Archive for March 2008

CoyoteBlog Readers' Tournament Pick Count

I am a glutton for stats, so I always love to post this analysis.  Of the 125 brackets we have in the tournament, this is how many picked each team in each game  (teams in red are those already knocked out)

By the way, how about that buzzer-beater in overtime by Western Kentucky!

Pick counts for all PickHoops

Round 1 Round 2 Round 3 Round 4 Round 5 Round 6
East
1 North Carolina 123
16 PlayinWinner 2
1 North Carolina 117
8 Indiana 6
16 PlayinWinner 2
9 Arkansas 0
1 North Carolina 107
4 Washington St 7
5 Notre Dame 5
8 Indiana 4
13 Winthrop 1
16 PlayinWinner 1
9 Arkansas 0
12 George Mason 0
1 North Carolina 79
2 Tennessee 23
3 Louisville 15
5 Notre Dame 2
8 Indiana 2
6 Oklahoma 1
13 Winthrop 1
4 Washington St 1
16 PlayinWinner 1
15 American U. 0
10 South Alabama 0
7 Butler 0
14 Boise State 0
12 George Mason 0
11 St. Josephs 0
9 Arkansas 0
1 North Carolina 53
1 Kansas 27
2 Tennessee 13
3 Louisville 10
2 Georgetown 7
3 Wisconsin 5
5 Clemson 2
4 Vanderbilt 2
13 Winthrop 1
16 PlayinWinner 1
6 Oklahoma 1
5 Notre Dame 1
10 Davidson 1
7 Gonzaga 1
13 Siena 0
12 Villanova 0
14 CS Fullerton 0
15 Maryland-Balt. 0
11 Kansas St. 0
6 USC 0
15 American U. 0
4 Washington St 0
12 George Mason 0
9 Arkansas 0
8 Indiana 0
11 St. Josephs 0
14 Boise State 0
8 UNLV 0
16 Portland State 0
10 South Alabama 0
7 Butler 0
9 Kent State 0
1 North Carolina 32
1 UCLA 22
1 Kansas 20
1 Memphis 17
2 Texas 6
2 Tennessee 6
2 Georgetown 5
4 Pittsburgh 3
3 Louisville 3
2 Duke 3
3 Wisconsin 2
5 Clemson 1
16 PlayinWinner 1
3 Stanford 1
15 Belmont 1
4 Connecticut 1
10 Davidson 1
6 Marquette 0
10 St. Marys CA 0
13 Oral Roberts 0
7 Miami Fla. 0
11 Kentucky 0
14 Cornell 0
8 BYU 0
3 Xavier 0
11 Baylor 0
14 Georgia 0
7 West Virginia 0
10 Arizona 0
6 Purdue 0
13 San Diego 0
12 Temple 0
16 MississipValSt 0
9 Texas A&M 0
5 Drake 0
12 W. Kentucky 0
15 Austin Peay 0
15 Maryland-Balt. 0
14 Boise State 0
11 St. Josephs 0
7 Butler 0
10 South Alabama 0
15 American U. 0
6 Oklahoma 0
13 Winthrop 0
9 Arkansas 0
8 Indiana 0
5 Notre Dame 0
12 George Mason 0
4 Washington St 0
16 Portland State 0
8 UNLV 0
7 Gonzaga 0
14 CS Fullerton 0
16 TexasArlington 0
8 Mississippi St 0
9 Oregon 0
11 Kansas St. 0
6 USC 0
9 Kent State 0
12 Villanova 0
4 Vanderbilt 0
13 Siena 0
5 Michigan St. 0
8 Indiana 63
9 Arkansas 62
5 Notre Dame 89
12 George Mason 36
4 Washington St 59
5 Notre Dame 49
12 George Mason 12
13 Winthrop 5
4 Washington St 101
13 Winthrop 24
6 Oklahoma 72
11 St. Josephs 53
3 Louisville 96
6 Oklahoma 19
11 St. Josephs 6
14 Boise State 4
2 Tennessee 62
3 Louisville 44
7 Butler 8
6 Oklahoma 8
15 American U. 1
14 Boise State 1
10 South Alabama 1
11 St. Josephs 0
3 Louisville 117
14 Boise State 8
7 Butler 96
10 South Alabama 29
2 Tennessee 101
7 Butler 20
15 American U. 2
10 South Alabama 2
2 Tennessee 122
15 American U. 3
Midwest
1 Kansas 123
16 Portland State 2
1 Kansas 117
8 UNLV 3
9 Kent State 3
16 Portland State 2
1 Kansas 94
5 Clemson 15
4 Vanderbilt 10
8 UNLV 2
16 Portland State 2
13 Siena 1
12 Villanova 1
9 Kent State 0
