software guy is working on blocking traffic from European IP addresses.

Postscript:  On some of my posts, people write me and ask, "Why did you even bother to publish that."  And my answer is that I often write to think, so it may be that it is only for my own benefit.  My software guy is a reader of this blog and was probably laughing as he read this post because I stopped a couple times in writing it to fire off new questions or requests to him.

Update:  Hah, what timing!   This just appeared on my blog when I scrolled down to the comments so I guess Disqus must indeed be working on this.

FOIA Needs A Major Overhaul and Reboot

I received some documents the other day as the result of a FOIA request, and as has been my experience in past requests, a lot of stuff is blacked out that I suspect is redacted merely to protect the agency and its managers from embarrassment rather than for reasons actually allowed in the FOIA rules.  Despite President Obama's claims to run the most transparent administration in history, I believe the problems have only gotten worse over the last decade.  The Administration even limited its own inspectors' general access to information  [how the hell does one punctuate the possessive of the plural of inspector general??].

Generally I do not have the time or resources to get to the bottom of these things, but folks in Congress do.  One of the patterns we have observed in the wrangling of Republicans in Congress with the Department of Justice over the last year have been releases of documents that are initially heavily redacted, and then latter re-released with fewer redactions.  The pattern we are finding is that many of the first redactions were not justified under any of the privilege rules that exist.  They were merely things the agency did not want anyone else to know.

My favorite example comes from Eric Felton in the Weekly Standard:

Some of the questionable redactions, by contrast, are charming efforts at bureaucratic butt-covering. Lisa Page, for example, was discussing with Peter Strzok the challenge of having an intimate meeting in Andrew McCabe’s conference room, given the size of his grand new conference table. “No way to change the room,” Page texts in the version provided by Justice. “The table alone was [REDACTED]. (You can’t repeat that!)” Hmmm, what classified, top-secret, national-security information could possibly have been redacted? The blacked out bit, it seems, was a simple “70k.” The DoJ—and can you blame them, really?—didn’t want Congress to know they were in the habit of spending $70,000 on a conference table.

Travel Report from the Big Island

My wife's cousin is in management of a beautiful resort (Mauna Kea / Hapuna)  on the Kohala coast of the Big Island of Hawaii.  I was asking him if it was OK to visit and you can feel the frustration of a resort executive in his reply:

Absolutely ZERO impact from Volcano….

Volcano is 120 miles away and has zero impact on MK. Since it has been rumbling we have had nothing but beautiful sky, perfect air and perfect water temperature.

Web site with air quality… http://www.hiso2index.info/ MK is about the same as Kihei in Maui… Kona occasionally gets not great with some Vog… So Kihei and MK are both at 14 right now. Kona is the worst at 46 on the west side (Still good) Phoenix is at 71; St. Louis right now seems the worst in the nation at 119. Worst are on the Big Island right now is Ocean View a little south west of the lava flows at 82.

Unfortunately, CNN makes it seem like everyone is wearing a gas mask and there is acid rain falling all over the place. The volcano is limited to a tiny area on the south-east coast and all Island in Hawaii and 90% of the big island and all of the Kohala Coast are not impacted. The impact from the Volcano for me is the same as you in Phoenix… ZERO….. Also no matter what it does it will not impact us… It is a shield volcano, not Mt. St. Helene so it can’t blow up and there is not enough lava in the chamber to cause any big issues other than right at its base…

The only time to “pay attention” is if Mauna Loa or Hualalai started to rumble. Both of those could have an impact on the west side of the island.

 

Well, I Got Another Threat and Takedown Demand Today

I received this email this morning, from a hotmail account no less

Subject:  Unlawful Use of Name

Hello,

I am writing on behalf of [redacted], whose name you published on your blog citing the PBS article about harassment in the Forest Service.

You do not have legal permission to publish his name. Please remove it immediately to avoid legal action.

Sincerely,

Heather Appelhof

I didn't really have to, but I redacted the gentleman in question's name, at least until Ms. Appelhof has a chance to respond.  Here was my response:

Ms. Appelhof:

Mr. _____'s name was quoted on my blog in the context of a much longer verbatim quote from the PBS website as it appeared on March 5, 2018. This sort of quotation taken directly from a respected national media outlet is a speech activity that is highly protected in this country. In particular, your argument that I did not have "legal permission to publish his name" is completely specious. There is no such legal requirement in this country to obtain prior permission before publishing someone's name, particularly in the case of a public figure in a leadership position of a public agency. As an example, I publish all takedown requests my blog receives so your name will get published on my blog as part of the email.

Few things irritate me more than people who threaten me with laws that do not exist. However, since Mr. _____'s name was really incidental to the point I was trying to make, I am open to a valid legal or ethical argument for removing it and will give you a second chance to provide one. Note that "this gentleman is upset about all the negative media coverage and has engaged me to try to intimidate people into removing his name" is not a valid reason.

There are obviously niche legal situations in which it is illegal to publicly reveal names -- a doctor revealing his patients' names and medical information is highly restricted under HIPAA, for example. However, I am not aware of any such situation that obtains here. I suppose there could be some sort of specific court order in play here, but if that is the case it should be easy to share it with me and I will respect it. It is possible Mr. _____ believes he was libeled by PBS, but that hardly applies to my merely quoting their story, particularly since I can't have had any malice towards him since I have not given him a second thought before or after publishing that post, at least until your email arrived.

This leaves ethical arguments, and I can certainly be swayed by such arguments more quickly than by empty threats. For example, if the accuser in the story has recanted her accusation, or if PBS had confused Mr. ______ with someone else, those would certainly be good reasons to remove his name.

You are welcome to try again.

Coyote

The original PBS story I quoted is here.  After I sent Ms. Appelhof this response, I noted that PBS had removed this gentleman's name from the article with a note at the bottom saying:

Editor’s Note: This story has been updated. The name of the Forest Service supervisor in Oregon has been removed. We stand by our reporting and thank the multiple women who went public for this story.

Despite this email ticking me off with its tone and absurd legal opinion, I actually want to do the right thing so I have reached out to the PBS editorial team on this story to see if I can get a hint why the name was removed.  A reason good enough for PBS is probably going to be good enough for me, since, again, the story was more about accountability issues on Forest Service fire teams than it was about this person in particular.

