Monday, February 18, 2019

Displaying ignorance is seldom a good thing


Last week I wrote an article titled, "Bait and switch" prices are still going strong".  In it, I made this statement:

What's more, many of the prices charged for goods bear no relation whatsoever to the actual cost of production of those goods - another con game.

I was immediately pilloried by various commenters, both here and on Instapundit (which linked to the article).  A common reaction was to describe that statement as "socialist", and to decry any linkage whatsoever between cost of production and selling price.  I was publicly attacked for my "ignorance" on some other blogs (although I note with some cynicism that when I attempted to post a comment replying to such attacks, that comment was seldom published).

However, those disputing my statement were, in fact, displaying their own ignorance on the subject.  I think it deserves a short explanation, for their sake if nothing else.  BTW, my "credentials" in this discussion are that I've studied economics at undergraduate and graduate level.  I don't consider myself an "economist" in professional terms, but I know enough about the subject to consider myself economically literate at a businessman's level.  I'm not just sucking this stuff out of my thumb.

To begin with, cost of production is only one of many factors that affect the price of an item.  There's an entire field of economics dealing with the subject, and it would be impossible to summarize it here.  For those interested in reading more, try one or more of these sources:

There's a fundamental relationship between what something costs to produce, and the price for which it's sold.  Basically, any businessman wants to make as much money as possible off each product:  but he's constrained by reality.  If he's selling it for, say, a hundred times what it costs him to make it (or buy it from someone who makes it), he's seemingly sitting pretty:  but every other businessman out there will notice that sort of profit margin.  Before long, they'll be selling similar products and undercutting him on price.  In other words, he has to set his price at such a level that the profit margin doesn't tempt others - or, at least, too many others - to enter his market.  The cost of production or acquisition is therefore an indispensable consideration (although, as stated above, not the only one) in the price of that product.

There's also the factor that excessive profit will attract public objection, and possibly political and regulatory intervention.  The past few years have provided some high-profile examples.  Consider, for example the scandal over the soaring price of Epipens, or the fury over the increase in price of Daraprim, both long-established medicines.  In both cases, the cost of production of the product concerned (tiny in relation to what consumers were expected to pay) was repeatedly cited in objections to their outrageous and egregious price increases.  Attempts by executives of the companies concerned to explain their actions went nowhere fast.  Both instances were very clearly "profit grabs", and the public and politicians saw through them and demanded action.  Any business trying to price its product at such excessive levels can expect such pushback, from the buying public at least, and possibly from the authorities if customers make enough fuss about it.  They will, if it's important enough.

Consider also the laws against price gouging passed in several states, that prevent businesses from raising prices on their existing stocks of critical items (e.g. fuel, emergency food supplies, etc.) during an emergency.  One can argue that such laws are misguided, because such increased prices serve to balance the (extremely limited and temporarily irreplaceable) supply with the sudden, vastly increased demand for it;  but that's beyond the scope of this article.  Suffice it to say that the reason such laws were passed is because consumers in those states knew full well that some businesses were making a fortune by charging vastly more for their stock in trade than it had cost them, and they resented it.  That resentment translated into passing laws to prevent and/or punish such profiteering.  Like it or not, the price of the article was legislatively linked to its input cost/cost of production, and that remains the law in those areas to this day.  I don't see it changing anytime soon.

"Pure" laissez-faire economics would certainly postulate that there should be no linkage between the cost of production of an item, and its selling price.  However, there is no such thing as "pure" laissez-faire economics, anywhere in the world.  It's no more than a theory, a pipe-dream, in precisely the same way that "pure" libertarianism would be completely unworkable as a means of running society.  There have to be checks and balances on the "purity" of both concepts, lest their "perfect" theory should run headlong onto the rocks of practicality in day-to-day life.

One such "check and balance" is the concept of a moral and/or ethical price.  Every major religion in the world, and most developed philosophies of life, embody, directly or indirectly, considerations of what is just and unjust in economic terms.  That includes the pricing of goods for sale.  It's generally considered unjust to set an excessively high price for necessities in terms of their actual cost, because people will suffer without them.  Their cost figures into what is considered a "fair" or "just" profit margin in pricing them.  For example, usury (the lending of money at excessive rates of interest) was (and still is) generally condemned as wrong, even sinful.  The modern version of an usurer, a loan shark, is considered a criminal in terms of many civil laws based on such norms.  The Epipen scandal referred to above was said to have "crossed ethical boundaries".  There are many other examples.  Such moral and ethical (and sometimes legal) constraints are a fact of life when setting a product's selling price, and we ignore them at our peril.

I'm not going to waste your time by going into more detail here.  I've provided sources you can read if you'd like further information.  However, let me close by reiterating that its production cost is inextricably linked to the selling price of a product.  That's not socialism, although socialists like to claim it as one of the tenets of their philosophy.  It's basic economic reality.  There are many other factors affecting price, to be sure:  but production or acquisition cost is unquestionably one of them.

Peter

Sunday, February 17, 2019

Sunday morning music


Something slower and more thoughtful this morning.  Here's Handel's Concerto Grosso Op. 6 No. 7.  This performance is from the Classical Music Studio of St. Petersburg, conducted by Alexander Titov.





Music by a composer of German origin, composed and presented in England, and here performed by a Russian orchestra and composer.  Who says music is insular?

Peter

Saturday, February 16, 2019

Rush to judgment, much?


The Jussie Smollett "assault" case, submission #1:




Submission #2:




Submission #3:




Aaaaaannd Submission #4:

Brothers say Jussie Smollett paid them to participate in alleged attack, source says

The two Nigerian brothers arrested in connection with the assault on "Empire" actor Jussie Smollett are no longer suspects in the attack. They're now cooperating with police.

A source close to the investigation confirms to CBS News the brothers told detectives Smollett paid them to participate in the alleged attack on January 29 and that they purchased the rope — which was found around Smollett's neck — at a nearby hardware store. The source said detectives have evidence to corroborate the sale, something the men's attorney alluded to Friday night.

"New evidence that was brought to their attention, obviously I had it, my clients had it," said Gloria Schmidt, the brothers' attorney.

The Chicago Police Department released a statement Saturday night saying information from the brothers had "shifted the trajectory of the investigation."

"We can confirm that the information received from the individuals questioned by police earlier in the Empire case has in fact shifted the trajectory of the investigation. We've reached out to the Empire cast member's attorney to request a follow-up interview."

Left-wing progressive politicians rushing to one-sided, self-serving judgment? Say it ain't so!  Clearly, they've learned nothing from the Covington affair, or from so many similar imbroglios in the past.  Perhaps they don't want to - or, more realistically, don't intend to.  Instead, they're following the Rahm Emanuel playbook.




Peter

This is why you slow down when driving in slippery conditions - and what happens when you don't


This was filmed on I-70 outside Kansas City, MO yesterday.





I'm very glad I was nowhere near that!  Apparently 47 vehicles were involved.  One person died, and seven were injured.  Allowing for the time it would have taken responders to arrive at the scene, and the time needed to remove just one vehicle (even with several tow trucks working at once), I have to think it took the best part of a day to clear away that lot . . .




