Archive for October 2011

Another Bankrupt Obama Investment

Via Business Week

 Beacon Power Corp., an energy- storage company that received $43 million in backing from the U.S. program that supported failed solar-panel maker Solyndra LLC, filed for bankruptcy after struggling to raise private financing.

The money-losing company, which makes flywheels that manage energy moving through a power grid, had sought to avoid the fate of Solyndra, which entered bankruptcy last month after receiving a $535 million loan guarantee from a U.S. Energy Department program designed to spur alternative energy development. Beacon faced delisting of its shares by the Nasdaq Stock Market and warned in an Aug. 9 regulatory filing that it might not remain a “going concern.”...

In addition, Beacon received $29 million in grants from the U.S. and Pennsylvania for a 20-megawatt plant in that state and hired Group Robinson LLC to help raise more funds for the $53 million project. Group Robinson, a Menlo Park, California- based renewable-energy consulting company, also was helping Beacon find customers outside the U.S.

This is not an accident.  By definition, the government is investing in companies that every other private lender and investor turned down.

My Most Difficult Customer Service Problem

The most frequent customer service fail we have in our company is when an employee, thinking they are doing me some kind of favor, go nuts on a customer trying to enforce some trivial rule or trying to collect the last $5 our company might be owed.

It is astronomically hard to train people to use their judgement the same way I would in a customer situation.  This is particularly true when ego gets involved, when the employee feels like they have somehow taken a ego hit, with the customer "winning" and them "losing."  I once had an employee drive out of the park we were operating and chase a woman down the road over a misunderstanding about whether $5 had been paid correctly.  Incredible.  Unfortunately,  I have found no amount of training can fix judgement this bad, and the only thing I know how to do is fire them as fast as possible so they can't do any more harm.

I have always supposed this over-zealousness was a general human train, but in certain am-I-crazy moments, I wonder if somehow I am preferentially selecting for this kind of nuttiness.  Apparently not:

A Hawaii couple’s 3-year-old daughter was taken away from them for 18 hours after they were arrested for forgetting to a pay for two $5 sandwiches.

“This is unreal this could happen to a family like ours,” Nicole Leszczynski told Hawaii’s KHON.

The outing-turned-nightmare happened Wednesday while the family was shopping at a local Safeway.

“We walked a long way to the grocery store and I was feeling faint, dizzy, like I needed to eat something so we decided to pick up some sandwiches and eat them while we were shopping,” Leszczynski told the news station.

Leszczynski, who is 30-weeks pregnant, her husband, Marcin, and daughter Zophia bought $50 worth of groceries — but forgot about their two chicken salad sandwiches.

“It was a complete distraction, distracted parent moment,” Leszczynski told KHON.

As the family left, they were stopped by store security, who asked for their receipt.

“I offered to pay, we had the cash. We just bought the groceries,” Leszczynski told the station.

Instead, the expectant mother told KHON that the Safeway manager called police. They were taken to the main Honolulu police station where they were booked for fourth degree theft. Then Zophia was taken into custody by Child Protective Services.

I will say that I think the public agencies we replace in operating these parks are generally worse at this than we are, simply because so many of their employees have law enforcement certifications.  Dealing with customer service issues using law enforcement officers is often a recipe for bad outcomes.

Friday Morning Test

Thought on Income Inequality

If the very rich got that way through special access to government power, then why is the solution to tax them more, and not just to reduce government power?

And if the very rich got that way through hard work and innovation, then why the hell are we proposing to take resources out of these people's hands?

Reasons I Love the 1%

The 1% make many beautiful things possible in the world which the rest of us could not afford.  Yes we could celebrate the ballet and the opera and the symphony, none of which would likely thrive without the 1%, but today lets celebrate something a bit more material.  I will never own anything like this.  In fact, I would feel like a sucker if I paid the asking price for one.  But I still enjoy the fact that they exist and I can admire their beauty.

Notes on Government Transparency

Transparency and accountability are always loved by those out of power but seldom by those in power.  Thus we hear a lot about them on the campaign trail, and then suddenly, once folks are in office, silence.  Two examples today.

First, this unbelievably anti-democratic and egregious proposal

A proposed rule to the Freedom of Information Act would allow federal agencies to tell people requesting certain law-enforcement or national security documents that records don't exist—even when they do.

