Wealth Distribution

From UC Santa Cruz Professor G. William Domhoff:

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

Wealth Concentration: As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers)

Estate Tax: Figures on inheritance tell much the same story. According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% of Americans receive $100,000 or more in inheritance. Another 1.1% receive $50,000 to $100,000. On the other hand, 91.9% receive nothing (Kotlikoff & Gokhale, 2000). Thus, the attempt by ultra-conservatives to eliminate inheritance taxes -- which they always call "death taxes" for P.R. reasons -- would take a bite out of government revenues for the benefit of less than 1% of the population.

You should read the entire article (click on link above). The charts are especially fascinating.

Update: per the Federal Reserve Bulletin (September 2014, Vol 100, No 4) aka the 2013 Tri-Annual Survey of Consumer Finances from 2010 to 2013, about 1 in 5 American families earns over 100,000 USD each year.

As of 2013, if you are between 18 to 35 years old and your net worth is more than 10,400 USD, you are better off than half of all American families in your age group.  

Free Book on Investing

I don't know how long the offer will last, but you can click on THIS LINK for a free book by Burton Malkiel: The Elements of Investing.

Back in the day, Mr. Malkiel's book, A Random Walk Down Wall Street, heavily influenced my financial education (even though I disagreed with his central thesis on EFM). Apparently, this new book is for beginners, but if Mr. Malkiel is involved, it should be fun to read for everyone.

Stranger than Fiction

[Published March 11, 2014]

"Let no young man choosing the law for a calling for a moment yield to the vague popular belief that lawyers are necessarily dishonest. Resolve to be honest in all events; and if, in your own judgment, you cannot be an honest lawyer, resolve to be honest without being a lawyer. Choose some other occupation." -- Abraham Lincoln, from another era. 

I can talk generally about an academia-governmental complex forming, not just with student loans (which the government profits from), but the idea that schools no longer teach practical skills and therefore rely on their ability to make connections, many of whom are governmental, therefore rendering schools less likely to criticize government overreach.  

I can talk generally about the public’s mistaken assumption that all judges are worthy of being trusted merely because a politician gave them a title. (Riddle me this: people hate politicians and lawyers, but respect judges, who are just former lawyers. Speaking of which, forgive me this soapbox moment: stop electing D.A.s to the bench and look instead at public defenders and private civil law practitioners, especially at smaller law firms. You’re far more likely to see a judge on a civil case than a criminal case if you’re a law-abiding resident, and you want your judge to have experience with different areas of civil law. Finally, when you elect a D.A., you’re often electing someone who is beholden to the police union. Yet, the point of having a separate judicial branch is to create independent oversight, especially over the police.) 

I can talk about the lack of diversity on the local bench—18 out of 89 judges are people of color, in a county where about 37% of the population (including myself) are immigrants. 

But I'll talk about the American public's failure to understand two crucial elements of America's success: first is immigration. On 9/11, some people think of burning buildings, Bradley/Chelsea Manning, Iraq, or Bush, but me, I think of a poem:  "I've promised myself, even if I'm the last snowman, that I'll ride into spring on their melting shoulders." As I wrote, “[The poem] represents the immigrant experience and persevering through difficulty to ensure that previous generations…did not toil in vain.”  In other words, we’re all immigrants here in America, though some of us are thrice-removed, trying to find springtime.  Corny, yes.  I stand by it.  As far as I’m concerned, America is successful because of our openness to immigration.  That iPhone?  Steve Jobs’s biological father was from the Middle East.  eBay?  Persian guy from France. And so on. 

Second is the principle that public and private spheres are different and must remain so. The failure to understand this concept has caused many government employees to misunderstand their role--namely, to serve the public and, in higher positions of discretion, to have integrity. We seem a long way from the 1970s bumper stickers of "Question Authority." We are going in the wrong direction.

I’ll close with one of my favorite legal quotes from then-law-student (later Supreme Court Justice) Louis Brandeis:

That the individual shall have full protection in person and in property is a principle as old as the common law; but it has been found necessary from time to time to define anew the exact nature and extent of such protection. Political, social, and economic changes entail the recognition of new rights, and the common law, in its eternal youth, grows to meet the new demands of society. Thus, in very early times, the law gave a remedy only for physical interference with life and property, for trespasses vi et armis. Then the ‘right to life’ served only to protect the subject from battery in its various forms; liberty meant freedom from actual restraint; and the right to property secured to the individual his lands and his cattle. Later, there came a recognition of man's spiritual nature, of his feelings and his intellect. Gradually the scope of these legal rights broadened; and now the right to life has come to mean the right to enjoy life, -- the right to be let alone [by the government]; the right to liberty secures the exercise of extensive civil privileges; and the term "property" has grown to comprise every form of possession -- intangible, as well as tangible.

           -- “The Right to Privacy,” Harvard Law Review, Warren and Louis Brandeis, 1890.

Update: though Brandeis was speaking of government in relation to people, nothing in his comments disallows stringent regulation against groups, nonprofits, and corporations. 

Law: Juries, Verdict Forms, and Keyser Soze

Rule #1 as a plaintiff. Strike all the engineers from the jury pool.

Jurors should remember: you don't have all the information in a trial, and you don't know how the legal process works. Just because a lawyer doesn't spend time trashing the other side, it doesn't mean the other side is angelic. Sometimes, we cannot introduce evidence about how bad the other side is, even if he's bashing our side. Sometimes, judges rule that one side can say certain things, and we can't respond in kind. That means if we mention certain things, the judge can declare a mistrial, and we have to do the whole trial over again.

Don't make any assumptions. Just look at the evidence. Don't assume that you're smarter than everyone else, and you're able to see something that isn't actually in front of you in the form of testimony or a document.

Also, if you do rule against a plaintiff, it usually means s/he has to pay the other side's costs. Sometimes, if you're not sure about who's right, the best thing to do is to rule for the plaintiff and give him or her one dollar.

For lawyers: don't assume that a plaintiff will always benefit from a general verdict form instead of a special verdict form. (A special verdict form forces the jury to think hard about each element of the case, while a general verdict form basically asks, "Is he liable for fraud? yes/no.") By giving the jury a simplified general verdict form instead of a special verdict form, jurors were able to avoid thinking hard about the case.

Also, a simplified form allows the foreperson to advance her/his own ideas about the law, even if s/he is completely wrong. Here, we thought the case was already complicated enough, so all of us agreed on a general verdict form to make things easier on the jury. Unfortunately, the general verdict form allowed the jury to bypass thinking analytically about the case and to decide based on their general feelings and the foreperson's own ideas about the law. For example, after the trial, one juror (the foreperson) said, "The other side's conduct wasn't flagrant enough." I was thinking, "Dude, that's not the law. There's no law that says, 'Only flagrant conduct is illegal,' or "The conduct must be flagrant to be illegal.'"

More advice for lawyers: don't always take the high road. If the other side is bashing your client and name-calling, try to find some way of countering without causing a mistrial. Jurors will choose sides based on whom they think is the good guy or the bad guy, regardless of the law. For example, if the other side hasn't bifurcated punitive damages, bring up the value of his home or another large asset if he keeps saying he's judgment-proof. Or bring up his unpaid debts. Or his or her massive wealth. You need something to make the jurors think they're dealing with someone who can handle a judgment or who deserves a judgment.

On the other hand, consider dropping punitive damages if you don't have a slam dunk situation. You won't be able to bring in any evidence of the defendant's net worth or financial information, but the punitive damages portion will probably get bifurcated anyway (thereby preventing you from talking about the other side's financial situation, bad debts, massive wealth, etc.). The upside is that you won't have to prove malice or oppression. If you try to show malice or oppression, jurors may get confused about the burden of proof on the original claim. For example, they may think that negligence requires malice (it doesn't). Lawyers may want to tell a jury in closing argument whether a specific claim requires specific intent.

I am going to need some time to get over this one. I will not be posting for a while.

P.S. Note to judges: if you allow the other side to bring up stuff about atomic bombs or to equate a foreign government's actions with an individual, no matter what the result, one party will think the process was tainted. Telling someone the remedy for any resulting prejudice is a mistrial--where a party and his lawyer have to come back and do everything all over again--is fair but somewhat impractical when one side is pro se and essentially unemployed, and the other side is paying for a lawyer and expert witnesses. I don't want to focus too much on the national origin issue now, but I might write about it later. At the end of the day, I feel the jury treated my client, an educated U.S. citizen of Middle Eastern descent, as not fully American. Why would they do that? Why would they side with the lawyer who had misrepresented facts all week? Could all the talk about atomic bombs and religion have something to do with it? Was it something else? Was it a combination of different factors, some permissible and some impermissible?