1 Kansas 60
2 Georgetown 29
3 Wisconsin 13
5 Clemson 9
4 Vanderbilt 5
6 USC 3
7 Gonzaga 2
16 Portland State 2
8 UNLV 1
10 Davidson 1
15 Maryland-Balt. 0
13 Siena 0
9 Kent State 0
12 Villanova 0
11 Kansas St. 0
14 CS Fullerton 0
8 UNLV 65
9 Kent State 60
5 Clemson 90
12 Villanova 35
5 Clemson 58
4 Vanderbilt 51
12 Villanova 10
13 Siena 6
4 Vanderbilt 109
13 Siena 16
6 USC 74
11 Kansas St. 51
3 Wisconsin 76
6 USC 36
11 Kansas St. 11
14 CS Fullerton 2
2 Georgetown 65
3 Wisconsin 41
6 USC 10
7 Gonzaga 4
15 Maryland-Balt. 2
10 Davidson 2
11 Kansas St. 1
14 CS Fullerton 0
3 Wisconsin 120
14 CS Fullerton 5
7 Gonzaga 70
10 Davidson 55
2 Georgetown 106
10 Davidson 9
7 Gonzaga 8
15 Maryland-Balt. 2
2 Georgetown 123
15 Maryland-Balt. 2
South
1 Memphis 121
16 TexasArlington 4
1 Memphis 118
8 Mississippi St 3
16 TexasArlington 3
9 Oregon 1
1 Memphis 76
4 Pittsburgh 31
5 Michigan St. 15
16 TexasArlington 2
8 Mississippi St 1
13 Oral Roberts 0
9 Oregon 0
12 Temple 0
1 Memphis 46
2 Texas 46
3 Stanford 13
4 Pittsburgh 10
5 Michigan St. 5
11 Kentucky 2
16 TexasArlington 2
6 Marquette 1
10 St. Marys CA 0
15 Austin Peay 0
7 Miami Fla. 0
13 Oral Roberts 0
8 Mississippi St 0
9 Oregon 0
12 Temple 0
14 Cornell 0
1 UCLA 49
1 Memphis 28
2 Texas 22
2 Duke 12
4 Pittsburgh 4
3 Stanford 3
4 Connecticut 3
3 Xavier 1
16 MississipValSt 1
5 Michigan St. 1
15 Belmont 1
12 W. Kentucky 0
11 Baylor 0
7 West Virginia 0
10 Arizona 0
14 Georgia 0
5 Drake 0
6 Purdue 0
13 San Diego 0
15 Austin Peay 0
12 Temple 0
13 Oral Roberts 0
9 Oregon 0
8 Mississippi St 0
16 TexasArlington 0
6 Marquette 0
11 Kentucky 0
8 BYU 0
10 St. Marys CA 0
7 Miami Fla. 0
14 Cornell 0
9 Texas A&M 0
8 Mississippi St 64
9 Oregon 61
5 Michigan St. 89
12 Temple 36
4 Pittsburgh 82
5 Michigan St. 36
13 Oral Roberts 4
12 Temple 3
4 Pittsburgh 119
13 Oral Roberts 6
6 Marquette 79
11 Kentucky 46
3 Stanford 68
6 Marquette 41
11 Kentucky 14
14 Cornell 2
2 Texas 80
3 Stanford 25
6 Marquette 12
11 Kentucky 4
15 Austin Peay 2
7 Miami Fla. 2
14 Cornell 0
10 St. Marys CA 0
3 Stanford 118
14 Cornell 7
10 St. Marys CA 63
7 Miami Fla. 62
2 Texas 115
7 Miami Fla. 6
15 Austin Peay 3
10 St. Marys CA 1
2 Texas 122
15 Austin Peay 3
West
1 UCLA 123
16 MississipValSt 2
1 UCLA 120
8 BYU 2
16 MississipValSt 2
9 Texas A&M 1
1 UCLA 101
4 Connecticut 13
5 Drake 8
13 San Diego 1
9 Texas A&M 1
16 MississipValSt 1
8 BYU 0
12 W. Kentucky 0
1 UCLA 68
2 Duke 27
3 Xavier 12
4 Connecticut 8
5 Drake 3
14 Georgia 1
6 Purdue 1
11 Baylor 1
10 Arizona 1
16 MississipValSt 1
15 Belmont 1
7 West Virginia 1
13 San Diego 0
8 BYU 0
9 Texas A&M 0
12 W. Kentucky 0
9 Texas A&M 79
8 BYU 46
5 Drake 97
12 W. Kentucky 28
4 Connecticut 67
5 Drake 50
13 San Diego 6
12 W. Kentucky 2
4 Connecticut 117
13 San Diego 8
6 Purdue 79
11 Baylor 46
3 Xavier 82
6 Purdue 20
14 Georgia 14
11 Baylor 9
2 Duke 66
3 Xavier 40
7 West Virginia 10
15 Belmont 2
10 Arizona 2
14 Georgia 2
11 Baylor 2
6 Purdue 1
3 Xavier 105
14 Georgia 20
7 West Virginia 78
10 Arizona 47
2 Duke 98
7 West Virginia 18
10 Arizona 7
15 Belmont 2
2 Duke 122
15 Belmont 3

Why Is Easter So Early?