Update:  I can't get the details, but there were apparently legal charges and settlements at PBS that led to their taking down the name.  I will defer to their judgement and do the same, because honestly the name was just incidental to my post anyway.  Ms. Appelhof wrote me back with a MUCH more compelling and intelligent email outlining a lot of investigation that has occurred since and she claims cleared the man in question.  I am not sure who is wrong or right but I am happy to retreat from this particular fray.  Having had to fight a number of takedown requests in the past, her initial email was worded in a way to rub my fur all the wrong ways.

More on The Poor State of Automobile Cockpit Interfaces

A while back I wrote that automobile dashboard design in modern cars sucks.  I drive many different cars as I am frequently renting cars on the road and I concluded:

If car designers are getting rid of physical buttons in favor of multilayered menu systems because it saves them a bunch of money, fine.  Bad trade-off in my mind, but there is at least a reason.   But if they are getting rid of physical buttons because they think that modern users prefer navigating multiple screens to access commonly used functionality, this is simply insane.  No one can top me for pure technophilia, but technical wizardry should not come at the expense of reduced usability.

No one listens to me but they do listen to Consumer Reports, and that magazine dinged the new Tesla Model 3's for exactly this problem:

"Another major factor that compromised the Model 3’s road-test score was its controls. This car places almost all its controls and displays on a center touch screen, with no gauges on the dash, and few buttons inside the car. This layout forces drivers to take multiple steps to accomplish simple tasks. Our testers found that everything from adjusting the mirrors to changing the direction of the airflow from the air-conditioning vents required using the touch screen."

Postscript:  This is not really the point of this post, but how is this even possible in a small car like the Model 3?

"The Tesla’s stopping distance of 152 feet from 60 mph was far worse than any contemporary car we’ve tested and about 7 feet longer than the stopping distance of a Ford F-150 full-sized pickup," reads the review based on tests on different Model 3s.

My Wife Is Ahead of Her Time

As "Stand By Me" is now teed-up to become the #1 wedding song in the English-speaking world, at least for a time, my wife actually chose it for our wedding almost 30 years ago.  It is really one of the great songs, and should be ranked well higher than the 122nd place Rolling Stone Magazine gave it.  I didn't watch the royal wedding this morning but my breakfast was interrupted by my wife screaming at me to "come see this" as "Stand by Me" was sung.

 

Postscript:  I remember years ago the Police's "Every Breath You Take" dominated weddings for a while.  At one point Sting did an interview where he told everyone -- I will paraphrase but I think this is close -- "stop playing that song at your weddings. Have you listened to the lyrics?  It is a super-creepy song about stalking."  I would add a big ditto to this for everyone in the 90's that was using at their weddings the Dolly Parton / Whitney Houston tune "I'll Always Love You," which is actually a break-up song.

Uber Drivers Just Killed All the Parts of the Job They Supposedly Liked the Most

At the behest of a group of Uber drivers, the California Supreme Court has ruled that Uber drivers are Uber employees, not independent contractors, under California law:

In a ruling with potentially sweeping consequences for the so-called gig economy, the California Supreme Court on Monday made it much more difficult for companies to classify workers as independent contractors rather than employees.

The decision could eventually require companies like Uber, many of which are based in California, to follow minimum-wage and overtime laws and to pay workers’ compensation and unemployment insurance and payroll taxes, potentially upending their business models.

I believe that this will pretty much kill Uber (though it will take some time to bleed out) for reasons discussed here.  Rather than discuss consequences for the company (everyone is finally doing this, following the general media rule I have stated before that it is OK to discuss downsides of new government regulations only after the regulations have been passed and become essentially un-reversible).

People don't always seem to have a good grasp of cause and effect.  I don't know if this is a general problem programmed into how humans think or one attributable to the sorry state of education.  My favorite example is all the people who flee California due to the high taxes, housing prices, and stifling regulation and then  -- in their new state -- immediately start voting for all the same things that caused them to flee California.

One of the aspects of being an Uber driver that supposedly attracts many people to it is the flexibility.  I summarized the advantages in an earlier post:

Here are some cool things about working for Uber:

You can work any time you want, for as long as you want.  You can work from 2-4 in the morning if you like, and if there are no customers, that is your risk

You can work in any location you choose.  You can park at your house and sit in your living room and take any jobs that come up, and then ignore new jobs until you get back home (I actually have a neighbor who is retired who does just this, he has driven me about 6 times now).

The company has no productivity metrics or expectations.  As long as your driver rating is good and you follow the rules, you are fine.

This all ends with the California decision.  You drivers are all thinking you won this big victory because you are going to have the same job you loved but you will just get paid more.  This is not going to happen.  As I implied above, in the long-term this job will not exist at all, because Uber will be dead.  But in the near-term, if Uber tries to make this work **, Uber is going to excercise a LOT more control of your work.

That is because if Uber is on the hook for a minimum cost per hour for your work, then they are going to damn well make sure you are productive.  Do you enjoy sitting around near your suburban and semi-rural home at 3AM waiting to get some business?  In the future, forget it, Uber is not going to allow this sort of thing now that Uber, rather than its drivers, is carrying the risk of your being unproductive.  They are going to take a lot more control of where and when you can drive.  And if you do not get with the program, you are going to be kicked out.  It won't be three months before Uber starts tracking driver productivity and kicking out the least productive drivers.

Congratulations Uber drivers, in the quest to try to use the power of government to extract more money for yourselves from the company, you just killed your jobs as you know it.  You may have had freedom before but now you are working in Office Space like the rest of us.

This whole case just goes to support my frequent contention that the only labor model the US government will fully accept is an hourly worker working 9-5 punching a time clock.  Every new labor model that comes along eventually runs head-on into the government that tries to pound that square peg into the round hole of a time-punching factory worker.  The Obama administration even did its best to force a large number of salaried workers into punching a time clock.

 

** If I were the leader of Uber, I would announce today that we are exiting California.  This is an existential issue and the only way to fight it is right now on your home turf.  Any attempt to try to muddle through this is going to lead to Uber's death, and would thus be a disservice to its shareholders.   Whether this happens will be interesting.  Uber is owned by a bunch of California VC's who generally support exactly this sort of government authoritarian interventionism.  It will be interesting to see if a bunch of California progressives let $50 billion in equity go down the drain just to avoid offending the sensibilities of their fellow California progressives.

