Posts tagged ‘san francisco’

What Happens to Poverty and Other State Economic Stats When One Finally Takes Into Account Different State Cost of Living Levels

This is really interesting, and I suppose not surprisingly, quite under-reported.  It appears the blue state model is even worse than we thought for combating poverty.  Not only does it suppress economic growth, but it also tends to raise prices of housing and other necesities

The familiar official [poverty] measure is more than 50 years old, and is showing its age. It has two huge shortcomings: it considers the cost of living to be the same in the 48 contiguous states (a patently ridiculous proposition when considering that the average rent in San Francisco in the first quarter of 2015 was $3,458 vs. $867 in Houston), and it doesn’t account for in-kind benefits, such as Section Eight housing subsidies and Electronic Benefit Transfer cards (food stamps).

Thus, the federal government’s main poverty gauge undercounts material poverty levels in high-cost states such as California, New York, and Hawaii, while over-counting true poverty in much of the low-cost Midwest and South.

Responding to concerns from Congress, advocates for the poor, and academics, some 20 years ago the U.S. Census Bureau began developing an alternative measure of poverty to address weaknesses in the official measure. The Census Bureau’s new, more comprehensive Supplemental Poverty Measure (SPM) is the result....

The authors use this data to compare Texas and California

Official Poverty Measure Rate, 2011-2013 Supplemental Poverty Measure (SPM) Rate, 2011-2013
California 16.0% 23.4%
Texas 17.2% 15.9%
National Average 14.9% 15.9%

The share of minorities in California and Texas is about 50 percent higher than in the nation as a whole, triple that of Wisconsin or Minnesota, more than quadruple that of Iowa, and about six-and-a-half times that of New Hampshire. Thus, it is an illuminating measure the wellbeing of America’s four largest racial or ethnic groups in the two most-populous states that one-fifth of Americans call home. The table below shows the average SPM for four years, 2010 to 2013, for these four groups.

White, non-Hispanic SPM Rate, 2010-13 Black, non-Hispanic SPM Rate, 2010-13 Hispanic SPM Rate, 2010-13 Asian SPM Rate,2010-13
California 14.8% 30.1% 33.7% 17.9%
Texas 9.7% 19.9% 22.7% 14.1%
National Average 10.8% 24.7% 27.7% 17.1%

I guess its time for a disparate impact suit against California!

In a related bit of data, here is the real value of $100 in each state (higher is better) which is sort of the inverse of cost of living.  States with higher costs of living will have lower numbers

$100 Map

Leading to this interesting outcome:

$100 Chart


Breaking News: Local Resident Victimized by Legal American Citizen

One of my critiques of global warming alarmists is that they are trying to use a type of observation bias to leave folks with the impression that weather is becoming more severe.  By hyping on every tail-of-the-distribution weather event in the media, they leave the impression that such events are becoming more frequent, when in fact they are just being reported more loudly and more frequently.  I dealt with this phenomenon in depth in an older Fortune article, where I made an analogy to the famous "summer of the shark"

...let’s take a step back to 2001 and the “Summer of the Shark.”  The media hysteria began in early July, when a young boy was bitten by a shark on a beach in Florida.  Subsequent attacks received breathless media coverage, up to and including near-nightly footage from TV helicopters of swimming sharks.  Until the 9/11 attacks, sharks were the third biggest story of the year as measured by the time dedicated to it on the three major broadcast networks’ news shows.

Through this coverage, Americans were left with a strong impression that something unusual was happening — that an unprecedented number of shark attacks were occurring in that year, and the media dedicated endless coverage to speculation by various “experts” as to the cause of this sharp increase in attacks.

Except there was one problem — there was no sharp increase in attacks.  In the year 2001, five people died in 76 shark attacks.  However, just a year earlier, 12 people had died in 85 attacks.  The data showed that 2001 actually was  a down year for shark attacks.

Yesterday I was stuck on a stationary bike in my health club with some Fox News show on the TV.  Not sure I know whose show it was (O'Reilly?  Hannity?) but the gist of the segment seemed to be that a recent murder by an illegal immigrant in San Francisco should be taken as proof positive of the Trump contention that such immigrants are all murderers and rapists.  The show then proceeded to show a couple of other nominally parallel cases.

Yawn.   It would be intriguing to flood an hour-long episode with stories of legal American citizens committing heinous crimes.  One wonders if folks would walk away wondering if there was something wrong with those Americans.

One could pick any group of human beings and do a thirty-minute segment showing all the bad things members of that group had done.  What this does not prove in the least is whether that group has any particular predilection towards doing bad things, or specifically in the case of Mexican immigrants, whether they commit crimes at a higher rate than any other group in this country.  In fact, everything I read says that they do not, which likely explains why immigration opponents use this technique, just as climate alarmists try to flood the airwaves with bad weather stories because the actual trend data for temperatures does not tell the story they want to tell.

CA Labor Commission Has Just Killed Uber, Though It May Take Years to Bleed Out

A while back I wrote a long article about all the ways the government is making it nearly impossible to employ low-skilled labor.  I worried that because it is getting harder and harder to profitably employ low-skill labor, the country would soon sort itself into those with skills and jobs and those on government assistance, with little or no opportunity for people in the second category to move to the first.

As part of that article, I observed that much of the capital in this country is flowing to new business models that use minimal numbers of employees.  I wrote:

Is it any surprise that most entrepreneurs are pursuing business models where they leverage revenues via technology and a relatively small, high-skill workforce?  Uber and Lyft at first seem to buck this trend, with their thousands of drivers.  But in fact they prove the rule.  Uber and Lyft are very very careful to define themselves and their service in a way that all those drivers don't work for them.  I would go so far to say that if Uber were forced to actually put all of those drivers on their payroll, and deal with they myriad of labor compliance issues, their model would fall apart.

Well, we are going to find out if my last statement is true.

The California labor commission has ruled that an Uber driver qualifies as an employee, not a contractor, of the company.  As a result Uber will have to reimburse a driver for expenses accumulated in the line of duty. That includes $256 in tolls and the IRS rate of $0.56 per mile for use of a personal vehicle for business purposes.

The actual issue in this case of reimbursement of expenses is pretty narrow, and actually kind of stupid.  Uber is already paying drivers effectively by the mile by giving them a percentage of the mileage-based fee customers pay.  All this will do is cause Uber to reduce the share of revenues drivers get by something like 56 cents a mile and then hand the $0.56 to them in a separate check.  Its an extra accounting and paperwork hassle, but business people deal with mitigating such government-imposed stupidity 10 times a day.

