Saturday, March 11, 2017

You Suck, Denver TSA

The TSA exists only because America overreacted post-9/11 and decided to go full metal hard-on while almost every other country in the world decided to wait and see, at least with respect to the body scanners now standard procedure in American airports. 

Many major international airports don't have a single new scanning machine--they've decided to invest in infrastructure, local police, or healthcare instead--and when they do have them, they make it easy for passengers to opt out.  Canada's Toronto airport had about 10 passenger lines but only one of the "new" machines. They rely on the same machines used pre-9/11. In Toronto, the "new" machine is only for "secondary" screening, and even then, the personnel ask if you want to "opt out" and get a patdown.  I was "randomly selected" for secondary screening and asked to opt out.  I was immediately given a patdown by a male agent in full view of my luggage. Because secondary screenings are less common under Canadian standard protocol, it's done as efficiently as possible.  

At Denver International, it took 5 minutes just to find a TSA screener to do a patdown while my luggage was out of my sight at the other end of the conveyor belt.  After a screener finally showed up, it took another 9 minutes to do the actual patdown. He blamed the inefficiency on me opting out as if he was doing me a favor rather than inconveniencing me by being inefficient. Either he doesn't understand how a waiver works with respect to the 2 minute spiel (short version: I'm going to molest you now) or not customer-savvy to explain upfront that the TSA should have written waivers to save experienced passengers time.  


The supervisor was worse. She actually said, "We're in charge" and "You do what we say." When I remarked it sounded like something the "SS would say," she looked confused. (One has to wonder--if the Nazis did take over airport screening, how would they do it differently than the Denver TSA?) 

The TSA has received flak for its handling of travelers who “opt out” of its backscatter radiation body scanners but they appear to have doubled-down under the theory if the opt-out procedure is as uncomfortable as possible, people won't opt out.  A few years ago, I asked a medical doctor and a PhD in radiation physics what they thought about the risk of radiation from the airport full body scanners. Both doctors indicated there wasn't enough information to make a valid judgment about the safety of the full body scanners. Although we receive radiation in small doses almost every single day, much of it is “non-ionizing.” A cell phone, for example, has non-ionizing radiation; however, the TSA scanners use ionizing radiation. Ionizing radiation can alter a person’s cells to the point where the cells cannot recover. In contrast, non-ionizing radiation will jumble or vibrate your cells but not permanently alter them. 

Science aside, what bothers me most about the TSA is its inability to understand a) the agency is routinely castigated for being totally incompetent; b) pissing off taxpayers by being inefficient or stupid is not a good way to get them to pay more taxes (and certainly not 8 billion USD annually); and c) the way the TSA gets paid is mostly by other people's taxes. 


Much has been made of "makers vs. takers," but the reality isn't too far off: most non-research government positions do not sell or produce anything, so they derive their legitimacy by facilitating a better life for the general public.  Such facilitation could be in the form of increased safety (competent police officers); greater accountability (investigations into false advertising); or some other check and balance needed for an efficiently functioning society (honest tobacco research).  


The minute government employees lose integrity or lack accountability, they become worse than useless. Not only are they taking money that could otherwise be used for productive activity or go into your pocket to spend as you see fit, they're being paid to interfere in other people's lives in ways that make their lives worse.  In contrast, someone who sells 200,000 USD in software licenses doesn't need to show anything else to justify his or her salary because the transaction was voluntary, subject to competition, and presumably needed or wanted by the buyer.  That's basically the "makers vs. takers" argument, except that good government employees--if they are efficient and do their jobs with integrity--can argue they are worth more than their salary because they increase trust and accountability and lay the seeds for future success (an excellent, smart public school teacher is probably worth more than what he or she is being paid). This is why I keep arguing we need to stop focusing so much on improving AI and machines and try to perfect a performance evaluation system that is objective and fair for government employees.  


In any case, somehow, the TSA--while taking 8 billion USD every year--manages to be incompetent at everything except pissing off travelers. Listen, I get it--America overextended itself post-9/11, and lower-level military veterans who were taught mainly to handle weapons and security need a job when they come back.  Still, why tolerate total incompetence AND crap customer service?  Why not try to be competent, efficient OR passenger-friendly so you don't create the kind of backlash that leads to voters and citizens turning against their entire government? 


The TSA screening process isn't even standard across America, which is frightening when you understand the whole point of having a federal government is to standardize national processes, thereby promoting national unity through nationwide predictability. Otherwise, why not let states, which are generally more accountable except for California, do it? (By the way, how can McDonald's manage to standardize its procedures worldwide--excepting the sometime addition of automated ordering machines that make the customer experience better--but the TSA can't manage to be consistent in its own country?) 


When I've complained about not being able to see my wallet and personal items while waiting 5 minutes for a TSA screener, one TSA agent told me to keep my luggage with me until the screener showed up.  I like that idea, but I don't get that option in most airports.  Most TSA agents tell me to put my luggage, passport, laptop, and wallet through the conveyor belt so I can pass the initial security check under the rationale that if a problem is found, they can deal with it right then and there as I wait for the screener. The wait times are all over the place but usually last about 5 minutes, plenty of time for someone else to steal any of my items on the other side of the conveyor belt.  

In Denver, the screener argued standard procedure required him to say his opening spiel despite my oral waiver and willingness to sign a written one.  Yet, he added items I hadn't heard in other screenings, such as needing to keep my hands up for 4 minutes straight. (Was it retaliation for asking him to waive the spiel?) 


We need airport security, but we need it done efficiently and with common sense and respect.  In the meantime, I'll be avoiding Denver airports.  Why experience excessive turbulence--standard for Denver flights because of its elevation and location--and terrible customer service? 