The answer to why Easter comes so early this year is actually up in the sky tonight:  the full moon.  Easter is defined as the first Sunday after the first full moon after the vernal equinox (which was today rather than the normal March 21, presumably due to it being leap year but someone may correct me on this).

Ich Bin Ein Terrorist

Megan McArdle observes (via data from the ACLU) that over 900,000 Americans have their name on various terrorist watch lists.  One could argue that this is perhaps four orders of magnitude off the actual number of active terrorists running around the country.  How can such a travesty occur?  Well, its the government, and McArdle points out, unsurprisingly, its an incentives issue.

Can some smart lawyer from the ACLU find a way to void this list on due process or maybe 14th amendment grounds?

The Rent-Seekers Ball

From Steven Milloy:

The audience -- a sold-out crowd of hundreds who had to apply to be admitted and pay a $3,500 fee -- consisted of representatives of the myriad businesses that seek to make a financial killing from climate alarmism. There were representatives of the solar, wind, and biofuel industries that profit from taxpayer mandates and subsidies, representatives from financial services companies that want to trade permits to emit CO2, and public relations and strategic consultants to all of the above.
    
    We libertarians would call such an event a rent-seekers ball -- the vast majority of the audience was there to plot  how they could lock-in profits from government mandates on taxpayers and consumers.
    
    It was an amazing collection of pseudo-entrepreneurs who were absolutely impervious to the scientific and economic facts that ought to deflate the global warming bubble.

    In the interlude between presentations by the CEOs of Dow Chemical and Duke Energy, for example, the audience was shown a slide -- similar to this one -- of the diverging
    relationship between atmospheric CO2 levels and average global temperature since 1998. That slide should have caused jaws to drop and audience members to ponder why anyone is considering regulating CO2 emissions in hopes of taming global climate.

    Instead, it was as if the audience did a collective blink and missed the slide entirely. When I tried to draw attention to the slide during my presentation, it was as if I was speaking in a foreign dialect.

    The only conclusion I could come to was that the audience is so steeped in anticipation of climate profiteering that there is no fact that will cause them to reconsider whether or not manmade global warming is a reality.

But of course we all know that it is the skeptics that are corrupted by money ;=)

Third Annual NCAA Tournament Bracket Challenge

Note: This post sticky through 3/20.  Look below for newest posts.

We had a blast with it last year, so back by popular demand is the annual Coyote Blog
NCAA Bracket Challenge
.  Yes, I know that many of you are bracketed
out, but for those of you who are self-employed and don't have an
office pool to join or who just can't get enough of turning in
brackets, this pool is offered as my public service.   

Last year we had close to 100 entries, and we expect more this year.
Everyone is welcome, so send the link to friends as well.  There is no
charge to join in and
I have chosen a service with the absolutely least intrusive log-in
(name, email, password only) and no spam.  The only thing I ask is
that, since my kids are participating, try to keep the team names and
board chat fairly clean.

To join, go to http://www.pickhoops.com/Coyote and sign up, then enter your bracket.  This year, you may enter two different brackets if you wish.

Scoring is as follows:

Round 1 correct picks:  1 points
Round 2:  2
Round 3:  4
Round 4:  6
Round 5:  8
Round 6:  10

Special March Madness scoring bonus: If you correctly pick the underdog in any round (ie,
the team with the higher number seed) to win, then you receive bonus
points for that correct pick equal to the difference in the two team's
seeds.  So don't be afraid to go for the long-shots!   The detailed rules are here.

Bracket entry appears to be open.  Online bracket entry closes
Thursday, March 20th at 12:20pm EDT.  Be sure to get your brackets in
early.  Anyone can play -- the more the better.

For All Our Problems...

For all our problems in this country with protecting individual liberties, we at least still have pretty free reign in criticizing public figures.  Unfortunately, the same cannot be said of Canada.  I am not really that sympathetic to all that gets written on these Canadian web sites, but I support their right to say it.

Do not be too complacent, however.  I am absolutely positive that there are many prominent people in this country who are scheming to bring exactly this sort of regime to the US.  In fact, it is already being tested at various college campuses, where a newfound right "not to be offended" has begun to trump free speech, at least so far as offense is defined and felt by the ruling elite on campus.

Last Reminder - Brackets Due by About Noon EDT

We have 99 brackets so far, lets get it over 100.  Remember, entry is free and fun.  As an added incentive, I will send
the winner a copy of either of my books  (yes, I know the inevitable
joke - 2nd place gets two copies).  Enter here:  http://www.pickhoops.com/Coyote.  More about the rules and scoring here.

24 Hours Left to Get That Bracket In

Remember, entry is free and fun.  As an added incentive, I will send the winner a copy of either of my books  (yes, I know the inevitable joke - 2nd place gets two copies).  Enter here:  http://www.pickhoops.com/Coyote     .  More about the rules and scoring here.