No, the real danger of this ruling lies far beyond expense reimbursement.  A few top of head thoughts

  • This would obviously make Uber drivers subject to minimum wage.  How does one even figure that out?  Now that there are local minimum wages (e.g. LA soon to be $15 an hour) how do you compute minimum wage for a trip that begins outside of LA but ends inside the city?  Or vice versa?
  • Uber drivers currently only get paid for transporting passengers, but what about their time driving around waiting for a passenger?  Will that be classified as standby time for which the employer must pay for?  You can expect the standby time class action in California in 3..2..1..
  • This changes the whole relationship between Uber and its drivers.  Currently, Uber does not have to worry about driver productivity or work ethic, as long as they get good customer ratings when they do drive. Why?  Because Uber is not paying them except when they haul a passenger.  Now, if they have to pay them by the hour, Uber suddenly must police them for productivity and set minimum revenue generation targets for drivers.  The flexibility that drivers love will be gone.
  • And then there is Obamacare.  If drivers drive more than 29 hours a week, Uber would have to provide health care or pay really expensive penalties.  Will Uber find it necessary, as my company has and many other service businesses have, to cap driver hours at 29 hours a week max?
  • What about California break law?  Employers have an affirmative duty to make sure employees take a 30 minute unpaid meal break after X hours.  And just allowing for it (ie allowing drivers to put themselves in unavailable status) is not enough - employers have to have processes and documentation in place to make sure the employee takes their break (I kid you not).
  • What about CalOSHA?  Is Uber suddenly responsible for working conditions and safety in the vehicle?  And how does it do that if it does not own the vehicle?
  • Every employee is essentially his or her own manager.  Does that now make Uber subject to ensuring every driver has all state-mandated manager training, such as sexual harassment training?
  • Employers are typically liable for actions by their employees, even if those employees are breaking the rules and ignoring the employer's wishes.  Is Uber now liable for a driver who, say, verbally harasses a passenger?  In the past, that gets sorted out pretty fast by the rating system, but does Uber have to take a more direct hand now do avoid a deluge of lawsuits?
  • As of July 1, California employers must provide paid sick leave to employees.  They must provide unpaid leave under the family and medical leave acts.  In fact, California requires employers provide and track literally dozens of forms of mandatory paid and unpaid leave (including leave for victims of stalkers, just as one example of the scope of these requirements)
  • The taxes and required fees owed by employers for each employee are myriad.  State and Federal income tax must be withheld, Social Security and Medicare taxes paid, California state disability tax paid, unemployment tax paid, and workers compensation premiums paid.
  • Unemployment could be real nightmare.  Can drivers choose to drive for a while, then take unemployment for a while, maybe while tourist season in San Francisco is slow, then go back to driving?  You think that can't happen?  A number of my seasonal employees work in the summer, then take unemployment all winter despite having no intention of trying to find work in the winter.  I pay 7% of wages in California as unemployment taxes and would pay more except that scale is capped and I can't get in a worse category than my current F-.
  • Then there are a myriad of smaller issues that probably can be solved but consume bandwidth of a company's management that would otherwise be innovating.  As one small example, one has to post about 20 different state and Federal labor posters in CA where all employees can see them.  Where would that be for Uber drivers?

Yelp's Way of Caving to Corporate Pressure and Hiding Reviews While Saying They Didn't Delete Anything

Update:  This post may be unfair, as discussed here.  I am not fully convinced, though.

A few days ago I posted a negative review of Applied Underwriters, and linked to this post on my blog for much more detail.  Yelp promptly pulled the review, saying I violated their terms of service by linking to a commercial web site.  I thought that bizarre, since my blog has absolutely nothing commercial about it.   But it made more sense when I received a letter from Applied Underwriters demanding that I take down my negative Yelp review or they would sue me for libel.  I don't know for sure what happened, but I suspect that Applied Underwriters sent Yelp a similar demand and they used the link in the review as an excuse to delete it and avoid legal entanglements.

So I posted an updated review with more detail and no link.  Now, Yelp is hiding the review, along with most of the other negative reviews, behind a nearly invisible link at the bottom that says "other reviews that are not currently recommended".  Scroll down to the bottom of this page and you may see it if you have a keen eye.  It is not even clear it is a link, but if you click on it, you get all the bad reviews Yelp is hiding.

Let's dismiss all the reasons why Yelp might say they do this.  One is clarity, to reduce clutter.  But go to your favorite restaurant Yelp page.  Likely you will not see this link / hidden review phenomenon.  You will see pages and pages of reviews, far more than they would have to show if they just displayed all the reviews for Applied Underwriters.

So there must be another reason.  They say in their note there is a quality algorithm.  Anyone who has read a lot of Yelp reviews will know that if this is so, their quality algorithm is not working very hard.   They have a number of reviews that they "recommend" that are nothing more than a rant like "I will never use these guys again" while my unrecommended review includes paragraphs of detail about the service.  They say it is based on your review volume as well, but I have more Yelp review volume than several of the others who seem to pass the screen.

All of which leads me to believe that this is Yelp's purgatory where they hide reviews based on corporate pressure.  They have gotten a lot of cr*p publicly about deleting bad reviews from sponsors and from corporations that pressure them to do so.   They have a zillion self-righteous FAQ's asserting that they don't delete anything.   So imagine Applied Underwriters sends Yelp loads of threats to take down each negative review that comes up.  What do they do?  They put them in the not-recommended purgatory.  They can claim that they haven't deleted anything, but absolutely no one will ever likely see the review.  And they don't count any longer to the company's review count, so for all intents and purposes they are gone.

All of this is a guess, because it is absolutely impossible to contact Yelp about these issues.  No phone numbers.  The ones in general directories for San Francisco don't work for them.  You can't email or chat or contact their customer support in any way.  For a company in the transparency business, they avoid it like the plague.

But do you want to know what makes me doubly sure of my analysis?  Because there is no way to up-rate any of the "not recommended" reviews.  I would have thought the whole up-rating system was how they sorted reviews to present the most relevent at the top, but you can't do that with the ones they have put in purgatory.  Why?  Because these reviews are being put in purgatory not for some customer benefit but to protect corporations able to put pressure on Yelp.  Yelp doesn't want them uprated.  They are supposed to disappear.    If I had time, I would compare the number of "not recommended" reviews for corporations with powerful legal staffs like Applied Underwriters to the number for Joe's local business  (AU has 17 recommended reviews but a 28 full reviews that have been "disappeared" as unrecommended).

Rental Market in San Francisco

One of the problems with making predictions about bad public policy is that sometimes you have to wait 20-30 years until after the policy was passed to see all the negative consequences play out, by which time people have forgotten about the initial policy changes that caused all the disruption.

But I got to skip those 30 years in San Francisco.  I never really paid that much attention to the city until I read a book called "Season of the Witch" written by a progressive about life in San Francisco in the 60's and 70's.  As I wrote previously:

What struck me most were the policies these folks on the Progressive Left had on housing.  They had three simultaneous policy goals:

  1. Limit San Francisco from building upward (taller).  San Francisco is a bit like Manhattan in that the really desirable part where everyone wants to live is pretty small.  There was (and I suppose still is) a desire by landowners to build taller buildings, to house more people on the same bit of  valuable land.  Progressives (along with many others across the political spectrum) were fighting to have the city prevent this increased density as a threat to San Francisco's "character".
  2. Reduce population density in existing buildings.  Progressive reformers were seeking to get rid of crazy-crowded rooming houses like those in Chinatown
  3. Control and cap rents.  This was the "next thing" that Harvey Milk, for example, was working on just before he was shot -- bringing rent controls to San Francisco.

My first thought was to wonder how a person could hold these three goals in mind without recognizing the inevitable consequences, but I guess it's that cognitive dissonance that keeps socialism alive.   But it should not be hard to figure out what the outcome should be of combining: a) some of the most desirable real estate in the country with b) an effective cap on density and thus capacity and c) caps on rents.  Rental housing is going to be shifted to privately owned units (coops and condos) and prices of those are going to skyrocket.  You are going to end up with real estate only the rich can afford to purchases and a shortage of rental properties at any price.  Those people with grandfathered controlled rents will be stuck there, without any mobility.

Since reading the book, I have paid attention to stories on the rental market in San Francisco.  In short, it is just as screwed up as would have expected 40 years ago when both density and rent caps were put in place.

As San Francisco's housing crisis continues to pit long-term residents against the recent influx of affluent tech employees, Airbnb and other short-term rentals have become a source of tension. Today San Francisco Mayor Ed Lee and Supervisor Mark Farrell hoped to ease some of that tension by introducing reforms to the city's short-term rental laws that put a 120 day yearly cap on all short-term rentals. The package of amendments also introduced the creation of a new Office of Short-Term Rental Administration and Enforcement for the city staff to "coordinate in the administration and aggressive enforcement of the law."