The Dangers of Trying To Reinvent An Industry, And A Few Notes on Tesla

I am often critical of Elon Musk and Tesla, and will be again later in this post, but I wanted to start by sympathizing with Tesla's plight.  As you may know, Tesla set out not only to produce a leading electric car (which it did) but also to reinvent automobile manufacturing (which it is struggling to do).  One of the hard parts about reinventing an industry is being correct as to what parts to throw out and what parts to keep.  Musk, I think, didn't want to be captive to a lot of traditional auto industry thinking, something anyone who has spent any time at GM would sympathize with.  But it turns out that in addition to all the obsolete assumptions and not-invented-here syndrome and resistance to change and static culture in the industry, there is also a lot of valuable accumulated knowledge about how to build a reliable car efficiently.  In Tesla's attempt to disrupt the industry by throwing out all the former, it may have ignored too much of the latter, and now it is having a really hard time ramping up reliable, quality production.  Musk even recently admitted it may have gone overboard on factory automation.

I don't agree with all the conclusions, but I thought this was an interesting article on Tesla vs. Toyota production practices and the industry lessons Tesla may have been too quick to ignore.  One quote I liked, “Machines are good for repetitive things… but they can’t improve their own efficiency or the quality of their work.”  I sympathize with Musk on this one.  You CAN"T upend an industry by copying everything it does -- you have to go off in a different direction, at least on some things.  It may be that Musk eschewed the wrong bits of industry practice, but this is an understandable mistake.

What is not understandable is Musk's lack of transparency, his self-dealing, his wild and unfulfilled promises, and his unprofessional behavior.  Some notes:

  • A few months ago, at the Tesla truck launch, I wrote:

But Tesla needs to stay hot. California is considering new vehicle subsidy laws that are hand-crafted to pour money mainly into Tesla's pocket. Cash is burning fast, and Musk is going to have to go back to the capital markets again, likely before the end of the year. So out came Musk yesterday to yell SQUIRREL!

Tesla's main current problem is that they cannot seem to get up to volume production of their main new offering, the Model 3. The factory appears to be in disarray and out of production and inventory space. They can't produce enough batteries yet for the cars they are already making. So what does Musk do? Announce two entirely new vehicle platforms for tiny niche markets.

I saw the truck launch as a cynical ploy to distract from Tesla's operating problems and perhaps to get a bit of financing in the form of customer deposits (a growing percentage of Tesla's available cash is from customer advance deposits).  There was no way it could do anyting with this truck, given its operating problems and lack of capital.  It seems that I was on target, because not even 6 months later Tesla has tired of pretending the truck is going anywhere.  After Telsa did not even mention the semi in their earnings conference call, Musk said in answer to a question:

I actually don't know how many reservations we have for the Semi. About 2,000? Okay. I mean, we haven't really tried to sell the Semi. It's not like there's like an ongoing sales effort, so sales – orders for Semi are like opportunistic, really companies approaching us. Yeah, it's not something we really think about much.

  • Elon Musk proved himself on the same conference call to be a spoiled brat who has spent too much of his time having people kiss his feet and compare him to Tony Stark.

One week ago, Elon Musk entered the history books for his unprecedented, petulant handling of "boring, boneheaded" questions from two sellside analysts, who merely wanted more details about the company chronic cash/rollout issues.  And no phrase captures Musk's descent better than "These questions are so dry. They're killing me."  That's what Musk told RBC analyst Joseph Spak in response to a question about Model 3 reservations.

My older readers will know that my dad was President of Exxon from the early 70's (a few weeks before the Arab oil embargo) until the late 1980's.  In that job he never had to do analyst calls, but he did about 15 annual shareholders meetings.  I don't know how they run today but in those days any shareholder with a question or a rant could line up and fire away.  Every person with a legitimate beef, every vocal person who hated oil companies and were pissed off about oil prices, every conspiracy theorist convinced Exxon was secretly formulating chemtrail material or whatever, and every outright crazy would buy one share of stock and show up to have their moment on stage.  My dad probably fantasized about how awesome it would be to just get asked dry financial questions about cash flow.  And through all the nuts and crazy questions and outright accusations that he was the most evil person on the planet, dad kept his cool and never once lost it.

If you asked him about it, he likely would not have talked about it.  Dad -- who grew up dirt poor with polio in rural Depression Iowa -- was from that  generation that really did not talk about their personal adversity much and certainly did not compete for victim status.  He probably would just have joked that the loonies at the shareholder meeting were nothing compared to Congress.  My favorite story was that Scoop Jackson once called him to testify in the Senate twice in 6 months or so.  The first time, just before the embargo, he was trying to save the Alaska pipeline project and Jackson accused Exxon of being greedy and trying to produce more oil than was needed.  The second time was just after the embargo, and Jackson accused Exxon of being greedy and hiding oil offshore in tankers to make sure the world had less oil than it needed.

Through all of this, the only time I ever saw him really mad was when Johnny Carson made a joke about killing the president of Exxon (he asked his audience to raise their hands if they thought they would actually get convicted for killing the president of Exxon) and over the next several days our family received hundreds of death threats.  These had to be treated fairly credibly at the time because terrorists were frequently attacking, kidnapping, and bombing oil company executives and their families.  We had friends whose housekeeper's hand was blown off by a letter bomb, and I was not able to travel outside of the country for many years for fear of kidnapping.  (For Firefly fans, if you remember the scene of Mal always cutting his apples because he feared bombs in them from a old war experience, you might recognize how, to this day, I still open packages slowly and carefully.

This is a long way of saying that Elon Musk needs to grow the hell up.

My New Favorite Attraction in LA and it NEVER Gets Any Publicity

A couple of weeks ago my wife and I were in Pasadena and we visited the Huntington.  I almost never see it on list of things to do in LA.  This list has 22 things including some odd choices but no mention of the Huntington.

The Huntington is the mansion and grounds of one of the heirs to railroad magnate Collis P Huntington.  Perhaps one of the reasons it is not well-known is that it is hard to exactly categorize what this place is.  First, it is an amazing garden (pictures below) that has a desert garden, a tropical garden, a temperate garden, a Japanese garden, the bonsai garden, a Chinese garden, a water garden, a rose garden and an herb garden.  I have been to a lot of gardens and arboretums around the world and this compares to the best.  More enjoyable, for example, than either major arboretum in Singapore which top tourist lists.  Then, there are the art museums, actually two.  We only made it to the European art museum, which was in the original mansion -- it contained a lot of large portraiture by Sargent and Gainsborough, among other works.  And then there is what is actually the centerpiece of the facility, the library.  Only a small part of the collection is on display, but what is there is amazing -- from fabulous illuminated manuscripts to a Gutenberg Bible to a number of signature historical documents.   As icing on the cake, there is the chance to walk through a couple of great mansions with a good part of the original furnishings intact.

