Monday, August 30, 2010

Ryan Dawkins on Park51

Ryan Dawkins writes a very interesting piece about the Park51 project (aka Muslim Community Center near Ground Zero):


I can't believe I'm saying this, but I especially liked the quotes from George W. Bush.

Note: the following is a list of prominent people and entities opposing the Park51 project. I call them "Americans for Selective Constitutional Application": Carly Fiorina, Investors' Business Daily (IBD), Newt Gingrich, John McCain, Anti-Defamation League, the WSJ's James Taranto, Rep. Peter T. King, Rep. Rick Lazio, John Bolton, Howard Dean, Rudy Giuliani, Geert Wilders, Gary Berntsen, Jordan Sekulow, Michael Grimm, Andrew Breitbart, Ilario Pantano, Gov. David Paterson, Pamela Geller, Robert Spencer, Michelle Malkin, and more...

I am most disappointed in McCain and Gingrich.

At least I can rely on Ron Paul's consistent brilliance:

It is repeatedly said that 64% of the people, after listening to the political demagogues, don’t want the mosque to be built. What would we do if 75% of the people insist that no more Catholic churches be built in New York City? The point being is that majorities can become oppressors of minority rights as well as individual dictators. Statistics of support is irrelevant when it comes to the purpose of government in a free society-—protecting liberty...This is all about hate and Islamaphobia.

Thank you, Mr. Paul. Props also to Roger Ebert.

Sunday, August 29, 2010

Seeking Alpha's Editor-in-Chief

SeekingAlpha's Editor-in-Chief Eli Hoffmann and myself at a S.F. event. If I had just two words to describe him, I'd go with "driven" and "professorial"--the perfect combo for an editor-in-chief.

Saturday, August 28, 2010

Megan McArdle on Government Pensions

Megan McArdle, on public pensions:

For decades, politicians have promised lavish pension benefits in return for the support of the public sector unions—-promises that they, unlike their counterparts in the private sector, did not have to cover by setting aside a reasonably large asset base. Now the bills are coming due, and many funds are disastrously underfunded. The California state pension system, for example, has only 60 percent of the assets needed to pay its obligations through 2042.

(from The Atlantic, August 2010)

Politicians have sold out the next generation of workers. Unfortunately, many of the workers on the hook for public pensions have had no say in the process--they were either too young or too uneducated to understand what their parents and politicians were doing.

Friday, August 27, 2010

Alice in Wonderland: the Gov's Hiring Process (Special Union Edition)

I knew California's public sector unions had major influence, but I didn't realize just how much until recently.   I wrote this post after I had an interview with the courthouse for a courtroom clerk job--not a law clerk, but a courtroom clerk--which is akin to a court's office manager.

The courtroom clerk job requires scheduling dates, taking phone calls from the public, marking some forms, filing documents, and running interference for the judge. Also, if there is a jury trial, the courtroom clerk marks the exhibits, swears in witnesses, handles the lawyers' requests, and reads the verdict. It's not known as an overly challenging job, but it is honest work, and it comes with the usual California government employee gold-plated benefits, i.e., dental insurance, medical, pension, union protection. Also, the salary for the clerk position--which requires three years of admin work in a law firm or courthouse and no college degree--pays about as much as a non-profit attorney position in the Bay Area. So I applied, thinking if I wanted to start a family someday, the benefits would come in handy. (And God knows dental work for growing children isn't cheap.) Plus, why not see the glory that is the Santa Clara County Superior Court hiring system?

The first step was a test, but the test's instructions indicated that I would be disqualified if I discussed the content of the exam. Therefore, I am not going to discuss the questions. Instead, I am going to tell you about completely unrelated tests that I remember taking in elementary school and elsewhere. To the extent you, my dear reader, somehow associate anything about my elementary school or other academic tests with the Santa Clara County Superior Court's courtroom clerk test, you are speculating and are going down a path I do not recommend.

In any case, one of my elementary school tests, as I remember, had questions like, "64 divided by 8." Oh, and I could not use a calculator in elementary school. Also, it wasn't multiple choice. But that was back in elementary school. Some questions were slightly harder--in elementary school--such as, "120,000 + 85,405 + 7,443." Again, back in the day, they didn't let us bring calculators to the test.