Airbnb and other short-term rental services have come under fire in San Francisco because they take rental units off an already limited housing market. The current law caps short-term rentals at 90 days when the host is not present. If the host is present -- for example a room rental in an occupied home -- there is no yearly cap. Today's amendment package sets caps for both types of rentals. Mayor Lee said in a statement, "this legislation will help keep our City more affordable for homesharers, preserve rental housing for San Franciscans, protect neighborhood character and streamline permitting and enforcement under a fair set of regulations."

This is from a tech site that has developed a reputation, at least with me, for being astoundingly ignorant of even basic economics, so one has to make some guesses at what is going on here.  For example, it seems odd to say that renting a space on a short term lease rather than long-term somehow takes rental units off the market.  They are still being rented, are they not?  How could one describe them as being taken off the market?

My guess at what is going on here is that short-term rentals are likely exempt from some of the most onerous portions of San Francisco tenant law.   Likely, renting short-term allows one to bypass rent controls and charge more.  It also likely gives one some relief from the city and the state's horrendous tenant protections that make it virtually impossible to evict a tenant.  You lease to someone in SF, and you are stuck with them for life like a shark with a remora on his back, even if that tenant refuses to pay rent for years or constantly trashes the apartment.

San Francisco has created a system where they are absolutely guaranteed to have a shortage of rental properties.  Rather than address those laws that create the problem, politicians put their whole effort -- creating brand new agencies, no less -- to stop entrepreneurs from circumventing the madness and trying to provide housing.

Postscript:  The war against wealthy tech workers in SF is in full swing.  What SF would really like to do, I think, is close its borders and institute immigration controls to keep these folks out.  I know there are many parts of the world, including unfortunately our country, that work to keep poor uneducated immigrants seeking opportunity out.  But has there ever been a time or place in history where a particular place worked so hard to keep out rich educated immigrants seeking only to spend their money?

Authoritarian Quote of the Day

From San Francisco Board of Education member Sandra Fewer:

“Choice is inherently inequitable”

Because some people make choices that their betters, like Ms. Fewer, do not agree with, government needs the power to override individual decision-making.  We will come back to this, but it turns out the problem here may not be too much choice, but too little.

The entire article is about school choice (defined VERY narrowly as the ability to pick what monopoly government school you want to attend, not the ability to take a voucher and pick any school) leading to a greater racial sorting, rather than mixing, in San Francisco schools.

I have no idea why that would be.  And I still have no idea, because the article presented absolutely no facts.  Oddly, my first guess -- that racial sorting of schools might match racial sorting of neighborhoods since people want to send their kids to a school that is close with kids and parents they know -- is not even mentioned until, in passing, it comes up around the 35th paragraph.

One of the issues that seems to be confusing the author is that people sometimes express preferences they don't act on.  You see that in the very examples in the article.  All the parents interviewed say they want a multi-cultural school, perhaps because they are really passionate about that or perhaps because they know they are supposed to say that, but it is not hard to see that these folks care more about having a school nearby with kids and parents with whom they are culturally comfortable.   I find it a little weird that the city with possibly the most famous ethnic neighborhood in the country (ie Chinatown) has trouble understanding that there are totally non-racist reasons why ethnic groups, particularly those who speak other languages, might voluntarily sort.

One funny thing in the article that I have pointed out in other contexts: in the absence of facts people like to explain bad trends (and it is not even established that this is necessarily a bad trend, just a trend that planners don't like) with whatever they were against before the trend revealed itself.  Teachers don't like the school choice system, so school choice is to blame.  Social activists are concerned with income inequality, so they blame the problem on income inequality.

In fact, a lot of the article pursues the inequality thesis, but the interesting lede, in my mind, was buried way way down in the article:

Though the number of racially isolated schools jumped by 22 percent over three years, according to a district study, to date none are more than 60 percent white. Yet in a broader sense, white children are the most isolated in the city.

Whites are 42 percent of the city’s overall population, 33 percent of the children but only 12 percent of public school students. Why aren’t more white children in public school? Again, money appears to be the key factor: The average white San Franciscan makes three times more money than the average black resident. Whites on average also make 66 percent more money than Latinos, and 44 percent more than Asians. Possibly as a result of this wealth, white children are much more likely to be enrolled in private schools than other racial groups.

So the reason public schools are sorting into minority-majority  schools is that whites have mostly bailed from the school system altogether.   My response to this is not that "choice" has created inequality but that choice hasn't gone far enough.  Don't just give public school kids a choice of which crappy public school they want to attend, but hand them the public money the system was going to spend on their education and let them go anywhere for school, just like rich kids.

Minimum Wage Deja Vu

This letter to customers from San Francisco bookstore Borderlands is making the rounds.  Apparently, the new "living wage" legislation in San Francisco is killing this store:

In November, San Francisco voters overwhelmingly passed a measure that will increase the minimum wage within the city to $15 per hour by 2018.  Although all of us at Borderlands support the concept of a living wage in [principle] and we believe that it’s possible that the new law will be good for San Francisco – Borderlands Books as it exists is not a financially viable business if subject to that minimum wage.  Consequently we will be closing our doors no later than March 31st.  The cafe will continue to operate until at least the end of this year.

I find the authors surprisingly open to the Progressive assumptions behind this bill, despite the death of their business.  I don't know if this is a pair of hipsters destroyed by their own cause, or if the nods towards Progressivism are merely boiler plate that is required in any San Francisco conversation, like having a picture of Lenin on your wall in Soviet Russia.

Anyway, I found the language here familiar because I spent most of last year writing such letters to angry customer bases.  In our case, fortunately, we had the ability to raise prices so the letters were to defuse customer irritation rather than to announce a closure.  Here is one example I wrote in Minnesota:

Labor and labor-related costs (costs that are calculated as a percentage of wages, like employment taxes) make up nearly 50% of our costs.  The Minnesota minimum wage is set to rise from $7.20 to $9.50 in the next two years, an increase of 31%.  Since wages and wage-related costs are half our expenses, the minimum wage increase raises our total costs by 15.5%. This means that all by itself, without any other inflation in any other category of expenses, the minimum wage increases will drive a $3.10 increase in our camping fees (.155 x $20).  Note that this is straight math.  The moment the state of Minnesota passed their minimum wage increase, this fee increase was going to be required.

One of the problems with these minimum wage increases is that the people behind them, with their hazy assumptions and flawed understanding of economics, typically think that companies will just absorb the increase.   Our net profit margin runs in the 4% range, so it difficult to see how any such retail company can absorb a 15+% cost increase, but it happens all the time.  After some trial and error, the "this is straight math" phrase seems to work the best in communicating the need for price increases.

What Happens When You Abandon Prices As A Supply-Demand Matching Tool? California Tries Totalitarianism

Mostly, we use prices to match supply and demand. When supplies of some item are short, rising prices provide incentives for conservation and substitution, as well as the creation of creative new sources of supply.

When we abandon prices, often out of some sort of political opportunism, chaos usually results.

California, for example, has never had the political will to allow water prices to rise when water is short. They cite all kinds of awful things that would happen to people if water prices were higher, but then proceed instead with all sorts of authoritarian rationing initiatives that strike me as far worse than any downsides of higher prices.

In this particular drought, California has taken a page from Nazi Germany block watches to try to ration water

So, faced with apparent indifference to stern warnings from state leaders and media alarms, cities across California have encouraged residents to tattle on their neighbors for wasting water — and the residents have responded in droves. Sacramento, for instance, has received more than 6,000 reports of water waste this year, up twentyfold from last year...