The closest analog I can come up with is the Getty.  The Getty gets top billing in many LA must-do lists, and I can tell you that the Huntington blows the Getty away.  Sure, you should see the Getty, but I have never had a desire to go back.  I will be back to the Huntington as soon as I can.

I could fill this post with pictures, but I will simply provide a few teasers:

My Apology to Art Students

For years (as an engineer) when I made fun of college students not doing any work or not studying anything of actual utility, I often used art students as an example.  Today I offer my apology.

My daughter is an illustration major at a college called Art Center in Pasadena, CA.  I don't know if this is usual for art schools or if it is just this one college, but these kids do an insane amount of work.  My wife and I both attended Ivy League schools and my son went to Amherst, all of which are high on rankings of top academic stress schools, but none of us ever worked like the kids at Art Center.  My daughter coasted to A's in one year at Rice University, which she would describe as a cake walk compared to art school.   Her art school features five 5-hour classes a week plus each class can and does issue up to 9 hours of homework a week.  Typical weekly assignment for 1 course:  draw 300 hands.

In addition to all of this there are mid-terms and finals.  Below is one project my daughter did for one course's final exam, a set of children's books put together from scratch with her own art.  This strikes me as an insane amount of work.

I will add that I have become reconciled to art school in other ways.  To some extent my daughter's false start going to a major university in a liberal arts program was a result of our family's expectations about college.   Our bias was that a liberal arts degree from a highly-ranked university was the path to success.  Art school was for slackers who ended up sleeping on the street in a refrigerator box.  But you know what?  Art school teaches a real craft and teaches it rigorously.  Can Yale say that about its gender studies program?

One caveat to this is that my daughter can write.  She went to a high school where all the assignments and exams were essay-based.   She can toss off a polished 5-paragraph essay in her sleep.   If this were not the case, I would worry about this one aspect of art school.  I consider writing (and remember, this comes from a mechanical and aerospace engineer) to be the most important core skill and an education that does not teach writing or provide a lot of writing practice is suspect in my mind.

The Absolutely To-Be-Expected Outcome of Government Regulation of "Fake News" on Social Media

Regulations to limit "fake news" will inevitably be used to limit criticism of the government and individual politicians.  Here is the latest example, from the WSJ

A foreign visitor became the first person convicted and sentenced to jail under a new law to punish those deemed to have published “fake news”after he criticized the police response to the slaying of a Palestinian engineer in Kuala Lumpur.

Salah Salem Saleh Sulaiman, 46 years old, a Danish national of Yemeni origins, pleaded guilty Monday at a court hearing. He was sentenced to a week in jail but opted to serve a  month behind bars in lieu of paying a fine of about $2,600. He wasn’t represented by a lawyer.

The case marked unexpected circumstances for the first use of the law since Parliament passed it April 3 amid criticism by rights groups that it would be wielded to inhibit criticism of the government ahead of elections on May 9. The government has denied that that is its intent, and Mr. Salah is the only person to have been charged under it.....

Mr. Salah appeared in a video posted to YouTube—and since removed—from the scene of the assassination of Palestinian Fadi al-Batsh, an electrical engineer and university lecturer who had lived in Malaysia for a decade. He was gunned down by two men on a motorcycle as he walked to dawn prayers at a mosque. No one has been arrested.

Mr. Salah accused medical services and police of being slow to respond to the shooting. Authorities vehemently rejected the allegations and arrested him. On Monday, he apologized and said he had recently arrived in Malaysia to visit friends and didn’t know the law existed.

The "and" in the third paragraph is odd.  I would have used "but nevertheless"

This Simple Tesla Production Trick Could Cost Taxpayers An Additional Half Billion Dollars

The Federal government provides a $7500 tax incentive for the buyers of electric cars.  This is an attractive discount on a $100,000 Tesla Model S, but is a huge incentive for a $40,000-ish Tesla Model 3.  However, there is a sunset for this incentive.  It turns out it begins to phase out for a given company in the first quarter after that company sells its 200,000th eligible electric car (two quarters at $3750, two quarters at $1875, then zero).

By the end of the second quarter, Tesla will be approaching its 200,000th car.  The numbers will likely be close enough that Tesla could likely easily manage to move the date for this event either just before or just after the end of the quarter.  The obvious incentive for Tesla, if it is going to be this close, is to build inventory at the end of the quarter, but keep actual deliveries under 200,000, then go full speed ahead with deliveries in the third quarter to maximize the last of the full tax credit.  Randy Carlson has created a model that looks at the case of Tesla delivering its 200,000th car on June 30 vs, July 1 (ie 2nd quarter or just in the third quarter) and demonstrates that the additional tax incentives by pushing this even into July are as high as a half billion dollars!  His model is below.

Activist Government vs. Emergent, Bottom-Up Solutions

From Engadget, on rental scooters in SF:

San Francisco is a city where companies frequently like to try out new ideas. Uber had its start here many years ago, as did success stories like Twitter and Airbnb. So it's no surprise that San Francisco happens to be one of many cities experiencing a new form of transportation: sharable electric scooters. They appeared in downtown SF seemingly out of nowhere, taking over sidewalks and pedestrian paths. But what was marketed as a low-cost, eco-friendly way to get around town soon became a public nuisance.

It all started in late March when three companies -- BirdSpin and LimeBike -- unveiled their scooter-sharing solutions in San Francisco. All three work the same way: You unlock the scooter with an app, pay a nominal amount -- $1 to unlock and 15 cents a minute thereafter. When you're done, simply lock it with the app and it'll be ready for the next person to hop on.

Unlike docked bicycles, like the Ford GoBikes in San Francisco or New York City's Citi Bikes, you don't have to park them in designated spaces; they can be left anywhere. These scooters are then rounded up and collected every night for any necessary repairs or charging and then redistributed the next day.