I should say it wasn't all bad.  The police officer called by the TSA supervisor--in an attempt to intimidate me--was completely professional. Overall, I had a good time in Denver.  I was going to publish something that would help other travelers, but after my TSA experience, I won't be writing that piece.  You're on your own when it comes to Denver.  





BonusPolice officers, unlike TSA screeners, can argue they're entitled to greater obedience from the public because officers often don't know the people they encounter; don't know the person's record, if any, until they get an ID and run a check; in a car stop, even with a license plate check, the driver may not be the owner of the car, and the police cannot see the person's hands until a closer examination to determine a threat level; and they haven't had the benefit of already screening the taxpayer's passport and luggage. 

A TSA worker, in contrast, has already had the benefit of multiple screenings and checks before the patdown, especially if the passenger is a frequent flyer; at the time of the patdown, the passenger is without access to luggage or unknown material; and the agent can see the passenger's hands. In addition, the passenger, unlike the TSA worker, has an immediate deadline to meet usually involving financial loss if missed, creating incentives to cooperate with competent agents. In other words, the presumption should go to the passenger, not the TSA screener, and the TSA needs to be as efficient as possible to justify its existence. At 8 billion dollars a year, the American public deserve better. 

Update on June 2017: Ft. Lauderdale TSA, immigration, and customs employees were all professional and efficient.  Why?  1) The cost of living there is lower than larger cities, making a federal salary and benefits more attractive.  Whereas a SF or LA or NY TSA or airport worker might see a TSA job as a last resort or temporary stop, a Ft. Lauderdale employee is being paid competitively; 2) Ft. Lauderdale's economy depends heavily on tourism, creating major disincentives to annoy travelers.  Even in Cuba, where almost nothing works and customer service is non-existence outside touristy Old Havana, Havana's airport was run reasonably well. Same concept--when an airport is in a city that relies on tourist dollars, it cannot afford to annoy tourists. 

America's dependence on gov security jobs like the TSA to lower the unemployment rate, especially for uneducated Americans, provides perverse incentives to make Americans afraid and to exaggerate terrorism threats.  "We're protecting your freedom and lives" sounds a lot better than "We can't figure out how to create meaningful jobs, especially for men without college degrees, so we're going to use a one-off event like 9/11 to divert billions into useless 'security theater.'"  Stay tuned for this news report on violence in other countries... 

Friday, March 10, 2017

Why is Media Dead? It's the Deadline.

By now, some of you have read my recap of Disney's 2017 shareholder meeting.  As I was leaving the meeting, I noticed an L.A. Times reporter taking one short interview while recording with his mobile phone.  I said I was from California, too, and asked him what he thought of Iger's half-arsed response to my question about unpaid student-athletes.  He brushed me off, saying he had a deadline to meet and could only interview one person.

I later looked at his "reporting" of the event.  Not a single thought-provoking sentence existed.  Even where the CEO had whiffed, the reporter complimented Disney's CEO for taking an array of diverse questions. Most of his "work" included tweets during the event and a few short articles published later serving as indirect advertising for Disney's upcoming movies.

I should have known better--the L.A. Times is in Disney's backyard, and it's doubtful Disney would advertise with it if the Times published any criticism.  As for the reporter himself, his prior work involved the seedy underbelly of becoming "famous" in La La Land.  His significant contributions to the annals of knowledge were revelations that 1) talent agencies require photoshoots and other expensive portfolio work, often steering clients to favored vendors; and 2) when paid from modeling or other shoots, the money is sent to the agent in escrow rather than the actor directly, allowing opportunities for fraud.  In other words, no real expertise in economics; media programming; and the stock market.  Throw in immediate deadlines with a lack of expertise on the topics being covered, and you can see the problem: reporters regurgitate content in ways that promote advertising opportunities, eyeballs, or consumer demand rather than substance.

People wonder why American democracy is in decline or no longer working.  It's not that hard to figure out.  Why read anything in mainstream media when it's almost all pablum and when the mainstream "opposition" is comedy that mocks rather than provide substantive knowledge?  It's as if we never really left good ol' England.  The media, government, and multinationals are still holding court over the peasants, and the jesters are the only ones able to tell the truth.

Bonus: "40% of the people in the U.S. read one book or less last year." -- Steve Jobs in 2008.

And yet, almost every kid has read Harry Potter.  It's not that people don't like to read--they just don't like reading crap.  

Wednesday, March 8, 2017

Disney's Annual Shareholder Meeting (2017)

Disney shareholder pin-- from Beauty & the Beast
Disney held its annual shareholder meeting in Denver, Colorado on March 8, 2017 at the Colorado Convention Center.  Shareholders were treated to coffee, tea, and bottled juices, but no food or pastries. (It's possible D23 members had a better selection after the regular shareholder meeting.)

Shareholders could also take pictures--available later at www.shareholderphotos.com--with characters Moana, Mickey Mouse, Captain America, and two Star Wars stormtroopers.  The stormtroopers seemed to be the most fun, making authoritative comments like "Affirmative," "Stand there," and "Let me see your badge."

Robert "Bob" Iger, Disney's CEO, opened the meeting in a suit and no tie, reading from a teleprompter until the shareholder proposals and Q&A session.  He expressed optimism about Shanghai Disneyland, which opened in 2016, the result of a "17 year journey."  He then lauded Disney's successful movie franchises, listing four films topping $1 billion each in box office revenues. On the matter of Disney's corporate image and its desire to be a "stellar corporate citizen," Iger mentioned Disney had added 30,000+ jobs in the U.S. since 2005; hired 8,000 military veterans since 2006; and donated $40 million to children's hospitals.

