Coyote Blog

In the aftermath of the two Boeing 737MAX crashes:

For years, the FAA has allowed plane manufacturers to self-certify parts of the oversight process for new planes, called Organization Designation Authorization. This process, in which the aircraft manufacturer’s employees perform some of the safety tests and inspections with FAA oversight, reportedly saved the government body time and money.

That practice was examined at Wednesday’s Senate hearing.

Department of Transportation Inspector General Calvin Scovel III, who testified at the hearing, said the FAA will significantly change the oversight process for new aircraft by July. Speaking in vague terms, Scovel said that the changes would include new ways for the FAA to evaluate the self-certifying process.

Sen. Richard Blumenthal said that putting manufacturers in charge of their own safety audits was like putting “the fox in charge of the henhouse.” Saying he would introduce regulations to ban the practice of companies self-certifying, Blumenthal stated that “the fact is that the FAA decided to do safety on the cheap, which is neither safe nor cheap.”

A few reactions:

1. The fox in the henhouse analogy is not apt.  The fox wants to eat the chickens, whereas Boeing does not want to have airplane failures.  In fact Boeing is going to be paying out on a bunch of really big lawsuits, not only to families of the folks that died and the airlines that lost their planes but also to airlines that have had to change their flight schedules due to these issues.  Airbus sales people will use this story in their pitches until the end of time.  Regulation is not the only, or the most important, check on Boeing's behaviors.
2. That being said, aircraft regulation is a dumb hill for libertarians to die on.  This is just not that big of a deal.  Regulation and capital intensity has pretty much reduced choice in large aircraft to two companies and that will not likely change no matter what extra regulatory hoops are added.  Aircraft are a bit more expensive and spare parts are way more expensive due to our regulatory regime, but I don't think there is a public constituency for making a different trade-off.
3. Whatever the regulatory environment, it is unlikely to actually catch more failures of this sort in the future.  Regulators are notoriously bad at this sort of thing (see: US financial system).
4. I did engineering failure analysis early in my working career and my experience is that this sort of multiple stacked failure -- lack of pilot training for a bad software response based on a failed piece of instrumentation that was not reported as needing maintenance -- is hard to predict.  What will happen now in addition to some software fixes will be more mandatory training on this particular subsystem and likely a requirement that the specific piece of instrumentation involved needs to have redundancy.  At best we should hope they will also do a review of other instrumentation failures that might lead to a flight control issue and consider redundancy or software changes.  But there's always the problem of failure of imagination, the best dramatization of which is in the fabulous From the Earth to the Moon episode on Apollo 1.

We got 72 entries this year, which is pretty good given that I got started late setting it up and promoting it.  Many contestants eschewed the obvious choices -- for example only a third picked Duke to win and barely half had Duke getting to the Finals.

Robert in Chicago is in the lead, but many are close.  The scoring system favored picking upsets but there just were not that many big upsets in the first 2 rounds

But 42 different people still have a chance to win, including all the top 20 and 20+ more besides.

Good luck to everyone this weekend.  You can see all the rankings at https://www.pickhoops.com/tslatslaq/

I have not really written on Brexit here, for a couple of reasons.  First, I am not at all informed about the issues, so it is hard to pontificate intelligently.  Second, I am torn because, were I British, I likely would have supported Brexit but for completely different reasons than many others.

My understanding is that many folks (in a parallel with Trump voters in the US) voted for Brexit out of fear of global free trade and immigration, both of which I support.  I, on the other hand, would have voted for Brexit to shed the absurd, overreaching EU regulatory state.  So I likely would have supported it, but don't want to be counted among modern anti-global nationalists.

But if you want to see the type of BS that would have driven me into the arms of the Brexit camp, this is it.

he European Parliament’s approval of the Copyright Directive today is the end of the internet as we know it. This new regulation creates substantial new controls on what we can share online which threaten freedom of expression, undermine creativity, and cement the dominance of technology giants.

The Copyright Directive will create two internets. The first, a heavily censored version for European users, including filters to prevent you from uploading content. The second, a free internet where creativity is encouraged, for everyone else.