Under current FOIA practice, the government may withhold information and issue what's known as a Glomar denial that says it can neither confirm nor deny the existence of records.

The new proposal—part of a lengthy rule revision by the Department of Justice—would direct government agencies to "respond to the request as if the excluded records did not exist."

The second story is in the same spirit, of using secrecy to avoid scrutiny and accountability

Sometime in 2012, I will begin the ninth year of my life under an FBI gag order, which began when I received what is known as a national security letter at the small Internet service provider I owned. On that day in 2004 (the exact date is redacted from court papers, so I can’t reveal it), an FBI agent came to my office and handed me a letter. It demanded that I turn over information about one of my clients and forbade me from telling “any person” that the government had approached me....

For years, the government implausibly claimed that if I were able to identify myself as the plaintiff in the case, irreparable damage to national security would result. But I did not believe then, nor do I believe now, that the FBI’s gag order was motivated by legitimate national security concerns. It was motivated by a desire to insulate the FBI from public criticism and oversight.

Thoughts on the Greek Bailout / Debt Writedown

I am not at all a financial or Wall Street guy, but I had a few thoughts

  • I am amazed at the equity rally over this.   Writing down one country's debt, without fixing its underlying financial problem or dealing with all the other countries who have problems, seems a small win.  Particularly when this one country stretched European resources to the breaking point, and there are a lot of other lined up just behind Greece.
  • Its interesting to see how much everyone bent over backwards not to trigger payouts from credit default swaps (CDS).  If this is the wave of the future, I would be shorting sovereign debt at the same time I was writing CDS contracts on sovereign debt.    Maybe this is exactly why I am not a trader, but it strikes me that if you had an arsonist around burning down houses, while at the same time the government worked hard to let fire insurance companies avoid paying off on the fire damage, wouldn't you be shorting houses and long on fire insurance companies?
  • How smart does the UK feel right now for staying out of the common currency?  The anti-EU folks in the UK should be calling for that referendum on EU participation right now.   It would likely fail by a landslide.
  • The question that keeps nagging at me -- is it really worth as much as a trillion euros to keep Greece in the Euro?  Why?
Update:  Oh, and I left out the obvious take:  moral hazard
When sharing our kneejerk reaction to yesterday's latest European resolution, we pointed out the obvious: "Portugal, Ireland, Spain and Italy will promptly commence sabotaging their economies (just like Greece) simply to get the same debt Blue Light special as Greece." Sure enough, 6 hours later Bloomberg is out with the appropriately titled: "Irish Spy Reward Opportunity in Greece’s Debt Hole." Bloomberg notes that Ireland has not even waited for the ink to be dry before sending out feelers on just what the possible "rewards" may be: "Greece’s failure to cut spending and boost revenue by enough to meet targets set by the European Union and International Monetary Fund prompted bondholders to accept a 50 percent loss on its debt. While Ireland won’t seek debt discounts, the government might pursue other relief given to Greece, including cheaper interest payments on aid and longer to repay it, according to a person familiar with the matter who declined to be identified as no final decision has been taken."

WOW. Our Countries Leaders Sure Have Come A Long Way

From ABC News via Q&O

At a million-dollar San Francisco fundraiser today, President Obama warned his recession-battered supporters that if he loses the 2012 election it could herald a new, painful era of self-reliance in America.

“The one thing that we absolutely know for sure is that if we don’t work even harder than we did in 2008, then we’re going to have a government that tells the American people, ‘you are on your own,’” Obama told a crowd of 200 donors over lunch at the W Hotel.

At least he is making the choice clear.

It's Hard To Change Corporate DNA

Especially when the government is doing all it can to damp the forces of evolution and extinction.  Via Mickey Kaus

Dysfunctional–or at any rate, not-functional-enough–corporate cultures are hard to change. That would include both the culture of the Old GM and that of many of its suppliers. Obama should have been more skeptical about “New GM’s” ability to turn itself around with its same old workforce and same old union

I warned of something similar long before GM was rescued by Bush and Obama:

But things change.  Sometimes that change is slow, like a creeping climate change, or sometimes it is rapid, like the dinosaur-killing comet.  DNA that was robust no longer matches what the market needs, or some other entity with better DNA comes along and out-competes you.  When this happens, when a corporation becomes senescent, when its DNA is out of date, then its multiplier slips below one.  The corporation is killing the value of its assets.  Smart people are made stupid by a bad organization and systems and culture.  In the case of GM, hordes of brilliant engineers teamed with highly-skilled production workers and modern robotic manufacturing plants are turning out cars no one wants, at prices no one wants to pay.