Some drought-conscious Californians have turned not only to tattling, but also to an age-old strategy to persuade friends and neighbors to cut back: shaming. On Twitter, radio shows and elsewhere, Californians are indulging in such sports as shower-shaming (trying to embarrass a neighbor or relative who takes a leisurely wash), car-wash-shaming and lawn-shaming.

“Is washing the sidewalk with water a good idea in a drought @sfgov?” Sahand Mirzahossein, a 32-year-old management consultant, posted on Twitter, along with a picture of a San Francisco city employee cleaning the sidewalk with a hose. (He said he hoped a city official would respond to his post, but he never heard back.)

Drought-shaming may sound like a petty, vindictive strategy, and officials at water agencies all denied wanting to shame anyone, preferring to call it “education” or “competition.” But there are signs that pitting residents against one another can pay dividends.

All this to get, in the best case, a 10% savings. How much would water prices have to rise to cut demand 10% and avoid all this creepy Orwellian crap?

One of the features of Nazi and communist block watch systems was that certain people would instrumentalize the system to use it to pay back old grudges. The same thing is apparently happening in California

In Santa Cruz, dozens of complaints have come from just a few residents, who seem to be trying to use the city’s tight water restrictions to indulge old grudges.

“You get people who hate their neighbors and chronically report them in hopes they’ll be thrown in prison for wasting water,” said Eileen Cross, Santa Cruz’s water conservation manager. People claim water-waste innocence, she said, and ask: “Was that my neighbor? She’s been after me ever since I got that dog.”

Ms. Franzi said that in her Sacramento neighborhood, people were now looking askance at one another, wondering who reported them for wasting water.

“There’s a lot of suspiciousness,” Ms. Franzi said. “It’s a little uncomfortable at this point.” She pointed out that she and her husband have proudly replaced their green lawn with drought-resistant plants, and even cut back showers to once every few days.

Update:  Seriously, for those that are unclear -- this is the alternative to capitalism.  This is the Progressive alternative to markets.  Sure, bad things happen in a free society with free markets, but how can anyone believe that this is a better alternative?

Bundy Ranch the Wrong Hill for Libertarians to be Dying On

Here is something I find deeply ironic:  On the exact same day that Conservatives were flocking to the desert to protest Cliven Bundy's eviction from BLM land, San Francisco progressives were gathering in the streets to protest tenant evictions by a Google executive.   To my eye, both protests were exactly the same, but my guess is that neither group would agree with the other's protest.  I think both protests are misguided.

In the case of Cliven Bundy, I agree with John Hinderaker, right up to his big "But...."

First, it must be admitted that legally, Bundy doesn’t have a leg to stand on. The Bureau of Land Management has been charging him grazing fees since the early 1990s, which he has refused to pay. Further, BLM has issued orders limiting the area on which Bundy’s cows can graze and the number that can graze, and Bundy has ignored those directives. As a result, BLM has sued Bundy twice in federal court, and won both cases. In the second, more recent action, Bundy’s defense is that the federal government doesn’t own the land in question and therefore has no authority to regulate grazing. That simply isn’t right; the land, like most of Nevada, is federally owned. Bundy is representing himself, of necessity: no lawyer could make that argument.

It is the rest of the post after this paragraph with which I disagree.  He goes on to explain why he is sympathetic to Bundy, which if I may summarize is basically because a) the Feds own too much land and b) they manage this land in a haphazard and politically corrupt manner and c) the Feds let him use this land 100 years ago but now have changed their mind about how they want to use the land.

Fine.  But Bundy is still wrong.  He is trying to exercise property rights over land that is not his.   The owner gave him free use for years and then changed its policy and raised his rent, and eventually tried to evict him.  Conservatives and libertarians don't accept the argument that long-time tenancy on private land gives one quasi-ownership rights (though states like California and cities like New York seem to be pushing law in this direction), so they should not accept it in this case.   You can't defend property rights by trashing property rights.   Had this been a case of the government using its fiat power to override a past written contractual obligation, I would have been sympathetic perhaps, but it is not.

I would love to see a concerted effort to push for government to divest itself of much of its western land.  Ten years ago I would have said I would love to see an effort to manage it better, but I feel like that is impossible in this corporate state of ours.  So the best solution is just to divest.  But I cannot see where the Bundy Ranch is a particularly good case.  Seriously, I would love to see more oil and gas exploration permitted on Federal land, but you won't see me out patting Exxon on the back if they suddenly start drilling on Federal land without permission or without paying the proper royalties. At least the protesters in San Francisco likely don't believe in property rights at all.  Conservatives, what is your excuse?

I suppose we can argue about whether the time for civil disobedience has come, but even if this is the case, we have to be able to find a better example than the Bundy Ranch to plant our flag.

I Am Guessing San Francisco Doesn't Provide Any Liability Protection For Employers In Exchange For This

San Francisco has put deep restrictions employers' ability to check the criminal records of people they hire.  Yesterday the Senate blocked the nomination of Debo Adegbile to run the Civil Rights division of the Justice Department.  Senators were concerned about his actions as defense attorney for a man convicted of murdering a Philadelphia police officer.  Honestly, I have no problem with defense attorneys going to extremes to defend their clients.  I was more concerned with his historic support for ideas like this one in San Francisco:

Private sector employers in the City of San Francisco will have to comply with new “ban the box” legislation restricting questions about applicants’ criminal records on applications for employment and during job interviews.

The Fair Chance Ordinance, No. 17-14, prohibits employers with at least 20 employees from inquiring about a job applicant’s criminal history on an employment application, including “checking the box” to indicate criminal convictions or other criminal justice system involvement. It also prohibits covered employers from asking about criminal history during an initial interview. The law applies not only to regular employees, but also those performing contracted or contingent work, or working through a temporary agency. The Ordinance becomes operative on August 13, 2014.

After the initial interview, the Ordinance prohibits the employer from asking the applicant about the following:

  • arrests that did not result in conviction, unless charges remain pending;
  • completion of a diversion program;
  • sealed or juvenile offenses;
  • offense s that are more than seven years old from the date of sentencing; and
  • offenses that are not misdemeanors or felonies, such as infractions.

The employer must provide the applicant with a written notice before making any inquiry into the applicant’s criminal history and display a poster in the workplace developed by the City’s Office of Labor Standards Enforcement (OLSE).

The Ordinance also restricts an employer’s ability to consider criminal history disclosed by an applicant. The information may be used in the selection process only if it has “a direct and specific negative bearing on that person’s ability to perform the duties or responsibilities necessarily related to the employment position.”

This is just stupid.  First, I cannot tell you how many government forms (e.g. corporate registrations) require me to report my criminal background -- this is outright hypocrisy, holding private employers to  a different standard than public agencies.  If they really are consistent, truly believing that criminal background checks are discriminatory because they have disparate impact, then they should be pushing to remove them for things like gun ownership.  Anyone really believe they will do this?

The bigger issue for businesses is that we don't make these checks because we are jerks, we make them for real financial reasons.  Specifically, we are worried about the health and safety of our employees and customers.  And for those that think that business owners are all evil and wouldn't care about such things, then we certainly care about getting sued for the actions of our employees.  As a business owner I have been made, particularly in California, responsible for any dumbass thing my employees do.  I will get sued if these employees do something wrong.  And worse, can you just see the trial -- plaintiff's attorney is going to be in front of the jury and say things like "this employee has a long criminal record and defendant did not even check, he did not even care about my client's safety."