The directive represents everything that’s wrong with the EU’s policymaking process. It was written at a substantial distance from Europeans, heavily influenced by lobbyists and national compromises. There is a serious lack of accountability.

By the way, I would have had completely the opposite instincts than President Obama during Brexit.  The day Brexit passed, as President I would have immediately announced to Britain that if they were leaving the EU's common market, they were welcome to join one with the US and would have sent a trade envoy over that day.  Instead, President Obama did nothing but threaten and scold Britain for trying to get out from under the EU's regulatory umbrella.

A while back I wrote that the Mona Lisa was easily the most disappointing art experience of my life (I believe I put the viewing of Seurat's Grande Jatte on the other end as exceeding expectations.)  If you are not sure why I dinged Da Vinci's lady so harshly, see this.

Watching this scene as she does every day, I now understand her smile.

I sent in a support request to Disqus reporting that Disqus comments exist for posts from the last 2 months but have disappeared for posts from 2012 up to a couple of months ago -- tens of thousands of comments missing.  And the comment box is not even showing up on the posts.  I sent a link to an example post both with and without comments and they responded:

We'd be happy to take a closer look into this, kindly forward us both of the following:
-text of a missing comment;
-link to the page on which the comment should be.

Obviously this is not responsive.  I can't send the text of a comment I don't have.  Thinking that maybe by support request had not gone through completely I resent the request:

I am not communicating well. There is not a particular comment missing. I had between 5 and 100 comments on every single post from 2012 through February 2019 at coyoteblog.com, all with Disqus, and they are all gone. Even the comment links are gone

Here is a recent one that still has comments: https://coyoteblog.com/coyote_blog/2019/03/an-incredible-crony-mess-in-maryland.html

Here is a random one from the past that had over 100 comments and they are all gone: https://coyoteblog.com/coyote_blog/2018/11/i-have-totally-lost-the-thread-here-based-on-what-we-know-now-someone-please-make-the-case-for-me-on-trump-russia-election-collusion.html

this same is true for literally thousands of posts that until recently had disqus comments but now have no comments at all

By the way, between these two posts and all others, they use the same template, code, add-ins, everything.

They answered:

If you give us an example comment, we would have a better idea of what is causing the broader issue across your site.

For folks old enough to remember the program, this is like talking to Eliza.  So I wrote back

How can I give you an example when they are all gone?  Just to be clear, it is not a comment I made that disappeared.  I run the blog coyoteblog.com and it is all the comments of my readers that have disappeared.
Please, go to this link:  https://coyoteblog.com/coyote_blog/2019/01/update-on-tesla-from-the-conference-call-today.html.  Do you see comments?  There were over 100 comments on disqus on this post, now they do not show up at all.  Ditto every post over the last 6 years except for posts over the last 2 months.  Please, rather than sending me these automated replies that don't actually address the issue, compare the comments section of the two post links I sent you.  One has comments on disqus, the other has them all disappeared.

For some reason all comments from about 2012 when I started on Disqus to this February are missing.   There are not even comment links.  Sigh, I apologize for the loss to all those who took the time to participate in the conversation and I have ponied up for a paid Disqus membership to try to get some support and see if its fixable.

If you want to see your socialist future, look no further than this mess in Maryland, hat tip to Overlawyered.  Absolutely nothing in this looks like free market capitalism, from the dueling subsidies to the threat by Baltimore to actually seize a business for the crime of trying to move out of their dysfunctional city.

Baltimore Mayor Catherine Pugh sued the owners of Pimlico Race Course in hopes of blocking them from moving the Preakness Stakes or using state bonds to fund improvements at Laurel Park.

In a lawsuit filed Tuesday in Baltimore Circuit Court, Pugh, on behalf of the city, also asks the court to grant ownership of the racetrack and the race to the city through condemnation....

Citing The Baltimore Sun’s reporting, the lawsuit asserts that since 2011, Stronach has “systematically underinvested in Pimlico and invested instead in the Laurel Racetrack.”