In the meantime, though, they're often strewn aside carelessly, blocking the public right-of-way, thus making it especially difficult for wheelchairs and those with disabilities to move past them. Further, scooter riders are using them on the sidewalk, which is not only illegal but dangerous. I've personally had scooter riders zoom up past me, yelling "Watch out!" as they whizzed by. According to California state law, motorized scooters must be used in the bike lane or on the road. This means it's also against the law to ride them without a helmet and without a driver's license (therefore user must be 16 years or older).

So San Francisco is cracking down. Not only is the city working on legislating the scooters, but on April 16th, the city attorney sent cease-and-desist letters to all three companies to end operations until regulations are in place. The city also passed a law, demanding that all scooters have permits. Scooters found without permits will be subject to impoundment. San Francisco's Municipal Transportation Agency (SFMTA) hopes to open up the permitting process starting May 1st.

So these things have been out on the streets for less than 30 days and now a handful of people in the SF government are going to ossify the whole thing with a set of rules that these couple of people dream up.  The impatience here is just staggering.  Clearly the riders and the owners both know that there are problems with the early implementation.  What about allowing them some time to iron out the bugs and figure things out?  What about giving the millions of people who live in this city some time to cooperate and create new social norms?  Nah, we are just going to let a couple of yahoos who are totally uninvolved with this new service and who know nothing about it and who likely are not even customers or potential customers (since they probably have a government car and driver) shut the whole thing down and make up some arbitrary new rules.  Jeez, how many of the products and services we now value would never have made it out of their infancy if the government started hammering them with uninformed new rules within 4 weeks of their introduction?

US Trade Deficit: Foreigners Are Consuming US Goods, But Consuming Them in the US (So They Don't "Count" As An Export)

Via Don Boudreaux:

Greg Ip writes that “The U.S. runs a trade deficit because it consumes more than it produces while its trading partners, collectively, do the opposite” (“How the Tax Cut President Trump Loves Will Deepen Trade Deficits He Hates,” April 19).

Here is how I like to explain why this is wrong.  The trade deficit exists in large part because foreigners are more likely to consume the American-made goods and services they buy right here in the US, rather than take them back to their home country, while US consumers tend to bring foreign goods back to America to consume them.  Let me unpack this.

First, over any reasonable length of time, payments between countries are going to balance.  If this were not true, there would be some mattress in China that has trillions of dollar bills stuffed in it, and no reasonable person nowadays just lets money sit around lying fallow.  There are some payments between countries for each others' goods.   And there are some payments for each others' services.   And there are some payments for various investments.  All these ultimately balance, which makes fixating on just one part of this circular flow, the payments for physical goods, sort of insane.  If we have a trade "deficit" in physical goods, then we must have a trade surplus in services (which we do) and in investments (which we do) to balance things out.

But what do we mean by an investment surplus?  It means that, for example, folks from China are spending more money in the US for things like real estate and buildings and equipment -- either directly or through purchases of American equity and debt securities -- than US citizens are buying in China.  But note that another name for investment is just stuff that foreigners buy in this country that stays in this country and they don't take back home.  If a Chinese citizen buys a house in Los Angeles (something that apparently happens quite a bit), that is just as much "consumption" as when I buy a TV made in China.  But unlike my TV purchase (which counts as an import), because of the arbitrary way trade statistics are calculated, selling a Chinese citizen a house in LA does not count as an export because they keep and use the house here.  Let's say one Chinese person sells 10,000 TV's to Americans, and then uses the proceeds to build a multi-million dollar house in Hawaii.  This would show up as a huge trade deficit, but there is no asymmetry of consumption or production -- Chinese and American citizens involved in this example are producing and consuming the same amounts.  The same is true when the Chinese build a manufacturing plant here.  Or when then invest capital in a company like Tesla and it builds a manufacturing plant here.

Our bizarre fixation on the trade deficit number would imply that, if trade deficits are inherently bad, then we would be better off if the Chinese person who bought the house in LA dismantled it and then shipped the material back to China.  Then it would show up as an export.  Same with the factory -- if we fixated on reducing the trade deficit then we should prefer that the Chinese buy the equipment for their factory here but have it all shipped home and built in China rather than built here.   Is this really what you want?

I am willing to concede one exception -- when Chinese use trade proceeds to buy US government debt securities.   This is where my lack of formal economics training may lead me astray, but I would say that the US government is the one major American institution that is able to consume more than it produces.  Specifically, by running enormous deficits it is able to -- year in and year out -- allow people to consume more than they produce.  Trade proceeds from foreigners that buy this debt in some sense help subsidize this.

However, I don't think one can blame trade for this situation.  Government deficits are enabled by feckless politicians who pander to the electorate in order to be re-elected, a dynamic that has little to do with trade.  I suppose one could argue that by increasing the demand for government securities, foreigners are reducing the cost of debt and thus perhaps enabling more spending, though I am not sure politicians are at all price sensitive to interest rates when they run up debt -- as a minimum their demand curve is really, really steep.   There is a relation between government borrowing and trade but the relationship is reversed -- Increased borrowing will tend, all things being equal, to increase the value of the dollar which will in turn make imports cheaper and exports more expensive, perhaps increasing the trade deficit.

Why Branding Has Value

I have written about this before, but critics of all things capitalism are usually particularly critical of branding, arguing that building brands has no value except to somehow beguile customers into overpaying for things or buying things they do not need.  Now, I can be sympathetic to this when I see folks who have paid a fortune for certain fashion items (*cough* Louis Vuitton bags *cough*), but in generally branding actually has real consumer value.  One important value of branding is predictability.  McDonald's was traditionally a classic example of this -- walk into any McDonald's in the world and you will be pretty sure what will be on the menu and what it will taste like.

I wrote about this before when travelling in Europe.  I know that I like some orange juice brands and don't like others.  I know for sure I like Tropicana and so I buy that because I am confident I will get something I will like.  In Europe, I had no idea what to buy -- I might pay for something I would enjoy, but I might also find myself having paid for something I really did not like.

I was reading a travel blog and thought that this quote really represented the epitome of why brands matter

I’ve been to Hyatts all around the world within every brand of the chain’s portfolio, and I don’t recall ever staying at a property which was miscategorized. There’s no mistaking a Park Hyatt for a Hyatt Regency, or a Grand Hyatt for an Unbound Collection. When I pick a property within the Hyatt portfolio, my expectations are met and the experience is standardized around the world. Hyatt Houses and Hyatt Places are almost identical properties regardless of where in the world they pop up.