Entirely Predictable Unintended Consequences -- San Francisco Rental Market

There should be a word for "entirely predictable unintended consequences".  The Germans have come up with some good words for complex ideas, like schadenfreude, so maybe we can outsource the task to them.

Anyway, I just finished a book called Season of the Witch, about San Francisco in the 1960's and 1970's.   Churchill once said that “The Balkans produce more history than they can consume” and I am reminded of this quote when reading about San Francisco in these two decades.  Written by a Progressive sympathetic to San Francisco's bleeding leftist edge (the author cannot mention Ronald Reagan without also expressing his disdain), it is never-the-less pretty hard-hitting when things go off the rails (e.g. the enablement of Jim Jones by the entire leftist power structure).

Much of the narrative is about the great influx of lost youth and seekers of alternative lifestyles into the city; the attendant social, crime, and drug issues this created; and a quest for tolerance and social peace.   As such, it is not a book about political or economic policy per se, it's more about the people involved.  But we do get glimpses of the policies that key players like Harvey Milk, Dianne Feinstein, and Willie Brown were advocating.

What struck me most were the policies these folks on the Progressive Left had on housing.  They had three simultaneous policy goals:

  1. Limit San Francisco from building upward (taller).  San Francisco is a bit like Manhattan in that the really desirable part where everyone wants to live is pretty small.  There was (and I suppose still is) a desire by landowners to build taller buildings, to house more people on the same bit of  valuable land.  Progressives (along with many others across the political spectrum) were fighting to have the city prevent this increased density as a threat to San Francisco's "character".
  2. Reduce population density in existing buildings.  Progressive reformers were seeking to get rid of crazy-crowded rooming houses like those in Chinatown
  3. Control and cap rents.  This was the "next thing" that Harvey Milk, for example, was working on just before he was shot -- bringing rent controls to San Francisco.

My first thought was to wonder how a person could hold these three goals in mind without recognizing the inevitable consequences, but I guess it's that cognitive dissonance that keeps socialism alive.   But it should not be hard to figure out what the outcome should be of combining: a) some of the most desirable real estate in the country with b) an effective cap on density and thus capacity and c) caps on rents.  Rental housing is going to be shifted to privately owned units (coops and condos) and prices of those are going to skyrocket.  You are going to end up with real estate only the rich can afford to purchases and a shortage of rental properties at any price.  Those people with grandfathered controlled rents will be stuck there, without any mobility.

So I was reading this the other day.  It turns out there is a severe shortage of affordable rental properties in San Francisco, and lately there have been a record number of conversions of rental properties to private ownership.

With the area economy rebounding, San Francisco is in the midst of a housing crisis as many residents are evicted from their apartments. With rents strictly regulated, an increasing number of San Francisco owners are getting out of the rental business and cashing out their properties to turn them into co-ops. Steven Greenhut argues that rent control actually forces prices upward, especially over the long term, by diminishing the supply of available rental housing.

Update:  One recurring theme through the book is that progressive elements in SF saw their government and particularly their police force as "bullies".  They used this term a lot -- and they were right.  So it is interesting today to see all these progressives and how they act with power.  Turns out, they are all bullies too, just on different issues.

By the way, the Dirty Harry movies are way more interesting after reading this book.  Season of the Witch is what all this looked like to a progressive.  The Dirty Harry movies are what the same events looked like from a different perspective.

Understanding "Mix": Is Flattening in Income Growth Due in Part to Geographic Cost of Living Differences and Migration Within the US?

For 20 years, before I liberated myself from corporate America, I spent a hell of a lot of time doing business and market analysis (e.g. why are profits declining in Division X).  I was pretty good at it.  If I had to boil down everything I learned in those years to one lesson, it would be this:  Pay attention to changes in the mix.

What do I mean by "changes in the mix"?  Here is an example.  A company has two products.  One has a 20% margin, and the other has a 30% margin, and both margins have been improving over time because of a series of cost reduction investments.  But overall, company margins are falling.  The likely reason:  the mix is shifting.  The company is selling a higher proportion of the lower margin product.

Here is a real world example:  When I was at AlliedSignal (now Honeywell) aviation, they had exactly this problem.  They were operating in a razor and blades business -- ie they practically gave the new parts away to Boeing and Airbus to put on their planes, because they made all their money selling aftermarket replacements at a premium (at the time, government rules made it almost impossible to buy anything but the original manufacturer's part, so they could charge almost anything for a replacement, especially given that an airline likely had a $50 million plane sitting dormant until the part was replaced).  I routinely would tell managers in the company that essentially our business made money from unreliability -- the less reliable our parts, the more money we made.  Because newer technology, competition, and pressure form airlines was forcing us to greatly improve our reliability (at the same time we were giving stuff to Boeing at ever greater losses), all our newer products on newer planes were less profitable than the old stuff.  As planes aged and dropped out of the fleet, our product mix was getting less and less profitable.

This same effect can be seen in many economic and political issues.  Take for example an argument my mother-in-law and I had years and years ago.  She said that Texas (where I was living at the time) had crap schools that were much worse that those in Massachusetts, her argument for the blue political model.  She observed that average educational outcomes were much better in MA than TX (which was and still is true).  I observed on the other hand that this was in part a result of mix.  Texas had better outcomes than MA when one looked at Hispanics alone, and better outcomes for non-Hispanics alone, but got killed on the mix given that Hispanics typically have lower educational outcomes than non-Hispanics everywhere in the US, and Texas had far more Hispanics than MA.

All of this is a long introduction to some thinking I have been doing on all the "Average is Over" discussion talking about the flattening of growth in median wages.  I begin with this chart:

click to enlarge


There is a lot of interstate migration going on.  And much of it seems to be out of what I think of as higher cost states like CA, IL, and NY and into lower cost states like AZ, TX, FL, and NC.  One of the facts of life about the CPI and other inflation adjustments of income numbers is that the US essentially maintains one average CPI.  Further, median income numbers and poverty numbers tend to assume one single average cost of living number.  But everyone understands that the income required to maintain lifestyle X on the east side of Manhattan is very different than the income required to maintain lifestyle X in Dallas or Knoxville or Jackson, MS.

Could it be that even with a flat average median wage, that demographic shifts to lower cost-of-living states actually result in individuals being better off and living better?

For some items one buys, of course, there is no improvement by moving.  For example, my guess is that an iPhone with a monthly service plan costs about the same anywhere you go in the US.  But if you take something like housing, the differences can be enormous.

Let's compare San Francisco and Houston.  At first glance, San Francisco seems far wealthier.  The median income in San Francisco is $78,840 while the median income in Houston in $55,910.  Moving from a median wage job in San Francisco to a media wage job in Houston seems to represent a huge step down.  If you and a bunch of your friends made this move, the US median income number would drop.  It would look like people were worse off.

But something else happens when you take this nominal pay cut to move to Houston.  You also can suddenly afford a much nicer, larger house, even at the lower nominal pay.  In San Francisco, your admittedly higher nominal pay would only afford you the ability to buy only 14% of the homes on the market.  And the median home, which you could not afford, has only about 1000 square feet of space.  In Houston, on the other hand, your lower nominal pay would allow you to buy 56% of the homes.  And that median home, which you can now afford, will have on average 1858 square feet of space.

So while the national median income numbers dropped when you moved to Houston, you actually can afford a much nicer home with perhaps twice as much space.  Thus, it strikes me that there are important things happening in the mix that are not being taken into account when we say that the "average is over".

Of course, while this effect is certainly real, I have no idea how much it affects the overall numbers, ie is it a small effect or a large effect.  Fortunately my son is studying economics in college.  If he ever goes to grad school, I will add this to my list of research suggestions for him.