What is Wrong With Tort Law

Despite seeing all kinds of major problems in tort law today, I have never been a huge proponent of many tort law reforms (though I support loser pays).  I don't see why my ability to pursue legitimate damages in court should be curtailed.  What all these tort law reforms never get at is this:

A Glendale jury on Friday cleared an emergency room doctor of
negligence and liability in John Ritter's death, holding he did
everything he could to save the comic actor. ... Jurors, who voted 9 to
3 against liability for Lee and Lotysch, said they were torn between
sympathy for Ritter's wife and children and their conviction that the
doctors were blameless
.

The fact that the jury is at all conflicted on this point represents a huge miscarriage of justice, but this goes on every day in court.  In fact, if the doctors had worked for Exxon, you can bet Exxon would have been paying despite being blameless.

What patients (and juries) really seam to want is bad outcomes insurance rather than malpractice insurance.  This is in part born out by the fact that researchers can usually find little statistical relationship between truly bad doctors and the size of court malpractice payouts.  Maybe the answer to malpractice insurance is to convert it to a workers-comp-like no-fault insurance systems that pays off on bad/unexpected outcomes following a fixed schedule and keeps everything out of court.  The reduction in legal costs alone would be staggering.

More Sick Children

I mentioned yesterday that, consistent with our perfect 15 for 15 history of having sick kids on the family vacation, I missed a day of skiing to take care of my sick son.  Well, the other shoe dropped today, and my wife missed a day of skiing with my sick daughter.  Fortunately, we only have two kids so we may all ski tomorrow.

By the way of disclosure, I enjoy the fun my family has skiing but it really is not my favorite activity or even in my top 50 or so activities.  Too cold, too much stuff to bring, too expensive, too many lines.  Like having to buy $1000 of equipment to go to Disney World and finding that they moved it to Alaska.  With the added risk of breaking a leg.

Bear Stearns & Enron

I wondered if folks would find my analogy from Bear Stearns to Enron I posted the other day stretched. 

Because Enron's demise came in exactly this sort of liquidity crisis,
and the situations are nearly entirely parallel, all the way up to and
including the CEO telling the world all is well just days before the
failure.  But no one understood Enron's business, so its failure seemed
"out of the blue" and therefore was attributed by many to fraud,
lacking any other ready explanation.   In the case of Bear Stearns, the
public was educated in advance as to the problems in their portfolio
(with mortgage loans) such that the liquidity crisis was less of a
surprise and, having ready source of blame (subprime loans) no one has
felt the need to apply the fraud tag.

Apparently, the Economist sees the same connection (via a reader):

For many people, the mere fact of Enron's collapse is evidence that
Mr Skilling and his old mentor and boss, Ken Lay, who died between his
conviction and sentencing, presided over a fraudulent house of cards.
Yet Mr Skilling has always argued that Enron's collapse largely
resulted from a loss of trust in the firm by its financial-market
counterparties, who engaged in the equivalent of a bank run. Certainly,
the amounts of money involved in the specific frauds identified at
Enron were small compared to the amount of shareholder value that was
ultimately destroyed when it plunged into bankruptcy.

Yet recent events in the financial markets add some weight to Mr
Skilling's story"”though nobody is (yet) alleging the sort of fraudulent
behaviour on Wall Street that apparently took place at Enron. The
hastily arranged purchase of Bear Stearns by JP Morgan Chase is the
result of exactly such a bank run on the bank, as Bear's counterparties
lost faith in it. This has seen the destruction of most of its roughly
$20-billion market capitalisation since January 2007. By comparison,
$65 billion was wiped out at Enron, and $190 billion at Citigroup since
May 2007, as the credit crunch turned into a crisis in capitalism.

Mr Skilling's defence team unearthed another apparent inconsistency
in Mr Fastow's testimony that resonates with today's events. As Enron
entered its death spiral, Mr Lay held a meeting to reassure employees
that the firm was still in good shape, and that its "liquidity was
strong". The composite suggested that Mr Fastow "felt [Mr Lay's
comment] was an overstatement" stemming from Mr Lay's need to "increase
public confidence" in the firm.

The original FBI notes say that Mr Fastow thought the comment
"fair". The jury found Mr Lay guilty of fraud at least partly because
it believed the government's allegations that Mr Lay knew such bullish
statements were false when he made them.

As recently as March 12th, Alan Schwartz, the chief executive of
Bear Stearns, issued a statement responding to rumours that it was in
trouble, saying that "we don't see any pressure on our liquidity, let
alone a liquidity crisis." Two days later, only an emergency credit
line arranged by the Federal Reserve was keeping the investment bank
alive. (Meanwhile, as its share price tumbled on rumours of trouble on
March 17th, Lehman Brothers issued a statement confirming that its
"liquidity is very strong.")

Although it can do nothing for Mr Lay, the fate of Bear Stearns
illustrates how fast quickly a firm's prospects can go from promising
to non-existent when counterparties lose confidence in it. The rapid
loss of market value so soon after a bullish comment from a chief
executive may, judging by one reading of Enron's experience, get
prosecutorial juices going, should the financial crisis get so bad that
the public demands locking up some prominent Wall Streeters.

The article also includes more details of exculpatory evidence that was withheld from the Skilling team and will very likely lead to a new trial.  The Enron prosecution team has not had a very good record in appeals court scrutiny of their actions at trial:

For what it is worth, prosecutors have had a tougher time in the
appeals court with Enron-related cases than in the initial jury trials.
Convictions have been overturned in a case relating to Nigerian barges
that Enron sold to Merrill Lynch. The conviction of the chief financial
officer of Enron Broadband has also been vacated, after two trials. So,
too, was the decision to convict Enron's auditor, Arthur Andersen
(albeit too late to save the venerable firm from liquidation).

Solar Has A Ways to Go

I have not ever been able to make solar installation on my house get a reasonable payback, even with rising electricity rates, the best location in the country for solar, and huge government subsidies.  Large solar installations remain a publicity stunt, a sort of really expensive indulgence bought to garner the "green" title:

Scott Gustafson runs the numbers on the solar installation at the revamped Phoenix convention center:

capital cost:  $850,000
operating costs:  not provided
annual electricity savings:  $15,000
return on investment (ignoring operating costs and interest):  1.7%

Solar is still a fine toy for the rich and public figures like Al Gore looking to disguise their true carbon footprint.  But the economics aren't there yet for big boy investors -- its still off by an order of magnitude, at least.

Hopefully, this will change as high energy prices encourage innovation.

Eww, Yuck, I missed this

Via TJIC, from that California homeschooling court decision, as reported in the San Francisco Chronicle:

"A primary purpose of the educational system is to train school children in good citizenship, patriotism and loyalty to the state and the nation as a means of protecting the public welfare," the judge wrote, quoting from a 1961 case on a similar issue.

Don't Bother Reading the News; Just Read My Novel

Excerpt from my novel BMOC that I posted hours after the Spitzer revelations:

Taking a deep
breath, Givens said, "Senator, there is a reason that this one is not
going
away. I will spell it out: S-E-X. The press doesn't give a shit about a
few billion dollars of waste. No one tunes in to the evening news if
the
teaser is "˜Government pays too much for a bridge, news at eleven.' The
Today Show doesn't interview the
contractors benefiting from a useless bridge."

"However, everybody
and his dog will tune in if
the teaser is "˜Your tax dollars are funding call girls, film at
eleven'. Jesus, do you really think the CBS Evening
News is going to turn down a chance to put hookers on the evening news?
Not just tonight but day after day? Just watch "“ Dan Rather will be
interviewing
hookers and Chris Mathews will be interviewing hookers and for God's
sakes
Barbara Walters will probably have a weepy interview with a hooker."

OK, I missed it by that much.  It is Diane Sawyer, not Barbara Walters.

At least one good thing has come out of Eliot Spitzer's fall from
grace: Diane Sawyer will finally get to air her hooker special!

Almost two years ago, Sawyer and producers at "Prime Time Live" set
out to do a story on prostitution. Wanting to examine Nevada's legal
brothels, she headed out to the famous Moonlite Bunny Ranch.

"She really hit it off with all my girls," Bunny Ranch head Dennis
Hof tells us. "We even gave her one of the terry-cloth bathrobes they
wear. We had it embroidered, "Diane: Trainee."

Home Theater Projector Reviews

I am a big proponent of front projection for serious home theater.  I currently have a 108" wide (not diagonal) projection set up and I paid less for it than many people do for their 50" flat screens.  Unfortunately, it is 720p rather than 1080p, but there is a great new crop of affordable 1080p front projectors that I am lusting after.  This site has very good, complete reviews of front projectors and has just posted its roundup of the best 1080p machines.

Reminder - NCAA Bracket Contest

Only a few more days to enter, but entry is free!  Enter here:  http://www.pickhoops.com/Coyote     .  More about the rules and scoring here.

Enron Class Action Lawyers Attempt to Extort More than Enron Management Was Ever Accused Of

Bear Stearns Roundup

My friend Scott, who actually worked for Bear Stearns years ago, sent me one of the more down to earth explanations of a liquidity trap that I have heard of late.  Imagine that you had a mortgage on your house for 50% of its current value.  Then suppose that in this alternate mortgage world, you had to renew your mortgage every week.  Most of the time, you are fine -- you still have good income and solid underlying asset values, so you get renewed with a rubber stamp.  But suppose something happens - say 9/11.  What happens if your renewal comes up on 9/12?  It is very likely that in the chaos and uncertainty of such a time, you might have trouble getting renewed.  Your income is still fine, and your asset values are fine, but you just can't get anyone to renew your loan, because they are not renewing anyone's loan until they figure out what the hell is going on in the world.