I cannot say the same for the expansive Marriott portfolio. Just last month I stayed at the JW Marriott Copacabana in Rio, and nothing about that property represented the other JW’s I’ve visited. Certainly not all generic Marriott hotels are created equally, and I’ve found a very large variation in property conditions, common spaces, room sizes and other factors at Marriotts.

For example, let’s look at Courtyard properties. Within the last year I’ve stayed at the Courtyard in Durham, North Carolina, which resembled an updated Super 8. Then, not two months later, I visited the Courtyard in LaGrange, Georgia, which was more akin to a full Marriott hotel branded property. Compare those two with the Courtyard Seoul Times Square, which has an executive lounge with a rooftop patio, and I don’t know what to expect when booking a Marriott property, even within a single brand.

This Guy Should Be The Patron Saint of Coders

(source)

“Once, in the last century, in the Cambria Iron Works at Johnstown, Pennsylvania, after working for months to build an unorthodox new machine for steel production, the engineer in charge, John Fritz, said at last, ‘All right boys, let’s start it up and see why it doesn’t work.’

Government Housing Policy: Restricting Supply and Subsidizing Demand

I am always amazed that folks, say those in government in places like San Francisco, consistently support restricting the supply of new housing while subsidizing home buyers and then are surprised when prices and rents keeps rising.  From the Market Urbanism Report via Walter Olson.

But a look at the numbers shows that, on the contrary, housing construction (or lack thereof) seems to be the driving factor behind whether or not large U.S. metros remain affordable.

This would be the conclusion from 7 years of data from the Census Bureau, which publishes annual lists on the number of new privately-owned housing units authorized in each metro area. Between 2010 and 2016, when overall national housing permits ticked up each year following the recession, most major metros have issued housing permit numbers in the high 4- or low 5-figures annually. But three metros have stood far above the rest.

The Dallas-Fort Worth-Arlington MSA issued 273,853 housing permits over this 7-year period; New York-Newark-Jersey City issued 283,814; and Houston-The Woodlands-Sugar Land topped every metro with 316,639 permits. Combined, the 3 metros accounted for 13.5% of the nation’s approved housing units.

Other metros weren’t even close to these three....

These statistics are glaring, and show that the urban housing affordability crisis, and its solution, is far simpler than many pundits suspect. In their ongoing quest to satisfy their anti-growth biases, they’ve settled on demand-side responses (read: government subsidies) that ignore or worsen the fundamental problem of under-supply; while they continue to blame various third party boogeymen, including developers, landlords, Airbnb hosts, techies, hipsters, Asian families buying second homes, and migrants in general.

But, again, the Census data sheds light on the actual nature of the issue: some metros in America are building a LOT of housing. Other metros may think they are, but actually are not. And housing prices within given metros are either stabilizing or skyrocketing based on this decision.

 

Mueller Is Revenge on Republicans for Bill Clinton Impeachment

When special prosecutor Ken Starr finally presented charges to Congress against Bill Clinton, it was for lying under oath about his sexual escapades with Monica Lewinsky.  Did someone really originally authorize Starr to look into this?  No, his original mission was to look into any criminal wrongdoing associated with the Clintons and the Whitewater Development Corporation from Clinton's days in Arkansas.  But he got nowhere with that, so like a typical prosecutor he looked for something else illegal so he could still score a "kill".

The other day, special prosecutor Mueller staged a very high-profile raid on President Trump's long-time attorney.  His original brief was to look into whether the Trump campaign conspired with Russians to win the election.  Readers will know I have always been skeptical of this.  I believe while the Russians were spinning propaganda about the election, its effects were incidental and likely not coordinated with Trump, though he may have benefited.  I think one could craft at least as strong a story about Clinton connections with the Russians as you can about Trump connections.

Anyway, the raid the other day made it clear that Mueller is getting no farther with Russia than Starr got with Whitewater.  He raided Trump's attorney's office (a pretty aggressive move) to get evidence of ... lying about details related to Trump's Stormy Daniels affair and perhaps for details about the famous Trump Access Hollywood tape.  While I am skeptical that there is much in the Russia story, I am more than willing to believe that there may be lying and fraud related to Trump's business and sex lives.

If history does not repeat itself, it certainly echoes.

Postscript:  When Republicans see the far Left slate of candidates the Dem's are likely to field for President in 2020, they are going to long for Bill Clinton.  Heck, I could list a lot of states that would happily run Clinton as their Republican candidate for Congress in 2018.

Our Double Standard on White Collar Fraud

Nobody really liked Jeff Skilling of Enron and he sits in jail for 20 years.  We think Elizabeth Holmes is attractive and cool so that despite the fact that she committed serial fraud in lying about her company's technology and financials (far more baldly and egregiously than Skilling) and actually put people at risk through faulty medical testing, she got only a slap on the wrist.

And then there is Elon Musk.

I am not sure how I got in the role of fact-checking Elon Musk, but given the company's stated results to date and announced operating plans and strategies, there is simply no way for the Tesla to be profitable and cash flow positive in Q3, barring some deus ex machina like a massive energy credit or California subsidy windfall.  It's possible I could go in there and shut down R&D and model 3 production and milk the Model S and X for cash and might make this be true, but that is certainly not their announced business plan.  On their current path Tesla has to continue to burn cash through the rest of this year.  I am not even sure that if you stated their gross margin the same way that other automakers state their numbers that even it would be positive right now -- there is an argument to be made they are still losing money at the margin on every car they produce**.  I would add that in this point of their ramp, if you want to see Tesla the huge success that is baked into its current stock valuation, you don't want Tesla to be cash flow positive in the third quarter, you want it continuing to invest.   Amazon rules the world because it deferred profitability for years in favor of growth.

Tesla pretty much never ever lives up to Musk's promises, at least for the dates he promises them.  That is probably OK with things like deliveries of new products -- people understand he is pushing technology and new products can be delayed and they forgive entrepreneurs for being -- shall we say -- overly enthusiastic about such things.   But on financial stuff like this his statements are bordering on fraud.  But he'll never get called on it, because we like him in a way we didn't like Skilling.

I will add that if Musk wants to get snippy about the media's guesses about his company's prospects, and thinks we are all getting it wrong, he could sure be a lot more transparent about Tesla's financials and plans.  Go watch an Exxon-Mobil analyst presentation and compare it to Musk's quarterly arm-waving.  Also, one final memo to Musk:  responding to your critics on Twitter emulating Trump's style is not recommended.  Though it might be interesting to compare the irrational populist wave behind Trump with the populist wave behind Tesla.  Though the two Venn diagrams of supporters probably do not overlap much, the whole relationship feels similar to me.