Throughout the meeting, Iger showed several videos, including ESPN clips featuring Denver and many other sports teams; a Disney movie mashup; and extended scenes from Beauty and the Beast (it's a musical!) and Guardians of the Galaxy 2.  The most anticipated clips were from Star Wars, The Last Jedi.  After presenting the end of the most recent Star Wars film, The Force Awakens, shareholders saw a very short clip of Luke accepting the lightsaber from Rey and another short clip of scattered one-second scenes from The Last Jedi.

The Last Jedi will be released in December 15, 2017, with two more Star Wars films already in the works. Fans of the franchise will be interested in knowing Iger expressed sorrow over Carrie Fisher's death and mentioned two Star Wars theme parks, including one where visitors will be able to pilot the Millennium Falcon.

After his prepared remarks, Iger progressed to shareholder proposals. The main ones involved 1) greater proxy access with respect to influencing the composition of the board of directors; and 2) greater transparency in Disney's lobbying efforts and its influence over trade associations.  Regarding the first item, some background: regular shareholders, even if they pool their votes together, have an extremely difficult time under existing rules putting anyone on the board.  The proposal would make it easier for "regular" shareholders--as opposed to hedge funds and insiders--to put more than two directors on Disney's board.  After all, it "takes more than two directors to change the corporate culture."  Disney's rebuttal is that it's not a good idea to spend too much time battling outside or regular shareholder representatives who may not know much about Disney's operations or business.

Regarding the second proposal, Disney doesn't issue a comprehensive report detailing its lobbying efforts, its lobbying payments, or its work through trade associations like the Chamber of Commerce.  Why not make it easier to see Disney's lobbying?  Disney remarked that it complied with all disclosure laws.  One person rebutted the argument for greater transparency by accusing the shareholder group making the proposal of wanting transparency only to demand conformity with its own political agenda rather than Disney's best interests.

The Q&A session was very political.  Several shareholders asked Iger to resign from a presidential council.  Iger patiently explained that being on the council and working with the president didn't mean he agreed with everything the president said or did, and it was better to have a "voice in the room" and be able to influence the direction of the country than be on the outside looking in: "I want to be in the room when it happens, but I respect your opinion."  He further elaborated by saying Disney projected its values through storytelling, where it would have the largest impact and reach, repeatedly referring to Zootopia, a movie about tolerance.

After a question on climate change, Iger said the "changes we see in climate are real," and Disney is doing everything it can to "not contribute to the problem." He expressed concern over Disney's Hong Kong and Tokyo parks, which are on the water and which may be affected by rising sea levels.

A shareholder alleging Disney was biased in its news reporting was met with strong resistance from Iger, who said ABC News and other channels were critical of the last president's administration, and he appreciated the "freedom to be adversarial, even to those in power."

I asked about Disney Tokyo's profit structure, where Disney lacks an equity stake in its park's management company, a different set-up from Shanghai and other international theme parks.  Iger explained the Tokyo park was negotiated back in the 1970s, when Disney didn't want to put substantial cash upfront and was comfortable delegating to a local management and operating company. Basically, Disney appears locked into the original contractual terms because the Japanese management company fronted all of the money for the initial development and land.

I also reminded Iger about unpaid student-athletes, from whom ESPN makes millions of dollars.  At a meeting a few years ago, I raised the same issue, and Iger referred me to the NCAA's role and Disney's documentary work through its 30 for 30 series.  Having heard nothing from Disney or Iger on the issue since then, I responded that waiting for the NCAA--a nonprofit--and its lawyers to take the lead on this issue would mean waiting forever.  As for documentaries, an excellent documentary was indeed made on this topic--Schooled: the Price of College Sports--but it was distributed by Viacom, a Disney competitor, not Disney itself.

As it stands, Iger, Disney, and ESPN look like modern-day plantation owners profiting from the blood, sweat, and tears of primarily African-American men who receive only food, shelter, and a piece of paper at the end of their service--a piece of paper that may not be worth much, if the expose of the University of North Carolina is any indication of nationwide D-I academic practices.

I said Iger might try to argue Disney had no direct control over colleges or the NCAA, but its million dollar payments to colleges gave it substantial influence as well as a "seat at the table" when it came to student-athletes' working conditions.  Years ago, Gap and Nike also tried to deflect exploitative practices at international suppliers and factories but soon realized they needed to be more hands-on to prevent consumer backlash and brand devaluation.  Colleges are ESPN's suppliers, and it has a responsibility to do more.  As Marvel's Spiderman says, "With great power comes great responsibility."

Iger provided the kind of response you'd expect from a rich and honest businessman.  He said he didn't know the current status of the 30 for 30 documentary he had mentioned years ago; it wasn't Disney's role to tell colleges how to run their programs; Disney's financial contributions helped colleges create numerous programs college athletes wouldn't otherwise have access to; and there are "two sides to this issue."

After all the talk about Disney values and corporate citizenship, I was sorely tempted to remark, "I didn't know it was a Disney value to profit indirectly from unpaid labor," but I held my tongue.  Iger's response minimized ESPN's influence in American college athletic programs.  It's as if the affluent cotton apparel retailer, upon being told of labor violations in the fields, responds that the fields are not his bailiwick, and the gentleman having an issue about field conditions should talk to the owner in the next city over.  Such an approach deliberately ignores Disney's vast influence over its suppliers of content--the colleges--in the same way Gap and Nike earlier tried to deflect blame for exploitative worker conditions on "independent" suppliers, many of whom derived almost all their business from a few primary American retailers.  If Iger is going to argue being on a presidential council allows him a voice, but paying colleges millions of dollars doesn't entitle him to help set or influence any student-athlete policies, he is either apathetic, hypocritical, or willfully blind.  I hope he changes his mind, but I'm not holding my breath.  Being a rich, successful businessman has its advantages, but identifying and empathizing with minority student-athletes probably isn't one of them.