Stronach has spent the majority of the state aid it receives for track improvements on Laurel Park for the past several years.

“Through the systemic divestment of Pimlico, Defendants could indeed manufacture an ‘emergency or disaster’ to justify transfer of the Preakness to Laurel, as undermaintained infrastructure begins to fail and crowds attending Pimlico races and the horses racing there are endangered,” the lawsuit states.

Moving the race or shuttering the track would harm the Park Heights and Pimlico neighborhoods around the track, which are significantly poorer than Laurel and Bowie, the lawsuit states.....

Stronach Group officials previously pledged to keep the Preakness at Pimlico through 2020. The 2019 race is planned for May 18.

But they also have made clear that they plan to invest in Laurel Park in Anne Arundel County, in hopes of building a “super track” that could attract a high-profile race such as the Breeders’ Cup.

To accomplish that, Stronach is backing legislation in the General Assembly that would allow the Maryland Economic Development Corp. to issue $80 million worth of bonds to pay for improvements at Laurel and an additional $40 million in bonds for its Bowie Training Center. The bonds would be paid back with money from the state’s Racing Facilities Renewal Fund, which is funded by a portion of slot machine proceeds....

If the court awards ownership of the track and the Preakness to the city, “These properties will be used to continue their historic role in the cultural traditions of Baltimore City, to foster employment and economic development in Baltimore, and in particular in the Park Heights Urban Renewal jurisdiction, as well as to protect the health and safety of the people attending the Preakness and other Pimlico events, as well as the employees and horses working there,” the city wrote in the lawsuit.

All of this is set against the backdrop of horse racing being a dying business.  This almost reminds me of the end days in Atlas Shrugged when rival local governments are fighting over a last, soon-to-close factory.

By the way, the article mentions the poorer Park Heights and Pimlico neighborhoods.  Now, I am not familiar with these parts of Baltimore, but let me venture it is insane to base your local economic development on a business (the Pimlico race course) that has racing just 12 days of the year over a single 3 week period in May (the rest of the time I believe it's just an oversized OTB parlor).  Just about any other business in that space would likely be healthier for Baltimore.

This is a classic case of politicians destroying economic progress by forcing sub-optimal resource investment.  I have observed that politicians love subsidizing the hell out of these high-profile single day businesses.  The Fiesta Bowl in the Phoenix area is another good example.   Look at how much politicians bend over backwards to get a Superbowl, which is at best one day out of every 5 or 6 years.   I am still trying to formulate a theory as to why, but a few elements likely include:

• Local political leaders get treated as a king-for-a-day at these events.  They get interviewed by national media, they hobnob with stars, they get special seats and boxes at the event
• Politicians want bullet points and sound bytes for their elections and these events are more widely visible to and understood by voters than the nuts and bolts of real economic prosperity.  A seen and unseen type thing.  From a politician's point of view, even massive unseen prosperity is useless to them.
• These events act as short-live but meaningful subsidies to a variety of powerful local interests such as hotel owners

Henry Payne, a cartoonist featured on many of the libertarian sites I read and a writer for the Detroit News, was a classmate of mine at Princeton.  Every year he creates a new birthday card that my class sends out to all of us on our birthdays.  I kick myself for not saving them all, but I am not really a keepsake kind of guy.  Here is the one for this year:

The Daily Mail claimed that this grammar test is so hard no one will get more than 10 or 20 right.  That is absurd, I nailed them all (yes, I have lots of grammatical mistakes in this blog because I am a sucky and indifferent proof-reader, not because I don't know what's correct).

That has to be just click bait or some sort of self-esteem reinforcement process.  The only other explanation is that there really has been a divergence between going to school/college and education.

via Maggie's Farm

I encourage you to click through to an animated visualization of the largest cities in the world, by year.

A few surprises, but the biggest one to me was how long Naples hung around on the list.