I also remember taking grammar tests in elementary school. I remember questions like, "Identify the problem with the following sentence: 'Each of the idiots who crafted this exam are to be fired.'" (Did you catch it? "Each" is singular, so "are" should be replaced with "is.") Other questions related to the difference between "affect" and "effect" or involved other common mistakes. Now, can you imagine if 40% of a test contained these kinds of questions? Well, back in elementary school, I wouldn't mind one bit.

Going to another unrelated topic, as an adult, sometimes I'd apply for a job and would have to take a personality test. I loved those questions, especially when the corporation would ask me something like, "In your capacity as a police officer, how should you treat members of the public?" a) punch them in the face every chance you get; b) if asked a question, act self-important and flash the badge two inches from the person's face; c) make sure you let unsupervised children play with your loaded gun whenever they ask; or d) remember that your job is to serve the public. I had a good time taking those tests, but can you imagine if those kinds of questions constituted 20% of an employment test?

I also remember taking some tests that were insanely hard, to the point where the questions had no relation to the job itself. For example, I had a very difficult biology class at UC Davis with a new professor. So many people did poorly on his final exam, if you scored something like 35/100, you got an "A-." I've never understood why anyone would put arcane questions on a multiple choice exam. They don't seem to measure anything except luck.

Can you imagine a test that asked you questions like, "President Calvin Coolidge was President Number a) 28; b) 29; or c) 30"? I mean, let's assume you want to hire a secretary or office manager for a history professor. How would someone knowing this obscure fact have any relevance to the job? Wouldn't most people just guess and take their 33.3% chances? In any case, I am good with obscure as well as general questions, so I usually do well on written tests. In fact, if I had a test with 50 questions, I'd probably get 46 or 47 out of 50 most of the time.

So I passed the court's initial exam. Regardless of an exam's difficulty level, if it's the only objective part of the hiring process, it makes sense to use the results to narrow the field considerably. (I would also hope the questions would get harder at some point if too many people were receiving high scores.) Otherwise, the objective part of the exam serves only to eliminate complete morons, causing the hiring process to be based primarily on subjective criteria. (Can you imagine hiring a civil engineer based mainly on how he or she interviews? Drive over those California bridges carefully, okay?)

After the initial exam came an interview (at only 20 minutes an interview, I am guessing 25+ out of 60 applicants passed the written test). During my interview, I was never told that anything was confidential, so I am going to tell you all about it.

First, four people interviewed me. All very nice ladies, one African-American, two Latinas, and one Caucasian (Tracy or Tracey H.). The Caucasian was the head of Human Resources and appeared to be in charge. At least two of the other three ladies were associated with unions, such as the court reporters' union. I thought it was fascinating that union members got to decide which courtroom personnel make it to the final stages of the hiring process. Isn't California government wonderful?

The interview had four questions. The first one was your basic, "Tell us about your experience, education, etc." So I explained I'd been to law school and have always worked in law firms where, in addition to the complex legal work, I either did all the administrative work or had no dedicated admin staff. I explained that I wasn't your typical lawyer--I work directly with very diverse groups of people and usually handle cases for the (disappearing) middle class and the poor. I was concerned about being deemed overqualified, so I made sure to mention that I hoped to meet someone and start a family one day, and I wanted to be able to offer stability, consistent working hours, and benefits--none of which was possible if I kept doing 30 to 40 hours/week of admin work and another 30 to 40 hours/week of legal work. In essence, I'd be doing similar work as a courtroom clerk, but my future kids would get braces and the chance to see me before 11:00PM. So far, so good.

The next item asked what I would do if I disagreed with a judge's order. I explained that 1) as a courtroom clerk, it wasn't my place to do anything; 2) I would file the order and mail it to the parties, unless instructed otherwise; and 3) if one of the parties disagreed with the order, s/he could file a motion for reconsideration or an appeal. (I realize the court is trying to eliminate morons, but wasn't that the point of the first test?)