Changing your DNA is tough.  It is sometimes possible, with the right managers and a crisis mentality, to evolve DNA over a period of 20-30 years.  One could argue that GE did this, avoiding becoming an old-industry dinosaur.  GM has had a 30 year window (dating from the mid-seventies oil price rise and influx of imported cars) to make a change, and it has not been enough.  GM’s DNA was programmed to make big, ugly (IMO) cars, and that is what it has continued to do.  If its leaders were not able or willing to change its DNA over the last 30 years, no one, no matter how brilliant, is going to do it in the next 2-3.

So what if GM dies?  Letting the GM’s of the world die is one of the best possible things we can do for our economy and the wealth of our nation.  Assuming GM’s DNA has a less than one multiplier, then releasing GM’s assets from GM’s control actually increases value.  Talented engineers, after some admittedly painful personal dislocation, find jobs designing things people want and value.  Their output has more value, which in the long run helps everyone, including themselves.

The alternative to not letting GM die is, well, Europe (and Japan).  A LOT of Europe’s productive assets are locked up in a few very large corporations with close ties to the state which are not allowed to fail, which are subsidized, protected from competition, etc.  In conjunction with European laws that limit labor mobility, protecting corporate dinosaurs has locked all of Europe’s most productive human and physical assets into organizations with DNA multipliers less than one.

Subsidy Magnets

From AutoGreenBlog

Output of cellulosic ethanol will surge starting in 2013, according to the U.S.' largest corn-based biofuel production firm, Poet LLC.

Poet says 2013 marks the start of commercial-scale cellulosic ethanol production in the U.S. and predicts its lone facility will "open the floodgates" for the advanced biofuel....

As Poet exec Greg Hartgraves points out, production of cellulosic ethanol is expensive and that means those floodgates need to be helped open with federal monies. Without an energy policy mandating its production, U.S. firms are likely to shy away from the cellulosic biofuel, he said.

Duh.  It's a substitute that is both less effective (lower btu per gallon) and more expensive that what it is supposedly substituting.   I am just floored at the number of investors who are putting money up on the come with an expectation that somewhere down the road they can convince the government to subsidize them.  Poet knows this plant is uneconomic but has built it anyway, probably hoping to extract promises of support from candidates in the Iowa caucuses.  Kleiner Perkins did the same think with Fisker Automotive, making early stage investments that could only be bailed out by future political largess.  As Ayn Rand would say,the aristocrats of pull.

The Great Bailout

Peter Tchir via Zero Hedge

The AIG moment was the first time that the US threw any pretense of real capitalism out the window.  Bear Stearns at least was done by JPM with government help.  Fannie and Freddie were taken over, but they were always quasi government entities.  It was AIG that was truly special.  The government didn't even attempt to see if the banks had managed their exposures at all.  The government didn't even care if they had.  They panicked and saved the banks from their own folly - they didn't give capitalism a chance.  The US has never truly recovered from that.  The entire system looks to government support more and more.  Since AIG the Fed has been running at least one massive easing program or another constantly.  The government is lurching from spending program to spending program to keep the economy churning.

At the first signs of weakness we beg for the FED or ECB or the government to do something big and fast.  The European credit crisis seemed a final chance to put some capitalism back into capitalism.  To allow dumb decisions to pay the price for failure.  To reward the institutions that had properly navigated through the risks.  There was even a brief moment when it looked like Germany would do that - would force those who failed to pay the price and support those who had taken the best steps.  But now with Dexia bailed out and some super SIV on the way, it looks like we are once again heading down a path of not allowing failure - in fact we are once again rewarding failure and living beyond your means.  It isn't communism, but it certainly doesn't fit any classic definition of capitalism.