The fall and rise of the Chinese cities is also interesting.  People seem to get freaked out by China's growing prosperity, a fear for which I have zero sympathy -- people exiting poverty in China is an unalloyed good.  But here is a thought for context.  I can't absolutely prove that it is correct but I am pretty sure it is true.  The history of the world is that, with the exception of the 200 years from about 1800-2000, China has for 4000 years been the largest economy in the world.  Chinese prosperity today is not some aberration, it is a return to normal.

Update:  OK, I think I got it to embed:

New project:

A “Bar Chart Race” animation showing the changing ranks of the 10 biggest cities in the world since 1500.

Fascinating to watch giant cities vanish after falling in conquests, and amazing that three UK cities were in the top 8 in the late 1800s. pic.twitter.com/KglMZbYobr

— John Burn-Murdoch (@jburnmurdoch) March 18, 2019

It's shrinking, but only because folks are getting wealthier.

via the always terrific Mark Perry

You folks can disagree with me about the prospects for the Tesla stock price.  You may hero worship Elon Musk and think he's a genius where I think he is a charlatan with PT Barnum promotion skills.  You may really, really love our Tesla car (I thought the Model S was a fine car when it first came out -- the Model 3, not so much).  But PLEASE do not rely on your Tesla autopilot.  Or at least read this Ars Technica article first.

A while back I went to a party in the suburbs of New York and needed a ride back to my hotel in the city.  A friend of a friend offered to give me a ride.  It turned out he was driving a Tesla Model X (SUV).  In the same way that you can't go 3 minutes with a Vegan without getting a diatribe on the virtues of veganism, for some distance in the ride we heard a paean to Elon Musk and Tesla.  This guy had really drunk the Kool-Aid.  Before my wife started kicking my ankle, I expressed a few of the reservations I had about the company and Musk, and the driver got really defensive. So much so he set out to prove Tesla's superiority.  So he drove us the rest of the way home (mostly) with his hands off the wheel through the freeways around Manhattan.  It scared the cr*p out of me, because I knew that while the AP could drive impressive distances and navigate on its own, it was only 99% reliable.  And since it makes hundreds of decisions every trip, those are not great odds.

What worried me is that he insisted on using the AP almost as a test of religious faith.  There is this weird dichotomy where all the Tesla literature that is actually reviewed by their lawyers and the DOT tell you never to take your hands off the wheel, but Musk goes on 60 Minutes bragging and doing exactly that (almost hitting another car) and verbally the company constantly brags on its AP capability.

This is crazy.  You only have to look at Boeing and the 737MAX experience to understand that even a very careful and experienced company like Boeing can screw up the software-hardware interaction  The 737MAX worked most of the time, just like the Tesla AP, but in Boeing's case you don't see consumers arguing that this makes it OK -- you see the DOJ initiating criminal investigations.  Tesla is a much less experienced and far less careful and organized company than is Boeing.  Despite Musk's bluster, third parties rank them close to dead last in self-driving technology development, but they are the only major self-driving provider who are actively encouraging their customers to use it outside of a carefully controlled test environment.   Everyone who actually understands AI believes Musk is totally full of sh*t when he talks about AI, particularly the much-hyped "shadow mode."

Interestingly, that latter reaction is the same one I hear from nearly everyone who hears Musk discuss something they actually know about. My moment came listening to Musk talk about the hyperloop, which is truly a crazy, unfeasible, uneconomic joke.  As I wrote before:

Elon Musk is not the smartest guy in the world.  He is clearly a genius at marketing and brand building.  He has a creative mind -- I have said before he would have been fabulous at coming up with each issue's cover story for Popular Mechanics.  A mile-long freight blimp!  Trains that run in underground vacuum tubes!  A colony on Mars!  But he suffers, I think, from the same lack of self-awareness many people develop when they are expert or successful in one thing -- they assume they will automatically be equally as brilliant and successful in other things.  Musk creates fanciful ideas that are exciting and might work technically, but will never ever pencil out as profitable business (e.g. Boring company, Hyperloop).