Peter

"Politics is the art of the possible"


German chancellor Otto von Bismarck famously pointed out, "Politics is the art of the possible".  Any successful politician has to learn the arts of negotiation and compromise - not to mention the Pareto principle, otherwise known as the "80/20 Rule".  If he can get 80% of what he wants with a tolerable amount of effort, and getting the final 20% of what he wants will consume an inordinate amount of time, energy and resources, he's often better advised to take what he can get and let go of the rest.  To use another well-known idiom, "the best is the enemy of the good".

However, when we view the current debate over the border wall, many of the passionate partisans on both sides are ignoring all those well-known pragmatic realities.  They want it all, they want it their way, and they want it now - and to hell with opposing opinions.  That, in a nutshell, is why US politics and politicians can't achieve anything meaningful these days.  They're too busy insisting on "my way or the highway", and too focused on denying the opposition any victories at all, even partial ones.  For too many of them, it's all or nothing.

I find this very disturbing on many levels, but particularly because reasonable people should be able to compromise along the lines of the 80/20 rule.  If one side wants something badly enough, and is willing to fight for it, what's wrong with the other side saying, "OK, we'll concede most of what you want, although we insist on these limitations:  but only if you give us most of what we want on this other issue."  The second party could then say, "OK, but we want these restrictions on it."  By a process of back-and-forth negotiation, both sides could end up with a win . . . but not in US politics today.  For both major parties, it's all or nothing.  They won't talk to each other, they won't listen to each other - and the country is the poorer for it.  Both sides are equally bad.  Alexandria Ocasio-Cortez is just as bad as Ann Coulter, and vice versa.  Both come across as intolerant, histrionic harpies, and I wish they'd both shut up for a while.  (I know, I know . . . fat chance!)

This is one of President Trump's weaknesses, too.  His personal style is abrasive and combative - not surprising for a New Jersey/New York businessman, to be sure, but not ideal in a politician.  I support his call for a border wall, and would even be prepared to pay higher taxes, if necessary, to build it;  but I'm not in favor of destroying bipartisanship in order to accomplish that.  (I accept that he's not alone in that destruction, of course.  Both sides are equally guilty of it.)

I've noted before in these pages that US politics is descending perilously close to the sort of division that sparked the American Civil War.  I don't know if we can get back to rationality and reasonable discourse before we end up in a second . . . certainly, events such as the Covington affair and the brutal, savage reactions to it suggest that it's likely to be a steeply uphill battle.

I think we have to accept that extremism has taken root in Congress and the Senate, and is unlikely to be uprooted from those institutions until it's been uprooted in our society as a whole.  That being the case, reasonable men and women will have to accept that they're in a permanent minority.  The "screaming classes" will insist that if we don't support their side, we must automatically belong to the unmentionable other side, and are therefore their enemies.  The only way to avoid that is to avoid political discourse altogether - and fierce partisans will try to deny us the right to not be involved.  They won't accept neutrality.  To them, that's a weakness;  one they must eradicate from national discourse.

We live in troubled times, and I don't have answers for it, no more than anyone else has.  The best advice I can offer is to keep our heads down, and don't be or become extremists ourselves, on one side or the other of the political divide.  Remember Bismarck.  "Politics is the art of the possible."  Let's strive to achieve the possible, and ignore the rest.  Remember the 80/20 Rule.  Let's strive to achieve the 80% while avoiding the over-the-top, very costly final 20%.  Let's be pragmatic, be reasonable, and do our best to survive as individuals, as families, and as communities.

Finally, if the fiercely partisan extremists won't let us do that, let's become equally extreme in our refusal to tolerate them.  Let them spout their nonsense to all and sundry, but not to us, and make it clear that we won't permit them to radicalize us.  It may come to something like another civil war - which God forbid - but let that not be because we helped it become reality.

Peter

Friday, February 15, 2019

Heh


This was sent in by several readers.  It made me chuckle.




From the spelling of "humour" and the acronym RSPCA, I suspect this was an item in an English newspaper about an American news report. Still, it's funny in any language and any nation.




Peter

OK, this is worth a road trip!


I think I know where I'm taking Miss D. (and perhaps some friends) in January next year.

Behold New Mexico’s ultimate pork fiesta: 43 pigs, 300 gallons of chile and 22,000 tortillas

It’s 4:30 in the morning, and Anthony Guardian has a problem: His cooking oil is frozen.



He’s getting ready for the 19th edition of the World’s Largest Matanza, an annual fiesta in the small city of Belen, N.M., that celebrates the state’s historic nose-to-tail hog-slaughtering festivals. Sixteen teams from across the state will gather in Eagle Park on this chilly late January day to feed traditional New Mexican matanza dishes — carne adovada, chicharrones, carnitas, red chile and more — to an estimated 9,500 attendees who’ll pay $15 for all they can eat.

. . .

“It’s heritage, it’s community, it’s ritual, it’s economics, it’s culinary, it’s celebration,” says Tey Marianna Nunn, visual arts program director at the National Hispanic Cultural Center in Albuquerque. “It really is a performance art form.”

Knowing its drawing power, the Hispano Chamber of Valencia County started what evolved into the World’s Largest Matanza in 2000 as a fundraiser for high school students.

“We can have a banquet,” says current board secretary Rita Garcia, “but isn’t a matanza more fun?”

. . .

The World’s Largest Matanza unfolds without any hitches, with attendees including military veterans, motorcycle club members and DEA agents. The temperature never exceeds 50 degrees, but no one seems to mind. The bands blast through their sets, with an announcer urging attendees to “dance off those chicharrones.”

By early afternoon, only a couple hundred people remain, mostly teams and their friends and family waiting to hear the winners in 10 categories such as carnitas, bizcochitos (an anise-flavored sugar cookie) and the Iron Pig, in which teams were tasked with cooking pork alongside a surprise ingredient: polenta. (“Maybe it’s not an exotic ingredient in Southern California,” says the head of judging. “But it is around here.”)

There's more at the link, and at the festival's Facebook page.

An article in New Mexico Magazine gives more information, and provides some mouth-watering recipes, too.  Here's one to whet your appetite.

New Mexico Red Chile Sauce

Simple sauces like this are a mainstay of every matanza. Dip a freshly fried chicharrón into a bowl of it. Experience bliss.

Makes 4 cups
  • 8 ounces (about 20–25) dried whole red New Mexican chile pods, mild, medium, hot, or a combination
  • 4 cups water or chicken stock
  • 2 tablespoons vegetable oil
  • 1 medium onion, minced
  • 3 garlic cloves, minced
  • 1–2 teaspoons crumbled dried Mexican oregano or marjoram
  • 1 teaspoon salt, or to taste
  1. Toast dried whole chile pods in a heavy skillet over medium heat until they are warm and release their fragrance, 1–2 minutes per side.
  2. Remove chiles from the skillet immediately. When cool enough to handle, break each pod into several pieces (wearing rubber or plastic gloves if your skin is sensitive). Discard stems and seeds.
  3. Warm the oil in a large saucepan over medium heat. Add onion and garlic. Sauté several minutes, until onion is limp.
  4. Place the chile pieces, onion, garlic, and oregano in a blender and pour in the water or stock. Puree until mostly smooth, with a few flecks of chile still visible.
  5. Pour chile mixture into a saucepan, then add salt. Reduce heat to medium-low and simmer. After about 15 minutes, taste the sauce and adjust seasonings. Continue simmering, for a total of 20–25 minutes.
  6. When ready, sauce will be cooked down enough to coat a spoon thickly but still drop off it easily. Use warm or refrigerate for later use.