Atlantic City, 1910

The thumbnail does not look like much, but the detail is incredible.  I can't remember a photo this old that one could zoom down so far in and look around.  Click to see the full version, via Shorpy

Steampunk GPS

I Don't Think Live TV is My Milieu

I started blogging because I was always frustrated in live arguments that I would remember the killer comment 5 minutes too late, so it is no surprise that I find live TV frustrating.  Here is how I had hoped the interview would go this morning on Fox.  In actual execution, I decided not to play the "2nd law of thermodynamics" card on the morning show just after the in-studio visit by a bunch of bijon frise's.

I'm confused, why are we we even talking about miles per gallon in an electric car?
  • We measure how well traditional cars use fossil fuels with the miles they drive per gallon of gas, or mpg
  • Of course, we can't measure efficiency the same way in an electric car since they don't use gas directly, though the electricity we use to charge them is mostly produced from fossil fuels.
  • So the EPA came up with a methodology to show an equivalent MPG for electric cars so their fossil fuel use (way back in the power plant) could be compared to traditional cars
And you think there is a problem with those numbers?
  • It turns out the EPA uses a flawed methodology that overstates the electric car equivalent MPG, in part because they assume the potential energy in fossil fuels can be converted to electricity in the power plant with perfect efficiency, which doesn't happen in real life and actually violate the second law of thermodynamics
How should they have done it?
  • During the Clinton administration, the Department of Energy came up with a better methodology which uses real world power plant efficiencies and fuel mixes to determine how much fuel went into charging an electric car.
  • Using this methodology, the Fisker Karma, even in all-electric mode, gets about 19 mpg equivilent, not 52.  This means that it uses about the same amount of fossil fuels to drive a mile as does a Ford Explorer SUV -- the only difference is that the fossil fuel use is better hidden.
Via my mom, here is the video.


Coyote on TV

I will be on the Fox and Friends morning show tomorrow morning at about 8:50ET  (though of course these things are always subject to change right up to the last minute).  I will be talking Fisker Karma.

This will make the third time I have been on national TV -- one talking about park management, one talking about the minimum wage and this one talking about MPG calculations for electric cars.  At least I am not in a rut, though I think my pundit brand identification is probably confusing.

Subjunctive in English

I prefer "If I were a rich man" to "If I was a rich man", though apparently I am in the minority.  This despite the fact that someone who is as bad at proof-reading and litters his posts with grammatical and spelling mistakes cannot afford to be snooty about verb tense.

I vividly remember the year in Spanish when subjunctive verbs were introduced.  After slogging for years learning verb conjugation on all kinds of tenses, it came as a rude shock that there was an entire second set of parallel subjunctive verb conjugations.  Eeek. It was like completing your tool box after years of careful purchases, only to discover you needed a second set in metric.

I have forgotten most all the Spanish, but since then I remain fascinated by what, to my knowledge, is the only remaining subjunctive verb conjugation in routinely-used English.

How Governments Solve Problems

This is hilarious, all the more so because the actors involved have absolutely no self-awareness of just how bad this looks

This week alone has seen a ratings downgrade for Spain as well as a threat by agencies to review France's AAA status -- and the markets have taken notice. Once again, it would seem, ratings agencies are making things difficult for European countries.

Now, the European Union is considering doing something about it.

European Internal Market Commissioner Michel Barnier is considering a move to ban the agencies from publishing outlook reports on EU countries entangled in a crisis, according to a report in Thursday's issue of the Financial Times Deutschlandnewspaper

This is not even a content neutral ban on speech - it obviously will only be applied to bad reports, not positive ones.  No wonder Obama has always been so admiring of the Europeans.

Fisker Chairman in 2009: Obama is Great Because He Invested in Solyndra

Ray Lane of VC Kleiner Perkins is seen in this video trumpeting how the Obama Administration is, for the first time in his memory, succesfully making investments in private companies.  His main example:  Solyndra!

The reason this is particularly timely and fascinating is that just a few weeks ago, Ray Lane took delivery of the first Fisker Karma electric car, financed with $529 million of our tax money and promoted with $7500 of our tax money on every sale,  Mr. Lane and Kleiner are investors in Fisker (and Lane is Fisker's Chairman) and therefore huge beneficiaries of Obama's largess, and Mr. Lane got the first Karma as a big thank you for his political connections that helped score the cash.