(And yes, I did ask the court to exclude testimony and comments about foreign governments and international affairs. The court wasn't sympathetic to my argument that mentioning the Iranian government and current events would result in prejudice. I argued that allowing such comments and testimony would be unduly prejudicial when the media is currently hyping an Iranian nuclear threat and when the primary images of Iranians in the mainstream media are of the much-hated Iranian president. The court wasn't swayed by my argument. The court did exclude evidence of my client's international travels, but the defendant still mentioned it during the trial. The judge stopped the trial, called us over for a sidebar, and warned the defendant that he was in contempt and should not mention excluded evidence again. The defendant went back to calling my client a "professional plaintiff," which was somewhat hilarious to hear from a plaintiff's lawyer. Also, I don't know if this should make me feel better or worse, but I believe the judge was sincerely fair. I still believe we were very lucky to get an excellent judge.)

Update: I forgot to add one more interesting tidbit. After the trial, a judge can ask the jurors how they voted if requested by a party. This is calling "polling" the jurors. According to the one juror who voted in our favor, someone switched her vote during polling. So one juror decided one thing in the jury room and another thing in public. Why would someone switch her vote?

Keep in mind, other than the defendant's/lawyer's own testimony, no other evidence was offered to prove my client had a bad motive for bringing his current lawsuit. The defendant even said at one point, "You're slicing baloney," when I asked him about the alleged conversations between himself and my client. Two other lawyers who were in the room and heard defendant's allegations found them to be totally baseless and indicated the defendant was not believable. Under cross-examination, the defendant testified that he and my client had a 2 to 3 hours conversation about my client's ex-wife, my client's search for an Iranian wife, and Middle Eastern politics. Later, the defendant suddenly added that my client had discussed the Holocaust during this conversation. I asked about the percentage of the conversation dedicated to personal issues, Middle Eastern politics, and the Holocaust. He answered, "50/50." I asked him how three different topics could be "50/50," which spurred his "slicing baloney" comment. During this part of his testimony, the defendant mentioned Iran's conference against the Holocaust and said the Holocaust is called the "Hollow Holocaust" in Iran. No one in the jury appeared fazed at all, perhaps because by that point, they were tired and had been desensitized by the earlier comments about nuclear bombs and government actions. My client is a clean-shaven U.S. citizen who has been living in America since 1978.

Furthermore, the defendant once accused a sitting judge of being anti-Semitic, a claim that was rejected. Defendant's allegation of judicial anti-Semitism occurred in a separate case, and I didn't want to risk a mistrial/contempt by mentioning it after the judge ruled that we could not discuss unrelated cases.

The one juror who voted in our favor on the legal malpractice claim? A retired ex-Air-Force sergeant. Post-trial, when the jurors learned more information about the defendant, they appeared shocked. The retired ex-Air-Force sergeant even angrily exclaimed, "I told you so," to one of the other jurors.

Union Influence

Scott Herhold, on San Jose's public safety unions and the financial strain they cause:

[What kind of city is San Jose?] Is it the one that gave police a series of nice little pay boosts after 9/11, bumps that take the average wage to more than $114,000 after five years on the job?

Is it the one that, thanks to an arbitration system it agreed to in the 1980s, is paying cops and firefighters 90 percent of their salary as a pension after 30 years?

In the past nine years, driven by public safety, the city's employee costs — wages and benefits — have increased by 64 percent. That's roughly 7 percent a year. I know I haven't done as well.

Wow. Interesting article.

Who's Running the Show?

From SJ Merc, Internal Affairs column, March 14, 2010:

A new report from the Fair Political Practices Commission — California's elections watchdog — mines years of campaign and lobbyist reports and turns up this nugget:

Over the past decade, 15 special-interest groups have spent more than $1 billion in an all-out bid to influence the state's affairs. They spent that money to sink ballot initiatives and boost candidates. They fed it directly to political parties' war chests. (Democrats came out slightly ahead of Republicans.) And they spent hundreds of millions wining and dining lawmakers and other state officials.

Almost a fifth of the cash came from one group: the politically powerful California Teachers Association ($211.8 million). The teachers union was followed by an affiliate of the Service Employees Union International ($107.5 million), a pharmaceutical industry group ($104.9 million) and two deep-pocketed Indian tribes ($83.6 million and $69.3 million). Rounding out the top 15 are some other big names, such as Pacific Gas & Electric, Chevron, AT&T and Philip Morris. (For the full report, go to www.fppc.ca.gov/reports/Report38104.pdf.)

So when we talk about special interests influencing state governments, remember: it's the teachers and other unions who have provided the most grease to Sacramento. Is it any wonder Sacramento provides teachers and unions with special benefits unavailable to most private sector workers? I'll end with this gem from the article:

"The conclusion is inescapable," reads the report's executive summary. "A handful of special interests have a disproportionate amount of influence on California elections and public policy."

Youth Basketball Season Over

Today is the last day of the youth basketball season. I hope my team wins, but they're up against a good team. After today, I'm not sure what I'm going to do with my 2010 Saturdays.

Update: my team lost, but all of them had fun. As usual, I had one parent who expected me to be overly tough with his son, even though his son just didn't have the physical development necessary to do certain things. Boys tend to develop in quick spurts, whereas girls seem to have a more steady physical progression. On any given team, one boy could be miles ahead of the other boys in terms of athleticism, while another boy could have major difficulty learning to pivot or even to dribble. In any case, I'm not going to bother a kid on the last day of the season if he's doing something unconventional. He can always refresh his skills the next year, right? Sigh.

On the bright side, two parents left me nice messages thanking me for coaching.

Santa Clara County's Diversity

Just some fun links re: immigration:

http://www.nytimes.com/interactive/2009/03/10/us/20090310-immigration-explorer.html?hp

http://projects.nytimes.com/immigration/enrollment/california/santa-clara

George Washington Quote on Religion

From THIS LINK, General Washington's statement 'To the General Committee, representing the United Baptist Churches in Virginia':

If I could have entertained the slightest apprehension that the Constitution framed by the Convention where I had the honor to preside might possibly endanger the religious rights of any ecclesiastical society, certainly I would never have placed my signature to it; and if I could now conceive that the general government might ever be so administered as to render the liberty of conscience insecure, I beg you will be persuaded that no one would be more zealous than myself to establish effectual barriers against the horrors of spiritual tyranny and every species of religious persecution. For, you doubtless remember, I have often expressed my sentiments that any man, conducting himself as a good citizen and being accountable to God alone for his religious opinions, ought to be protected in worshiping the Deity according to the dictates of his own conscience. While I recollect with satisfaction, that the religious society of which you are members have been, throughout America, uniformly and almost unanimously the firm friends to civil liberty, and the persevering promoters of our glorious revolution, I cannot hesitate to believe that they will be the faithful supporters of a free yet efficient general government. Under this pleasing expectation, I rejoice to assure them that they may rely upon my best wishes and endeavors to advance their prosperity,'

I am, gentlemen, your most obedient servant, GEORGE WASHINGTON.'

"The horrors of spiritual tyranny"? I can't believe I haven't seen those words before. Beautiful language, isn't it?

Roger Ebert on the Gathering Storm

Roger Ebert inspired by Thomas Friedman leads to an interesting post:

http://blogs.suntimes.com/ebert/2010/02/the_gathering_storm.html

Here is the comment I tried to post on Ebert's blog:

I am agog at how many people have shared their stories and opinions. As for me, I don't have much to say except this: no system will work, including universal or for-profit healthcare, unless people are ethical.

Today, in almost every profession, incentives tend to push people, even good ones, into poor decisions. For example, if you're a doctor who gets reimbursed based on the number of tests you order, why not order an extra one? Does this attitude change under universal healthcare? Of course not. The only difference is who pays for it.

Conservatives understand human nature's tendency to game systems and are afraid that universal healthcare represents a massive opportunity for dishonest people to game the system and pass the buck (literally :-) Liberals, on the other hand, see the poor man in the street dying from a treatable chronic disease, or the cancer patient who can't get treatment, and are outraged. They want things to change. Neither side seems to understand that the incentives in healthcare need to change in order to promote ethics and a sustainable system.

When I see people argue in broad terms, I see no opportunity for real agreement. I am reminded of Yates: "Turning and turning in the widening gyre..."

Random Note about the NBA

Matt Barnes = the new, improved Raja Bell. If you're an NBA fan who watched the Orlando/Lakers game yesterday, you know what I'm talking about. By the way, Mr. Barnes is a Santa Clara, CA native. So Steve Nash and Matt Barnes...representing Santa Clara, California. I guess Gary Payton and Jason Kidd would represent Oakland, CA. I'm not sure who would represent San Francisco, CA.

Barry Ritholtz on Madoff

As usual, Barry Ritholtz gets it right:

http://www.ritholtz.com/blog/2010/03/what-were-the-actual-losses-in-madoffs-fraud/

Love the example about the trillion dollars. Doesn't it seem that "trillion" will be 2010's word of the year?

Fiscally Conservative Democrats -- Not Necessarily a Contradiction

During one of the worst recessions in modern history, the senior citizens' lobby wanted to take $250 from working people and put the money into their own pockets. The measure failed, because the following Democratic Senators exercised restraint:

Bayh (D-IN)
Bennet (D-CO)
Carper (D-DE)
Feingold (D-WI)
Feinstein (D-CA)
Landrieu (D-LA)
Levin (D-MI)
McCaskill (D-MO)
Nelson (D-NE)
Shaheen (D-NH)
Udall (D-CO)
Warner (D-VA)

Both of Colorado's Senators appear to have good financial sense.

Dianne Feinstein seems to have enough job security to vote against the lobby's demands. Sadly, Barbara Boxer voted for the bill and seems to be doing everything she can to lose to Republican Tom Campbell in the next California election.

Russ Feingold did the right thing (he seems to do that a lot).

To Bernie Sanders from Vermont, who sponsored the bill: you need to go back and re-take basic math. No cost-of-living adjustment means there was no significant reported inflation. If prices in general didn't go up, why do benefits for senior citizens have to go up? We already expanded prescription drug coverage under the Bush administration, and senior citizens are eligible for Medi-care. What, exactly, is the problem, as long as senior citizens don't spend excessively? If you have a beef with the reported inflation numbers, then you go and address that issue, but please don't run straight to the taxpayers every time you get a harebrained idea.

Teaching Kids (and Adults) about Natural Gas

Even though the following webpage is for kids, I think it's an excellent way to explain natural gas to anyone, including adults. More after the jump, courtesy of the federal government:

http://tonto.eia.doe.gov/kids/energy.cfm?page=natural_gas_home-basics

34K for Kindergarten Tuition?

The rich are not like you or me. $34,000 for kindergarten tuition? More after the jump:

http://www.bloomberg.com/apps/news?pid=20603037&sid=aMSOxnqW3VQs

Tuition at Dalton [Kindergarten]...is rising 3.5 percent to $35,300 for the 2010-11 school year. If you ask me, these kids would do just as well if they went to a private Montessori school.

RIP Theresa Pfeiffer, Esq.

A good woman and a good lawyer, Theresa Pfeiffer, recently died. I saw her in court and in seminars several times, and she was always so dignified--gentle yet strong. When we talked, she always left an impression with her beautiful blue eyes and soft voice. I couldn't read the obit, because I started to tear up.

RIP Theresa Pfeiffer.

Day of Action for California Public Schools? Seriously?

Apparently, there's going to be a Day of Action for California public schools tomorrow, March 4, 2010. Here's a response I wrote regarding this so-called "Day of Action" to someone who was protesting "public education cuts":

Correct me if I'm wrong, but California's Constitution still requires that public schools receive first crack at any state revenues, right?:

From all state revenues there shall first be set apart the moneys to be applied by the State for support of the public school system and public institutions of higher education.

So when you refer to "cuts," you mean that in the midst of a recession, tax revenue declined across the board, right? Not just for teachers, but for most government programs, right? (The less taxes/revenue a state receives, the less money it has to fund all government programs, including education.) That means in order to maintain education spending at the same levels as last year or the year before, some other government program has to be cut, right? So if you really think about it, anyone complaining about "cuts" to education is really asking people outside the public education sector to give public school teachers and public schools preferential treatment, even when the money to maintain other government programs and services doesn't exist.

Without spending cuts, including cuts to education, California has only two other options: raising prices (i.e., UC tuition increases); or forcing other people to pay more taxes (e.g., the higher sales tax, which disproportionately hurts the poor). Am I missing something here? I'm sure we all wish we could fund wonderful government programs, including education programs, but if the money isn't there, then what do we do? How much more can we expect individual taxpayers in California to pay so that teachers, schools, and teachers' unions benefit?

FYI: according to the California Budget Project, "In 2007, more than four-fifths (82.9 percent) of statewide spending for schools went to pay for the salaries and benefits of teachers and other staff."

Another example: let's assume like the state of California, I have no savings. If I make less money in 2009 than I did in 2008, and I want to maintain the same level of spending I had in 2008, what do I need to do? I have to borrow money, i.e., use my credit cards. A state, however, has no credit cards. If it wants money, it has to issue bonds, sell assets, or get loans to raise revenue. Unfortunately, California is in the hole $20 billion, and it can't sell $20 billion worth of assets. It needs to borrow money, which is another way of saying it needs to borrow against the future income of its residents, namely, the kids.

When educators say they want more money to help the kids or to invest in children, remember: they are actually saying they want to take money away from the next generation of kids to help themselves. When someone says, "Think of the children," you should say, "Darn right, we need to think of the children. That's why we need to cut spending, so we don't have to borrow money from our kids to fund government programs." I'm just sayin'.

Counterpoint: California Spends Less on its Students.

Bill Simmons is Right

THIS Bill Simmons article on the NBA's woes is spot on. David Stern and the NBA's owners need to sit up and pay attention.

Obama Not Helping the Unemployed?

Interesting link about the job market and excerpt below:

http://esr.ibiblio.org/?p=1752

We’ve spent the last seventy years increasing the hidden overhead and downside risks associated with hiring a worker — which meant the minimum revenue-per-employee threshold below which hiring doesn’t make sense has crept up and up and up, gradually. This effect was partly masked by credit and asset bubbles, but those have now popped. Increasingly it’s not just the classic hard-core unemployables (alcoholics, criminal deviants, crazies) that can’t pull enough weight to justify a paycheck; it’s the marginal ones, the mediocre, and the mildly dysfunctional.

If that doesn’t scare the crap out of you, you’re not paying attention. It’s a recipe for long-term structural unemployment at European levels of 10%, 15%, and up. What’s even crazier is that the Obama administration wants to respond to this problem by…raising taxes and piling more regulatory burden on employers.

Raise the cost of something fungible, and demand usually falls. Raise the cost of hiring someone, and unemployment usually rises.

Must-Read Article on Crime Rates

Fascinating article on the crime rate--THIS ARTICLE is a must read. (Ron Unz, American Conservative, March 2010, "His-Panic") Below is an excerpt:

Personal experiences are no substitute for detailed investigation, but they sometimes provide a useful reality check. Since the early 1990s, I’ve lived in Silicon Valley, a region in which people of white European ancestry are a relatively small minority, separately outnumbered by both Asians and Hispanics, with many of the latter quite poor and often here illegally. On any given day, more than half of the people I encounter in Palo Alto are Hispanics from immigrant backgrounds. Yet my area of the country has exceptionally low crime rates and virtually no serious ethnic conflict. This confounds the expectations of many of my East Coast friends.

You should click on the link above and read the whole thing.

Interview with Accuray's Founder, Dr. John Adler

Dr John Adler recently left Accuray's (ARAY) Board of Directors. Below is his departure letter and a personal interview:

Friends and colleagues,

Many of you have asked why I withdrew from the Accuray board, and more recently, even stopped consulting for the company. Because of our friendship and your close involvement with Accuray, I know that I owe you an explanation, but until now my previous board status prevented me from saying much of anything.

The decision to leave Accuray stemmed from the fact that my vision for both the future of The CyberKnife technology and how business should be conducted increasingly diverged from management. My several year effort to serve as a constructive contrarian voice on the board and within the company at large was so unwelcome (by the CEO) that I was twice issued threatening letters by Accuray-paid lawyers, demanding silence and including allegations of defamation. As my voice was muted, I felt constructively terminated from providing any meaningful company leadership.

As the founder, visionary, and passionate spokesman for Accuray, I have felt deflated by this turn of events. But I am hardly the first company founder to be rebuffed, as so beautifully described in the above video excerpted from Steve Jobs’s 2005 Stanford commencement speech: Short: http://www.youtube.com/watch?v=kRt4VUv90Gw, Long: http://www.youtube.com/watch?v=UF8uR6Z6KLc

The realization that even an innovative business genius like him once felt “rejected” by “his” company, does provide solace.

Despite past events, I love what I do and remain energized by the possibility of helping to shape the still emerging field of radiosurgery. Even if our baby, the CyberKnife, is to date THE BEST radiosurgical instrument, I am convinced the future will bring yet better technology and even cooler clinical applications for precision radiation, and with this will come the potential to impact unimaginable types of disease and numbers of patients. However, if I am to be part of this future, I must find or create a partner who shares my enthusiasm for the field of radiosurgery and values my input. As I seek to make this transition, I urge you, no matter what, to remind yourself of my primary purpose. Thank you for your past and continued support.

Matthew Rafat's Interview with Dr. John Adler:

1. You recently left Accuray’s (ARAY) Board of Directors. Did you feel your departure was voluntary or involuntary? Without repeating statements you’ve published elsewhere, please explain.

For all intents and purposes my position at Accuray was “constructively terminated” over the past few years and I ceased to have any meaningful leadership role within the company or on the board of directors. For a long time I tried to be a constructive contrarian voice but Accuray’s current culture tends to mistake disagreement for disloyalty, and when coming from me, criticism was interpreted as merely the whining of a never-satisfied founder. Painful or not, it was time for me to move on and seek out or create a partner who valued my leadership and was genuinely interested in my vision for radiosurgery’s future.

2. When you first founded Accuray, what were your aspirations for the company and for CyberKnife?

At its inception, I dreamed Accuray could dominate the field of radiosurgery, especially the now rapidly emerging field of extracranial radiosurgery. A lot of my dream has come to fruition; a broad range of clinical applications, as first enabled by the CyberKnife, are now becoming ever more accepted. Hopefully someday it will be widely acknowledged that the formation of Accuray proved a decisive moment in this incipient, but very real, surgical revolution.

3. What do you believe are the main reasons CyberKnife has not experienced more widespread adoption within the medical community? How do you think Accuray could improve CyberKnife’s prospects?

Revolutions rarely happen in an instant, but rather take time for ideas to be understood and accepted. This is especially true in surgery. Today it seems unbelievable, but most of the leading hospitals in the 1800s resisted Joseph Lister’s advice for surgeons to wash their hands and sterilize their instruments before operating. Ideas and technology are not enough in themselves. For Accuray to effect meaningful change, the entire culture and eco-system of surgery and radiation therapy need to change in part, a process that involves longer term clinical outcome studies, training, government regulations, product design, the control of hospital budgets, professional and hospital re-imbursement, and more. Meanwhile, with a CyberKnife, we are talking about a very expensive product that crosses current medical specialty lines and requires the construction of a dedicated treatment facility. Moreover, one should not be surprised to realize that physician egos play a huge role at every level. Thrust in the middle of this incredibly complex and turbulent marketplace, Accuray has accomplished a lot over the life of the company. To my way of thinking it is unrealistic to have expected appreciably more success at this stage. Unfortunately expectations for Accuray were allowed to get way ahead of reality the past few years and this has engendered the current disappointment among investors with Accuray’s performance. However, I cannot emphasize enough that given the complexity of the radiosurgery marketplace, this is not a sprint but a marathon. Accuray is fortunate to have a head start because the CyberKnife is such an outstanding product. With the above understanding, it is important to build a business and company culture designed for the long haul.

It would be glib of me to suggest a few simple strategies and imply that they would miraculously transform Accuray’s prospects. It is going to be a long drawn out battle for market share over a decade or more, and to pretend otherwise is disingenuous. However this very realization in itself can help to guide corporate strategy. For example, developing the right long term allies is so critical; ultimately, salesmen don’t sell CyberKnifes, but one set of doctors, typically, but not always in academia, sells to another set of doctors. Moreover, a long drawn out battle implies being very mindful of your cash position. Meanwhile, one should avoid the frequent temptations of losing focus on your core product and customer base. Accuray’s success will be determined by literally thousands of decisions as it navigates the still undefined radiosurgery eco-system. Improving Accuray’s prospects will require a nuanced understanding of this emerging marketplace and deft hand on the leadership tiller. Management and board composition should have the requisite skills and background to make this happen. If Accuray is to succeed in its mission, it is not going to be enough for the board of directors to merely ensure that financial statements are clean.

4. Accuray may believe the medical data relating to CyberKnife patients isn’t yet sufficient to gain FDA approval. Without FDA approval, however, CyberKnife may not experience widespread adoption. This Catch-22 results because so many facilities rely on FDA approval prior to buying and using complex medical equipment. If Accuray’s current Board of Directors were to say that you are being impatient, and there is nothing they can do until CyberKnife has at least fourteen total years of post-operation medical data before FDA approval, what would be your response?

I don’t know that any response is required because I have never been at odds with the Accuray board over this general issue. However, it is important to point out that the CyberKnife has been cleared by the FDA for a broad range of clinical applications. Instead the issue to which you allude is not FDA clearance but governmental and private health insurance reimbursement. In this regard, for many years now I have tried to emphasize, and drive within Accuray, the organizational structures which can help CyberKnife users demonstrate through clinical outcome studies the benefits of radiosurgery for a range of clinical applications. So practically speaking I am among the converted. Moreover, if you are going to demonstrate clinical benefit at 5 years, it is going to take at least five years to produce credible research papers…there is no other way around it and you sometimes have to be patient. However, for many clinical applications, one can still make a compelling argument for CyberKnife radiosurgery today by cleverly utilizing shorter term data, as well as studies created by competitors.

5. In many cases, a company’s founder will cede control and guidance of his or her company in order to promote the company’s growth. eBay (EBAY) is one successful example of a founder accepting a more business-savvy CEO in order to maximize shareholder value. Why is your departure from Accuray different from the usual tensions between founders and less technically-knowledgeable but more business-savvy executives?

When a company transitions from a start-up to a more financially driven enterprise there may come a time when it makes sense for a company to bring in a “professional” CEO. Sometimes a so-called “business-savy” CEO can also burnish company image just prior to an IPO; eBay and Google (GOOG) being cases in point. But then if the CEO is smart, he should step aside and get out of the way! The greatest technology companies are routinely guided for years and years by their founders…HP, Intel, Oracle, Apple, Amazon and Microsoft all come to mind. Eric Schmidt may be the CEO of Google but it is widely understood that his job is to execute the vision of Google’s founders. Meanwhile, the loss of the founders can doom a leading-edge technology company as so aptly illustrated by what happened to Apple after Steve Jobs was fired. The more murky the future, and the greater the need for continued product innovation, the more important it is to keep the founder directing company vision. However, in the event that it becomes necessary to replace the founder, the onus should be on the board of directors to ensure beyond all reasonable doubt that they have the right man or woman! And if a new CEO is brought in who doesn’t measure up, the board should ‘fess up and either promptly recruit a replacement or bring the founder back to take charge.

For Accuray much of the future depends not on making elaborate business deals or driving down the cost of goods (although both of these can be useful objectives), but rather successfully navigating the myriad pitfalls of product development and clinical research. If Accuray is to reap the long term success for which it was once positioned, company leadership, including the board, should have a nuanced view of the most complex medical marketplace imaginable. This emerging radiosurgical marketplace is going to require non-stop innovation, especially in product design and changing the medical eco-system in which radiosurgery resides. If you look at Silicon Valley’s most successful companies, which tend to depend on continuous innovation, the founding team stayed engaged for a very long time.

6. What do you feel Accuray is doing well?

Up until now The Cyberknife continues to be the best overall dedicated radiosurgery system in the medical marketplace. Moreover, Accuray, in conjunction with the not-for-profit CyberKnife Society, which it once helped to create, has been instrumental in working with users to generate vital outcome studies demonstrating radiosurgery’s clinical benefits. In doing so, the CyberKnife has established itself as the gold standard to date for many if not most radiosurgical applications. Once upon a time Accuray was unique in the radiation field for its ability to attract a broad cross section of surgeons. In addition, the company was very successful in getting differentiated technical re-imbursement for CyberKnife radiosurgery. The above is particularly laudable when one is reminded that Intuitive Surgery, arguably the most successful capital equipment medical device company in Silicon Valley over the past decade, has neither conclusive outcome data to support the utilization of its Da Vinci device nor is there special re-imbursement for using its surgical products; so far the Da Vinci is merely an intrinsically cool and rather expensive surgical gizmo. Despite Accuray’s many shortcomings and Intuitive Surgical’s lionization, it is notable that CyberKnife radiosurgery is miles ahead of the Da Vinci concept for surgery when measured by clinical validation and cost effectiveness.

7. What do you feel Accuray is doing poorly?

In planning for unrealistic growth, Accuray scaled operations prematurely and needlessly burned through a lot of cash, and at the same time, communication with investors deteriorated terribly. Of note, since the arrival of CFO Derek Bertocci’s, both of the above issues have improved. However, the company has tragically lost touch with what was once a credible and very unique base of surgical users. The CyberKnife product is increasingly becoming bloated and overly expensive. In parallel, internal company processes have the complexity of a company 10 times the size, which is not a good thing for a company so dependent on rapid innovation. Many CyberKnife features were poorly conceived and in the process of development, robbed engineering talent from more important projects. Rather than envision and drive new clinical applications for radiosurgery, Accuray has chosen to spend a lot of energy and focus backtracking into the traditional radiation oncology market, long dominated by Varian and others. Internally, dissenting opinions are frowned upon, and the Accuray board has virtually no background in any of the medical or technical fields that are relevant to company business. For many years now Accuray has done a very poor job of selling to major US academic centers, which represent vital hubs of clinical research going forward. Moreover, because it’s under represented at major medical centers, Accuray lacks political clout within major medical societies and the government. In belatedly following my mother’s admonition “to not say anything, if you can’t say something nice,” I will stop here.

8. What are your favorite memories during your time with Accuray?

I loved my years as CEO between 1999 and 2000. Going into the company, I was a complete neophyte in the business world, and had so much to learn. Although these were very challenging years from the standpoint of hiring (the competition from technology companies was fierce) and at the same time the ensuing economic downturn was ferocious (making fund raising incredibly tough), during this period the business was finally righted after 5 years of repeated near death experiences. We turned the business around by simply focusing on the product, creating the right team and aggressively selling.

9. Your son, John “Trip” Adler, is an accomplished gentleman in his own right. Please tell us more about him and his company, Scribd.com. What would people be surprised to know about Trip?

Although a very young CEO, Trip has been incredibly successful with Scribd, the company he founded 3 years ago at age 22. If Trip wasn’t my son, I’d be very jealous! However, the nature of Scribd and its business is almost the diametric opposite of Accuray. For those interested in knowing how different I suggest they listen to a podcast at:

http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2333

The world might be surprised to know that Trip is an incredibly talented Jazz saxophone player. I wish he played more often.

[Disclosure: I (the interviewer) own shares of Accuray (ARAY).]

Apple Shareholder Meeting (2010)

Apple, Inc. (AAPL) held its annual shareholder meeting in Cupertino, California on February 25, 2010. Apple offered shareholders only coffee, tea, and water. Steve Jobs attended the meeting in his trademark jeans (with holes in the right knee area) and black turtleneck. Although he looked noticeably thinner than two years ago, he appeared healthy. Al Gore also attended the meeting, and he looked like he was in great shape (unlike previous years, where he appeared to be a tad overweight--perhaps recent Democratic victories have improved his health).

Much of the meeting focused on environmental issues. One person argued that if the science is right, then nothing else matters, and Apple needed to be more environmentally-conscious. Another shareholder summed up the issue by saying, "Pollution is waste, waste is inefficiency--it's as simple as that."

During the Q&A session, a shareholder mentioned Apple's $40 billion in cash, and asked whether Apple would issue a dividend. Mr. Jobs said that the cash provided security and flexibility, and Apple could take risks knowing that "the ground is always there if we miss." Mr. Jobs also implied that the stock price would stagnate if Apple issued a dividend.

Someone else mentioned that Nintendo was doing very well with its Wii and asked if Apple would consider a strategic alliance with Nintendo. Mr. Jobs said that such alliances take a lot of work, and Apple would need a big payoff to consider a strategic alliance.

I was tired of the environment-related questions. I explained that business-wise, it doesn't matter whether the science is right or wrong, only whether a majority of the American public believes that environmental issues are important. If the majority of Americans feel strongly about environmental issues, they will petition Congress or state legislatures to pass more stringent laws mandating certain corporate behavior. However, if Apple at least projects an image of being socially conscious, it will help stave off stringent legislation that might harm the company. In short, being ahead of the curve on environmental issues allows Apple to increase its chances of saving shareholders from potentially harmful and costly legislation. (It also makes little sense to criticize Al Gore whenever the Democrats control Congress, because Mr. Gore's presumed access to Democratic legislators allows him to provide input into legislation affecting Apple.)

Mr. Jobs responded by saying that it was even more simple--being environmentally-conscious "is the right thing to do." He then made several comments showing that Apple sincerely believed in environmental issues not just as a business issue, but as a philosophical issue.

I also asked what challenges Mr. Jobs saw for Apple, i.e., what keeps you up at night? Mr. Jobs first joked, "Shareholder meetings," but then became more serious. He said he was concerned about the overall economy, because if people were concerned about buying textbooks or putting their kids through school, then it would be more difficult for Apple to sell its products.

Overall, the meeting went well. Mr. Jobs was more pro-active in cutting off shareholders who would ramble on, but otherwise, it was a typical Apple meeting--people came to see Mr. Jobs and to get a piece of the Apple mystique.

Bonus: Mark Duncan has been a marketing consultant at askmar (www.askmar.com) for over 25 years, focusing on helping early stage start-ups develop traction in their marketplace. Mr. Duncan's thorough notes on the shareholder meeting are below:

* The meeting started at 10 AM, the formal meeting ending at 9:25 AM. At that point, Steve Jobs took questions and answers to about 10:20 AM.

* Apple wants to do the right thing. We have reduced the size of our packaging because it benefits us both from an environmental and business standpoint. People are noticing, our reputation is pretty good. Can it be better? Yes, but we’re working on it. Our recycling rates are phenomenal.

* What is Apple afraid about most, what keeps you up at night? Fundamentally, we require stability in the world. People aren’t going to buy our products unless they can put food on the table and afford school. We are affected by things beyond our control. Accordingly, we try to do the best we can.

* Why not issue a stock dividend? It is part security and flexibility. It nice to know when you jump that the ground will still be there if we miss. Also, we never know what opportunities are out there. Sometimes you need to think big and pretty large. When you want to do something big and bold, it is nice to be able to write out a check and not have to borrow a lot of money. Our judgment and instinct is to keep out powder dry. Quite frankly, if we issued dividends or did a stock buyback, our stock price would still be in the same place. What really drives our stock price is our ability to grow and keep up with new products that everyone wants.

* Internationally, we opened our first store in China, and have 25 more stores planned for China over the next year.

* [On environmental issues.] We are more interested in walking the talk, than talking the talk. Lots of companies set goals and attend conferences, than don’t actually meet their goals. We are the first and only company to actually do something about it. Dell challenged us on our green statements to the Truth in Advertising board, which found that we were correct [in our claims]. We have audited 100 of our suppliers, and over half of them told us that they had never been audited before. We do it because it is the right thing to do.

* With respect to usability and accessibility. We have the most accessible products in production available today, with a few hundred million passionate users. I personally receive 6 to 12 emails each week about accessibility.

* When I run across a security problem, it would be nice to have a way to email Apple regarding the threat. We will look at providing an email for this purpose.

* Will the increased emphasis on mobile products result in a decrease in traditional Mac products? First, we have decreased our app approval time from 2 to 3 weeks to one week. Our customers are buying mostly laptops, followed by iMacs, Mac Minis, and towers. We listen to our customers. We love the iMac, we think it is the best product of its type in the world.

* Apple has no retail stores in Wyoming, Montana, and North Dakota. Would like to see more theaters in stores. It is hard to do this [take Apple classes?] in smaller stores, particularly with the higher noise levels.

* Apple ads are primarily targeted at the young and hip. Yet the products have a tremendous appeal to middle aged and older people. Jobs noted that often older people like to think of themselves as young and hip!

Update: other reviews of the meeting are HERE and HERE.

John Yoo, D-Bag

For anyone out there who still supports or likes John Yoo, please, please, for the love of God and Constitution, read THIS short Atlantic article. One excerpt:

Based on the results of our investigation, we concluded that former Deputy AAG John Yoo committed intentional professional misconduct when he violated his duty to exercise independent legal judgment and render thorough, objective, and candid legal advice. [Italics added]

And you're welcome, even if I can't expect a "thank you."

EIA on Natural Gas

Natural gas seems to be hitting new lows these days. Yet, the government expects the price of natural gas to increase in 2010: 

EIA expects this year's annual average natural gas Henry Hub spot price to be $5.37 per million Btu (MMBtu), a $1.42-per-MMBtu increase over the 2009 average of $3.95. EIA projects continuing price increases in 2011, averaging $5.86 per MMBtu for the year. EIA expects working gas inventories to end the first quarter at about 1,644 billion cubic feet (Bcf) compared with 1,734 Bcf in the previous Outlook, because of colder-than-normal weather in early January. [Citation here.] 

UNG and GAZ allow traders to play natural gas prices. There are several negative potential tax issues with buying GAZ or UNG, so I trade these in a retirement account to be on the safe side. 

Also, it's true that natural gas ETFs/ETNs may not necessarily track the actual price of natural gas, but they do seem to follow the general movement of prices. If the government is saying prices are heading up, why not consider natural gas as an investment, albeit an admittedly speculative one? 

I don't know if I will hold my GAZ shares one day or one year, but I don't feel as if I am buying an overvalued commodity. As more consolidation occurs in the natural gas sector (XTO Energy, etc.), at some point, prices are likely to increase. While consolidation may not be good news for consumers, speculators may benefit from short-term volatility. 

Disclosure: I own GAZ and have owned UNG in my Roth IRA. 

Note: GAZ closed at 12.03 on February 25, 2010, the date of this posting. 

Update on March 1, 2010: MF Global’s Mike Fitzpatrick's says, "Technically, the charts are bearish." According to THIS article, he "expects $4 natural gas to be tested very soon." As of today, natural gas traded at around 4.680, so Mr. Fitzpatrick expects a 17% drop. 

Update on March 8, 2010: I averaged down by buying some GAZ at around 11.23. I am now losing around 5% on this position. The actual price of gas is $4.517/MMBtu. I hope I have the mental fortitude not to check this position until October 2010, when natural gas prices may rise much higher. 

Under no circumstances do any statements here represent a recommendation to buy or sell securities or make any kind of an investment. You are responsible for your own due diligence. To summarize, I do not provide investment advice, nor do I make any claims or promises that any information here will lead to a profit, loss, or any other result.

Update on June 2020: I haven't owned GAZ, USO, or UNG for many years. It looks like GAZ actually traded lower by October 2010. I did not learn about "contango" until after I published this post, though I did warn that GAZ "may not necessarily track the actual price of natural gas." I also wrote that GAZ was "an admittedly speculative" investment. A much better post on natural gas can be found here: https://willworkforjustice.blogspot.com/2009/07/commodities-cap-and-trade-and-natural.html 

Under no circumstances do any statements here represent a recommendation to buy or sell securities or make any kind of an investment. You are responsible for your own due diligence. To summarize, I do not provide investment advice, nor do I make any claims or promises that any information here will lead to a profit, loss, or any other result.

U.S. Supreme Court to Decide Important Free Speech Case

Click HERE for a transcript from the Supreme Court's oral arguments in Holder v. Humanitarian Law Project. [Click on "Full Screen" after the jump to enlarge the text.] 

The Humanitarian case might determine the breadth and scope of power the American government may exercise when it wants to control speech. Amazingly, the case and its complex issues aren't front page news everywhere. Below are some off-the-cuff comments I made after I read the transcript: 

The pro-free-speech lawyer, Cole, didn't do a great job. There was some drama: Scalia verbally smacked Sotomayor when she raised a misguided example, but Breyer played the good knight and saved her. Justice "That's Not True" Alito looked out of his range intellectually. None of the lawyers were able to really answer Ginsburg's very relevant questions. Breyer, as usual, asked the most interesting and intelligent questions. Scalia clearly wants to kick the ball down the road and uphold the statute. Unfortunately, it appears Kennedy, the swing vote, might be leaning towards Scalia's angle due to the unusual fact pattern involved, i.e., the government did not actually convict anyone for exercise of free speech (the case involves an action for declaratory relief, not an actual prosecution or conviction). Surprisingly, Roberts looked like he hadn't yet made up his mind, though towards the end, he seemed to be leaning towards Constitutional avoidance. Unsurprisingly, Thomas never asked a question. 

Actually, come to think of it, neither lawyer did well. The government's lawyer, Kagan, started off very well, but self-destructed at the end, when she suggested the government could prosecute lawyers who submit briefs on behalf of Congressionally-labeled terrorist organizations, even if the briefs relate to tsunami relief or U.N. aid requests. She should have thought harder about her audience. She's talking to a bunch of former lawyers who used to write briefs and in-house advisory opinions for sometimes-not-so-wonderful organizations. Maybe that's why former corporate attorney Roberts seems conflicted. 

After I emailed the transcript to an acquaintance, I sent him more detailed comments: 

The fact that the Justices spent most of their time discussing hypotheticals indicates that no one really knows what kind of conduct is prohibited. If the Justices can't figure out what is covered, then how is an ordinary American supposed to comply with the law? As for Scalia trying to kick the ball down the road, isn't the whole point of a request for declaratory relief precisely to avoid kicking the ball down the road and having to deal with a prosecution? 

What really bothers me is that no one answered Justice Ginsburg's perfectly valid questions. For example, everyone agrees that membership isn't proscribed, but then what? Are we supposed to just show up to a meeting and sit there to ensure we comply with the statute? Kagan seems to say anything beyond being an inactive paper member of an organization could be proscribed conduct, and it's up to the prosecutors to determine the scope of the law. Sorry, but I'd rather have a clear line than a line drawn by the Supreme Court than thousands of politically ambitious D.A.s deciding what constitutes inactive, legal membership in their own discrete jurisdictions. 

Also, I am a member of numerous legal organizations. I've attended annual meetings, communicated with board members, dispensed legal advice to schools they operate, posted on their blogs, etc. For all I know, one of these organizations might have rogue members plotting against the government. If the Court doesn't narrow the law and require a specific intent provision, then I could potentially be prosecuted merely by being an active member of the overall group, despite lacking any malicious intent. Thus, Kagan's argument boils down to this: trust the government, because we won't prosecute someone who isn't really a terrorist. I'm sorry, but if you're a Muslim in 2010, a Japanese-American in 1942, an African-American with Black Panther friends in 1965, etc, it's a little harder to trust prosecutorial discretion. 

Practically speaking, if the conservative Justices have their way, any lawyer with Muslim clients or Islamic non-profit clients must consider dropping all of them as clients. After all, who knows? If one person within an organization is supporting terrorism, then the entire organization becomes suspect, and anyone who has helped the organization, even in good faith, can be held liable for material support. Just my two cents.

Monks and Nuns in Love

Last Sunday's NYT published a beautiful love story. See HERE for more.

To all the American Newborns: You Owe a Trillion Dollars, Thanks to Mommy and Daddy

Mish has done an excellent analysis on the trillion dollar public sector benefit problem. See HERE for more. It's horrifying and edifying at the same time. Sigh.

First Date Ritual

Do any of you have pre-first-date rituals? I have a few things I do before a first date.

I have an older American car (from 2003), and it's not worth much, so I try to spend as little as possible on it. On date night, however, I like to get the car washed and inflate the tires.

Usually, I go straight from work to the date, so in the morning, I spend an extra half hour fussing about my appearance. For example, I use a straight razor instead of my usual electric one, and I cut the hair on my nape.

As for my clothes, I usually stick with a business casual outfit, which tends to be a nice white collared shirt and a pair of new jeans. I wear my faded Wrangler jeans all the time, so I use another pair of jeans, which I rarely wear, on dates.

I have Drakkar Noir cologne and toothpaste/mouthwash in the office, so I use those before I go. (I bought the Drakkar Noir cologne because of a Dale Earnhardt, Jr. car promotion.)

I should probably add hair gel, but I don't use hair gel enough to justify buying any. For some reason, most of the hair gels I see come in large tubes that would take me years to finish.

Sometimes, I forget to wear a belt, but I fix that issue if there is a second date. Unfortunately, I have to wake up earlier than usual to do all the administrative stuff, and changing my sleeping patterns leaves me in a tired mood. I make up for it by taking a small nap in the afternoon.

I fully realize I sound like a bad Southern caricature--Wrangler jeans, Earnhardt car collection, no hair gel, no belt, old American car, etc. I tend to just come in casually, even when I implicitly realize the dating game requires some song and dance. At the same time, my casual approach should weed out the materialistic, shallow women, so I'd like to think it all balances out. Besides, my white collared shirt is from Nordstrom or another higher-end retail store, so at least there's one hoity-toity part to my first date ritual.

I have no idea if my first date ritual works, but I'm in no rush. I hear good things come to those who wait.

Big v. Small: Telephone Edition

The battle continues: Here is an article about telephone companies against new tech companies. The seedy understory is that telephone companies don't want to share their lines or subscribers with smaller telephone companies, so they might be ripping out the copper wiring in some areas.

Then, to avoid regulation and possibly to avoid sharing new fiber optics lines with smaller competitors, some companies have apparently convinced courts that their newer fiber optic lines transmit "information," not telephone calls, so the state PUC isn't the appropriate regulator. Such a strategy would help big phone companies take care of smaller telephone competitors, but it may also open the door for companies like Cbeyond (CBEY). (At the same time, I think the FCC, a federal agency, may still regulate telephone companies' fiber optic networks, but that regulation would occur at the distant federal level, not the more local state level.)

Daily Journal Article on Campbell's Youth Basketball Program

See HERE for an article on Campbell's youth basketball program (by Lisa Kestenbaum). It's good to see Campbell's youth basketball program get some well-deserved recognition.

Below are some of the comments I submitted to the writer:

I’ve been coaching basketball for about seven years. A Campbell Community staff member, Terry Alexander, saw me playing basketball and asked me to referee some games. The next year, he asked me to coach, and I’ve been involved in the Campbell Community Center’s program ever since. After dealing with adults and their problems all week, there’s nothing more gratifying than coaching kids, especially kids in grades 2nd to 5th. These kids just want to move around and play, and when you have a great program and staff like Campbell does, it makes it easy to teach the kids.

I’ve traveled all over the world, and I’ve run my own solo practice since 2004, but my biggest lessons in life came from coaching kids. At some point, for example, you realize that every single kid on your team looks up to you. I started coaching when I was about 25 years old, and it was stunning to think that anyone actually looked up to me. At first, it’s the most frightening feeling in the world. I joke that coaching kids is my own personal version of Orwell’s 1984, because the kids are always watching you and trying to see how much they can get away with, how much you care about them, and how dedicated you are.

You worry that your own personality issues–the same impatience and hyper-competitiveness that drive many lawyers–will negatively affect the kids. Over time, though, you realize that your responsibility to the kids trumps everything else. And that’s the lesson: when you’re around kids, everything else must fade away, and you must learn to be calm and collected with them no matter what.

Campbell’s program is unique because of its diversity. I’ve coached in several different programs, but Campbell attracts kids from all over. This year, my team has kids with backgrounds from Japan, China, Mexico, Africa, the Middle East, and Ireland. Later on, these kids will probably go to different high schools and separate based on income or education status. Right now, however, they have the opportunity to play together and become friends.

People talk about achieving a world where race won’t matter, but such a post-racial world already exists in Campbell’s youth sports programs. To me, diversity is important because it proves that America works. For instance, when I call some of the kids’ houses to notify them about practice times, a grandparent will pick up the phone. Oftentimes, he or she doesn’t speak any English. Later, I meet the parents. They sometimes speak English with an accent, and they might hold onto the old culture because it’s familiar to them. The kids, however, speak perfect English and will identify primarily as American. That’s the beauty of America–no matter where you come from, by the third generation, we produce Americans who speak and act virtually the same. This isn’t necessarily true in France, other parts of Europe, or Japan, and I think sports programs, especially youth sports programs, are a large part of why America has successfully assimilated people from all over the world. After all, it’s hard to think someone’s different from you because of the color of his skin or his mom’s accent when you play sports with him over the course of several months.

Coaching sports also helps generate interesting conversation topics. Non-lawyers don’t want to hear about your latest CCP 998 offer, but everyone loves a good story about the kid who shot from halfcourt, made it, and did a funny little dance. Recently, during settlement discussions, I discovered opposing counsel also coaches youth sports. We spent about two minutes chatting about our coaching experiences. Even the case doesn’t settle and moves to litigation, it’s going to be much harder to treat each other without civility now that we have something in common.

A Gentleman and a Scholar

I have not laughed so hard in so long. HERE's an article on dating an attorney. My favorite tip:

Don’t be surprised when your lawyer sweetheart nitpicks everything. When it happens, don’t accuse him of splitting hairs. That would be like accusing a dolphin of swimming. Instead, thank him for being both a gentleman and a scholar.

Hilarious, isn't it? And so true.

Amity Shlaes on Government Employment

From Bloomberg's Amity Shlaes (2/17/10):

From January 2000 to January 2010 -- first under President George W. Bush after Sept. 11, then under Barack Obama -- the number of non-postal employees in the federal government grew 15 percent, to 2.18 million from 1.89 million...[but] over the same period, private-sector employment decreased by 3 percent.

[When including local and state government employees] Federal data show that [over the last decade] the number of total government employees in the U.S. rose to 22.5 million from 20.6 million.

Jobs with Uncle Sam aren’t just more numerous than they used to be. They’re better. Wages and benefits for federal civilian workers were more than double the average total compensation in the private sector: $119,982 versus $59,909. In the treacherous period between December 2007 and mid-2009, the number of federal employees earning more than $100,000 doubled, rising to 66,500 or so.

See here for more. Personally, I'd love to be a federal government attorney. Right now, I regularly receive phone calls where the person calling has a good case based on the facts and the law, but his or her wage losses or damages are too low to file suit.

Many people don't realize that lawsuits are expensive. By the time you file a lawsuit, get the complaint served, file a few motions, and take a deposition, you're looking at about $2,000 in costs--none of which goes to the lawyer. Fast forward six months, and costs can increase to $6,000 easily. In one case I took to trial, the other side's costs exceeded $18,000.

If damages are low, I cannot ordinarily justify spending $5,000 of my own money for a potential $10,000 settlement--and so many hourly or part-time workers have cases where six months of severance would equal about $10,000. Sadly, it's not unreasonable to argue that poor people get run over twice--first, in their job environments, because poor people tend to take tougher or boring jobs, and second, in finding an attorney to negotiate a severance or to file suit.

In any case, if I worked for the federal government, I could, assuming the approval of my boss, assist anyone who had a good case. Why? The taxpayer would be footing the bill for my time, not the poor or middle class worker. Of course, I would hope the agency would keep costs as low as possible. One way to do that would be to reduce retiree benefits, such as pensions. If taxpayers are paying $80,000/yr to a retired cop or lawyer, that's $80,000 that's not being used to hire a new cop or lawyer. Plus, it's always been unclear to me why taxpayers should be paying money to someone who is not longer helping taxpayers.

These kinds of "golden parachutes" exist in the private sector, too. In fact, taxpayers could be liable for private pension obligations as well as government employees' pensions. As of 2008, the Pension Benefit Guaranty Corporation (PBGC) had a $10.8 billion deficit, estimated to rise to $26.3 billion in 2018; however, total underfunding of all private sector pension plans, on a termination basis, amounts to an astounding $225 billion. Clearly, we have a problem.

America's pension plans need reform. One simple reform would be to require that all new government workers have 401(k)s, not pensions. Such a move would immediately reform public sector pension plans and assist already stretched taxpayers, but it is highly unlikely. Public sector unions have so much clout, it seems they can force politicians to put government employees' interests ahead of taxpayers' interests. That's a shame, because Congress had no qualms about reforming private sector pension plans. According to CNN's Colin Barr, Congress has already enacted a law--the 2006 Pension Protection Act--to force corporations to fully fund their pensions by 2015. See here for more.

Despite the new law, cash-rich companies like Exxon Mobil Corporation (XOM) continue to have underfunded pensions. In Exxon's case, its pension is underfunded by about $6 billion. Shareholders should take notice--over the next five years, some companies may have to reduce their growth or take on more debt to fully fund their pensions.

More here, from Mark Scolforo. He points out that taxpayers are in the hole $1 trillion because of public sector retirement benefits, including pensions: "As of 2008, states had $2.4 trillion to meet $3.4 trillion in promised pension, health care and other post-retirement benefits."

O' Canada: a Cheat Sheet

Courtesy of the NYT and Bruce Headlam, HERE is a hilarious "cheat sheet" on Canada. Below is my favorite part:

Canada has two national symbols, the Maple Leaf, a symbol of nature and growth, and the Beaver, which represents industry and loyalty.

According to Roman legend, the beaver, when cornered, will chew off its testicles and offer them up to the attacker. Modern biologists have dismissed this as myth. Beaver will only chew off their testicles if you ask nicely. But that’s our point: you have to ask.

Like I said, it's hilarious.

Chuck Thompson on the NBA

An oldie but a goodie: HERE is Chuck Thompson's take on last year's NBA finals. Who is Chuck Thompson? For starters, he's written one of the funniest books I've ever read. See here for a book review of Smile When You're Lying.

Solutions

I saw an excellent comment from "milleniumfalcon" on the Motley Fool's website. The author's comment relates to our current economic crisis. The author promulgates several interesting ideas. For more, see below:

1. Create jobs. More jobs = more tax revenue. The question is how to create them. Well for one, how about truly funding and streamlining the SBA loan process, since small business creates most of the jobs.

2. Invest in new technology. Eventually (and we all know this) oil prices will rise to the point that using it is not economically viable. The time to start this process is now. Turn those old Saturn plants into wind turbine factories. Turn the closed Chrysler plants into solar panel R&D and manufacturing factories. Get into the business of partnering with business, much like large corporations do when they "incubate" a business before spinning it off. Not takeovers, but investments. Part of what an intelligent government does is invest in the items of the future that don't have an immediate payoff. (Like stem cell research, for example.)

3. Invest in education. I am a college professor. Let me tell you, I see the pablum that comes from our educational system and it is not pretty. MOST OF YOUR CHILDREN have pathetic reading skills, sickening math skills, and the creative resources of your average fruit fly. They can't think outside the box, because they haven't learned a bloody thing INSIDE the box. Kill the U.S. Department of Education. Keep that money local, the way ti is supposed to be. Get rid of NCLB: teaching students to take a test is not actually teaching student. (Besides, this [law] has become a racket--states keep lowering standards so students can "pass." If we don't get back to basics, your kids will have exciting careers asking, "Would you like some vanilla in your latte?" (Okay...rant over.)

4. Level the taxes playing field. Under the current tax code, people who labor (you know, work for a living) have a higher tax rate than those who make most of their money through investments. Raise the rates and make them equitable. Let's go back to the 90's tax rates. [Note: I do not agree with going back to the 90's tax rates.] Let's get rid of the $90,000 "cap" on taxable salary for social security. [I do agree with raising the Social Security taxable income ceiling.]

5. Take the idea of a flat tax or a value-added tax (VAT) seriously. It works in other countries, so why not here? It solves a couple of problems. There's no use for an enormous IRS. There are fewer ways to cheat. Make exemptions for the necessities of life only: food, clothing, shelter.

6. Really reform healthcare. As it stands, 50% of healthcare costs are covered by the government, between the Feds and the States. What we need to do is cut the costs of healthcare before adding anyone else to the rolls. How do we do that? There must be downward pressure. Repeal the part of the "drug bill" that does not allow Medicare and Medicaid to negotiate lower prices. Allow the importation of cheaper drugs from countries with good regulatory systems (Canada, Germany, etc.) Allow competition across state lines. (Here in MO, one company has a lock on 87% of healthcare coverage.) Tort reform. And for God's sake, get the fat people on a diet. We lowered smoking rates in this country from 45% in the '60s to 21%. And most of that was done via peer and cultural pressure, not laws. If we can do that with smoking (an addictive habit--I know--I was one of them), why can't we do the same thing regarding the fat b*stards in our populace. Dropping weight = dropping costs. (I know this too, because I was 50 pounds overweight. I lost a lot of it and my blood pressure dropped, my cholesterol went down and I'm generally in better shape. All that and more with no drugs.)

6. Really dice up the defense budget. Bring our men and women in uniform home from Iraq. Seriously. Do we need more tanks? Really? Really? Must we have troops in Germany? Really and truly? Let's stop playing cop and let most of the rest of the world learn some responsibility. (And let the National Guard do its real job to boot. Helping people here after a disaster. We need no more Katrinas.)

7. Rebuild. New Orleans.

I'll shut up now.

I can't remember the last time I read a comment that made so much sense. By the way, when I visited New Orleans, the French Quarter is completely intact. When the author talks about rebuilding, he ought to mention roads, bridges, etc. Otherwise, however, many of his suggestions make sense.

Hank Paulson = Idiot or Just Stupid?

America's recovery plan: cause other countries to spend more and save less.

From former Treasury Secretary Henry Paulson: "[W]hen you look at it globally we have nations in Asia, China, Japan and others that don't have enough domestic consumption. They need to consume more and...save less. And...the only way [is] with direct, very forceful dialogue between nations."

So the plan is to put other countries' citizens in debt? With "dialogue"?

Just when I was starting to get over George Bush II, something like this comes up.

New Interview with Bill Watterson

HERE is the (unfortunately short) interview with Bill Watterson, who created my favorite comic strip, Calvin and Hobbes:

By the end of 10 years, I'd said pretty much everything I had come there to say. It's always better to leave the party early. If I had rolled along with the strip's popularity and repeated myself for another five, 10 or 20 years, the people now "grieving" for "Calvin and Hobbes" would be wishing me dead and cursing newspapers for running tedious, ancient strips like mine instead of acquiring fresher, livelier talent. And I'd be agreeing with them. I think some of the reason "Calvin and Hobbes" still finds an audience today is because I chose not to run the wheels off it.

Also, the Post Office is releasing a Calvin and Hobbes stamp--I can't wait!

Bonus: as of 2010, Watterson lives in Cleveland. I wonder if he's a LeBron James fan. Actually, Watterson attended Kenyon College in Gambier, OH, and he's been in Ohio ever since.

Here's one interesting fact: Watterson designed grocery advertisements for four years prior to creating Calvin and Hobbes.

And for the self-employed out there: "It's surprising how hard we'll work when the work is done just for ourselves." (1990 graduation speech at Kenyon College) I guess the days are just packed, huh? :-)

Lawyers and Depression/Pessimism

From Daniel Lukasik:

Pessimism is seen as a plus among lawyers, because seeing troubles as pervasive and permanent is a component of what the law profession deems prudence. They have to foresee every possible snare and catastrophe. While this might help them be better lawyers, this trait does not always make them happy human beings.

More here. Hat tip to Alison B.

EA Stumbles

What is going on with Electronic Arts? Its stock tanked today, and it doesn't seem able to catch up to Activision. Gaming companies seem to make money when they 1) create internal blockbuster hits like Call of Duty that generate sequels; and/or 2) create online casual games like Farmville, which rely on advertising to make money, not tapped-out or piracy-happy consumers.

I just bought some shares of ERTS. Not much, but a little. Maybe Microsoft will buy them out.

Why Medicare Will Destroy Us

According to financial journalist Steve Kerch, the "55+ age group represents 38% of all U.S. households and is projected to rise every year to be almost 45% of households by 2019." In short, we are inviting fiscal disaster unless we find a way to fix Medicare.

I really hope the younger generation starts having more kids. After all, someone has to pay for all the entitlement programs. What's that? You think it's immoral to pass along bills to an unborn generation? Well, what spending would you cut? The military? It's about 21% of our budget. The latest military budget passed in the Senate with an 80 to 10 margin. Good luck.

P.S. Common sense called. It says it's time for a third party that understands basic math and basic economics.

Reggie Miller Interview: What the NBA Has Lost

HERE is a NY Times interview with Reggie Miller. Reggie was probably my favorite player to watch in the NBA. In my mind's eye, I can still see his incredible series against New Jersey (back when the Nets were legit contenders), and his playoff games against Michael Jordan.

If you haven't seen the Bulls-Pacers playoff series yet, you are definitely missing out. What NBA fan could possibly forget Reggie's eerily similar "Bryon Russell" push-off against Jordan, the game-winning three-pointer, and Reggie's subsequent twirling dance? (By the way, people forget Jordan almost won that game, but his three-pointer at the buzzer rolled in and out.)

I also clearly remember certain games from the Knicks-Pacers playoff series--such as LJ's unfortunate four-point play, which came from an Antonio Davis foul that clearly didn't warrant the continuation. The refs should have called a non-shooting foul, but after the Madison Garden crowd exploded, the refs probably risked a riot if they hadn't called a shooting foul and the three-point basket. The worst part was that Indiana shipped out Antonio Davis, one of the league's best defenders, the very next year, making it look like it was his fault the Pacers lost. In reality, Coach Larry Bird, who was just five feet away from the play, was telling Antonio Davis to "get up on him" and play closer defense, and Davis was just listening to his coach.

In my eyes, only Reggie Miller and Glen Rice were able to get under Michael's skin--and that feat alone is quite an accomplishment. I've copied an interesting section of the interview below:

Q: Are there any talkers left in the league?

A: It’s not the same. Everyone hugs one another now and kisses before jump balls and pats each other and helps them up. It’s a kinder and gentler league. Chivalry is nice and all, but it’s not the same.

I think Reggie just inadvertently explained why the NBA has lost its luster. There are no real rivalries anymore. As Charles Oakley once said, David Stern has "sissified" the league.

In the interview, Reggie also proclaims that LeBron will not be going to New York. I happen to agree, but Reggie seems awfully sure that LeBron won't be playing for the Knicks. I wonder if he has any inside information.

P.S. Although Reggie Miller and Jason Williams (during his Sacramento days) were my favorite players to watch, in real life, if I ever made it to the NBA, I'd be more like Dennis Rodman or Ben Wallace.

Simpsons Super Bowl Ad

Employment Relationships

Very interesting post by "Not a Potted Plant" regarding employment relationships. See here for more.