That sounds so delicious, I'm going to try cooking it soon.  I might try a variation using New Mexico's famous Hatch green chiles, too.  My mouth's watering already at the thought!

Peter

Hmmm . . . me Tarzan, you Jain?


For those who may not know, Jainism is an ancient Indian religion that, among other tenets, requires its followers to avoid harming any other living thing.  "Causing injury to any being in any form creates bad karma which affects one's rebirth, future well being and suffering."  The slaughter of animals for food is anathema to them, as it is to militant vegans - although the latter all too often don't subscribe to Jainism's non-violence creed.  Anyway, that's where the title of this article comes from.

Be that as it may, a group of vegans in England have come up with a non-violent new twist of which Jains will probably approve.

Leicestershire Animal Save are hosting roadside monthly vigils once a month in Melton Mowbray in which they whisper phrases to cattle before they arrive at an abattoir run by Foyle Food Group.

The activists, who have held 35 ceremonies since founding their group in 2015, also hold signs which say "your taste=their death".

Group founder Dina Aherne said the group has an understanding with the slaughterhouse bosses, who let them stop the trucks and trailers which transport the cows.

The 38-year-old former solicitor from Leicester said: "We want to make the cows feel at ease every time because they are living and sacred beings.

"Cows have a living soul and conscience. We really want to help comfort them.

"We have to arrange and give two weeks notice for when we are going to be on site.

"When we arrive usually at about 8am, we gather outside the slaughterhouse on days when the abattoir is operational for about three hours.

"We then stop each of the trucks and are given two minutes to say the last goodbye's before they go and get a bolt gun put through their head.

"We whisper phrases to them like 'we're sorry', 'we see you' and 'I love you'."

There's more at the link.

I don't suppose it does any harm . . . but if I were to join them, I'd be whispering other things, like "Sirloin!", "Ribeye!" and "T-bone!"  I can't imagine the cows will feel any the worse for the more . . . ah . . . secular incantations!  I'll invite the rest of the North Texas Writers, Shooters and Pilots Association to join me.  We frequently enjoy a good steak together, so we'll be able to get into the spirit of the thing, as well as digest (you should pardon the expression) its deeper implications.




Peter

Thursday, February 14, 2019

"Bait and switch" prices are still going strong


It looks like companies are getting sneaky with high-tech shopping apps, using them to bait you into visiting their stores or Web sites, then switching prices on you.  This and other tactics have been used online for well over a decade, as this 2005 report shows.  Now Target appears to be doing something similar.

In a two-month investigation, that began with a concern from a viewer, KARE 11 found Target’s app changes its prices on certain items depending on if you are inside or outside of the store.

For instance, Target’s app price for a particular Samsung 55-inch Smart TV was $499.99, but when we pulled into the parking lot of the Minnetonka store that price suddenly increased to $599.99 on the app.

To test this further, we selected 10 products on the Target app at random, ranging from toys to bottled water to vacuum cleaners. We found that when we entered the store, four of the 10 products jumped up in price on the app.

. . .

Our list of 10 items was a total of $262 cheaper in the back of the parking lot on the app with no indication that the prices had changed.

There's more at the link.

Let's be honest:  most companies are out to separate you from as much of your money as possible, as painlessly as possible.  It's only because we aren't vigilant, and don't pay enough attention to what's going on, that we continue to tolerate this.

What's more, many of the prices charged for goods bear no relation whatsoever to the actual cost of production of those goods - another con game.  To illustrate, when I did my Masters degree in management, I recall our class visited a clothing factory.  A production line was churning out identical women's dresses.  At the end of the line, the last thing to be done before they were packed and shipped out was to sew a label into the neckline.  The dresses - all identical, remember, using the same materials and coming off the same production line - were shunted onto five "label rows".  The first - very few dresses - got an upmarket label, destined for high-end boutiques.  The second - a few more dresses - got a less upmarket label, but nevertheless one with "snob appeal".  They'd go to the "better" department stores.  The next three lines - the majority of the dresses - received middle-class to lower-class labels, and were destined for mass-market clothing stores and major supermarkets, where dozens of them would be hung on racks to be pawed through by all and sundry.  The prices charged for the high-end label would be twenty or more times higher than for the lowest-level label, but the dresses were identical.  It was "con the consumer" from beginning to end.

The Target app referred to above is simply another version of the same principle.  Charge what the market will bear, and deceive the consumer into paying the highest possible price.  The concepts of fairness, equity and value for money are irrelevant, as far as most sellers today are concerned.  As for openness and honesty . . . fuggetaboutit!

What's the best counter to this naked greed?  I think Charles Hugh Smith's advice on frugality is very apposite.  If we give as little of our money as possible to these companies, they'll be forced to reconsider their tactics.  As long as we tolerate their antics, they have no reason to change them.




Peter

Stealth isn't a universal military panacea


A recent article highlights the very important fact that stealth in military aircraft isn't the be-all and end-all of existence.

The commander of Sweden’s air force, Mats Helgesson, recently made the bold statement that his country’s Saab Gripen E fighter could beat Russia’s formidable fleet of Sukhoi jets with none of the expensive stealth technology the US relies on.




Saab Gripen (image courtesy of Wikipedia - click it for a larger view)

“Gripen, especially the E-model, is designed to kill Sukhois. There we have a black belt,” Helgesson told Yle at a presentation in Finland, where Sweden is trying to export the jets.

. . .

The Gripen can’t carry the most weapons and has no real stealth. And it isn’t the longest-range, the fastest, or even the cheapest jet. But it has a singular focus that makes it a nightmare for Russia’s fighter jets.

Justin Bronk, an aerial-combat expert at the Royal United Services Institute, told Business Insider that like the A-10 Warthog was built around a massive cannon, the Gripen was built around electronic warfare.

Virtually all modern jets conduct some degree of electronic warfare, but the Gripen E stands above the rest, according to Bronk.

. . .

To defeat Russia’s fearsome fighters and surface-to-air missiles, the US has largely turned to stealth aircraft. Stealth costs a fortune and must be built into the shape of the plane.

If Russia somehow cracks the code of detecting stealth-shaped fighters, the US’s F-35, the most expensive weapons system in history, is cooked.

But Saab took a different, and cheaper, approach to combating Russia’s fighters and missiles by focusing on electronic attack, which gives them an advantage over stealth because they can evolve the software without a ground-up rebuild, according to Bronk.

There's more at the link.

I'd have to agree to a large extent with the article's arguments.  Back in the 1980's, South Africa was faced with what many considered to be the most comprehensive air defense system outside the Warsaw Pact, during its war with Angola.  It was able to penetrate it routinely, and carry out raids on enemy positions without major difficulty (even though it had lost air superiority to the later-generation MiG and other fighter aircraft, and modern anti-aircraft missiles, operated by Communist forces).  Similarly, Israel has been able to operate over Syria almost with impunity, despite the latter's relatively modern air defense systems.  This capability was publicly displayed in the famous 2007 raid on a nuclear reactor complex being built in that country:  "The attack pioneered the use of the Israel’s electronic warfare capabilities,as IAF electronic warfare (EW) systems took over Syria’s air defense systems, feeding them a false sky-picture for the entire period of time that the Israeli fighter jets needed to cross Syria, bomb their target and return".  Over the past couple of years, it's been evident in Israeli air strikes against Iranian and terrorist positions in Syria.