Disclosure:  I have been short TSLA in the past but right now have no position.  To be honest, I am going to let Musk urge his fanboys to pump the stock a bit further before I short again.  The fanboy effect makes TSLA a dangerous short, as TSLA stock holders will defy reality for far longer than will holders of say GE or XOM.

 

** gross margin at TSLA is interesting because TSLA has no dealer network, something I like them for.  GM discounts its cars to their dealers (10% or so?) but in turn they offload a bunch of selling and support costs to the dealers.  In their gross margin, TSLA banks in their gross margin the extra 10% from not having to discount their cars but in turn does not charge gross margin for a lot of the extra sales and support costs they have to take on -- instead they drop these costs into SG&A overhead. The situation with gross margin is even more complicated because Tesla not only has to build out and operate its own warranty service, sales, and delivery network to replace traditional dealers, it is also building out its own fueling service to replace gas stations.  Here is one guy who thinks Tesla gross margin is really negative.  I have zero idea who he is but for the last year his predictions about Tesla have been a lot more reliable than Musk's statements.

Thank God Arizona Not In The Running For Amazon (part 2)

Can you imagine the insult to Maryland businesses that $5 billion of their hard-earned money as they struggle to make their businesses work is going to be just handed over to another business because that business creates better press releases for politicians?

In one of the most aggressive attempts to cajole Amazon into selecting their state as the location for the e-commerce giant's second headquarters, the Maryland General Assembly just passed a bill offering the company a $5 billion incentive package should Amazon choose to settle in Maryland's Montgomery County.

Montgomery County is competing with Washington DC, Northern Virginia and 17 other areas that made Amazon's HQ2 "short list", which was released earlier this year. Specifically, Amazon is eyeing the site of the former White Flint Mall.

The "Promoting ext-Raordinary Innovation in Maryland’s Economy," or PRIME (yes that misplaced capitalization was intentional) would require Amazon to create at least 40,000 qualified jobs (with an average comp of at least $100,000). The company would also need to spend $4.5 billion on "eligible costs" like capital projects, the Baltimore Business Journal reported.

Note that governments pretty much never police these jobs or investment requirements after the fact.  High-profile businesses in states from New York to Michigan to California have pocketed the money and then failed to add the promised jobs or investment without a hint from anyone the money was going to be taken back.

California Progressives Go Full Authoritarian

I almost titled this article "go full fascist" but the f-word is so used and abused in public discourse that I now try to avoid it.  Presented largely without comment because I would have assumed five years ago that any thinking person in this country would understand why this was a bad idea.  State law proposed by California Senator Richard Pen, SB 1424

Existing law prohibits a person, among others, from making or disseminating in any advertising device, or in any manner or means whatever, including over the Internet, any statement concerning real or personal property or services that is untrue or misleading, as specified.
This bill would require any person who operates a social media, as defined, Internet Web site with a physical presence in California to develop a strategic plan to verify news stories shared on its Web site. The bill would require the plan to include, among other things, a plan to mitigate the spread of false information through news stories, the utilization of fact-checkers to verify news stories, providing outreach to social media users, and placing a warning on a news story containing false information.

Because having the government decide what is and is not true, and what can and cannot be criticized, always works out so well.

Update:  This seems relevant, from China (bold added).  This is what happens when the state "fact-checks" social media:

When does a corporate apology become a political self-confession, or jiantao (检讨), an act of submission not to social mores and concerns, but to those in power? The line can certainly blur in China. But the public apology today from Zhang Yiming (张一鸣), the founder and CEO of one of China’s leading tech-based news and information platforms, crosses deep into the territory of political abjection.

Zhang’s apology, posted to WeChat at around 4 AM Beijing time, addressed recent criticism aired through the state-run China Central Television and other official media of Jinri Toutiao, or “Toutiao” — a platform for content creation and aggregation that makes use of algorithms to customize user experience. Critical official coverage of alleged content violations on the platform was followed by a notice on April 4 from the State Administration of Press, Publication, Radio, Film, and Television (SAPPRFT), in which the agency said Toutiao and another service providing live-streaming, Kuaishou, would be subject to “rectification measures.”

Read through Zhang’s apology and it is quickly apparent that this is a mea culpa made under extreme political pressure, in which Zhang, an engineer by background, ticks the necessary ideological boxes to signal his intention to fall into line.

At one point, Zhang confesses that the “deep-level causes” of the problems at Toutiao included “a weak [understanding and implementation of] the “four consciousnesses”. This is a unique Xi Jinping buzzword, introduced in January 2016, that refers to 1) “political consciousness” (政治意识), namely primary consideration of political priorities when addressing issues, 2) consciousness of the overall situation (大局意识), or of the overarching priorities of the Party and government, 3) “core consciousness” (核心意识), meaning to follow and protect Xi Jinping as the leadership “core,” and 4) “integrity consciousness” (看齐意识), referring to the need to fall in line with the Party. Next, Zhang mentions the service’s failure to respect “socialist core values,” and its “deviation from public opinion guidance” — this latter term being a Party buzzword (dating back to the 1989 crackdown on the Tiananmen Square protests) synonymous with information and press controls as a means of maintaining Party dominance.

Zhang also explicitly references Xi Jinping’s notion of the “New Era,” and writes: “All along, we have placed excessive emphasis on the role of technology, and we have not acknowledged that technology must be led by the socialist core value system, broadcasting positive energy, suiting the demands of the era, and respecting common convention.”

In the list of the company’s remedies, there is even a mention of the need to promote more content from “authoritative media,” a codeword for Party-controlled media, which suggests once again that the leadership has been unhappy with the idea of algorithms that wall users off from official messaging if they show no interest in such content.

 

 

Some Thoughts on Congressional Hearings

I have a small bit of experience with Congressional hearings (I have been a witness at two) so I wanted to answer a question asked at Engadget after the Facebook hearings:

Throughout the hearings, Congressional leaders repeated questions that had already been asked. We heard them ask again and again whether the company would work with Congress on legislation that would impose regulations on social networks like Facebook and others. We also heard many leaders ask when exactly Facebook learned that Cambridge Analytica had improperly obtained user data. This repetition continued with questions about changes to policy, Facebook's dense terms of service and whether users have been notified if their data were purchased by Cambridge Analytica. If time was so precious to these individuals -- and it should be, four minutes flies by and this is an important topic -- wouldn't they try to avoid repeating the same questions ad nauseam?