Clearly there are some very bad assets lurking on company books, as companies are still coming to terms with just how lax mortgage lending had become.  But in this context, one can argue that JP Morgan got a screaming deal, particularly with the US Government bending over and cover most of the riskiest assets.  Sigh, yet another government bailout of an institution "too big to fail."  Just once I would like to test the "too big to fail" proposition.   Why can't all those bankers take 100% losses like Enron investors or Arthur Anderson partners.  Are they really too big to fail or too politically connected to fail?

Anyway, Hit and Run has a good roundup of opinion.

Update:  I don't want to imply that everyone gets off without cost here.  The Bear Stearns investors have taken a nearly total loss - $2 a share represents a price more than 98% below where it was a year or two ago.    What I don't understand is that having bought Bear's equity for essentially zero, why an additional $30 billion guarantee was needed from the government.

Immigration and Welfare

Well, I should be skiing right this moment, but my son woke up barfing this morning, making it a perfect 15 of the last 15 family trips where one of my kids has gotten sick. 

But the ski lodge is nice, and the wireless works great, and Q&O has a very interesting post on immigration and welfare.

High unemployment among immigrants is of course not confined to just
Sweden or Scandinavia. Throughout Europe, governments have found that
well-intentioned social insurance policies can lead to lasting welfare
dependence, especially among immigrants. Belgium is the European
country with the highest difference in employment rates between the
foreign-born and natives. The images of burning cars in the suburbs of
Paris that were broadcast around the world illustrate the kind of
social and economic problems France is facing with its restive
immigrant population.

Given the high barriers to entry, many
immigrants in Europe no longer start accumulating essential language
and labor market skills. This is in stark contrast with the situation
across the Atlantic. For example, in 2000, Iranians in the U.S. had a
family income that was 42% above the U.S. average. The income of
Iranian immigrants in Sweden, however, was 39% below the country's
average.

Lots of interesting stuff there.  Which reminds me of something I wrote years ago:

In the 1930's, and continuing to this day, something changed
radically in the theory of government in this country that would cause
immigration to be severely limited and that would lead to much of the
current immigration debate.  With the New Deal, and later with the
Great Society and many other intervening pieces of legislation, we
began creating what I call non-right rights.  These newly described
"rights" were different from the ones I enumerated above.  Rather than
existing prior to government, and requiring at most the protection of
government, these new rights sprang forth from the government itself
and could only exist in the context of having a government.  These
non-right rights have multiplied throughout the years, and include
things like the "right" to a minimum wage, to health care, to a
pension, to education, to leisure time, to paid family leave, to
affordable housing, to public transportation, to cheap gasoline, etc.
etc. ad infinitum....

These non-right rights all share one thing in common:  They require
the coercive power of the government to work.  They require that the
government take the product of one person's labor and give it to
someone else.  They require that the government force individuals to
make decisions in certain ways that they might not have of their own
free will. 

And since these non-right rights spring form and depend on
government, suddenly citizenship matters in the provision of these
rights.  The government already bankrupts itself trying to provide all
these non-right rights to its citizens  -- just as a practical matter,
it can't afford to provide them to an unlimited number of new
entrants.  It was as if for 150 years we had been running a very
successful party, attracting more and more guests each year.  The party
had a cash bar, so everyone had to pay their own way, and some people
had to go home thirsty but most had a good time.  Then, suddenly, for
whatever reasons, the long-time party guests decided they didn't like
the cash bar and banned it, making all drinks free.  But they quickly
learned that they had to lock the front doors, because they couldn't
afford to give free drinks to everyone who showed up.  After a while,
with the door locked and all the same people at the party, the whole
thing suddenly got kind of dull.

Highly Leveraged Financial Companies Sometimes Fail

Bear Stearns is being bought for a price that is barely indistinguishable from zero:

Just four days after Bear Stearns Chief Executive Alan Schwartz assured
Wall Street that his company was not in trouble, he was forced on
Sunday to sell the investment bank to competitor JPMorgan Chase for a
bargain-basement price of $2 a share, or $236.2 million.

The stunning last-minute buyout was aimed at averting a Bear Stearns
bankruptcy and a spreading crisis of confidence in the global financial
system sparked by the collapse in the subprime mortgage market. Bear
Stearns was the most exposed to risky bets on the loans; it is now the
first major bank to be undone by that market's collapse.

This is what happens to a highly leveraged company when there is a liquidity crisis.  Fears about the company's health caused most lenders to withhold short term capital, which then in turn brought those fears to reality. 