I watched the Ant-man and the Wasp the other night and listening to Musk is a lot like Marvel movie physics -- both use recognizable terms (if you had a drinking game in this last Ant-man movie that took a shot when they said "quantum" you would be dead now) that sound good to laymen but make no sense to people who actually understand the topic.  There may have been some excuse to lionize Musk's brilliance a year or five years ago, but how can anyone think this guy is anything but a knucklehead with an overcharged ego after the Boring Company fiasco?

Anyway, don't rely on this guy's reputation.  If you like what you see in the Tesla showroom (if there are any left), then by all means by the car.  But do not turn on the auto-pilot.  Please.  A loss of even one of you readers could... reduce my blog visitation by whole number percentage points.

Last weekend I watched both the Leaving Neverland documentary about Michael Jackson and the Out for Blood documentary on Elizabeth Holmes and Theranos.

The Theranos documentary was fine -- Theranos is an amazing story and any documentary on it is naturally going to be engaging.  My only issue with it was that it was very spare compared to the depth of the Bad Blood book.  The documentary worked a bit too hard trying to be too stylized.  I would have rather a faster-paced, harder hitting approach.  But if you have not read the book, it is definitely worth your time.

On the other hand, the Michael Jackson documentary was simply riveting.  I really had zero desire to sit and watch 4 hours on child molesting, but I was totally engrossed.  The individuals telling the story were so articulate and honest that I just got sucked in to the story.  The whole thing was simply devastating.  And as an aside, the B-reel footage used in cut scenes and such was simply beautiful.

In a tradition that goes back well over  a decade on this blog, it's time for our 2019 just-for-fun bracket challenge.  You know how it works -- fill out your bracket for the NCAA men's basketball tournament before noon Eastern this Thursday.  First prize  is lots of adulation and a 1 year free subscription to Coyoteblog.  Second prize is a two-year subscription.

We are using the usual scoring method -- 1 point for each correct pick in the first round, then 2 points in the second round, then 4, 8, 16 and 32.  This gives each round the same number of possible points.  In addition, there is a bonus for each game you correctly pick an upset equal to the difference in the two seeds, so there is some incentive to take a bit of risk with your picks.

This year's theme is the ongoing battle of Tesla bulls and bears ($tsla and $tslaq respectively).  You don't have to be part of that mess to play, but if you want to self-identify with a side, put it in your team name. If you need anonymity, you can use a fake name and make sure to check the box not to show your email address publicly.

It is totally free to play (I have paid the fees) and you can sign up and find our bracket here.  

http://www.pickhoops.com/TSLATSLAQ

I do not consider myself a tequila expert, but I do live in Phoenix where the tequila aisle at the liquor store is longer than the beer aisle in most other places.  Of late, I have discovered that while I am may not be the world's expert, a lot of my friends and family in other places are buying bad or overpriced tequila.  So here are some good choices (these are not the only good choices, but I would rate these as "you can't go wrong" at each price point).

Inexpensive:  Altos.  I prefer the reposado, but both it and the blanco are good and they often can be found at the supermarket at a price that will make you hesitate to buy it because it is so cheap.  But get it, way better than that Cuervo stuff.  If I remember right, it was created by an British company trying to take on the high price of tequila in that country.

Moderate to premium:  Cazadores.  My go-to brand for general use.  If you want to pay a bit more the super anejo is really terrific.  As presents we give bottles of homemade pepper-infused tequila to our friends and when we want it to be really good we infuse the Cazadores super anejo

Expensive:  Clase Azul Reposado:  Don't even think about putting this stuff in a margarita.  It is an amazing sipping tequila.  I did not even know there was such thing as a sipping tequila until I drank this.   Honestly, it is an entirely different experience than most any other tequila you have had.  It comes in a distinctive bottle that looks great on the shelf, too.

Postscript:  The tequila descriptions relate to the amount the tequila has been aged.  Regular or blanco tequila is clear and has not been aged.  Reposado is a golden color and is lightly aged -- I think personally this is the sweet spot in the aging scale.  Anejo and Extra Anejo means aged even more (anejo means "old" in spanish).