I have two answers for this

  1. Congresspersons don't really care what the answer is to these questions.  OK, they may care a little, but probably only a little because they seldom leave any time for answers after they are done with their public posturing.  What they really care about is that their constituents back home see that they CARE and are DOING SOMETHING about a timely issue of concern to ordinary people.  Representative Loony is playing to his local media in East Random, WV.  The Representative from East Random doesn't care if four other Representatives have asked the same hard-hitting question.  Those other repetitions are not going to show up on the local news in East Random.  What is going to show up is Representative Loony asking the question.  He will look like he CARES and like he is DOING SOMETHING.  He is likely not really concerned that he is mocked in the Washington Post for wasting his questioning time, because no one who is going to vote for him in East Random reads the Washington Post anyway.
  2. Many (but not all) Congresspersons are not that bright.  I remember sitting in the committee hearing listening to the questions they were asking me and the other folks testifying and thinking, "how did these folks get here?"  I decided the only common denominator had to be pure will.  Because they were not all smart, not all charismatic -- not even as a group particularly impressive**.   Anyway, whether bright or not, most do not really understand technology and related issues.  And so their staffers write their questions for them.  And if someone else asks the questions first?  Some have the ability to improvise but I can tell you for a fact that for some, all they can do is just proceed and read the questions their staffers gave them.

** Postscript:  Ayn Rand used to write that everyone assumes that people in power got that way by beating out everyone else, such that they must be excellent at something.  Rand always said this was false, that people in power were the zero where conflicting forces cancelled out.  Their being in power (vs. someone else being there) was a happenstance due to external factors and having little to do with that particular individual.  I never really understood this the first few times I read it but in modern times I am starting to understand it better.  Donald Trump strikes me as following Wesley Mouch's career arc.

 

Business Lesson From the Vietnam War

I just finished watching the PBS series on the Vietnam War and found the experience powerful and educational.  My only disappointment was that every soldier they interviewed and followed through the war ended up in the anti-war movement (or in the case of one POW, his wife did).  I agree with their perspective, and see the whole war as a giant waste, but unlike most people on campus nowadays, I like hearing from people with points of view that are different than mine.  I get nervous just having my expectations reinforced.  Surely there are veterans who thought the war was winnable and the US largely honorable -- I know some of these folks -- but we really do not get to hear their voices very often.   But with this proviso, the series was terrific.

One of the most important -- and hardest -- lessons of business is to think at the margin.  Perhaps the toughest corollary to this is: Sunk costs are sunk.  I don't care how much we have already spent on that factory -- that money is gone -- if it is going to take another $100 million to finish, are the benefits of the factory worth that $100 million? If not let's stop work on it no matter how much has already been spent.   I have worked to teach this to my wife.  I don't care how much the tickets for the show on Sunday night cost -- that money is gone -- isthe enjoyment we expect to get from the show worth the remaining costs we face (getting in the car, fighting for parking, etc)?

Transit projects thrive on the sunk cost fallacy.  Agencies explicitly try to get some money, spend it, and then claim the rest of the money has to be spent because we have already "invested so much".  Here is an example:

But what is really amazing is that Chicago embarked on building a $320 million downtown station for the project without even a plan for the rest of the line -- no design, no route, no land acquisition, no appropriation, no cost estimate, nothing.  There are currently tracks running near the station to the airport, but there are no passing sidings on these tracks, making it impossible for express and local trains to share the same track.  The express service idea would either require an extensive rebuilding of the entire current line using signaling and switching technologies that may not (according to Daley himself) even exist, or it requires an entirely new line cut through some of the densest urban environments in the country.  Even this critical decision on basic approach was not made before they started construction on the station, and in fact still has not been made.

Though the article does not mention it, this strikes me as a typical commuter rail strategy -- make some kind of toe-in-the-water investment on a less-than-critical-mass part of the system, and then use that as leverage with voters to approve funding so that the original investment will not be orphaned.

It amazes me that no politician in California has shut down the insane California high speed rail project, but I will bet you any amount of money that when they do the rail agency will be screaming that it can't be shut down because they have already spent billions of dollars and shutting them down would waste all that money.  Sorry, but that money has already been wasted, the point is to avoid all the additional money that will be wasted going forward.

The government decision-making around the Vietnam War seemed like nothing so much as a series of sunk cost fallacies.  We can't give up now, not after so many brave men have already died!  That last sentence could be the title of about half the episodes.   But sunk costs shouldn't matter in a go-forward decision -- but they do matter to ego and prestige.  Politicians talk about things like "the nation's honor" but what really matters at its heart is their own ego and perception.  Abandoning sunk costs, for the real humans making decisions (whether Presidents or CEOs) is about confessing past errors of judgment.  Its a hard thing to do, so hard a lot of extra people had to die in Vietnam before it could happen.  I can't find a transcript but Kissinger had some amazing quotes in Episode 9 that pretty baldly outline this problem.

 

 

A Geographic Fact Many Find Surprising

One of my odd niche interests is that I am fascinated by the Panama Canal and its construction.  I probably have read 10 books on the topic.  My kids know never to ask anything remotely about it because they will get a 1-hour lecture.

So here is your fun fact that all but other canal aficionados will find surprising:  The Atlantic entrance to the Panama Canal is west of the Pacific entrance.  The canal actually runs largely north-south rather than east-west as we imagine.

The other thing most people have wrong in their minds when they think about the canal is that they picture ships traveling through a narrow excavation.  Pictures of boats are almost always at the locks or at the Culebra Cut.  But for most of the route the sort of median view is of a ship sailing across a peaceful lake in the middle of a rain forest.  The canal was made by damming two rivers and creating two lakes (one of them enormous) that spread out to cover most of the isthmus.  The digging was then to connect the two lakes through the spine of the country (the Culebra cut) and to build flights of locks at each end up and down from the lakes.  Thinking of the canal as a bridge over the land rather than a cut is a more accurate picture.  This design solved the twin problems of too much digging (we'd still probably be digging in the Culebra Cut if people had insisted on make the canal at sea level, a vision that was surprisingly hard to get past) and the Chagres River which could become an incredible torrent in the rainy season and flood out everything in its path.