Of course Kleiner (who also hired green Crony-in-chief Al Gore) is going to be thrilled with the government money. Nothing is worse than being a VC in with a large early round position in a company and being unable to get the next stage of investment. Since it appears they could not get any private investors to fund this, the taxpayer money probably saved their investment .... at least for a while.

Update: Ray Lane is apparently ticked off by the negative publicity surrounding the Fisker Karma and the money they received from taxpayers. Tough. Surely he is used to his investors being ticked off about bad outcomes. Well, now he gets to see how REALLY ticked off his investors can be when their money was taken against their will, even without their knowledge. At least he can tell his institutional guys, when things go bad, that they came in with eyes open. What's his response to taxpayers?

For those who have not seen it, my article on how the Fisker Karma, even on all electric, uses more fossil fuels per mile than an SUV is here.

Time for Some Individual Action in NY

Folks in the OWS neighborhood in NYC are fed up and want the city to kick out the protesters.  While they grow old waiting for that, I would suggest taking some individual action right out of the army psi-ops manual (actually, its also from a Sopranos episode).

  1. Find some big-ass speakers
  2. Find the biggest amp you can
  3. Place speakers in window, point out at park.
  4. Find the single most annoying recording you can, and play it at volume 11 .. over and over and over and over, day in and day out.  I might try "I'm turning Japanese" or maybe "I want a hippopotamus for Christmas."  Possibly the song they used to play over and over in FAO Schwartz stores, or "It's a small world."   Or maybe something like a Joel Osteen sermon.  It almost doesn't matter once its been repeated 12 times an hour for 3 days.

Some Love for the Ballet

For those of you in the Phoenix are, I would like to encourage you to check out the Arizona Ballet (disclosure:  my wife is on the board).

I was never a big ballet fan.  To be honest, the only times I really ever went in my younger days was when I was dating a girl who loved the ballet and when I was still in that relationship phase that I was bending over backwards to please her.

That being said, the Arizona Ballet is really doing a good job here.  In particular, we were dating far above our heads when we lured Ib Andersen as artistic director.  My wife wouldn't like me saying this, but we are not going to keep this guy in flyover country forever.

As I have grown to appreciate the ballet, I really like the more modern, story-less dances more than the classic ballets, but that is a matter of taste.  But this week the company is putting on Prokofiev's Cinderella, and the music, sets, and dancing are just fantastic.  This is not going to be the most daring or interesting dancing the company will do this year, but it is very likely the most accessible to the newcomer.  Everyone knows the story, so there are not any wtf? moments I get in some ballets, even ones as overdone as the Nutcracker.  And there is real humor in the ballet, in the form of the two stepsisters, that makes this perhaps the most accesible ballet for kids I have ever seen.

So go try it.

Update on Fisker Karma

I had some fun yesterday, dashing off a quick note about the Fisker Karma electric car and just how bad the electric mileage is if you use the DOE methodology rather than the flawed EPA methodology to calculate an mpg-equivalent.

It was the quickest and shortest column I have ever written on Forbes, so of course it has turned out to be the most read.  It has been sitting on top of the Forbes popularity list since about an hour after I wrote it, and currently has 82,000 reads (I am not a Twitter guy but 26,000 tweets seems good).

I wanted to add this clarification to the article:

Most other publications have focused on the 20 mpg the EPA gives the Karma on its backup gasoline engine (example), but my focus is on just how bad the car is even in all electric mode.    The calculation in the above article only applies to the car running on electric, and the reduction in MPGe I discuss is from applying the more comprehensive DOE methodology for getting an MPG equivilent, not from some sort of averaging with gasoline mode.  Again, see this article if you don’t understand the issue with the EPA methodology.

Press responses from Fisker Automotive highlight the problem here:  electric vehicle makers want to pretend that the electricity to charge the car comes from magic sparkle ponies sprinkling pixie dust rather than burning fossil fuels.  Take this quote, for example:

a Karma driver with a 40-mile commute who starts each day with a full battery charge will only need to visit the gas station about every 1,000 miles and would use just 9 gallons of gasoline per month.

This is true as far as it goes, but glosses over the fact that someone is still pouring fossil fuels into a tank somewhere to make that electricity.  This seems more a car to hide the fact that fossil fuels are being burned than one designed to actually reduce fossil fuel use.  Given the marketing pitch here that relies on the unseen vs. the seen, maybe we should rename it the Fisker Bastiat.