Yes, I know, the "Congress needs to act" subject line is an unusual one for this blog.  But great damage is being done on the tax front to businesses and only Congress can mitigate some of the harm.

The taxes in question are sales taxes, and the problem results from a Supreme Court decision that allows states to start collecting sales taxes on interstate internet sales.  Eric Boehm of Reason writes:

Heitman and his wife, Carla, have been running Pegasus Auto Racing Supplies since they founded the company back in 1980, out of a two-story building in New Berlin, Wisconsin. Until last year, that meant Heitman was responsible for collecting and paying sales taxes to exactly one place: the Wisconsin Department of Revenue. But thanks to an under-the-radar ruling from the U.S. Supreme Court in June, he's now receiving letters, phone calls, and emails from revenue officials across the country, each wanting a piece of his business

The source of Heitman's frustrations is Wayfair v. South Dakota,which allowed states to collect sales taxes from online businesses located beyond their borders. Many states view the Wayfair ruling as a potential tax revenue windfall in which the taxes are paid by non-residents who can't vote against them. That's why businesses like Heitman's are now facing the chilling prospect of owing taxes in dozens, and possibly hundreds, of different jurisdictions—while being hounded by out-of-state tax collectors.

Since the Supreme Court issued its ruling in June, Heitman has been scrambling to become compliant with tax commissions and revenue departments from coast to coast. He's spent thousands of dollars on new software to help navigate the complexities of state sales tax law, but that's only been so much help. "It almost seems like I have another full time job dumped on me with this sales tax thing," he says. "It's burning me out."

Like most writes, Mr. Boehm actually understates the problem.  Because the potential exists not to have 50 new taxing authorities for every sales, but thousands.  I have to deal with this every day. I wrote a while back:

Take Arizona, which seems from my experience to be roughly average.  The sales tax rate table is 18 pages long in a small font.  There are 29 separate rate categories which each have different rates in each of Arizona's 15 counties.    My business is in 6 counties and we have 3 rate categories that apply, or 4 if you consider items with no tax as another rate category.  This is 24 different state/county sales tax rates we charge.  But that is the easy part.  Because then there are, in addition to county taxes, 92 different towns and cities that have their own rate tables with up to 29 different rate categories that add to the base state/county rate.  Other states such as Washington (rule of thumb -- if the state has no income tax then it has a LABYRINTHIAN sales and business tax systems) have additional overlay taxes such as for transit and stadium districts.

When my company opens a new location, we have to spend hours on the Internet and with maps trying to figure out what sales taxes to collect, and even with good due diligence we sometimes get it wrong and find in an audit we are actually just inside or outside some line where the rate changes (we once had a location 30 miles outside of Seattle on a long dirt road where we found we had to collect the Seattle Rapid Transit tax).  Thatcher, AZ is a town of like 4000 people but has its own special sales tax rates -- do you know where the town line is?  Well neither do they, because last time I checked they did not have any sort of online lookup system to tell one automatically if the address is inside or outside the town and its sales tax district....

But even after registering in all 50 states, you are STILL not done, because many states don't have a fully unified sales tax collection system.  In Arizona, for example, the larger cities require their own registration and monthly reporting.  Each of these towns in AZ require a separate registration and monthly report:

Apache Junction, Avondale, Chandler, Douglas, Flagstaff, Glendale, Mesa, Nogales, Peoria, Phoenix, Prescott,Scottsdale, Sedona, Tempe, Tucson

Douglas, Arizona is a town of freaking 16,000 people but make sales there and you have to have a separate local registration and reporting.  And this list is for one not-very-urban state.  Currently my company does business in 9 states but we are registered and pay sales taxes to about 25 different authorities -- and we are mostly a rural business, so we are not in the larger urban areas that are more likely to have their own sales tax systems.

Apparently Congress is considering legislation to pre-empt this tax burden for all but the largest (read: Amazon) retailers

One potential vehicle for resolving problems created by Wayfair is a bill sponsored by Rep. Jim Sensenbrenner (R-Wisc.), first introduced in October and likely to be re-introduced to the new session of Congress within the coming weeks. His bill, the Online Sales Simplicity and Small Business Relief Act, would add important specifics like prohibiting states from collecting out-of-state sales taxes on transactions that occurred before January 1, 2019, essentially giving businesses much-needed time to get up to speed on the new requirements without suddenly being hit with tax bills they weren't expecting.