Disclosure: as of March 8, I own an insignificant number of Disney (DIS) shares.

Bonus: ESPN's current troubles may be linked to how it is handling the unpaid student-athlete issue. Consumers are becoming more educated about their choices and do not want to support exploitation, even indirectly.  Iger's neutral stance--there are "two sides to this issue"--reminds me of Desmond Tutu's quote: "If you are neutral in situations of injustice, you have chosen the side of the oppressor."

Paying hundreds of millions of dollars each year to broadcast college football games has other consequences.  From a college football fan: "Hey Disney, you have this network called ABC. It is available for free and reaches far more viewers than ESPN. Try putting some of these games on ABC so people without cable can watch."

News of the Weird, from Disney's 10K (2016): "[B]roadcast channels are generally required to provide a minimum of three hours per week of programming that has a 'significant purpose' meeting the educational and informational needs of children 16 years of age and younger." (pp. 7)

Update:




Tuesday, March 7, 2017

Snap Out of It: GoPro or Go Home

Most software is fungible these days. Snap (NYSE: SNAP) has called itself a "camera company," which is clumsy shorthand for its goal of becoming a premier consumer hardware company. While Snap has successfully created exciting marketing events with its filters and is well-situated to promote blockbuster movies, this expertise alone cannot justify its current valuation. Following Larry Ellison's unrelated comments many years ago about "going back to the future," hardware is becoming sexy again because software features are easily replicated.
My main concerns are 1) Snap's main user base is between 10 and 29 years old; and 2) GoPro (NASDAQ: GPRO) is already the premier camera company.

With respect to 1), this group lacks high levels of disposable income and isn't known for brand loyalty, indicating hardware margins or profit may be stressed. As for 2), if Snap plans on avoiding competition with GoPro by focusing on teenagers and younger adults with cheaper products, Polaroid and vintage cameras have already been done. Spectacles is not revolutionary, unless you count flashing lights as a remarkable innovation over Google Glass. How does Snap plan on differentiating itself long-term?
Unlike Amazon (NASDAQ: AMZN), Snap cannot displace existing software and hardware companies, which have entrenched users and their own "sticky" ecosystems. Furthermore, how many different ecosystems will consumers tolerate before they become frustrated? A quick online search shows several apps capable of adding both filters and special effects to pictures, such as BeFunky.com. In short, Snap lacks a "wide moat" from a technological standpoint and needs to quickly capitalize on its accomplishment of being first to market and capturing younger users.
Being first to market can be a long-lasting advantage in the consumer market. Success begets success as retailers provide more prominent shelf space to faster-selling products, leading to relationships between suppliers, advertisers, and manufacturers that are hard to displace. If a consumer company is first to market, competitors often end up vying for second place, fighting over shelf and virtual space that hasn't already been allocated to the market leader. Older readers might remember that Gameboy was first to market and maintained its leadership position in the videogame industry, even though Sega later produced a much better product. In fact, Nintendo continues to ride the success of the Gameboy today, while Sega sputtered with its Dreamcast console, becoming the Reebok to Nintendo's Nike.
How can Snap ride the wave of its younger user base and its "first to market" unique filters? One interesting scenario would be for Snap to partner with existing hardware companies like Fitbit (NYSE: FIT) and GoPro. More specifically, Snap could leverage the retail relationships smaller hardware companies have already built and offer access to its software and user base--for a fee, of course--as a way for smaller hardware companies to combat Apple and Samsung. Trying to displace Fitbit and GoPro shelf space in existing retail establishments doesn't make much sense--there's only so much shelf space to go around--and Snap doesn't have enough hardware products to open its own stores yet. If Snap tries to go against Apple, Google, and Samsung alone, it risks becoming exactly like Fitbit and GoPro, i.e., hardware companies desperately trying to hang onto to existing customers as larger companies copy their products and force the smaller companies to spend more dollars on each additional user, delaying profitability and making it harder to maintain margins.
One potential scenario involves GoPro CEO Nick Woodman pledging his own net worth as collateral and taking GoPro private, with the understanding that Snap would be a long-term partner and GoPro would design its products to be compatible primarily on Snap's software platforms. With either Snap or a consortium of equity funds buying a 49% stake in GoPro, Woodman could direct GoPro into new areas, diversifying his own user base and continuing to spend dollars on marketing and retail relationships rather than software engineers. (Note: most of GoPro's open technical careers are currently in Romania and the Philippines for software-related positions.)
Once software costs are minimized, GoPro could quickly move into new areas such as 1) food delivery by drone; and 2) tourism/travel.
Right now, Walmart (NYSE: WMT) is attempting to solve the "food desert" problem in inner cities, which tend to have cheap fast food and not enough healthy food. Using drones and online grocery ordering could revolutionize healthy eating in inner cities or isolated areas like First Nation lands. GoPro could offer to work with Walmart, Costco, and Target in delivering fresh food to consumers--a low margin business, but one that could serve as indirect advertising for its drones and other hardware products and a way to gain feel-good content.
Users, especially younger users, are tired of meaningless news and will quickly warm up to a software platform bringing them creative and positive content, such as tourism videos. GoPro CEO Woodman originally wanted to create content through an entertainment channel, but it wasn't profitable to do so, or he would have done it. As a private company in a cooperative setting, and with Snap handling the software, GoPro could focus on content development and capturing more users outside of Snap's existing demographic. Snap would broaden its demographic reach and save money and time leveraging GoPro's existing retail channels, and GoPro would maintain its financial strength by avoiding the costs of building and maintaining a competitive software platform.
Netflix once advertised with Amazon in its early days when it was trying to build its brand, and Jeff Bezos put a stop to it as soon as he found out about it, but GoPro and Snap don't compete directly with each other or larger food retailers, airlines, or travel agencies, making it easier to build relationships.
Once Snap demonstrates it can be a reliable partner, it can branch out to other consumer companies like Fitbit and discuss partnerships or demand a premium to reach its users in more substantive ways. For example, if Snap receives a movie licensing deal, it would normally create filters and receive payment for its marketing. However, in a longer-term partnership where its platform is used as a conduit to attract self-made content--such as mini-movies--it could become the purveyor of cool.
Right now, YouTube and other larger companies focus on all types of users to gain the most advertising dollars possible, but in doing so, fail to differentiate themselves. People sometimes go on YouTube to search for music and random videos, but they don't look forward to opening its app every day because Google relies on algos rather than curated content guaranteed to "wow" users. If Snap and GoPro create a mutually beneficial relationship establishing themselves as content curators and conduits for creativity, they can attract other companies experiencing difficulty breaking through the usual Apple, Google, and Facebook channels.
Snap's 12% drop on March 6, 2017 shortly after its IPO indicates it needs to think outside the box. In the hardware world, Apple and Samsung already dominate. Smaller companies like Snap need to figure out a coordinated way to take on the established behemoths or end up bleeding cash trying to avoid becoming fads. Meanwhile, GoPro CEO Woodman needs to do something soon. In 2015, he ordered a 180-foot yacht, to be delivered in 2017. It won't look good to be in a custom-made yacht while his shareholders suffer. Unless Woodman does something soon, his yacht might end up being called "French Revolution" or "Marie Antoinette." Will GoPro and Snap work together, or will they try to displace Apple and Samsung, two companies with marketing budgets larger than most companies' market capitalizations? Shareholders of Snap and GoPro should hope their CEOs make the right choice.