The third question was a little strange, but at least it was more difficult. It asked me what I would do if the phone was ringing, an attorney had come up to me and wanted to ask me a question, and I had just missed the judge's order. It didn't provide any background information, i.e., is this a CMC or law and motion? (A CMC usually requires the courtroom clerk to fill in a form with the next court date, while a law and motion matter usually has a written order prepared by a law clerk or a judge.) Also, in practice, the deputy would stop an attorney interfering in the middle of a hearing, so unless a lawyer managed to get past the deputy, the above scenario would never happen in an open session.

I was a little stumped on this one, because the question required some background information about the judge's preferences, type of hearing, etc. I answered that I would pick up the phone (if it's ringing, it might be distracting, so I thought I should pick it up), tell the caller court was in session, and s/he should leave me a voicemail or call back later, and then ask the lawyer to give the deputy a note with his or her issues (usually, the deputy passes notes between counsel and the clerk). But I still have a problem--I've missed the judge's order, and it's the clerk's job to make sure the judge's order is recorded properly.

I should have answered that I would check with the court reporter when the open session finished, but that answer didn't come to me, and not all hearings have court reporters. So I answered that I would make a note about the line number of the case and check the file later to see what happened. If the file was unhelpful, I would ask the judge about the case. It wasn't a great answer, but the question was unduly vague. In practice, the courtroom clerk would know whether he or she could interrupt the session and ask the judge a quick question, or use some other method blessed by the judge.

The last item asked me if I had any questions or comments. I said that while I wouldn't actively volunteer any information, I would be in a position to assist the court when it came to diversity because of my experience dealing with so many different groups of people. I've heard judges grossly mispronounce names and have seen other judges lack basic understanding about particular cultures, and it's embarrassing to everyone involved. (Well, at least it would be embarrassing if the judge had the empathy or knowledge to know that s/he had made a mistake, but some judges don't have the highest emotional IQs. Remember: they used to be lawyers--a generally prickly lot--and now they're lawyers with political connections and pensions--meaning they've upgraded to satisfied, powerful, and prickly.)

I also indicated I had a Westlaw contract up for renewal in two days, and asked whether I would hear back before then. This question created a tizzy. One of the interviewers smiled ominously. Tracey H. seemed put off. I'm not sure if any of them knew that Westlaw legal research contracts usually have to be renewed for one or two year periods and have much different pricing based on the contract length. Basically, unless I could figure out if I had been eliminated or hired prior to Friday, I ran the risk of spending several thousand dollars on a contract I might not need to use. In a normal interview, a company would probably say, "Well, we have other candidates to evaluate and other steps to go through, and we weren't planning on deciding the finalists so soon, but we'll try to get back to you as soon as possible." That's what a normal private employer would do, but this is the government. They don't have to give a damn.

On the way up, I asked Tracey H. about the number of positions available. She said it depended, which seemed sort of vague, especially because she'd been so chatty previously. (I am speculating, but I don't think the court knows the expected start/hire date for the job, or she would have been more specific.) She also said the next step would be to narrow the field to seven candidates, and then there would also be a hands-on test. On the way to the interview, she shook my hand, but on the way out, she did not shake my hand. My last question had definitely changed the tenor of the interview, and I don't expect to make the final cut--even though my initial test score was most likely in the top five, and no one else applying probably has a law degree. Now, is it possible my last question gave off a presumptive vibe? Absolutely, but nothing up to that point indicated that it would take four to five months (or more) to choose someone for an admin position. Besides, this is the government, not a private company--if they're spending taxpayer funds (some of which I've contributed), should they really be acting as if I'm being presumptuous by asking a simple question?

After the interview, I left the HR specialist a message thanking her for her time and telling her I appreciated her professionalism and her colleagues' professionalism. I also asked when applicants would need to be available if they made the next cut, and when the expected start date would be for the eventual hiree. I said I wanted to make sure I would be available if I managed to make the next step. Over 48 hours later, I've received no return phone call.