While I suspect that we may find a lot of stupid blunders (at least in hindsight) and poor decisions, my sense is that this has nothing to do with fraud of any sort.  Which raises some interesting questions about Enron.  Because Enron's demise came in exactly this sort of liquidity crisis, and the situations are nearly entirely parallel, all the way up to and including the CEO telling the world all is well just days before the failure.  But no one understood Enron's business, so its failure seemed "out of the blue" and therefore was attributed by many to fraud, lacking any other ready explanation.   In the case of Bear Stearns, the public was educated in advance as to the problems in their portfolio (with mortgage loans) such that the liquidity crisis was less of a surprise and, having ready source of blame (subprime loans) no one has felt the need to apply the fraud tag.  (It also did not help that Lay and Skilling kept a higher profile than Schwartz at Bear Stearns, so that they were an easier target for vilification. 

I never really had the time to fully understand all the charges against Skilling at Enron (though I do think he deserves a new trial) but I always thought that it was unfair to try to ring either Skilling or Lay up for fraud because they were out trumpeting the health of the company shortly before its collapse.  Because it is clear from the Bear Sterns collapse that liquidity crises have everything to do with confidence, and you could see the Bear Stearns CEO out there in the last few days trying to boost confidence.  Was that fraud?  Or was that his very legitimate duty and obligation given his fiduciary responsibility to shareholders?   Why is Schwartz at Bear Stearns fighting for shareholders when he is trying to build confidence in the company in a liquidity crisis but Lay and Skilling at Enron defrauding shareholders when they were doing exactly the same thing? 

Lucky Here Too

Travis writes about how a customer of his web service tracked him down at home at gave him a 40-minute earful -- and why he was very lucky the customer did so, in that it revealed some problems in his delivery process of which he was not aware.

Ditto here.  I was just about to write about a very similar experience on Friday, where a customer of ours ran into a new manager who was just hell bent on collecting an extra $4 he thought we were owed -- four lousy dollars -- and this employee managed to progressively anger, then intimidate, and then outright scare a customer, up to and including trying to reach in and grab stuff out of the customer's car.  The father of a woman in the car contacted us absolutely irate -- as well he should have been.  After about 2 hours of patient listening, we got dad and the other unfortunate customers calmed down.  They will all be getting some nice freebies in the mail, and apparently we will end up with a laudatory rather than hostile customer letter, as the customers ended up being impressed that our regional VP and the out-of-state owner would spend so much time with them trying to figure out what was wrong.  I will say it was easy to be sympathetic, as I was horrified by the story.  I felt personal shame that such actions were taken in my name  (if this sounds silly or exaggerated, think again.  I have talked to a lot of people who have built successful service companies, and every one shares stories of experiencing similar shame for boneheaded actions taken by employees on their behalf.)

Unfortunately, the manager in question had to go -- this was the second time in a very short period where the manager had shown poor judgement in customer service situations.  The manager was a nice person who interviewed great and did a lot of things well, but my experience is that if you don't have good judgement on such customer service interactions, you are not suddenly going to get it next week.  So, like Travis, we were lucky to head off a potential problem before it got worse, and we were lucky to be given a chance to turn around the customers' experience.

The frustrating thing for me is that this manager had just been to my personal customer service training.  At this training I lecture several times over two days fairly passionately about customer service issues, and in fact I cover situations almost identical to the one here.  I even say in the training "I don't want you or your employees going to battle with customers over small amounts of money."

We have found that there are certain people who simply cannot put their ego aside when dealing with a customer.  If these type people get it into their head that the customer is somehow trying to get over on them or the company, even for $4, they will dig in their heals and refuse to let the customer come out on top.  In their mind, the customer is a "bad" person and does not deserve to win, and there is no way they are going to take the ego hit in letting the "bad" customer have a small victory at their expense.  But as I tell employees all the time -- if you refuse to apologize to the customer, you are not counting coup on the customer, all you are doing is delegating the task to Warren (the owner) because he is certainly going to give that customer an apology.  And likely a bunch for free camping as well.  And do you know what some employee's reactions are to my giving that customer an apology and some freebies?  They get mad at me, for not backing them up and letting that "bad" customer get away with whatever they think he is getting away with!

While absolutely predictable that some people will act this way, I have found it nearly impossible to screen for this in the interview process, and totally impossible to train this characteristic out of people.  The best we can do is watch for the first signs of these traits and let folks who evidence them go as soon as possible.  That is also why we try to make it a hard and fast rule that we never hire managers directly from outside the company, we only promote managers from field service employees who have shown good judgment on the front lines.  Once in a blue moon we ignore this rule, as we did when hiring the managers I had to fire on Friday.  Which just goes to show that it is probably a pretty good rule for our business.

In Case You Thought Homeland Security Knows What it is Doing

I am on my way to a few days of skiing in Utah, but I thought I would leave you with this travel story.  A few weeks ago I was traveling and was at the airport really early.  I had forgotten to remove the toothpaste from my stuff, and I was flagged for extra screening because they saw it on X-ray (I remember the good old days when they were X-raying for guns and stuff rather than toothpaste, but I digress). 