Postscript:  This exact same discussion could apply to US poverty statistics.  We have one poverty line income number whether you live in Manhattan or Tuscaloosa.  I have always wondered how much poverty statistics would change if you created some kind of purchasing power parity test rather than a fixed income test.

Liberal Douchebag vs. Liberal Douchebag: Google Employees Invade San Francisco

This is an article a reader described as being from the "screw them all" category, and I am inclined to agree.  There are many funny bits in the piece, but I particularly liked the San Francisco lefties arguing that these new Google millionaires should act more like the Rockefellers and the Vanderbilts.  LOL for sure.

Incredibly, no one asks the obvious question -- why is home supply in San Francisco treated as zero sum, such that a Google millionaire moving in by necessity kicks some  poor people out.  The reason is that no place in the country does more than San Francisco and the Bay Area to make it impossible to build new housing.  San Francisco has some unique geographic constraints but you don't hear people complaining about this in Houston (which is in fact a much larger city).  In fact, I am trying to imagine Houston complaining about too many rich people moving in.  I just can't seem to focus that image in my head.

Actually, the article does very briefly consider the supply side of the equation, but of course no one mentions government development and zoning restrictions -- its the fault of capitalist speculators!  My reader highlights this paragraph:

Though he doesn’t much care for the start-up douchebags, Redmond blames not individual tech workers for the current crisis, but property speculators and the lawmakers who have let them take advantage of their precious commodity: space. “If we had a major earthquake in San Francisco, the water mains all broke, and some guy showed up with a water truck and started selling water for $10 a gallon, people would be pissed,” he says. “That guy would be ridden out of town; he’d be attacked with sticks and pitchforks. But that’s what the real estate people are doing right now – and they’re getting away with it.”

Memo to speculators:  If I have lost all access to water and am dying of thirst, you are welcome to come to my house and sell water to me for $100 a gallon.  I promise no pitchforks at my house.

PS-  One thing I did not know is that tech companies seem to be running large private bus systems

The Google buses, which often stop in spaces supposedly reserved for public transport, are a particular point of contention. This growing fleet of unmarked luxury coaches carries some 14,000 people on their 35-mile trip from the city to Silicon Valley and back. Since the search giant introduced the buses a decade ago, Facebook, Apple, eBay and almost 40 other companies have followed suit. Each new route quickly becomes a corridor of hip clothing stores and restaurants.

This is an interesting exercise in privatization.  For riders, it certainly would be nice to have routes custom designed to match your needs (ie exactly from your origin to your destination without changing trains or busses), something that is often an issue with public transport networks.  Als0- and this is going to sound awful but it is from many public surveys and not my own point of view - these private bus networks get around the social mixing issue that turns a lot of middle class riders off on bus systems.

This is obviously expensive but I understand why some companies do it.  As someone wrote a while back, no one in their right mind would put Silicon Valley in California today if it were not already there.  It is absurdly expensive to do business in CA and it is expensive to live there as an employee.  However, tech companies have found that  a certain good called "access to San Francisco" is quite valuable to the types of young smart employees they want to hire and can overcome these negatives.  So the bus system is a way for companies to better provide this good.  The irony of the article is that as so many tech companies are selling this good (ie access to San Francisco) they may be changing the character of San Francisco in a way that makes the good less valuable over time.

How Can People Say This Stuff With A Straight Face?

Joane Hayes-White has no shame:

San Francisco's fire chief has explicitly banned firefighters from using helmet-mounted video cameras, after images from a battalion chief's Asiana Airlines crash recording became public and led to questions about first responders' actions leading up to a fire rig running over a survivor.

Chief Joanne Hayes-White said she issued the order after discovering that Battalion Chief Mark Johnson's helmet camera filmed the aftermath of the July 6 crash at San Francisco International Airport. Still images from the footage were published in The Chronicle.

Filming the scene may have violated both firefighters' and victims' privacy, Hayes-White said, trumping whatever benefit came from knowing what the footage shows.

"There comes a time that privacy of the individual is paramount, of greater importance than having a video," Hayes-White said.

Any 5-year-old can figure out here that this has nothing to do with victim privacy -- this is all about shielding her organization from accountability from future screw-ups.  Somehow we have ended up in a completely backwards world where surveillance is aimed at private citizens doing private things but is banned for public officials doing public things.  Ms. Hayes-White is obviously just a puppet for the firefighters union, and she be treated with contempt.

California Regulatory Burden

I often tell folks that while the taxes in California are irritating, what has really killed my interest in expanding in California is the regulatory burden.  It took 3 years to get through Ventura County planning department to get permission to put a modular ticket booth in a corner of an existing parking lot -- only to be denied.  I have faced potential prosecution because we demolished an unsafe deck without state permission.  I now have to fire people who try to work through lunch or else face employees suing  me (successfully!) later for their voluntarily working through lunch.

I think that is why I enjoyed this blog, SLO Leaks, so much.  It is a 3-1/2 year story of an obviously wealthy gentleman trying to get the local planning board and later the California Coastal Commission to allow him to build a house on his residential-zoned land.  I sat up for hours last night reading through it.  42 months and $3 million later, he still is not even close to having his approvals.  It is interesting to see his respectful-of-authority tone shifting over time, until at the end he is writing about how he has shifted his company's new office and expansion from California to Texas.

Here are a few nuggets.   Here is what he is up against:

Once a year the Public Works Dept gives a report on what has happened in the previous year in the Avila Beach area. One part of their report is on how many building permits were issued. In order to get a building permit you first have to get a minor use permit through the Planning Dept, so this is a good gauge of how much work the Planning Dept does. So for the period from July 1, 2010 to June 30, 2011, in the Avila area, which has Ryan Hostetter as a full time planner, the entire list of building permit issued is here:

One single family residential permit was issued during the entire year.

That’s it. No commercial buildings, no office building, no barns, just one single family house permit. And it wasn’t my permit, that’s for sure – because I am now going through the potentially years long Coastal Commission permit appeal process before I can even apply for a building permit.

And this:

So after waiting nearly a year, Daniel Robinson, who is a low level bureaucrat with the California Coastal Commission, and who had never even been to the house site, and who had never even met me or my wife, has told me that he doesn’t like my front yard, he thinks the retaining walls are too big, he thinks my house is too big, and that he doesn’t like the overall design of my house. Daniel thinks that my house should look more like a farm house, and also that people walking around in the city of Pismo Beach will be offended by the mere sight of my house (so called “visual impact”). And if my house design doesn’t please him then he will recommend to the full Coastal Commission that they deny my permits. Since I will only get 3 minutes to defend my house in front of the Coastal Commission I would then probably lose that permit appeal vote and I will be unable to build my house at all, and I will lose about $3 million, and will have wasted years of my life.

The California Coastal Commission is perhaps the most capricious and authoritarian government entity in the country, for example:

But then there was the minor issue of a permit for Daly City, a suburb of San Francisco, to rebuild a rock retaining wall that had been damaged during the last winter storms. It was such a minor issue that Daley City didn’t even send a representative to the CCC meeting. What could possibly go wrong?

The rock retaining wall was to protect a dirt and gravel road that follows along the coastline. On the other side of the dirt road is an abandoned landfill that Daley City capped over in the 1970′s. And I watched the Coastal Commission, apparently on a whim, decide to overrule their staff and instead of issuing a permit they decided to require Daily City to dig up the entire landfill and relocate it inland somewhere. Where it got relocated to the Coastal Commission didn’t care – since that isn’t their problem. And the estimate to do this landfill relocation is $125,000,000.00!