Oh, I almost forgot--aside from my experience with diverse groups, I am a "four-fer"--a minority based on religious, ethnic, immigration, and other status.  While the court loves talking about diversity, at the end of the day, it's still a breath of fresh Orange County, California when it comes to visible positions. There's nothing necessarily wrong with having a slice of country club O.C. in the middle of San Jose, California, but why persist with the disingenuous diversity talk? Why not be honest and tell people that the government isn't looking to hire based on merit, but other qualities, like social agreeableness? God forbid if an employee might rock the boat and offer new ways of doing things. I used to wonder why Santa Clara County Superior Court has been behind the curve on multiple issues. It adopted online tentative rulings very late (much later than Placer County), still doesn't have its orders and pleadings online like Alameda County, and recently incorporated a new judicial mediation program that Santa Cruz County had at least five years ago.

At the end of the day, if I don't get the job, I will be fine; however, I'm worried about the unemployed person who applied for the clerk job, is almost at the end of his or her benefit period, and is waiting for a decision. The court closed applications for the clerk position back in mid-June 2010. It doesn't take much time to grade a scannable multiple choice test, so why would it take four months or more to hire a clerk?

And that's when it hit me. Government jobs are not based on need, but on budgetary considerations. The unions demand money for votes, the state provides money, the money has to go somewhere, and if someone isn't hired right away, there are no real consequences to the government entity. Perhaps some work takes a little longer to complete, but the government can take its sweet time because it generally provides non-essential services.

In contrast, a private business usually won't hire someone unless it has a specific need, so when it wants someone, it usually completes the process as soon as possible. That's because a private business can terminate the employee if s/he isn't a good fit before the usual three months probationary period and hire someone else. As for job protection, in the real world, almost no one fires a person who can produce. That's why so many managers get away with murder--the company may have to pay tens of thousands of dollars in settlements, but as long as the manager produces, you don't want him leaving to your competitor.

The fact remains that most government workers do not produce or sell anything, which allows them to avoid accountability. If you don't make or sell anything, how can someone judge your performance? (Other than talking to a manager, who has no power to discipline anyone outside of complex union rules, there isn't really a way to effectively complain about a government employee's performance.) Why, then, should I be surprised if the courtroom clerk position doesn't seem to have a definite hire or start date, and the hiring process seems based more on subjective qualities than my test score, education, and experience?

While I realize every job requires people who can fit into the organization, government union jobs tend not to have clearly measurable performance metrics, so unions can prioritize subjective factors over merit. Another way to analyze the union hiring problem is to think of a world where jobs are determined primarily on subjective criteria. In that world, Mike Huckabee has just as much of a chance of getting the science job as Stephen Hawking, because if the objective test is too easy, Hawking has no real advantage over Huckabee when it comes to proving his superior scientific knowledge. In fact, Hawking is actually disadvantaged by the entire process, which weighs the subsequent interview more heavily than the earlier objective test. (By the way, I'm sure we all know that California teachers' unions love the current system, where there is no way to judge their teaching abilities. Recently, because of the teachers unions' desire to maintain the current non-accountability system, California kids lost millions of federal dollars--again. See Race to the Top article.)

You see, union jobs are like gifts, and the hiring committees view them as such. They know they won't get props for hiring the most talented person, because there isn't a way to measure performance accurately. So they focus on hiring someone agreeable, who may have few other options, and who isn't necessarily the most qualified.

Also, since public sector unions deal with OPM all the time, why should they bother getting the most bang for the buck? After all, it's not their money, and if they hire someone with new ideas or an exceptional work ethic, s/he might show up everyone else. In short, government hiring committees have no incentive to act quickly or to hire the most talented person. For taxpayers, that means if they're lucky, they get an above average employee, and the most talented applicants go elsewhere.

Why should we care? First, there's the basic fairness issue. When a recession hits, a terrible public sector worker has more job protection than an excellent private sector worker--even though the private sector pays for public employees' salaries and benefits.