Bonus: the kind of partnership I envision is similar to the way Disney runs international resorts, i.e., a hybrid licensing and royalty model. Basically, Snap could license its software and platform to GoPro (and other smaller hardware companies like Fitbit) and also negotiate royalties based on revenues to incentivize a true partnership.  In the first few years, the licensing fees would be smaller and the royalty percentages higher, but as both companies learn each other's channels and execute more efficiently, the licensing fees could increase while royalty percentages to Snap decrease. More here on the overall model. 

Update on March 8, 2017: great comment from another website: "I like your Nintendo vs. Sega analogy but you compared apples to oranges. Gameboy was a portable handheld. Dreamcast was a console system. A better comparison would be how Sega's 16GB Genesis was better than Ninendo's 8bit NES system or how their full color GameGear portable was better than Ninendo's black and white, dinky Gameboy. But like VHS and Beta, Nintendo won out." 

Monday, March 6, 2017

Vaclav Havel on the Intellectual

Vaclav Havel, a political prisoner in the Czech Republic who later became its first President, is not studied enough.  His life is amazing, and his thoughts even more relevant today as many "developed" societies replace spiritual beliefs with consumerism.

Here are his thoughts on the role of the intellectual, from Disturbing the Peace (1990), copyright Paul Wilson, paperback (First Vintage Books edition, April 1991), pp. 161:


Here is another excerpt, on faith (pp. 190):


In an age where ideas are recycled and claimed as new, Havel continues to be even more original with the passage of time. 

Friday, March 3, 2017

The Canadian Dream: Nav Bhatia

I scored a picture with Canadian philanthropist and Toronto Raptors superfan Nav Bhatia! He jokingly covered my Wizards shirt in a pro-Raptors gesture before this shot.  Mr. Bhatia is the personification of Canada's inclusiveness.  Born in India, he left and earned a degree from a California university, but found success only after a Canadian-Chinese manager at a car dealership took a chance on him.  Now arguably the most admired self-made businessman in Canada, he spends six figures annually on Raptors tickets, donating many of them to underprivileged children.


Wednesday, March 1, 2017

Technology Isn't the Problem

I'm tired of people blaming technology for America's problems.  Apple, Amazon, and Facebook have grown rapidly, lessening America's dependence on oil prices and oil discoveries for economic growth.  Without technology, we wouldn't be talking about driverless cars, disease eradication, or personalized medical advances.  Just when we are close to implementing the Jetsons lifestyle (sans jetpacks), we screw it up by turning on each other.

I'm particularly troubled by pundits and regular people picking on "millennials," branding the latest college grads as lazy or self-entitled. If you spend close to 100K on a piece of paper, it's perfectly reasonable to think it should lead to a decent-paying job in the absence of a recession.  Let's try to agree on at least a few principles so we're not always speaking past each other:

1.  An economy based on consumer spending--especially on unnecessary items--needs more and more consumers, so if population isn't growing steadily, especially among middle and upper classes, then you have two choices: 1) increase legal immigration; or 2) make it easier for your businesses to sell abroad, especially to countries with growing populations (i.e., the probable rationale behind President Obama's "pivot to Asia").

None of the above means you have to support illegal immigration.  It just means if you want a wall, you have to ask yourself whether you'd rather spend x billion on the massive number of police and federal employees required to maintain and patrol it rather than spending x billion on more healthcare subsidies, lower college tuition, stronger Social Security, etc.

I suppose such a choice depends on whether you believe illegal immigrants bring crime with them, which is contingent on what you see.  Do you live in a city where they work in restaurants keeping your discretionary food prices low, or do you see them loitering outside, up to no good or engaging in what you believe to be drug sales?

In any case, you cannot possibly be against legal immigration because it is undisputed America has a low population density outside its fifteen to twenty largest cities, which is why its highway and public transportation systems are such a mess. (Too much space begets sprawl.)  All this means we either have to figure out a way for native-born women to have at least two kids, especially higher-earning college educated women, or we need to attract law-abiding immigrants into mid-sized and smaller cities.  As an American, you cannot be against the aforementioned statement if you have both logic and facts--and that's without even discussing how entitlement programs like Social Security and Medicare work.

2.  Why aren't more American women having at least two kids, especially college-educated women?  About 65% of American women have at least two kids, but only 30% have at least two kids by the time they're 29 years old. (Fertility issues also exist in Europe.) 

In addition, about 20% of native-born American women never have kids, and about 30% to 42% of women with at least a bachelor's degree never have kids. Interestingly, 80% of women without a bachelor's degree have at least one child in their lifetimes.  Basically, less education in developed countries means more kids, and more education means fewer kids.

The reason college-educated women are having fewer kids than lesser educated women is obvious--college takes a long time, is expensive, saddles many women (and their partners or spouses with debt) and doesn't guarantee a middle-class job.  Why would anyone favor a system where more ambitious women have fewer opportunities to raise the next generation of citizens?  And yet, here we are.  It's not just lawyers who need grad degrees now--even social workers in many large cities need master's degrees to be competitive. (By the way, what logical relationship does sitting in a classroom and studying macro-social issues have with working in a hospital and dealing with people one-on-one every day?)

Evidence shows college now helps student loan creditors--which include the federal government--more than graduates in terms of practical or job-related skills.  Yet, we keep demanding more of our taxes go to K-12 and university systems without any incentives linked to increased employment or some system of checks and balances imposing discipline on admissions counselors (such as partial refunds of tuition if a grad is unemployed 6 months after graduation).  Americans now owe $1.19 trillion as a result of student loans.  Don't voters know that "insanity is doing the same thing over and over again and expecting different results"?

(Bonus: “I've been making a list of the things they don't teach you at school. They don't teach you how to love somebody. They don't teach you how to be famous. They don't teach you how to be rich or how to be poor. They don't teach you how to walk away from someone you don't love any longer. They don't teach you how to know what's going on in someone else's mind. They don't teach you what to say to someone who's dying. They don't teach you anything worth knowing.” -- Neil Gaiman, The Sandman, Vol. 9: The Kindly Ones.)

[Update on November 2017: a counterargument is here, but notice that the data used concerns families making over 500,000 USD annually and/or women with graduate degrees, i.e., outliers.) 

3.  When your profit and investment structure incentivize short-term goals, why would you expect long-term success?  Having about 25% of innovation, especially in tech and biomedical sectors, backed by venture capital guarantees anti-trust problems because profit, not competition or lasting change, is the primary goal.  (VCs back "more than a quarter of the total government, academic, and private U.S. R&D spending of $454 billion.")

Throw in quarterly rather than annual earnings or semi-annual reporting requirements, and you have a recipe for disaster.  Need more sales?  No problem--increase the discount, cannibalizing future sales, or borrow money to hire commission-based workers you'll let go the second they're not profitable.  When debt is so readily accessible and a significant percentage of creditors or founders focused on short-term gains, then the private sector becomes a feast-or-famine circuit for large companies to pounce upon.  There's no one left except for military R&D--which lacks fiscal checks and balances--to take a long term view.  The lessons are simple: public companies must be incentivized to reduce, not increase non-R&D-allocated debt; accounting rules must become stricter and globally consistent (I rue the day "pro forma" earnings gained any sort of credibility); and reporting earnings must be reduced from quarterly to at least mid-annually. 

4. Promoting long-term romantic relationships requires job stability, but not in ways that promote factions.  Most Americans don't understand the following principle: the more groups able to negotiate terms separate from everyone else means some costs must fall on persons not able to access the group rate and therefore disadvantaged. Such a dynamic harms the individual and incentivizes factions and a fractured society as some people care more about their "in-group" than the public trust or the individual.

Such faction-building--which inevitably facilitates corruption by reducing accountability and then trust--is particularly problematic within America's government unions.  Such unions have used their insider knowledge of complex hiring and political procedures to negotiate separate and unequal compensatory and disciplinary terms exclusively for their members, but without any direct benefit to the taxpaying public.  In doing so, they--and other fiefdom operators--have made America into a complex web of laws favoring only certain connected groups, causing dissension and the mainstream media's suppression of politically unfavorable facts.  Such suppression--rather than honest, thoughtful dialogue--inspires rebellion in any free person, leading to oppositional forces--such as Fox News's political pundits (excepting the wise Judge Andrew Napolitano) and Breitbart--that increase rather than heal growing divisions. Viewers forgive the divisive bombast because pablum and condescension are not features, and the material taps into a visceral belief that honesty and integrity no longer lead to success.  The outrage is really because fiefdoms promote system-gaming, but the complexity of how this occurs is difficult to get across in any kind of 30-minute dialogue, so we are left attacking factions receiving different benefits from the general public rather than the system itself.

Let me try to explain how this dynamic can work against the individual.  Group A has lots of members and, through a broker, approaches a health care provider or insurance company and negotiates a discount or shops around for better deals.  The ability to get an excellent insurance broker is somewhat dependent on the fees paid to the broker, and broker fees can be more easily spread out over groups if paid directly, or indirectly if commissioned based on overall value.  [My friend says, "Brokers make a first year bonus form the actual insurance based on number of lives insured. If they maintain the account, they get a yearly retention bonus based on the number of lives insured. If new employees are added, they get a bonus for each new addition.] Therefore, the group rather than the individual is able to better attract the finite time of the better negotiator because the fee system tilts in the group's favor--even if the services requested are essential on an individual level.  The better the broker, the better the discount or research, but without an in-depth medical examination of every single plan member, no one really knows whether the larger size of the group helps insulate the plan or provider from excessive costs in the future.  [According to my friend, an employee census of the business is obtained by the broker and given to the rate-runner or insurance fiduciary.] The future, as always, is unpredictable, especially when individual assessments aren't done, but the group generally ends up with a better or more cost effective plan if the age ranges are comparable.  (Imperfect metrics like age and zip codes are used in the absence of individual assessments.)