Love XKCD

Only XKCD could be this geeky.

The problem with going so deeply nerdy is so few people share the humor with you.  I wear this shirt to work out all the time and I can't remember anyone ever getting the joke.

 

Fisker Karma: Worse Mileage Than A Ford Explorer

The Fisker Karma electric car, developed mainly with your tax money, has rolled out with an EPA MPGe of 52.   But this number is bogus.  The true MPGe is worse than a Ford Explorer.  Learn why in my Forbes.com piece.

OMG! Why Didn't We Fully Fund the Government Tiger-Catching Agency?

This via Q&O:

Earlier today, New York Times columnist Nick Kristoff opined on Twitter about cuts in government services. It’s not every day that you see such stupidity displayed so confidently…except from the Left:

Imagine John Boehner home in OH, seeing an escaped tiger–and getting a msg that help is unavailable due to govt cutbacks.

Well, I don’t know about John Boehner. But I do know that if I received such a message, it’d be because I was trying to call up a government flunky to haul a tiger carcass away. And if I did get such a message, my very next call would be to a good taxidermist.

It’s an interesting glimpse into the worldview though. The unspoken assumption is that, without government tiger hunters, we’re all doomed to be mauled by wild beasts. Presumably, this is because we are all tiny, little children, utterly incapable of solving our problems without the intervention of our benevolent government overlords. It’s a worldview that operates on the assumption that the government is the only adult in the room.

A great example of this sort of mentality was the Bruce Willis action filmLive Free or Die Hard.  The movie was a decent thriller, falling into the unlikely-buddy-movie genre (including also 48 Hours and most of the Lethal Weapon movies).

Like most modern techno-thrillers, it required a lot of technical suspension of belief, but what really struck me was the premise -- that somehow, if terrorists were able to really shut down the government, people would go into a panic and be totally lost and forlorn.  Even the strong male hero buys into the premise.  Can you even imagine a Clint Eastwood movie where Clint laments how scared Americans will be if they were to call the FDA to inquire if a certain product is truly organic and no one answered the phone?   It makes for a sort of irony in the movie because in fact the government is completely useless in the face of the terrorists, who are brought down essentially by a few private individuals.

Green Cronyism

I am willing to believe that the initial push into alternative energy subsidies was undertaken with good, honest (though misguided) intentions to change the US energy mix.  But once such a program is begun, it inevitably gets turned into cronyism.

The best example is probably corn ethanol.  A combination of subsidies and mandates have pushed an enormous proportion of our food supply into gas tanks, for little or even negative environmental effect.   Environmentalists and the Left turned against it, but for a few large corporations like ADM, the subsidies have become life and death, and they do anything they have to to get Congress to maintain them.

The best evidence that corn ethanol shifted from a green program to pure cronyism was the imposition of large import tariffs.  The only possible purpose of these tariffs was to enrich farmers and a few manufacturers.  After all, if one really cared any more about getting more ethanol in the fuel supply, one would welcome low cost imports.

Well, the Solyndra debacle has started to make clear that cronyism has taken over solar subsidies as well.  Every day we find yet another high-ranking Obama supporter with his thumb on the scales tilting the DOE funding decision toward Solyndra.

Now we will see the ultimate test:

A group of U.S. solar-panel makers Wednesday called on the federal government to punish Chinese rivals with extra duties for allegedly dumping their products on the U.S. market…

The U.S. makers are asking the Department of Commerce and the International Trade Commission to impose a duty on panels imported from China, a market that totaled $1.6 billion in the first eight months of 2011. SolarWorld accused Chinese manufacturers of selling solar panels at less than half of what the production costs would be in a comparable free-market economy, and is asking for tariffs to make up the difference.

One could argue that this is in direct response to the Solyndra failure.  Solyndra's failure has been blamed on low cost panel manufacturing in China.   Again, if we care just about energy, we should be thrilled about low-cost Chinese solar panels.  If the Chinese government wants to somehow subsidize our consumption of solar panels, great!

Watch this proposal.  Any politician that jumps on this solar tariff bandwagon will be saying "My statements about wanting to see more solar usage is just a bluff, I only really care about subsidizing a few selected businesses."