The screener pulled it out and said - sorry, this is more than three ounces.  So, as an engineer with no sense of self-preservation, I asked, "Weight or volume?"  The screener asked what I meant.  I said that an "ounce" is a unit of both weight and volume, which did he mean?  (The TSA site is no help, it just says ounces).  He said "volume."  Still being stupid, I said "but the 3.5oz on that toothpaste is weight -- you can tell by the 'net Wt.' in front of it and the number in grams behind it.  He looked at it for a minute, and then gives me an answer right out of Spinal Tap:  "But its over 3 ounces"  [but this one goes to 11].  Anyway, I gave up and surrendered my Crest to government authorities, and the world was that much safer.

I am told by an airline exec that the policy was originally volume, but after many complaints, the government realized that an ounce was also a unit of weight and they have informally changed the policy to "3 ounces weight or volume" but they never really communicated this change fully because it's too, you know, embarrassing that they operated so long not knowing the difference.

Have a good week -- I will probably post a bit but it will be light.

Climate Thought for the Day

Via Climate Skeptic:

The catastrophe that Al Gore and others prophesy as a result of greenhouse
gases is actually not, even by their admission, a direct result of greenhouse
gas emissions.  Even the IPCC believes that warming directly resulting from
manmade CO2 emissions is on the order of 1 degree C for a doubling of CO2 levels
in the atmosphere (and many think it to be less). 

The catastrophe comes, not from a mere 1 degree of warming, but from the
multiplication for this warming 3,4,5 times or more by hypothesized positive
feedback effects in the climate.   Greenhouse gas theory gives us warming
numbers we might not even be able to find amidst the natural variations of our
climate;  it is the theory of strong positive climate feedback that gives us the
apocalypse.

So, In a large sense, the proposition that we face environmental armageddon
due to CO2 rests not on greenhouse gas theory, which is pretty well understood,
but on the theory that our climate system is dominated by strong positive
feedbacks.  This theory of positive feedback is almost never discussed publicly,
in part because it is far shakier and less understood than greenhouse gas
theory.  In fact, it is very probable that we have the sign, much less the magnitude,
of major feedback effects wrong.  But if we are considering legislation to gut
our economies in order to avoid a hypothesized climate catastrophe, we should be
spending a lot more time putting scrutiny on this theory of positive feedback,
rather than just greenhouse gas theory.

Government as Price-Maker vs. Taker

Megan McArdle makes a great point that should be absolutely uncontroversial:

government is much better as a price taker than a price maker.
Government procurement is all kinds of tedious and cluttered with red
tape, but in the end there's no gigantic problem with the government
pencil supply. Defense procurement, on the other hand, is pretty well
agreed to be godawful-expensive for what we get, the only excuse being
that we can't think of another way to buy fighter planes.

That means that government procurement alongside a free market looks a lot
different from government procurement when the government is the only
buyer. Yes, the health care market is extremely screwed up, but the
prices in it do tell you something about demand for various services,
and provide some signals about cost/benefit. You may think that viagra
is a prime example of wasted pharmaceutical R&D spending (though if
you do, I am willing to bet that you are either under forty, or
female), but the fact that a lot of people are willing to pay a fair
amount of coin for it tells you that they probably feel it is improving
their lives in some significant way. Governments can estimate
cost-benefit when the benefit is limited to crude mortality
improvements, but they are pretty much at sea when it comes to
quality-of-life. America's price signals are wildly distorted by its
insurance markets--but they're almost certainly better than no signal
at all.

Europe's governments operate their health care systems in the
context of an existing US market that provides information about demand
for new treatments (and of course I would argue, also the new
treatments). They don't use that price information to set what they pay
for drugs, but it does filter through to their markets--for example,
more widespread use of Herceptin for breast cancer in the US is putting
pressure on the British government to provide it. I think an American
shift to single-payer would be more problematic than the European
example for a variety of reasons related to our government structure.
But one important reason is that if we did, we'd have no where left to
get prices from.

I Think I Can Agree With This

I observed a while back that "Eliot Spitzer has been brought down for a crime most libertarians don't
think should be a crime, by federal prosecutors who should not be
involved even if it were a crime, and using techniques, such as
enlisting banks as government watchdogs of private behavior, that
stretch the Fourth Amendment almost out of recognizable shape."

Megan McArdle makes a pretty good point about the last part:

I'm not distressed to hear that the Feds were spying on Eliot Spitzer.
No, not because I don't like the man, but because I think maybe we should
spy on our politicians, all the time. No probable cause, you say? I
fling back at you Mark Twain's observation that America only has one
distinct criminal class: Congress. . . . I think it's entirely
appropriate that the anti-corruption police watch politicians like
hawks. They've chosen public office; that conveys a lot of
responsibility to the public, including assuring them that your votes
aren't being bought outright. I also think that politicians, when
caught in a crime, should automatically get the maximum penalty; if
they think the law is such a good idea, they ought to suffer heartily
when they disregard it.