In contrast, an individual who wants to buy a health insurance plan must generally choose a more costly plan because he or she is an individual and cannot demand an individual health checkup and negotiate a discount based on good health.  [My friend adds, "True, but it's like picking a single stock vs. a mutual fund with 100 stocks--more people insured spreads risk, lowering premiums by a group on a per capita basis.]  Insurance is tricky--it needs both healthy and unhealthy people to be possible.  If insurance companies were able to identify and sign up only healthy people, insurance wouldn't work--no one would insure the more costly unhealthy people, or they'd put in so many exemptions as to make coverage inadequate.  [My friend adds, "ACA depended on 'young invincibles' signing up to pay for the sicker patients but this didn't happen, which led to dramatically increased premiums.] The reason insurance works is because a healthy person today may be unhealthy tomorrow, and an unhealthy person today may be healthy in a year, and no one can predict with any certainty the future.  Key takeaway: the system is not designed to evaluate the individual, whether alone or in a group. ["The system is designed as a risk pool with ratios of healthy to sick people being the factor for solvency."]

In any case, if the projections for a group's negotiated costs turn out not to be true and more than expected, the provider can try to pass on those costs in the future, but chances are, because of their greater numbers and therefore greater revenue potential, the health care provider or insurance company will generally pass on unexpected costs to them and dispersed individuals, eventually raising premiums for everyone.  The minute you allow separate groups within systems that provide either essential services or that serve all persons, you must be an oracle when it comes to costs or try to pass those costs into the future. [My friend adds, "Not necessarily.  You use predictive analytics and population-based health models."]  The same dynamic applies to private vs. public schools, but such factions are tolerated because education, while essential, isn't geared towards the best performing students, and no one wants to argue that such students should be short-changed if they can pay voluntary and additional fees.  In the case of health care, the argument for allowing fiefdoms is much less clear because insurance requires healthy people to be part of the system, and segregating them would cause the collapse of the insurance plan.

Let's dive into another example of a fiefdom in America: local government unions.  In most major American cities, 50% to 70% of all local tax revenue is spent on "public safety" aka cops and firefighters. Many of these taxes go to pension obligations, i.e., paying gov employees who no longer work and who haven't paid into the retirement fund in sufficient amounts to sustain it without higher taxes or cutting other local programs.  As a result, not only do police officers lack full-time partners riding with them in patrol vehicles due to the increased expense in paying a six-figure pension while also generating sufficient, sustainable tax revenue to pay for an active-duty officer, but working hours are extended, leading to higher stress, which creates greater likelihood of mistakes and impatience.

What's the upshot?  America's military spending is not subject to any real audits due to the federal government's ability to borrow almost unlimited debt, and even local entities are forced to divert their taxes into strengthening a police state because by law, pension interests--at a guaranteed 7.5% ROI, regardless of GDP growth--are vested and therefore untouchable.  Instead of discussing these issues--which require nuanced, fact-based dialogue--American mainstream media leads the public into the morass of useless, emotion-based dialogue about Black Lives Matter or All Lives Matter, which will do nothing to resolve any substantive issue.  It's like Laurence Fishburne's line in Boyz in Da Hood--"They want us to kill ourselves," except in this case, they want us to be confused so we don't rock the (political) boat.

When your educational system lacks any real connection with the job market, despite receiving the lion's share of taxpayer dollars in most states; your government employees are insulated from accountability through laws and procedures they themselves helped pass; and your private sector, which drives most employment, is subject to a completely different set of employment rules from your public sector, what could possibly go wrong?

My proposed solutions?  For companies of at least 100 people and over a certain revenue threshold (adjusted for inflation), I like the idea of IBM's peer review panel. It used to be that IBM would not generally terminate a post-probationary-period employee until a peer review panel of three managers and worker representatives evaluated the facts and heard testimony from the manager and the employee. (The difficulty would be determining which "side" held the majority vote, even under a rotating power setup, or how to guarantee a cost-effective way of bringing in a truly independent third person with enough knowledge about the company.  Highly respected ex-employees who left voluntarily might be the best bets.)

Witnesses would be restricted to co-workers with personal knowledge of the employee's work and managers participating in any performance review or termination.  Testimony would be confidential--but an opinion must be published with a chance for dissents--and the number of days of the hearing could be set at a minimum of one and then increased (up to a cap) based on the number of years of the employee's tenure. The written opinion would be inadmissible in court.  The overall number of employee and company "wins-losses" must be publicly available for each location in a simple two-number chart (e.g., Due Process Outcomes: Termination Upheld = 20 in 2014, 10 in 2015; Reversed = 10 in 2014, 5 in 2015; link to opinions here, etc.).

Ideally, the turnover rate within every employer above a certain size--both governmental and private--should be publicly available for each division.  A simple chart would suffice: one row for the division (sales and marketing, engineering, etc.); one column for the number of years of employee tenure (less than one year; more than one year; more than two years, etc.).  To promote full transparency, companies relying on contractors (rather than W-2 employees) must publish the same chart but with a twist--they must show how many contractors became employees, and after how many years.  (Of all my employment-related ideas, I'm most optimistic of the ones directly above.)

What's the incentive for a business to allow such meddling in its employment processes, especially in a rapidly changing competitive landscape?  In exchange for due process, employees would agree that if they lost at the peer review stage and sued in court for any claims relating to their termination, they would be liable for the employer's attorneys' fees, capped at some reasonable amount--perhaps a percentage of the employee's annual salary at the time of termination.  Such a process would provide a way for companies to save on litigation costs as well as give their lawyers insights into the employee's credibility, while capping the downside for the employee if s/he lost in court.