Stealth is very useful, but it has limitations.  It's another arrow in the quiver, but not the only one.  I think the Swedish approach (and that of Israel and other powers) is equally viable.  I also note that Israel insisted on the right to modify the stealthy F-35 with its own software and electronic systems before it agreed to buy it for its Air Force (a concession granted to no other foreign purchaser).  I suspect Israeli F-35's will combine stealth and electronic warfare to create a truly formidable adversary.

Peter

The self-inflicted abdication of moral authority


Two searing headlines about the Catholic Church and the morality (or otherwise) of some of its clergy sum up the current mess in that institution.


That, plus the persistent refusal of so many Church leaders to publicly proclaim what the Church teaches and (at least officially) believes, has in turn led to this cynical condemnation:


I'm afraid that last headline is all too accurate in many cases.  I have a friend who's in the process of preparing to get married in a few weeks' time.  His local diocese is insisting on all sorts of bureaucratic i-dotting and t-crossing, none of which have a single thing to do with his actual faith, and all of which are obstacles to celebrating his nuptials in the sight of Christ and his church.  Those involved are behaving like lawyers and bureaucrats, not men and women of faith.  The Church has, in far too many cases, become nothing more than yet another worldly institution, where filling out the right forms and clocking in and out of the office on time are more important than the faith it's supposed to preach, teach and practice.

As for the (im)moral situation of at least some of its clergy . . . what more can be said that hasn't already been said?  Priests and bishops are supposed to lead by example:  yet very few of them are making even a token attempt to do so.  Many are hunkering down, not daring to stand out in public and defend the truths of their faith for fear that their own hierarchy will discipline them for doing so.  The few that actually preach and practice what the Church teaches are in constant danger of being removed from their pastoral offices, because such behavior is no longer politically correct.  In how many parishes today can one hear sermons about the moral evil of abortion, or promiscuous sex, or honesty, or fidelity?  Precious few.

The clergy child sex abuse crisis over the past couple of decades is symptomatic of the decline - if not the virtual extinction - of the moral authority that the Catholic Church once had.  If it tries to proclaim today that something is immoral, it's more likely to be greeted with scorn and derision than with agreement, along with the pointed observation that people in glass churches should not throw stones.  It no longer has the moral authority it possessed for centuries . . . because it's thrown it away.  Some might suggest a stronger verb than "thrown".  I agree.

I've cited Bob Mumford before.  He's a Pentecostal evangelist who, back in the 1970's, defined secular humanism as "what happens when the world evangelizes the church".  I think he was exactly right, and I think that's what we're seeing in so many Christian churches today.  (The Catholic Church is far from alone in its moral malaise, more's the pity.)  More and more, the so-called "Benedict Option" (a term coined by Rod Dreher) seems to make sense.  Certainly, I don't see any other way in which the teachings of Christ can survive in an utterly secular, post-Christian First World society and culture, since the Catholic Church (and most other Christian churches) are no longer proclaiming, defending or living them.

I recommend Dreher's book on the subject to those who see no other way forward.




He doesn't have all the answers, to be sure . . . but I think he offers more of them than the current institutional Church - and that's a tragedy in itself.

Peter

Wednesday, February 13, 2019

Trying to de-technify . . . and failing


Kashmir Hill spent six weeks trying to "divorce" herself from the five major businesses that dominate the Internet:  Amazon, Facebook, Google, Microsoft and Apple.  She's written a series of articles about her efforts, which demonstrate very clearly how the Big 5 dominate Internet commerce and business, and how hard it is to avoid their tentacles.

As an example, here are excerpts from her article about "locking out" Amazon for a week.

I am on a mission to live without the tech giants—to discover whether such a thing is even possible. Not just through sheer willpower but technologically, with the use of a custom-built tool that would literally prevent my devices from accessing these companies, and them from accessing me and my data.

. . .

Amazon reportedly controls 50 percent of online commerce, which means half of all purchases made online in America, which is obscene.

Amazon is not just an online store—that’s not even the hardest thing to cut out of my life. Its global empire also includes Amazon Web Services (AWS), the vast server network that provides the backbone for much of the internet, as well as Twitch.tv, the broadcasting behemoth that is the backbone of the online gaming industry, and Whole Foods, the organic backbone of the yuppie diet.

Keeping myself from walking into a Whole Foods is easy enough, but I also want to stop using any of Amazon’s digital services, from Amazon.com (and its damn app) to any other websites or apps that use AWS to host their content. To do that, I enlist the help of a technologist, Dhruv Mehrotra, who built me a custom VPN through which to route my internet requests. The VPN blocks any traffic to or from an IP address controlled by Amazon. I connect my computers and my phone to the VPN at all times, as well as all the connected devices in my home; it’s supposed to weed out every single digital thing that Amazon touches.

Ultimately, though, we found Amazon was too huge to conquer.

. . .

Dhruv keeps track of all the times my devices try to ping Amazon’s servers during the week. It happens nearly 300,000 times, probably in part because apps frustrated not to get a reply from the mothership keep pinging repeatedly until I close them. My devices try to reach Amazon via 3,800 different IP addresses, which suggests that there are a lot of different apps and websites attempting to connect to Amazon throughout the week.

. . .

Amazon has embedded itself so thoroughly into the infrastructure of modern life, and into the business models of so many companies, including its competitors, that it’s nearly impossible to avoid it.

In her blockbuster academic article, Lina Khan, now a legal fellow at the Federal Trade Commission, argues that Amazon is breaking the spirit of antitrust law, but that regulators have failed to act because that law has evolved in a way to ignore monopolies if they result in immediate low costs to consumers.

But Khan says that our increasing reliance on Amazon in our everyday lives carries harms that we are only beginning to see, including Amazon being able to exploit its workers (who reportedly pee in bottles to keep up with the company’s punishing pace), being able to massively data-mine Americans whose activity it has vast access to (meaning it could charge different people different prices based on what it knows about them, which it experimented with in the past), and being able to kill off competitors who would otherwise offer consumers a variety of options and prices (R.I.P. Diapers.com).

There's much more at the link, and in the rest of the series of articles.  Highly recommended reading.

This is a very sobering series of articles.  Effectively, we're in a monopoly situation on the Internet, even though it doesn't fit the "traditional" definition of a monopoly.  Each of the Big 5 have so much clout in the market that they can effectively wipe out competitors by undercutting them, then buy up the remains and incorporate them into their own companies.  (As the article says, look at what Amazon did to Diapers.com.  That's just one example out of many that could have been chosen.)

I'm in a similar situation in that, as an independent author, I sell my books exclusively on Amazon.com.  That's because the time and hassle of selling them across multiple platforms is outweighed by the better terms offered by Amazon.  If Amazon chose to alter those terms (which it can do at any time, without warning), keeping more of the sales proceeds for itself and giving me less of them, I might be in all sorts of trouble.  That's a very uncomfortable thought.

On the other hand, having seen the enormous inefficiencies demonstrated by the US government when it tries to regulate commerce and industry, would an attempt to break up these de facto monopolies actually result in anything better?  That's the big question no-one's able to answer right now . . . but sooner or later, someone's going to have to make the attempt.

Peter

That'll git 'er done . . .


Seen at Wirecutter's place (clickit to biggit):




The "towed" vehicle looks like it's on the way to the scrapyard, so I don't suppose it matters to its owner that it's being carried like that . . . but I bet the combination would disrupt traffic, as every driver in the vicinity braked hard and stared!




Peter

Tuesday, February 12, 2019

Not a bad attitude towards money, IMHO


From Pearls Before Swine yesterday (click the image to be taken to a larger view at the comic's Web site):




I approve.  I've met a number of fairly wealthy people in my time, some during my business career, others as a pastor or chaplain.  The one trait most of them had in common was that they didn't own their money . . . their money owned them.  They spent so much time worrying about how to keep it, and how to make more, that they forgot to sit back, relax, and enjoy what they had.

I don't ever want to be like that.

Peter

The Founding Fathers gave us an Electoral College for a reason


I note that one of the myriad Democratic Party candidates for that party's presidential nomination in 2020 has come out four-square against the Electoral College.

Pete Buttigieg, the Democratic mayor of South Bend, Ind., and a 2020 presidential candidate, on Thursday called for abandoning the Electoral College, saying it has made the country less democratic.

“We’ve got to repair our democracy. The Electoral College needs to go, because it’s made our society less and less democratic," Buttigieg said during an appearance on "CBS This Morning."

"We’ve got to explain our values and explain why Democrats are committed to freedom, to democracy, to security," Buttigieg added.

Some Democrats have voiced increasing criticism of the Electoral College since President Trump defeated Democratic presidential nominee Hillary Clinton in the 2016 election despite Clinton winning the popular vote.

There's more at the link.

There's just one problem, Mayor Buttigieg.  The United States is not a democracy.  It's a constitutional republic.




One of the hallmarks of a constitutional state of any kind (be it a democracy, a monarchy, or whatever) is that the will of the ruling power (the majority of voters, or the king, or whatever) is constrained by the legal requirements of the constitution - the so-called "Rule of Law".  In other words, they can do what they wish within those constraints, but they may not go beyond them.

The United States is such a nation.  In the case of the Electoral College, the only way to amend or abolish it is to use the process to amend the Constitution, thoughtfully provided by the Founding Fathers.  It's difficult to accomplish - deliberately so - but it's the only legal way to do it.  Any other way will be illegal in terms of the Constitution, and will therefore be disobeyed by any and all right-thinking Americans.

So, Mayor Buttigieg, I'm afraid your dream (a nightmare to the rest of us) won't become reality unless and until you and your party can get the necessary supermajorities in Congress and the Senate, or among the member States of the Union.  Somehow, I suspect that's not about to happen.

Peter

Just like love, money will find a way


I'm sure many of my readers know the old proverb, "Love will find a way".  That may or may not be true . . . but money usually does, too, and probably much more reliably than love.  If someone wants something badly enough to pay the costs involved, someone else will find a way to supply it, irrespective of laws, natural obstacles and any other barriers.  (Witness the trade in illegal drugs, which flourishes despite literally tens of billions of dollars spent fighting it each and every year.)

In that light, I was amused to read an account of how US ethanol is still being sold in China free of tariffs, despite nominally crippling import duties.

Although China slapped retaliatory tariffs up to 70 percent on U.S. ethanol shipments, the fuel can still legally enter China tariff-free if it arrives blended with at least 40 percent Asian-produced fuel, according to trade rules established between China and the Association of Southeast Asian Nations (ASEAN), the regional economic and political body.

In a striking example of how global commodity markets respond to government policies blocking free trade, some 88,000 tonnes of U.S. ethanol landed on Malaysian shores through November of last year – all since June, shortly after China hiked its tax on U.S. shipments. The surge follows years of negligible imports of U.S. ethanol to Malaysia.

In turn, Malaysia has exported 69,000 tonnes of ethanol to China, the first time the nation has been an exporter of the fuel in at least three years, according to Chinese import data.

Blending U.S. and Asian ethanol for the Chinese market undermines the intent of Beijing’s tariffs and helps struggling American ethanol producers by keeping a path open to a major export market that would otherwise be closed.

“Global commodity markets are incredibly creative in finding ways to ensure willing sellers are able to meet the demands of willing buyers,” Geoff Cooper, head of the Renewable Fuels Association, said in a statement to Reuters. The group represents U.S. ethanol producers.

. . .

Malaysia has no track record of significant domestic ethanol production, so it is unclear where the ethanol blended with the U.S. product originates.

There's more at the link.

I don't know where the "Malaysian" ethanol is coming from, but it wouldn't surprise me to learn that it was also from US sources.  Import and export certifications can always be "arranged", with the help of a few greased palms.  (Nor should we feel smug about US businessmen getting one over on China.  I'll lay long odds that Chinese companies are doing the same with their exports to the USA, one way or another.  It's a universal phenomenon.)

I lived in South Africa during the period when economic and military sanctions were at their most swingeing, from the late 1970's through to the early 1990's.  They exacted an economic toll, to be sure;  but they didn't stop most really important necessities from being imported or "substituted".  A few examples:

  • For a particular item of military equipment, a miniature electronic component was needed that was unobtainable through normal sources, because its military application was well-known.  However, a certain Far Eastern watch company made a wristwatch that contained an almost identical component, applied to a different purpose.  As a result, South Africa rapidly became the single largest market for that model of wristwatch in the entire world, importing them by the thousands.  They were all opened up, the needed component removed, and the rest scrapped without further ado.  It was a little more expensive than buying the component itself, but not much more.
  • A number of South African military and research establishments needed access to computer equipment to conduct their work, but sanctions made it very difficult to obtain this through normal commercial sources.  Undaunted, a South African company began importing "spares" for DEC PDP-11 minicomputers.  This rapidly turned into a worldwide hunt for the necessary parts, as well as manufacturing some locally and having others "pirated" in Far Eastern factories that turned a blind eye to the illegality of the procedure - provided they were paid in gold or hard currency.  I understand that several hundred of these computers were produced, by the simple expedient of assembling parts acquired from all those sources.  They became crucial elements of South Africa's national security data processing infrastructure.
  • High-precision industrial controllers could still be exported to South Africa under sanctions, for use in industry.  I found it interesting that a well-known West German brand of "industrial controller" was clearly visible (albeit carefully relabeled) in the fire control system of locally developed armored vehicles.  Since the same German firm happened to manufacture both industrial controllers and military fire control systems, it was obvious that the housing of one device had been used to conceal electronic innards from the other.  Nobody turned a hair.

Where there's a will, and money to be made, there's always a way.

Peter

Monday, February 11, 2019

Be my anti-Valentine?


Two news reports bring a new twist to Valentines Day.  The first is from Oregon.

"Did you fall hook, line, and sinker for someone who broke your heart?" the Wildlife Images Rehabilitation & Education Center asked in its promotion. "Kodi & Yak would love to help you get your revenge!"

For a $20 donation, the animal rehab center will name a salmon after the ex of your choosing and feed it to their bears, send you a certificate and photos of Kodi and Yak enjoying the salmon named after your former love.

There's more at the link.

In similar vein, here's one from England.

For those that don’t quite require revenge, there’s another way to make you feel better about getting back at your ex this Valentine’s Day.

The [Hemsley Conservation Center] is offering the chance to name a cockroach in honor of your friend's worthless ex-“someone” on this special holiday of love.

Again, more at the link.

(EDITED TO ADD:  El Paso Zoo is doing the same thing - and then feeding the cockroach to the meerkats on February 14th.)

Hmmm . . . a dead fish, or a live cockroach - or both?  I suspect you'd better be sure that your relationship with the victim is terminally "ex", or such gifts might make getting together again a bit risky!




Peter

Doofus Of The Day #1,036


Today's award goes to a hapless Australian heavy transport driver.

The northbound off-ramp on the M1 Pacific Motorway at Cameron Park in Newcastle is expected to remain closed into the evening after a truck transporting a huge piece of refinery equipment became wedged on the guard rail.



The incident has caused traffic chaos, as the scene remains closed to motorists.

Emergency crews and experts including police, Rural Fire Service, RMS, heavy vehicle inspectors and a bridge engineer have spent the day trying to extricate the truck from the off-ramp, but the vehicle is wedged in tight.

There's more at the link.

I've seen taller loads squashed under bridges, but that's the first wide load I've seen that couldn't get through a tight spot.  Around here, loads like that often take off-ramps to avoid going under bridges or between guardrails on the highway.  Their escort vehicles lead them up the off-ramp, across the crossing road, and down the on-ramp again, precisely to avoid that sort of trouble.  I guess there wasn't an alternate route in this case . . . but surely someone should have done the measurements, and foreseen trouble?  (Unless they measured above or below the constriction of the guard rail.  That might be a factor.)

Peter

This is when a pilot earns his flying pay


A Boeing 787 was coming in to land at London's Heathrow Airport last week during a winter storm.  It got caught by turbulence (possibly wind shear) during the last few feet of its descent, and almost went out of control.  Full marks to the pilots for getting out of that mess.





A brown-trouser moment for sure, to the observers.  I'm not sure whether the passengers realized what a close call they'd had.  Kudos to the flight crew for their quick reactions.

Peter

Sunday, February 10, 2019

Sunday morning music


Edward Elgar is one of the best-known British composers.  Here's his Serenade for Strings, performed by the Concertgebouw Chamber Orchestra in Holland in 2016.





It's interesting that this rendition is paced slightly faster than most recordings of the Serenade for Strings.  Its timing is very close indeed to a recording of the piece conducted by its composer in 1933, shortly before his death, which you can also hear on YouTube.  To my ear, the faster rendition seems to flow more naturally than some of the slower ones I've heard.

Peter

Saturday, February 9, 2019

I did not know that


Bell pepper facts, found on Gab:




I didn't know that either.  I wonder if bell peppers can suffer from gender dysphoria - or is that merely a matter of taste?




Peter

EDITED TO ADD:  Apparently (according to commenters) this is fake news. Oh, well . . .

50 years ago today . . .


. . . the first flight of the Boeing 747, the famous "Jumbo Jet", took place, on February 9th, 1969.  Here's Boeing's official video of proceedings.  The actual takeoff is shown from about 14m. 30s. onwards.





Congratulations to Boeing on a landmark in aviation history.  As of December 2018, over 1,500 747's had been built, and the type is still in low-rate limited production, primarily in freighter configuration.  It's proved to be one of the most successful aircraft programs of all time, particularly in terms of the number of people carried - including the largest number ever carried on a single flight by a passenger aircraft, during Operation Solomon:

An astounding record was set on 24 May 1991 when 1086 Ethiopian Jews were evacuated to Israel in one plane. This was more than double the normal capacity of a passenger jumbo jet, and not surprisingly, never before had so many people flown in a commercial airliner. Two babies were born en route bringing the total who landed in Israel to 1088. The flight was just one of 40 which were put on to evacuate a total of 14,200 Jews to their promised land from Addis Ababa, the besieged capital of Ethiopia, all in the space of 24 hours.

The seats had been removed, of course, to make more room, but even so - talk about a crowded flight!




Peter

Friday, February 8, 2019

More over-the-top Bollywood


This fight scene from the 2014 movie Maanikya is utterly impossible.  Anyone sustaining the sort of blows and injuries depicted would certainly not be capable of fighting back, let alone the miraculous recovery exhibited by the protagonist:  and the feats of strength (including launching seven or eight attackers into the air simultaneously) are just plain ridiculous.  Nevertheless, the movie was a smash hit in India - perhaps not surprising, given all the smashing and hitting in this scene!





Peter

Danger, disguised as a toy


It seems some criminals at least have found a new way to put their intended victims off their guard for just long enough to get within striking distance.

Police caught a felon painting a shotgun to look like a toy in a Spokane motel room Monday, according to Spokane Police Department in a news release.

The suspect, Elijah B. Zon, also was in possession of three black-powder guns, methamphetamine, heroin and ammunition.



He was arrested and booked into the Spokane County Jail.

. . .

They found Zon in the middle of painting a double-barreled, sawed-off shotgun green and yellow with an orange tip to resemble a toy, according to the news release. Pictures display a shotgun painted on one side.

“Officers throughout Spokane County and across the nation come across real guns that are made to look like replicas,” the news release stated.

There's more at the link.

Police officers of my acquaintance have seen the same thing, although not quite so garish or covering so much of the firearm.  It's not uncommon for the tip of the barrel of a criminal's gun to be painted orange, so that the weapon resembles an Airsoft toy.  You can imagine the advantage this gives the criminal if his residence is raided by the police.  Their automatic assumption used to be that a toy gun was precisely that - a toy - and that it presented no threat.  They can't assume that any longer.

Similarly, if you're confronted by a young criminal waving something like that shotgun, you can no longer assume it's a toy.  It may be a deadly threat.  Certainly, if I see something like that, I'm going to take every precaution to safeguard myself and my wife.  Tragically, that may expose real kids, with real toys, to real risk . . . but then, criminals don't care about such niceties.




Peter

Thursday, February 7, 2019

If you use Flickr, download your images right away


It seems that Flickr is reducing the storage provided to non-paying users of its facilities.

The company said months ago that it planned to whittle free accounts down from a terabyte to only 1,000 images and delete the rest on Feb. 5. After that, if users wanted to post more photos to the site, they would have to purchase a Flickr Pro account that would run them $50 annually. Flickr announced these changes back in November as part of an overhaul to focus on paid subscriptions after it was purchased by SmugMug last year.

But despite giving users plenty of time to prepare for this massive photo purge, many were—hm, let’s say unprepared ... Some users also reported getting error messages while they were attempting to download their photos, which the company seemed to imply in its statement Wednesday was part of the reason it pushed the deadline back to March 12. Needless to say, some Flickr users seemed genuinely pleased to have another month to get this squared away.

For a step-by-step guide for how to download your photos, we’ve got you covered right here. But photo nerds, seriously, this is your last chance.

There's more at the link.

I don't use Flickr myself, but I know many people who do.  You've got less than a month to download your images, after which you may lose them - or most of them, at any rate.

Peter

Emergency potable water supplies - an update


Some years ago, I wrote about the importance of water storage and purification as part of one's emergency preparations.  It's a very important, but often neglected topic.  All I had to say in that article remains valid.

Over the years, I've noticed that storing water long-term in most plastic containers has an added problem.  The water takes on a sort of "plastic taste" that I find unpleasant.  It's not dangerous to one's health (provided one uses containers made of food-safe plastic), but it's strong enough to taint the taste of food, and can discourage drinking enough to stay properly hydrated.  One can remove most of it by using a carbon filter device (such as a water filter jug), but that's an added step that might not be convenient, and can't provide large quantities of filtered water on demand - it takes time to filter each jugful.  Another approach is to stock potable water ready-packed in plastic bottles, usually holding about a pint each (about half a liter, for those used to metric measurements).  This deals with the problem, but involves buying a lot of small bottles.  Storing them can be problematic.  I keep a few flats of them on hand, because they're so useful, but it's not an ideal solution.

Recently, I found that Sams Club was selling 4-gallon water jugs, made to fit the water vending machines sold there, for a very reasonable price - four dollars and change.  They may be labeled as "Spring Water" or "Purified Water", but the jugs are the same.




Similar jugs, usually three to five gallons in capacity, mostly sell for higher prices (sometimes much higher, up to $20 or more).  Most are sold empty - one has to fill them oneself.  The Sams Club jugs are a very cost-effective deal by comparison.  What's more, by design, these water jugs (made of food-safe material) don't spoil the water by imparting a plastic taste to it.  They have a "use by" date a couple of years ahead, and probably will stay fresh rather longer than that.

I looked around, and found that there are many stands available to hold such water jugs ready for use.  I decided to try this one, because it was reasonably priced, and came with two taps that screwed onto the jug and made dispensing water very easy.  I found it worked very well with the Sams Club water jug;  the taps fit well and were watertight in use, with no leaks.  The stand made dispensing the water from our kitchen counter an effortless procedure.

I also found that several companies make caps to fit these jugs, so that one can refill them once they've been used.  I chose these caps after carefully reading reviews, and found that they do a good job.  They're very tight indeed, hard to get on, but completely watertight once fitted.  This means I can refill the bottles every so often with potable water, either after use or after their "use by" date, and re-seal them for re-use.  (While you're at it, handles like this one make it much easier to carry around the big water jugs.)

I've accordingly upgraded our emergency water storage.  I now have eight of those 4-gallon jugs in store, holding 32 gallons of purified, good-tasting potable water.  At a gallon per person per day, that provides Miss D. and I with approximately two weeks worth of drinking and cooking water.  I have another eight gallons in small, one-pint bottles, for convenience when carrying them around, so we have a total of 40 gallons of potable water.  I also have about 40 gallons of tap water stored in "regular" containers like these.  They'll generally impart a plastic taste to the water over time, so I reserve them for cleaning and washing purposes - again, about two weeks' supply at one gallon each per day.  That's probably more than we need to be prepared for most emergencies;  but I've learned the hard way (as regular readers will recall) that it's hard to predict what might happen.  I'd rather be safe than sorry, and all the water together takes only two shelves in a storage unit in our garage.  I can live with that.

I also have water filters, etc. (as mentioned in my earlier article) to cater for possible longer-term needs.  I think every household should have at least one.  (I currently use the Sawyer Mini system for individual needs, with one available for each vehicle, and the Lifestraw Family 1.0 unit for household needs if worse comes to worst.  I find the latter much more cost-effective than the excellent, but very expensive, Berkey and Katadyn countertop systems.  I think the latter are worthwhile if one uses them constantly to purify hard or chemically impure water, but aren't cost-justifiable to leave sitting on a shelf for possible emergency use - not unless you have a lot more money to spend on that sort of thing than I do!  Also, their replacement filters are anything but cheap.)  If you'd like to know more, this Web site offers comprehensive reviews of almost every portable water filter on the market.  Recommended reading.

Don't forget to have water purification chemicals on hand.  They'll kill bacteria and viruses that might survive filtration.  If your water supply is in any way suspect, they're essential.  I keep these tablets in stock for smaller quantities, and pool shock chemicals for bulk water supplies (see here for a primer on how that's done, and make sure you get chemicals that are at least 75% calcium hypochlorite - I currently keep this brand in my emergency supplies).  I prefer to apply them prior to filtration.  That removes many impurities from the water, leaving it clearer and cleaner, so there's less load on the filter:  and any aftertaste will be reduced, if not eliminated, by the filtration process.  YMMV on that.

Also, plan for additional water containers to collect impure or unfiltered water.  You don't want to use your purified-water containers for that, for obvious reasons.  I use 5-gallon buckets for the purpose.  They're cheap, and fast and easy to use.  With screw-on or snap-on lids, they won't spill, either.  (If you're using snap-on lids, make sure you have a pail opener tool handy.  It's a lot quicker and more convenient than doing it the hard way, and you won't break as many lids.  How do I know this?  Trust me.  I know this!)

Peter

Wednesday, February 6, 2019

A bureaucratic twist to the public pension crisis


We've spoken several times about the crisis in public pensions that confronts this country.  It now emerges that a significant part of that crisis was caused by bureaucratic mismanagement.

The second-longest bull market in American history hasn’t stopped the deterioration of state and local pension funds, whose unfunded debt has almost quadrupled—by their own accounting—from about $360 billion in 2007 to $1.4 trillion today. Having relied on overly optimistic and inaccurate financial assumptions for decades, public pension administrators are now forced to acknowledge that the systems owe much more than previously thought. Even as local governments struggle to pay for this debt, it keeps growing.

. . .

In 2014, several communities in Illinois discovered that officials were using mortality tables from 1971, when life expectancy was much shorter, which vastly underestimated pension costs. The resulting outcry forced those communities to update their calculations, and led to average increases in costs by about 20 percent. Most state plans now use more recent numbers, but even year-to-year adjustments in mortality rates put pressure on communities already struggling to meet pension obligations. After New York State’s retirement system updated its mortality tables in 2015, for instance, localities increased their pension payments from 14.2 percent of salaries to 18.2 percent, according to S&P.

Longer lives for public employees will mean higher costs, and not just for pension plans. Many state and local governments promise to pay for the health care of their retired workers, but few have enough money set aside to do so. A recent analysis by Pew found that states spent $20 billion on retiree health care in 2015, and that, collectively, states owe nearly $700 billion in promises they’ve made to finance their workers’ health insurance in retirement. But that number is undoubtedly higher, given longer life spans.

. . .

In about half of the states, added costs from these inaccurate projections fall entirely on taxpayers. That’s because these states have laws or constitutional provisions that limit the ability of governments to alter pensions for current workers for as long as they remain employed. Among other things, governments often can’t require higher contributions from workers themselves; nor can they lower benefits. Consequently, the amount of money that local governments must pay into the system has been rising steadily. As the latest study on mortality rates shows, that trend is going to continue.

There's more at the link.

In the old days, one might have a single job from college graduation to retirement.  A teacher might accumulate 40 or 45 years of service before starting to draw a pension, and would contribute to his or her retirement fund for that long - and then, of course, they'd die within a decade or so, not drawing a pension for very long.  Nowadays, a person might turn to teaching as a second career, starting in their 40's and retiring at 65.  Others may retire as soon as they reach 20 years of service, when their pensions vest.  It's not inconceivable that a teacher retiring today might draw a pension for more than twice as long as he or she was employed as a teacher . . . and that changes the whole actuarial perspective.  Health care costs, too, are so much higher today that they drastically affect long-term financial considerations.

One would have thought that the bureaucrats administering the pension plans would have been more alert to such changes . . . but they're bureaucrats.  They push pencils, dot I's and cross T's.




Peter

The root of many of our economic problems


Several articles in recent years have focused on the so-called "financialization" of business and commerce.  I'll highlight a couple of them here.  I think they explain very clearly why our economy is out of balance.  Basically:

  • This is how you get a company like Bain Capital, asset-stripping the companies it buys, maximizing "shareholder value", and then selling off the stripped shell, leaving employees without jobs or pensions.  Its primary focus is on finance, not production.
  • This is how you get product pricing that has nothing whatsoever to do with the intrinsic value of the product, or the amount of work or materials that went into it, but is predicated solely on what the market will bear - thus leading, for example, to prices for established medicines increasing by hundreds or even thousands of percent, purely to subsidize owner or shareholder "value".
  • This is why profits go, not to the workers who made the product, or the people who invented or developed it, but to professional managers and financiers who manipulated the market, rather than producing any part of that underlying value.
  • This is why major companies in reality derive a very large proportion of their profits, not from their products, but from financializing those products (for example, the securitization of mortgages and other financial instruments).  This often produces more income for the companies than the sale of the original product.

This is also why President Trump's economic measures are focused, not on Wall Street - the heart of financialization - but on Main Street, where business and commerce are actually conducted.  As a result, we have a Wall Street financial elite who are adamantly opposed to many of this Administration's policies, because it will mean less money for financiers and their cronies.  On the other hand, the ordinary working man and woman is delighted to be earning higher (and more steady) wages, and wants more of the same.  It's as much of a divide in society as the famous rift between the "haves" and the "have-nots".  In this case, it's the financiers who "have", and the rest of us who are left out in the cold with the crumbs they decide to toss us from time to time.

Click on the headline for each article to read it in full.


1.  The Pitfalls of the ‘Financialization’ of American Business.

Today, finance, while making up only 7% of the economy and creating a mere 4% of all jobs, generates more than a fourth of corporate profits — up from 10% 25 years ago.

Parallel to the ascendance of finance ... was a decline in American business as large corporations increasingly came to mimic the banks that were supposed to serve them and to seek profits in ‘financial engineering’ activities divorced from their core services and goods.

. . .

A famous Harvard Business Review article from 1980, “Managing Our Way to Economic Decline,” dates falling investment in research and development back to the mid-1960s. Increasingly, the authors found, U.S. companies focused on “sophisticated and exotic” management of their growing cash reserves, grew preoccupied with cost-cutting measures, and treated “technological matters simply as if they were adjuncts to finance or marketing decisions.”

. . .

The purpose of the corporation, Milton Friedman and others asserted, was to maximize financial value ... Accordingly, maximizing stock prices was increasingly elevated as a cardinal virtue. In 1990, the Business Roundtable (a group of CEOs from America’s largest companies) defined management’s responsibility as that of serving a broad range of stakeholders, including but not limited to stockholders. Just seven years later, the wording had changed. Management’s “paramount duty” was to stockholders — the interests of other stakeholders relevant only “as a derivative” to that primary loyalty.

Armed with this ideology, powerful shareholders like Carl Icahn pressured companies to pass on more and more of their earnings to those who owned stock in the company — in the form of higher dividends, and increasingly, stock buybacks. In 1982, the SEC loosened regulations limiting a company’s ability to repurchase its own stock, despite protests by some dissenters that this would essentially legalize market manipulation. And this, Foroohar and others argue, is exactly what happened.

Reducing the number of outstanding shares on the market artificially inflates a key measure of a company’s value: its earnings-per-share, or EPS. Buybacks are often followed by an immediate surge in stock price, at least in the short term. The concern is that prominent owners of a stock will lobby for buybacks and then sell off that same stock, reaping a healthy profit even though there has been no change in a company’s underlying value. Icahn was recently charged with such a “pump and dump” strategy when, after successfully lobbying Apple to engage in a series of costly repurchases, he sold his entire stake in the company.

The buyback boom began in the 1980s, and has only accelerated since. In the last decade, the author writes, “American firms have spent a stunning $7 trillion buying back their own stock — the equivalent of half their profits.”

. . .

Complicating matters further, Foroohar and others point out, is the fact that stock options account for a huge chunk of executive compensation — creating a built-in incentive to engage in financial maneuvering that lifts stock prices but doesn’t create real value. This has eroded American competitiveness, a Brookings Institute paper worries, by replacing a “retain-and-reinvest” corporate model with a “downsize-and-distribute” one. The end result, the author of the paper writes, is “profits without prosperity” as business focuses on “value extraction” instead of “value creation.”


2.  Why Financialization Has Run Amok.

Financialization isn’t bad in itself. Its initial role is the healthy one of translating work-products and services into exchangeable financial instruments to facilitate trade in the real economy. Through mortgages, workers can trade their promise of future wages for a home. Through insurance, homeowners are able to share financial risks and avoid financial catastrophe. The problems begin when financialization becomes excessive.

Throughout history, periods of excessive financialization have often coincided with periods of national economic setbacks ... The focus by elites on “making money out of money” rather than making real goods and services has led to wealth for the few, and overall national economic decline. “In a financialized economy, the financial tail is wagging the economic dog.”

. . .

Quite apart from the tendency of a super-sized financial sector to cause increasingly bad global financial crashes, excessive financialization leads to resources being misallocated. “As far back as 1984 the Nobel Prize–winning economist James Tobin observed that ‘very little of the work done by the securities industry...has to do with the financing of real investment.’ He was troubled that ‘we are throwing more and more of our resources, including the cream of our youth, into financial activities remote from the production of goods and services...that generate high private rewards disproportionate to their social productivity.’”

. . .

... we need more fundamental change in the way we think about management—a radical transformation in the whole notion of how companies, both financial and non-financial, should be run.

. . .

Obsolete ideas like maximizing shareholder value need to be discarded ... Instead, we need to get back to Peter Drucker’s 1973 insight: the only valid purpose of a firm is to create a customer.


Most worrying of all, financialization also creates a pathway to socialism.  If socialists see an imbalance of wealth between the financializers and the rest of society, it gives them an opportunity to peddle their unworkable, historically catastrophic policies by claiming that they'll "nationalize" the wealth and spread it around.  They never do, of course:  they end up becoming wealthy themselves, a new "ruling class" to replace those they displaced.  Nevertheless, they can (and do) use the imbalance as a lever to pry their way into power.  Right now, in these United States, that's a very real threat.

Peter