$125,000,000.00 works out to $1250.00 for every man, woman, and child in Daly City. And the Coastal Commission decided that this must happen with about 10 minutes of discussion amongst themselves and without a single fact to cloud their minds! It was both unbelievable and terrifying.

From all the facts, it looks to me like he is never going to get approved.  But you can get quick approval from the  CCC -- if you are rich and have political juice

Like me, [Steve Blank] is in the high tech industry. Like me, he has started several high tech companies....

After Steve sold his last startup company he applied for a permit to build a house in the California Coastal Zone in 2000. And, just like me, Steve’s land use permit was appealed to the California Coastal Commission. The reason for the appeal was “sensitive habitat” issues. (I don’t have any sensitive habitat issues because my proposed house is in the middle of a field of non-native weeds.)

Unlike me, Steve’s appeal to the Coastal Commission went pretty smoothly. He had his hearing in only 8 months – start to finish. It has taken me a year and a half, after waiting a year and a half for SLO County to issue the permit in the first place. And there were no onerous “Special Conditions” imposed on Steve by either San Mateo County or the Coastal Commission.

Here is the list of “Special Conditions” that the Coastal staff wants to impose on me.

Superficially Steve’s house and my house are similar. I have a main house and a barn on 37 acres, Steve has a main house, two barns, and a farm labor house. But Steve’s house is 15,780 sq. ft., with a swimming pool, and a 2,500 sq. ft. barn, and another 3,040 sq. ft. barn 31 ft. high, and a 1240 sq. ft. farm labor house all on 261 acres. So Steve’s house is around 3 times larger than my proposed house (and much taller). Steve also got to have a fence and there was no requirement for public access. And Steve was able to build his house to look anyway he wanted. No “rural agricultural theme” architecture for Steve, that’s for sure. Steve can also plant in his yard pretty much any damn thing he wants.

Steve is pretty proud of his house. A picture of his house is the banner to his web page, which ishere. You can see the front gate of his house here. And this is an overhead view.

Steve Blank is one of the current California Coastal Commissioners.

You Can't Use Voluntary Action to Try to Stop Government Coersion

Or so says California's Gavin Newsom, in a great Reuters quote found by Zero Hedge:

California Lieutenant Governor Gavin Newsom says he wants the U.S. Department of Justice to investigate "threats" against local communities considering using eminent domain to seize and restructure poorly performing mortgages to benefit cash-strapped homeowners.

Newsom sent a letter on Monday to U.S. Attorney General Eric Holder asking federal prosecutors to investigate any attempts by Wall Street investors and government agencies to "boycott" California communities that are considering such moves.

"I am most disturbed by threats leveled by the mortgage industry and some in the federal government who have coercively urged local governments to reject consideration" of eminent domain," he wrote in a letter, a copy of which was provided to Reuters.

Newsom, a Democrat who was previously mayor of San Francisco, warned the influential Securities Industry and Financial Markets Association in July to "cease making threats to the local officials of San Bernardino County" over the proposed plan to seize underwater mortgages from private investors.

Some towns in San Bernardino County, which is located east of Los Angeles, have set up a joint authority that is looking into the idea of using eminent domain to forcibly purchase distressed mortgages. Rather than evict homeowners through foreclosure, the public-private entity would offer residents new mortgages with reduced debts.

Newsom said in the letter on Monday that while he is not endorsing the use of eminent domain at this time, he wants communities in California to be able to "explore every option" for solving their mortgage burdens "without fear of illegal reprisal by the mortgage industry or federal government agencies."

This quote is so rich with irony that it is just delicious.   Certainly ceasing to do business in a community that threatens to steal all your property strikes me as a perfectly reasonable, sane response.   Calling such a response an actionable threat requiring Federal investigation just demonstrates how little respect California officials, in particular, have for private activity and individual rights.

The third paragraph might be worth an essay all by itself, classifying a voluntary private boycott as illegally coercive while treating use of eminent domain, intended for things like road building, to seize private mortgages as so sensible that it should be sheltered from any public criticism.

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.

Why Would Anyone Start a Business in San Francisco?

Via Protein Wisdom:

A legislative proposal in San Francisco seeks to make ex-cons and felons a protected class, along with existing categories of residents like African-Americans, people with disabilities and pregnant women. If passed by city supervisors, landlords and employers would be prohibited from asking applicants about their criminal past. [...]According to The City’s Human Rights Commission, San Francisco has the highest recidivism rate of any big city in California, almost 80 percent. With an influx of new prisoners set to be released because of the state’s budget crisis, supporters argue felons need legal protections before they’re disqualified simply because of their record, which could be decades old and for crimes that have nothing to do with the job they’re hoping to get.

Do you really want to open your customer contact business in a location where you cannot background check employees, or are not legally allowed to fire them if you find some horrible criminal history?  Can you imagine the lawsuits flying?  And don't tell me that the company would be safe in a courtroom arguing that it was illegal to check.  I could easily see a California jury holding a company liable for not background checking an employee for an incident even when it was illegal to do so.


19th Century FU

Here are a couple of mansions in San Francisco, on of which was built by Charles Crocker of the "big 4" (including Sanford, Huntington, and Hopkins) who built the western half of the transcontinental railroad  (don't be fooled -- the railroad itself, forced years ahead of its time by government policy, was a financial mess.  The big 4 made their real money in the construction company that built the railroad, and in real estate and ancillary businesses at the railroad's terminus).

Note the thing that looks like a four-story high wall in the back corner of the near mansion. What is that?  Its a four-story high wall.  Crocker was ticked off the last building owner on the block did not sell to him.  So he built a "spite wall" on his property on three sides of the building to block its views.  Abusive, I suppose, and used by some to talk about what the rich could get away with in that era.  But consider that in the current era, Crocker would just go to the government and get it to condemn the building and hand the property to him, in the Kelo logic that he would pay more taxes on the property.   Rich people have more power today to abuse their relationship with government for the simple fact that the government has a lot more power to be commanded.

As I tell people all the time, if you want to limit the special powers the rich wield by influencing politics, the only solution is to limit the power of the government.

From this cool 360 panorama of San Francisco

Environmentalists Praising Use of Coal

From environmental blog the Thin Green Line:

McDonald's has been a frequent target on this blog, and many others related to health and environmental issues. But mark it on your calendar: This post is in praise of Micky D's, for installing EV charging stations at a new West Virginia location.

Yes, it's just about the strangest place you could pick, given that the Huntington, WV, location is not on a throughway connecting EV early-adopter towns like New York, D.C., or San Francisco. The location clearly has more to do with its proximity to partner American Electric Power's Columbus, Ohio, headquarters "” but we'll give kudos where kudos are due. With 58 million people eating at McDonald's everyday, the burger chain isn't a bad spot to enable electric vehicle drivers to charge up.

99% of West Virginia's electricity comes from coal, so its interesting to see environmentalists championing the switch from gasoline to coal.  Notwithstanding the fact that the fossil fuel use of electric vehicles is being grossly under-estimated, charging up your EV in WV is a great way to take positive steps to increase your CO2 footprint.

Trading Cribs

Brian Caplan compares his life with that of the richest of the Gilded Age:

I just returned from the Biltmore, America's largest home.  Built by George Vanderbilt between 1889 and 1895, the Biltmore is a symbol of how good the rich had it during the Gilded Age.  I'm sure that most of the other visitors would answer "very good indeed."

But how many would actually want to trade places with George?  Despite his massive library, organ, and so on, I submit that any modern with a laptop and an internet connection has a vastly better book and music collection than he did.  For all his riches, he didn't have air conditioning; he had to suffer through the North Carolina summers just like the poorest of us.  Vanderbilt did travel the world, but without the airplane, he had to do so at a snail's pace.