Second, when a new government employee is hired, taxpayers are really paying for two people--the person and his/her pension. Stated another way, the money paid for the person's pension could be used to hire a new person thirty years down the road, so assuming finite resources, each new government employee takes a job away from someone else in the future. Even if we reform the current system, at least one generation will suffer the trillion-dollar consequences of past pension promises. See Bloomberg article, here: "The effects of altering the [pension] system are limited because most costs arise from benefits promised to workers who are already retired, and wouldn’t be affected by changes to benefits for current employees." In short, promises already made to public sector unions are so large, the government unions have irrevocably harmed at least one generation of Americans.

In an era of declining American birthrates, it's not feasible to have a system where a taxpaying adult is on the hook for someone else's pension even as s/he suffers the loss of a potential job because of the diverted tax revenue used to pay for that pension. If we continue to rely on immigration to maintain a replacement population rate (which helps support future pension obligations), we must ensure our public schools are the best in the world--and that is clearly not the case in California. (In the distant past, America was able to put new immigrants in the coal mines or other manual labor jobs and then their kids would take over their manufacturing jobs, but that system no longer exists. Today, formal education is necessary to move immigrants into upwardly-mobile status.)

Most developed societies become victims of their own success. In Europe, where unionization is heavier than in the States, we can already see major problems. Young people have difficulty finding jobs, even in skilled professions like medicine. At the same time, most native-born European citizens don't want to do menial jobs, so they import persons from poorer countries to maintain their way of life (or, if you're Japan, you stick your head in the sand and continue to oppose immigration...and build human-looking robots). While I support immigration, new immigrants tend to bring new ways of doing things, which upsets the "natural" order and creates tensions--unless a country has the resources and the flexibility to take a long-term view, i.e., to judge immigrants by whether their children assimilate.

To summarize, the natural progression of modern successful societies is as follows: industrialization; women receive equal rights; birthrates decline; unions are eventually formed; taxes are increased to support government union jobs [and tax or other benefits primarily accruing to natives]; native-born citizens refuse to do certain work, requiring the importation of poor people; the new immigrants create cultural tensions; and either society adapts and is able to welcome the new immigrants like the United States has done, or it fails to assimilate the new immigrants and begins a slow, steady decline, like Europe. One common theme in the collapse of a country is public sector unions. See Niall Ferguson's The Ascent of Money, page 104:

"The Weimar tax system [which led to massive inflation, making the German mark basically worthless] was feeble, not least because the new regime lacked legitimacy among higher income groups who declined to pay the taxes imposed on them. At the same time, public money was spent recklessly, particularly on generous wage settlements for public sector unions."

[Bonus: "As its economy stagnated in the early 2000s, Germany increased competitiveness by working with unions to keep wage increases below productivity growth. Greece, its economy fueled by the cheap government loans that came with eurozone membership, saw labor costs soar [as Greek unions negotiated wage and benefit increases above actual economic growth]." (National Geographic, March 2015 pp. 109)] 

Public sector unions bring with them a culture of no merit, no production, no accountability, and OPM. The larger they get, the more society is forced to rely on higher taxes and immigrants to move the country forward. California has been very lucky to receive many hard-working, smart immigrants in the past thirty years. Without recent immigrants and their children, Yahoo (YHOO), Google (GOOG), eBay (EBAY), Sun Microsystems, and Apple (Steve Jobs is biologically half-Syrian or half-Lebanese) would not exist.

I don't know whether I've been rejected for the court job. When I get the next letter, I'll probably just throw it away. I have no interest in working for an entity that places significant decisions in the hands of four people who don't seem to understand the issues facing a small business with annual contracts and who don't seem intent on moving the hiring process forward in a timely manner.

I'm happy to note, however, that there was a silver lining to the interview. It reminded me that I spend each day trying to help people resolve problems, and I am accountable to my clients every single moment. Even if my future kids have crooked teeth because Daddy doesn't have dental benefits, at least I can tell them that I did my best. Plus, if I had received the clerk position, who knows whether I would have been able to fit into the courthouse's union culture. At least as the owner of a small business, I can strive to make sure that every person who comes into my office is treated honestly, openly, and respectfully--just like I've been doing for the past six years. Now if only the courthouse could meet my standards.

Thursday, August 26, 2010

Fahrenheit 451: Bradbury on Popular Culture

Ray Bradbury:

I wasn’t worried about freedom, I was worried about people being turned into morons by TV. See, we’ve never had censorship in this country, we’ve never burned books....Fahrenheit’s not about censorship, it’s about the moronic influence of popular culture through local TV news, and the proliferation of giant screens, and the bombardment of "factoids."

There you go.

Wednesday, August 25, 2010

Little Boxes

And the people in the houses
All go to the university,
And they all get put in boxes,
Little boxes, all the same.
And there's doctors and there's lawyers
And business executives,
And they're all made out of ticky-tacky
And they all look just the same.

It's a modification of this Malvina Reynolds song, made famous by Pete Seeger.

Speaking of boxes, H. L. Mencken wrote in The American Mercury (April 1924) that the aim of public education is not

to fill the young of the species with knowledge and awaken their intelligence...Nothing could be further from the truth. The aim...is simply to reduce as many individuals as possible to the same safe level, to breed and train a standardized citizenry, to put down dissent and originality. That is its aim in the United States.

The more things change, the more they stay the same? Sigh.

Team Mark Cuban

Interesting battle between two major bloggers and superstars. Barry Ritholtz compliments Mark Cuban but also points out that Mr. Cuban seems to be contradicting himself unless he has an edge. The original thread is here. I wanted to share my thoughts, and while I am usually on Mr. Ritholtz's side, in this case, he's missed the big picture.

Mr. Cuban has always maintained two overall themes: 1) the stock market has morphed into a casino, far from its original purpose, which was to help entrepreneurs expand their businesses; and 2) financial advisors and Wall Street have so many conflicts of interest, they are inherently dishonest and no longer consider retail investors’ interests. (Quite frankly, both of these themes are 100% correct.)

Mr. Ritholtz's comments seem to hold Mr. Cuban to a strange standard, i.e., If Cuban says the market is rigged and you should be in cash, bonds, or CDs, what exactly is his "edge" in giving this investment advice? The problem is that you don’t need an “edge” to be in cash. For most non-traders, the point of having a cash-centric portfolio is to avoid volatile investments. Mr. Cuban was just pointing out that the average retail investor is usually at a disadvantage in the stock market, meaning s/he should be in cash or another investment that is not subject to the whims of Wall Street bankers.

Thus, criticizing Mr. Cuban for his lack of an investment “edge” seems nonsensical, because he’s not giving investment advice–as Mr. Ritholtz himself admits. Mr. Cuban is just trying to guide people to a savings vehicle that does not require an edge. Now, if someone wanted to criticize Mr. Cuban in non-straw-man fashion, s/he could mention two things:

1) in the absence of 8% money market accounts, bonds and CDs, most of us rely on stock market gains to fund our retirements, because most of us don’t have billions of dollars in the bank; in other words, after a certain financial point, one does not need to subject himself to the whims of Wall Street (I still remember Ted Turner saying that he keeps all his money in Treasuries). However, since most people are not in Mr. Cuban’s financial position, his advice seems questionable in the absence of persistent deflation; and

2) being in cash has been a terrible move over the long run (30+ years) due to inflation, and therefore Mr. Cuban’s advice is not helpful to retail investors who lack billions of dollars for retirement. In short, Mr. Cuban’s 10 year time horizon is too short and conveniently selective, because under Bogle’s, Graham’s and Buffett’s theories, investors should be prepared to hold stocks for 30+ years to smooth out returns.

Perhaps Mr. Ritholtz is trying to start something with Mr. Cuban to get more readers. As an avid fan of both men, I have no problems with his strategy. I also continue to wonder if the average long-term investor is best served by Mr. Cuban's all-cash advice.

Update: Kedrosky interview (6/29/10) with Mark Cuban here:

So that’s when I kind of gave up my widows and orphans approach and started trading stocks and that was the early 90s and it worked out very, very, very well for me. I think I took that $3 million, which is about $2 million after tax, and turned it into about 10x, just having boom years. Which a lot of people did in technology in the 90s and that was just, you know, from probably 1990 to 1995.

Ah, the 90's. Good times.