One problem would be if a company wanted to do a mass layoff (say, at least 50 people at one time), indicating it wasn't intending to terminate a specific employee for performance-based reasons.  Perhaps it wanted to dedicate more resources to software rather than hardware or do something else that would increase its competitiveness and protect jobs in the rest of the company.  In such a case, each employee should receive 6 months' worth of salary or at least double the minimum wage multiplied by six months.

Current laws in California try to protect employees above 40 years old from being included in mass layoffs as pretext for removing older workers, but once again, an American law has managed to accomplish very little in preventing age discrimination while increasing the power of lawyers and the public's reliance on them.  It is far better policy to accept that if discrimination occurs, then the idea should be to provide some automatic and substantial benefit to mitigate the effects of pretext.

Government agencies could still investigate and bring claims against companies but an employee who filed such a claim--say, for termination based on racial discrimination--would waive his/her right to collect monetary damages. (European companies have a similar set-up where they appoint a management and worker representatives to a panel that hears issues of importance, but I'm unsure if such panels also hear employment disputes.)  Note that claims not related to termination would still be viable, such as sexual harassment, civil assault, invasions of privacy, etc.

Basically, post-probationary employees in businesses with 100 employees or more should have some form of due process before losing their livelihoods, which would incentivize relationship-building, and the process should be the same in the private as well as public sector to prevent faction-building.  In other words, for any entity with 100 or more employees, any legal change to the due process system would apply to both the private and public sectors.

Combine a due process system with an ESOP that cannot be leveraged or borrow against its assets (retirement assets would increase based on governmental bond rates with additional returns, if any, from some capped percentage of annual profits)--and you would create a private sector employment and retirement system not overly dependent on Wall Street. After a certain size, a credit union for your employees could continue to keep the money "in house" and revitalize Main Streets everywhere.

Another idea includes recruiters going to major city hubs and having one-on-one interviews with persons terminated 150 days or less.  Think of it as "speed dating" for job applicants.  Such interviews would be much more useful than post-termination resume building workshops, which are sometimes included in severance packages for employees.

We've covered the employment side of the "stability" equation, but we're still bound by other factors, such as marriage and child support laws.  From my own perspective, marriage under American laws becomes riskier over time, as both men and women gain more assets than can be used by a random judge to give to a less ambitious or unjustifiably greedy former spouse.  One problem is that the judge--who is paid out of the public purse--has incentives to prevent any spouse from going on welfare, thereby minimizing the government's own obligations.

No logical person with assets would get married under these circumstances, where there is no upside and extensive downside.  Such a system discriminates against lower-earning and middle class persons by making marriage the resort of the ultra-rich--who can afford lawyers who draft airtight prenups and update them as laws change every year--or the cult of sameness, where people from similar backgrounds are incentivized to marry or couple together, increasing class and educational segregation rather than encouraging people to focus on personal qualities like integrity, patience, and resilience.  When the laws of a nation expressly discourage an emphasis on personal honor and render a life's savings contingent on the discretion of random government employees, contempt for such a society cannot be far behind. It is no wonder that in such a system, even the elites believe that government should be a mere referee rather than a more active participant in enforcing predictability and financial stability.

5.  If we cannot agree on the general principles above, there is no point in discussing anything of substance.  European and other countries may have issues with immigration and escalating social welfare costs, too, but they continue to make their political structure work for them by using the majority of their tax dollars to implement essential programs for all residents. Thus far, European countries, for the most part, are not set up structurally to encourage specific factions for purposes of siphoning substantial tax dollars from the public purse for benefits that apply only to a small number of politically-connected residents.

Like Americans, Europeans have ample and complex laws, and they, too, have problems with segregation and upward mobility, but continue to show ample common sense, such as Sweden's linkage of old age pension benefits to annual GDP.  In Sweden, public retiree benefits are adjusted annually according to changes in prices--which means benefits can be reduced if overall GDP declines. Other retiree benefits are based on an annual index of trends in average wages (including social insurance benefits); an annuity factor depending on average life expectancy at the time of retirement for the appropriate age cohort (based on the most recent 5-year average of unisex life expectancy projections); and the expected increase of average wages in future years.  Under such a system, sustainability is the goal, which minimizes the need for emotion-based drivel.  To have a discussion means knowing your metrics and data, and because everyone is on the same system, "good data" becomes incentivized.

Meanwhile, in America, retiree benefits are assigned an arbitrary increase--never a reduction--every year called COLA, which is manipulated by political parties depending on the need to fund other programs.  Over time, politicians exhaust arbitrary means of manipulating existing metrics, which forces them to start excluding persons from the programs or to make it more difficult to apply for the same level of benefits.

Welcome to America in the year 2017: factions galore, and a political system designed to either become a police state or to collapse eventually because of demographic headwinds or through laws that increase segregation and lead to less accountability. In just ten or fifteen years, my optimism has gone missing, much like America's institutional integrity.  Why?  It's becoming apparent America's current laws and debt restrict the primary engine that made it so successful--the ability to absorb immigrants, even uneducated ones, and assimilate their children in ways that benefit everyone. At least I can say, at the age of 39, I've already lived through the highest of the high--a national budget surplus and the dot com boom in Silicon Valley--and the lowest of the low--9/11, the 2008-2009 financial crisis, and the aftermath.  Since it appears I've lived in exactly the right place at the right times to see the highs and lows, I wonder what my future holds.  To paraphrase W.H. Auden,

When the future comes, will it come without warning
Just as I'm picking my nose?
Will it knock on my door in the morning,
Or tread in the bus on my toes?
Will it come like a change in the weather?
Will its greeting be courteous or rough?
Will it alter my life altogether?
O tell me the truth about my future. 

© Matthew Mehdi Rafat (2017)