Perhaps most shockingly, he suffered "sudden death from complications following an appendectomy" at the age of 51.  (Here's the original NYT obituary).  Whatever your precise story about the cause of rising lifespans, it's safe to say that George's Bane wouldn't be fatal today.

I made this observation several years ago, though, though I went west coast railroad entrepreneur rather than east coast.  I showed pictures of a San Francisco mansion and a middle class home of a friend of mine in Seattle.

One house has hot and cold running water, central air conditioning, electricity and flush toilets.  The other does not.  One owner has a a computer, a high speed connection to the Internet, a DVD player with a movie collection, and several television sets.  The other has none of these things.  One owner has a refrigerator, a vacuum cleaner, a toaster oven, an iPod, an alarm clock that plays music in the morning, a coffee maker, and a decent car.  The other has none of these.  One owner has ice cubes for his lemonade, while the other has to drink his warm in the summer time.  One owner can pick up the telephone and do business with anyone in the world, while the other had to travel by train and ship for days (or weeks) to conduct business in real time.

I think most of you have guessed by now that the homeowner with all the wonderful products of wealth, from cars to stereo systems, lives on the right (the former home of a friend of mine in the Seattle area).  The home on the left was owned by Mark Hopkins, railroad millionaire and one of the most powerful men of his age in California.  Hopkins had a mansion with zillions of rooms and servants to cook and clean for him, but he never saw a movie, never listened to music except when it was live, never crossed the country in less than a week.  And while he could afford numerous servants around the house, Hopkins (like his business associates) tended to work 6 and 7 day weeks of 70 hours or more, in part due to the total lack of business productivity tools (telephone, computer, air travel, etc.) we take for granted.  Hopkins likely never read after dark by any light other than a flame.

If Mark Hopkins or any of his family contracted cancer, TB, polio, heart disease, or even appendicitis, they would probably die.  All the rage today is to moan about people's access to health care, but Hopkins had less access to health care than the poorest resident of East St. Louis.  Hopkins died at 64, an old man in an era where the average life span was in the early forties.  He saw at least one of his children die young, as most others of his age did.  In fact, Stanford University owes its founding to the early death (at 15) of the son of Leland Stanford, Hopkin's business partner and neighbor.  The richest men of his age had more than a ten times greater chance of seeing at least one of their kids die young than the poorest person in the US does today.

Hopkin's mansion pictured above was eventually consumed in the fires of 1906, in large part because San Francisco's infrastructure and emergency services were more backwards than those of many third world nations today.

Here is a man, Mark Hopkins, who was one of the richest and most envied men of his day.  He owned a mansion that would dwarf many hotels I have stayed in.  He had servants at his beck and call.  And I would not even consider trading lives or houses with him.  What we sometimes forget is that we are all infinitely more wealthy than even the richest of the "robber barons" of the 19th century.  We have longer lives, more leisure time, and more stuff to do in that time.   Not only is the sum of wealth not static, but it is expanding so fast that we can't even measure it.  Charts like those here measure the explosion of income, but still fall short in measuring things like leisure, life expectancy, and the explosion of possibilities we are all able to comprehend and grasp.

You Libertarians are So Paranoid. Government Would Never Use its Power to {Fill in the Blank}

From San Francisco, of course.  Via Maggies Farm's great daily link roundup

If the commission approves the ordinance at its meeting tonight, San Francisco could soon have what is believed to be the country's first ban on the sale of all pets except fish.That includes dogs, cats, hamsters, mice, rats, chinchillas, guinea pigs, birds, snakes, lizards and nearly every other critter, or, as the commission calls them, companion animals.

"People buy small animals all the time as an impulse buy, don't know what they're getting into, and the animals end up at the shelter and often are euthanized," said commission Chairwoman Sally Stephens. "That's what we'd like to stop."

This is the same city that is replacing Cokes with Soy Milk in its vending machines.  Oddly, when you read the pet article, it turns out their main concern is with hamsters, that get euthanized a huge rates as people who initially think they are cute wake up one day and realize they are just irritating rodents.  One wonders then why they ban on all animals just to get at one kind.  And why are fish OK but dogs are not?

I think I blogged this the other day but I want to repeat the un-ironic comment made by a city official on the soda ban in vending machines:

"It's entirely appropriate and not at all intrusive for city government to take steps to discourage the sale of sugary sodas on city property."

One wonder if any limitation on individual choice (save perhaps on abortion) would be considered inappropriate or intrusive by these folks.

How Can You Argue with Logic Like This?

From the Thin Green Line:

So much for criticism that California's environmental leadership "” notably AB 32 "” kills jobs: The state has the most green-collar jobs of any in the nation, and San Francisco leads the Golden State with 42,000 positions. For a city with a population of 809,000, that's pretty impressive.

I think of my father-in-law when I read something like this.  He was a lifelong environmentalist as well as a PHD physicist and a researcher at MIT's Lincoln Labs.  While we often disagreed on various issues, he always tried to bring both science and the scientific method to environmental issues.  I wonder what he would think about this bozo.

Not that this quote really deserves further attention, but here are a couple of random thoughts:

  • While AB32 has been law for a number of years, the CARB has made only limited progress actually setting up the enabling regulations and carbon trading schemes.  In effect, AB32 is largely un-implemented at this point, making its lack of effect on job growth fairly unsurprising
  • Wow, what a surprise -- the state with the largest number of workers has the largest number of workers in a particular employment category.  My guess is they have the most car mechanics in the country too, and the most SUV owners.  So what?
  • The whole definition of a "Green collar job" is total BS.  Basically it means you work in a job that has been deemed to be in a politically correct energy related field.  But why are solar executives green jobs but hydro plant workers not?
  • The implication in the post is that this is some kind of public policy victory, but of course there is no evidence at all of why these jobs exist or are located in California
  • Even if these jobs are the result of some kind of California public policy initiative, how much did they cost?  How many jobs were lost when the government shifted resources around by fiat?  In Spain, its been calculated that more than 2 jobs were lost for every green job created.

There used to be a joke in Texas during the 80's oil bust -- "How do you make a million dollars in oil?  Start with $10 million."  The same likely applies here -- "How do you create 42,000 green jobs?  Start with 100,000."

Chinese Factories

TJIC writes:

Chinese factory conditions may not be the exact cup of tea for a San Francisco graphic designer or a Connecticut non-profit ecologist grant writer "¦ but they're, by definition, better than all the other alternatives available to the Chinese workers (or the factories would find it impossible to staff up).

I wrote previously:

One morning, a rice farmer in southeast Asia might faces a choice.  He can continue a life of brutal, back-breaking labor from dawn to dusk for what is essentially subsistence earnings.  He can continue to see a large number of his children die young from malnutrition and disease.  He can continue a lifestyle so static, so devoid of opportunity for advancement, that it is nearly identical to the life led by his ancestors in the same spot a thousand years ago.

Or, he can go to the local Nike factory, work long hours (but certainly no longer than he worked in the field) for low pay (but certainly more than he was making subsistence farming) and take a shot at changing his life.  And you know what, many men (and women) in his position choose the Nike factory.

Update: In an interesting question of incentives, Foxconn, the manufacturer much in the news for a rash of suicides at its plant in China, apparently pays about 10-years salary to the families of workers who kill themselves.  They have ended the practice, worried that they are incentivizing some of the suicides.

Black Swan

It is not often that the NY Times will question the long-term consequences of any Democratic program ostensibly aimed at mitigating a short-term need.  So I don't want to fail to highlight this:

The Obama administration's $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good.

Since President Obama announced the program in February, it has lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes.As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.

Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

"The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis," said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. "We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway."