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Below are the 10 most recent journal entries recorded in
Philip Greenspun's Weblog's LiveJournal:
- Israel is not home to a lot of huge successful international companies. There is nothing comparable to Samsung in Israel (Samsung is 10X the size of Teva, Israel’s biggest company)
- The Arab Boycott of Israel prevents the development of successful regional companies.
- Israel got lucky when a lot of Russian Jews wanted to migrate and were not able to get into the U.S. or Western Europe (see my Israel article from 2003).
- These Russians and their well-educated children couldn’t find good jobs in a big company, so they started a lot of new companies in hopes of selling their labor (by selling the companies) to U.S. and Western Europe without moving physically to those countries.
| Saturday, January 4th, 2014 | |
| 11:30 pm | Will de Blasio’s new income tax for New Yorkers actually increase income inequality? A friend here in Massachusetts was singing the praises of New York’s Mayor de Blasio for adding taxes on high-earners in order to reduce income inequality. It sounds reasonable on its face, but then I remembered my helicopter student, age 39 and about to retire from NYPD on a 100% pension. He was up in Boston attending Harvard’s Kennedy School of Government, courtesy of New York City taxpayers and, once done he was planning to retire to his native Philippines and have New Yorkers wire him money every month. Since government workers are paid, on average, more than private sector workers, mightn’t extra taxes that actually increase income inequality? State and local governments overwhelmingly spend money on salaries, health care, and pension benefits for government employees. (See http://seethroughny.net/payrolls/city-of-n Suppose that the tax rates are left unchanged. The high-income New York City resident now has the money to go out for some additional restaurant meals. for example. Many restaurant workers earn less than average and probably nearly all earn less than city employees. What do readers think? Will inequality of income go up or down in New York City with this new tax? [Personally I think that the new tax might not result in much additional cash being collected. A certain number of New Yorkers who currently spend 140 days per year in (potentially tax-free) places other than New York City might decide to start spending 183 days in those places (see this article on what people are doing already). A handful of businesses will move to places with lower tax rates. So more money will be collected from those who stay for at least 183 days but there will be fewer people from whom to collect tax. This could be a positive for helicopter charter operators as more people try to get out to the Hamptons before midnight (which would tend to reduce income inequality, since helicopter pilots make a lot less than school teachers or police officers!).] [There is no question that New York's government needs the money. The Tax Foundation says that New York needs to collect 12.77 percent of state residents' income in order to function (probably higher in the city). This compares to 7.9 percent in Texas, 8.1 percent in New Hampshire, and 10.4 percent in Massachusetts.] |
| 1:35 am | Feel better about your humanities degree: Glenn Beck’s bestselling history book Back in 2010 I wrote about Glenn Beck’s salary in comparison with his educational spending (never enrolled in college). This evening it was pointed out to me that Glenn Beck, high school graduate, is the author of a New York Times bestseller on American history: Miracles and Massacres: True and Untold Stories of the Making of America |
| Monday, December 30th, 2013 | |
| 10:23 pm | Who appreciates the Dave Eggers book “The Circle”? Folks: Who else is reading The Circle I’m about one third of the way through, listening as a book on tape, and the Amazon reviews (“well written but pointless”) are encouraging me to return it to the library before I’m finished. Who has read to the end? [Oftentimes I find that with science fiction-tinged books the author's best ideas are in the first 100 pages.] |
| Saturday, December 28th, 2013 | |
| 10:29 pm | Idea for an employment agency: The 100th Week The federal government is winding down its five-year-old program of sending checks to people who held jobs relatively recently but currently are not working (nytimes; also see my January 2011 posting on the 99-weeks-of-Xbox system). So here’s an idea for a business… An employment agency for the long-term unemployed. Offer intensive training in areas where there is currently a shortage of workers as well as relocation assistance to parts of the country where jobs are abundant (check this map). Get funding from state and federal government grants (e.g., from http://www.doleta.gov/ ) and maybe from employers if the new workers is successful during his or her first 90 days on the job. Call the company “The 100th Week”. [Separately and curiously, the New York Times article on the subject highlights the difficulties of an "information technology expert and web designer" in finding a job. If he is truly an expert and truly cannot find a job (perhaps due to his age of 68) that indicates a terrible lack of efficiency in the employment market, since employers say that they are finding it impossible to recruit IT experts (the example guy is also in the Washington, D.C. area, which has arguably the best job market in the U.S. (this study says it is second best for college grads)).] |
| 6:02 pm | Review of Start-Up Nation I’m wondering if there should be a genre on Amazon of “Jew-pride” books. If so, Start-up Nation: The Story of Israel’s Economic Miracle The book opens rather unfortunately, celebrating the achievements of Better Place. Given that Arab countries surrounding Israel won’t allow Israeli cars on their roads, it is basically impossible to drive farther than a person would within the state of New Jersey. So it was practical to set up a network of battery-swapping stations. Better Place would own the batteries, relieving consumers of the burden of having to pay for them up front and also from having to worry about battery condition deteriorating. The batteries could be charged at times that were most efficient for the Israeli electric grid. You had a group of consumers not necessarily enthusiastic about contributing to the demand for oil that has been funding wars and terrorism against Israel (e.g., the Saudi government paying the families of suicide bombers or the Iraqi government, back in Saddam’s day, doing the same (CBS News)). Better Place managed to secure a partnership with Renault to make the vehicles that would accept the batteries. It looked like a great idea when the book was printed… but by now we know how it worked out (investors left with a $700 million hole in their pockets, though unlike similar greentech companies in the U.S., these seem to have been private investors rather than taxpayers). Lesson 1: Start-ups are risky, even when Israeli! The authors claim that the success of a handful of companies has changed societal norms:
[I asked a married-with-kids friend who is a computer scientist in Israel "If a mom had to choose, would she be happier to see the new graduate going to medical school or into a startup?" and he responded "For sure, go to Medical School!"] The most confusing thing about the book is that in several places the authors throw rocks at Singapore. The authors claim that having compulsory military service and existential threats to the country as a whole are conducive to economic success, citing Israel, South Korea, and Singapore as examples. But Singapore is supposedly woefully deficient in start-ups compared to Israel:
I’m not sure where they are getting their data on Singapore’s failure to keep up. The CIA Factbook says that Singapore has a GDP per capital (purchase-power adjusted) of $61,400. This is almost double Israel’s, at $32,800. If that is failure, where can we get some? [The authors are not alone in their tender concern for the wealthy Singaporeans sweating peacefully next to their koi ponds and bonsai: "As the New York Times’ Thomas Friedman put it, 'I would much rather have Israel’s problems, which are mostly financial, mostly about governance, and mostly about infrastructure, rather than Singapore’s problem because Singapore’s problem is culture-bound.'"] The authors note that a planned economy worked well in the 1950s when Israel needed to build out basic infrastructure:
The authors go on to point out that this centrally planned economy worked only because of an unusual lack of corruption (Israel didn’t have any big companies lobbying for special benefits back in the 1950s and, in any case, the place is so small that ordinary citizens would have howled in protest at sweetheart deals for the connected). Anyway, the command-and-control economy stalled out and resulted in inflation rates above 400 percent in the 1970s:
The last paragraph is cautionary for the U.S. as the government gradually assumes a larger role in the U.S. economy (see this chart for the growth from about 20 percent of GDP after World War II to nearly 40 percent now). A lot of government expenditures are indexed to the inflation rate, notably pensions, Social Security payments, etc. If inflation takes hold here, it may not be as easy to stop as it was in the past. Like the U.S., Israel does not seek out educated immigrants. There is no Australian/Canadian/NZ-style point system that favors the educated and/or skilled. Anyone with a connection to Judaism can immigrate. Israel spends lavishly on integrating immigrants into its society, with a wide range of welfare programs targeted specifically at immigrants. How has it worked out?
But then Israel picked up a batch of immigrants from Russia, who showed up with fantastic technical educations:
It seems that these Russians may in fact be the secret to Israel’s recent economic success:
If so, that is hardly replicable for other countries, few of whom would welcome 800,000 Jews as immigrants (the authors note that “Even after World War II ended and the Holocaust became widely known, Western countries were still unwilling to welcome surviving Jews. The Canadian government captured the mood of many governments when one of its officials declared, ‘None is too many!’”). One good thing about the book is that the authors interview people who have invested in Israel to ask “Why were you crazy enough to put your money at risk in a war zone?” It does seem reasonable for an investor to ask “What happens to my money when the Iranians finish their nuclear weapons and decide to test them out over Israel?” Warren Buffet’s subordinates shared his perspective with the authors:
Israel is a relatively crummy place to do business, according to the Heritage Foundation (link). The government chews up 45 percent of GDP, for example, compared to 17 percent in Singapore (the failed state, according to the authors of this book, because they are not cranking out as many iPhone apps!). But it used to be even crummier:
And it is sliding back into crumminess due to the fact that a growing number of Israelis prefer to collect Welfare rather than work:
(Of course, the U.S. labor force participation rate is also shrinking currently (see this Washington Post analysis). The book also tries to explain why Arab countries, similarly situated to Israel but far wealthier due to oil, have not been successful in producing start-up companies, despite some special enterprise zones in places such as Dubai and despite collaborations with a lot of top American universities.
Celebrating student-teacher ratios without measuring teacher performance? I don’t think we need to go to Saudi Arabia to find a situation like that! The authors interview Shimon Peres, President of Israel at the time (sort of a ceremonial job in a parliamentary democracy). He shows that politicians everywhere are attracted to the lure of central planning:
The authors celebrate the military and three years of compulsory military service as a boon to Israel. They point out that when Israelis go to college they get more out of it because they are older. This is something that hasn’t been lost on American colleges. Harvard, for example, often requires applicants to spend a “gap year” doing something other than attending a full-time school before starting college at age 19. It is hard to imagine, however, that the supposed benefits of military service are worth taking three years out of everyone’s life. And is this replicable for other countries? Suppose that French drafted everyone from age 18-21 and made them practice all kinds of elaborate military techniques. Given that there is no credible threat from Germany anymore, would people take it seriously? The authors end on an optimistic note, quoting the Economist magazine regarding the Collapse of 2008: “Israel was one of the ‘last countries to enter recession and among the earliest to exit.’ Indeed, Israel had only one quarter of negative growth, and has since been leading all other OECD countries in GDP growth.” And what about the shift of economic activity to Asia?
Suppose that there were a much simpler explanation for all of this? How about the following: If this is the correct explanation then there is pretty much nothing that can be learned from the success of some Israeli start-ups. You have smart well-educated people who are blocked for political and practical reasons from moving somewhere else. There are practical and political impediments to Israeli companies growing huge, which creates a relatively more favorable environment for small companies. [The book contains some factual errors that call the whole project into question. The authors talk about the Ayalon Institute, a secret underground bullet factory. The equipment came from Poland. The "factory" was smaller than the average American SUV driver's McMansion "great room". Apparently there are no fact-checkers at Reed Elsevier because they didn't do a Google search to check the authors' assertions: "One factory was literally hidden underground, beneath a kibbutz laundry; the machines were kept running to mask the banging noise from below. This factory, built with war-surplus tools smuggled from the United States, was producing hundreds of machine guns daily by 1948. "] |
| Friday, December 27th, 2013 | |
| 5:14 pm | Is percentage of GDP the right way to measure health care costs? Folks: Generally when people question whether or not our central planners are allocating the right amount of money for health care, the debate is cast in terms of percentage of GDP (given that government will spend 67 percent of health care dollars in the Obamacare era (source) it seems fair to say that the level of health care spending is now almost entirely determined by bureaucrats in Washington, D.C.). Given how capital-intensive medicine has become, however, I’m wondering if this is the right measure. The central planners are currently spending 18 percent of our GDP on health care and they are on track to increase this spending to 25 percent. As I noted in my health care reform proposal back in 2009, the Mexicans spend 6 percent of their GDP on health care (World Bank) . So in theory we will be spending only 4X as much as the Mexicans. But measured in dollars, we will actually be spending more like 20X (since our per-person GDP is about 5X larger, according to the World Bank). If the only cost to health care were labor maybe it would make sense to use the percentage of GDP as a comparison. But health care involves a lot of stuff that is traded on the world market and costs about the same everywhere. There is cement to build hospitals. There are pills that come from factories in Israel and India. There are machines that go “bing” in the treatment rooms. There are LCD televisions in the waiting room. So when people say that we spend double what the U.K. spends on health care right now (18 percent of GDP versus 9 percent), despite the fact that the U.K. manages to cover all of its residents without burying them in billing and insurance paperwork, that’s understating the difference. GDP in the UK is only about 75 percent of US GDP. A comparison in terms of spending power for buying stuff other than health care would show that we are spending closer to 2.7X what the UK spends. What do folks think? Is it more accurate to assess our government’s competence in delivering health care with percentage of GDP consumed or absolute dollars spent? |
| 4:18 pm | Sony A7r: dream camera with crippling autofocus shortfall? Friends and I have been playing around with the Sony a7R I tried it last night taking pictures of a sleeping baby in a room lit by a table lamp. A Samsung Note 3 mobile phone didn’t have any trouble capturing focus on the baby’s face (though the result was grainy). The a7R hunted, despite blasting the baby with a bright AF illuminator. It really was not a usable device, though in theory it has reasonable manual focus capabilities (hard for an old Canon EOS user to wade through Sony’s interface, though!). For now I think it is safe to say that the Sony a7R is a dream camera for landscape photographers looking for a lightweight hiking companion but I don’t think it is as good a general-purpose camera as an Sony NEX-6 Is all of the excitement about mirrorless cameras misplaced? The old Canon Rebel G film body was very light and compact and had much better AF than this latest Sony (at 10X the price!). I’m wondering if we aren’t all suffering from a collective delusion and if it wouldn’t be better to stick a sensor in the back of a Rebel G. I’ve posted some example images on Google+ and will be adding to the collection periodically. |
| Thursday, December 26th, 2013 | |
| 3:38 pm | U.S. military saves taxpayer dollars by replacing $300,000 helicopters with $6 million ones A friend sent me this ArmyTimes article about the U.S. Army “cutting costs” by replacing old Bell JetRanger helicopters (the civilian 206B equivalents are available in airworthy condition for $300,000 to $500,000). For active duty, the $300,000 single-engine machines will be replaced with $20 million twin-engine Apache helicopters. For primary training, students will learn to hover in $6 million twin-engine Eurocopter EC-145s (the “Lakota”). After you’ve paid the $6 million, what do these cost to run? Back in 2011 Conklin and de Decker estimated nearly $1200 per hour (source), i.e., nearly triple the cost of the EC120, a modern equivalent to the JetRangers that will be retiring. [What do other countries do for primary training, you might ask? Some have decided to use the Robinson R44, whose brand new purchase cost is about $350,000 and whose direct operating costs are about $200 per hour. Where 100LL gasoline is impractical to obtain and brand new helicopters are desired, the jet-powered Robinson R66 is getting some military sales. These are about $800,000 to purchase with direct operating costs of perhaps $350-400 per hour.] If this really does save money, I think our flight school needs to look into getting rid of our single-engine Piper Warriors ($30,000 to $80,000 in value, depending on vintage and engine time; about $85 per hour in operating cost). We could replace them with brand-new twin-engine jet-powered airplanes that cost $800 per hour to operate and then reduce our prices for customers. Related: July 2010 posting about the Port Authority of New York operating Sikorsky S-76 helicopters for $15,500 per hour when the mission could have been done for $400 per hour in an R44. |
| Tuesday, December 24th, 2013 | |
| 4:58 am | Obamacare = health care for the poor I’m the secretary for the MIT Class of 1982. I recently sent out a request for news to be published in our alumni magazine. I asked folks if they had anything interesting/exciting/funny to share that related to Obamacare. I promised anonymity to anyone who was involved with the healthcare.gov debacle. This unleashed a firestorm of rage from Obama supporters and I was accused of “ridiculing efforts to provide health care to the poor.” Nobody questioned the equation of Obamacare with “health care for the poor.” Given that this is a group with a lot of age, experience, and education, I think it is safe to say that Obamacare has won the PR battle. A fair number of people are attributing to it all of the things that they like about Medicaid (the actual government program to provide health care to the poor, established in 1965). I wrote about this in November 2012 and I’m wondering to what extent it is possible for politicians to take credit for doing things that the government is already doing. Could a politician convince voters, for example, that prior to his election there were no streets? That they needed to vote for him and his party in order that surface transportation remained possible? Probably not, but presumably there are harder-to-observe portions of government where the public might forget that a service predated a politician’s claim to have delivered it. Anyway, it seems as though Obamacare will be permanent because all that supporters need to do to shut down any criticism is to assert that the critic is trying to strip poor people of health care. Especially at Christmas it would take quite the Scrooge to suggest that less than 100 percent of GDP might be spent on aiding the suffering. [I should add that the most vociferous supporters of Obamacare among the class members, and the ones most likely to take the position that every American had a moral duty to support both President Obama and Obamacare, were physicians, i.e., folks who will draw approximately 67 percent of their revenue from the government. (source: Forbes). Employees of Lockheed Martin must be jealous. If you say that you'd rather our national wealth be spent on something other than the government giving them $200 million for an extra F-35 fighter plane, Lockheed Martin workers who would collect some of this as salary can't call you immoral.] |
| Monday, December 23rd, 2013 | |
| 12:19 am | Do variable annuities make sense for retirement saving? Folks: When I was in my 20s the end of a calendar year was a time to eat 12 plates of food at family dinners. Now it is an occasion for tax and retirement planning. So sad… I’m poking around looking at ideas that might be better than just sticking money in a taxable S&P 500 index fund. What I would really like is what state government workers get, i.e., a pension that starts sending me monthly checks when I turn 65 years old and adjusts those checks to account for inflation. So far I haven’t found a product like that. Does it truly not exist? If so, it is interesting that Detroit thought that they could provide this to their workers without going bankrupt. If Goldman Sachs and the rest of the Wall Street geniuses can’t figure out how such a product should be priced, why did states and cities think that they could do what the world’s most sophisticated financial services industry could not? Insurance companies offer annuities, but they start paying immediately and don’t adjust for inflation. I’m 50 now. By the time I am 65 what seemed like a fat annuity check today might be the price of a Diet Coke. (Note to folks who ask why insurance companies can do this without going bankrupt as Detroit did… life insurance companies save money on their insurance polices when human lifespan is extended so they can use those savings to keep paying annuities that they have promised. When General Motors went bankrupt their oldest pensioned worker was 115 years old and GM had no way to benefit financially from people living longer.) The “variable annuity” is something that I can’t figure out at all and I want a reader to explain it to me. The basic idea of a variable annuity is that you put money into it today and the investment returns compound tax-free until you decide to start taking money out for retirement income. Vanguard sells them at what they claim (source) are low fees. It turns out, however, that “low” means at least 0.5 percent per year more than the fee on a corresponding index fund. As the S&P dividend yield right now is 1.9 percent (source), that means that one quarter of the yield is raked off to pay Vanguard and its insurance company partner. This sounds suspiciously like paying taxes on qualified dividends plus the new Obamacare rake. If yields were 10 percent and tax rates on dividends were 40 percent this product would make sense to me. But if all of the benefits of tax deferral accrue to the insurance company and/or Vanguard, why go to the trouble and take the risk that the insurance company (think AIG!) will go bankrupt between now and when you need the retirement income? Are people still buying variable annuities in this low-yield environment? If so, why? [Oh yes, if you're looking for a little humor from the financial services industry, here's a gem from the Vanguard web site: "Note: The American Taxpayer Relief Act of 2012 (ATRA) raised the top marginal income tax rate to 39.6% and the top capital gains tax rate to 20%." (emphasis added)] |
. The book gets 4.5 stars from Amazon reviewers, narrowly beating out Pauline Maier’s 
(Maier is a professor at MIT with a PhD in history) and crushing Drew Gilpin Faust’s 
(Faust, possessed of an Ivy League PhD, is now 
? The ideas for technological innovations are banal (video cameras everywhere, RFID tags inside humans) but I like the way that the interior life of the mega-corporation and the ambitions of its employees are painted. (The company is a combination of Google, Facebook, Twitter (“Zings” instead of “tweets”!), and PayPal.)
should be first in the category. The book meets all of the rigorous standards of business bestsellers, which is to say that it is mostly anecdotes.
, supposedly the dream camera of 2013. Indoors, it turns out to be very slow to autofocus, to the point that it is almost unusable for conventional family photography. A friend who is a regular Nikon D800 user said “I really wanted one of these but now that I have seen how slow it is, I will stick with a conventional SLR.” This was after an hour or so of taking pictures at a noon to 2 pm party lit by a fair amount of window light and also some incandescent bulbs (i.e., much darker than outside but nowhere near as dark as a home interior at night).
(still slower than an SLR but usable).