Most important of all, the bill would create a $10 million sales tax exemption for all small businesses that do not have a physical presence in a given state. That means upping the $100,000 threshold in the South Dakota law that triggered the Wayfaircase to a level far in excess of what a small business would have in sales—effectively removing the ability of states to target all but the largest of remote sellers.

"Small business owners, in particular, have shared fears that they will be unable to bear the new compliance burdens and may have to shutter their businesses," Sensenbrenner says. "I've heard from online sellers in Wisconsin and across the country who are concerned with the complexity of the post-Wayfair tax regime."

The bill is likely to have bipartisan support in the House this year, with Reps. Anna Eshoo (D-Calif.) and Zoe Lofgren (D-Calif.) lined up as co-sponsors, along with Rep. Jeff Duncan (R-S.C.).

This is actually good news if this law has support.  I actually thought that there would be no solution short of a federal sales tax on interstate sales that pre-empts the state rates, and whose proceeds would get shared with the states on some kind of pro rata basis.  I didn't think politicians would walk away from money, and I still think that if the Sensenbrenner bill is to pass it needs to do it this year before states get used to the new money and refuse to part with it.

Sam Sheepdog and Ralph Wolf (looking suspiciously the same as Wile E Coyote) pound each other from 9 to 5 but can still be good friends in their personal lives.  Its just 2 minutes long but watch it and think about the polls showing a shrinking number of people are willing to be friends with someone who disagrees with them politically.

In a tradition that goes back well over  a decade on this blog, it's time for our 2019 just-for-fun bracket challenge.  You know how it works -- fill out your bracket for the NCAA men's basketball tournament before noon Eastern this Thursday.  First prize  is lots of adulation and a 1 year free subscription to Coyoteblog.  Second prize is a two-year subscription.

We are using the usual scoring method -- 1 point for each correct pick in the first round, then 2 points in the second round, then 4, 8, 16 and 32.  This gives each round the same number of possible points.  In addition, there is a bonus for each game you correctly pick an upset equal to the difference in the two seeds, so there is some incentive to take a bit of risk with your picks.

This year's theme is the ongoing battle of Tesla bulls and bears ($tsla and $tslaq respectively).  You don't have to be part of that mess to play, but if you want to self-identify with a side, put it in your team name. If you need anonymity, you can use a fake name and make sure to check the box not to show your email address publicly.

It is totally free to play (I have paid the fees) and you can sign up and find our bracket here.  

http://www.pickhoops.com/TSLATSLAQ

It should not surprise us that the folks in Hollywood are disproportionately represented in those arrested in the academic bribery scandal.

The first reason for this is related to law enforcement -- if given a choice of investigating and arresting Joe Schmoe and investigating and arresting, say, Martha Stewart, the FBI is going to invest resources to take down the big name every time.

But the second reason is related to Hollywood itself.  I don't have stats on this, but I am willing to bet that, with the possible exception of politics, Hollywood is the most nepotistic industry in America.  Look at the IMDB descriptions of the actors, producers, and directors in some recent movie.  Some will be first generation talent out of nowhere.  But a huge number will be the Tori Spellings of the world, kids who got their start in part due to family connections.

In this sense, making it in Hollywood is very similar to getting admitted to Harvard -- they are both brutally hard and low likelihood events that have enormous payoffs.  So it should not be surprising that people in Hollywood, who every day see family connections being used to short-circuit difficult entry processes, would apply the same philosophy to university admissions.

... we somehow decided that the first 24 hour fundraising amounts had any meaning whatsoever.  All this means now will be that campaigns now will queue up a slew of "pre-commitments" for donations ahead of the official announcement date.  Bundlers will be operating months ahead of time like advanced scouts, further making a mockery of, uh, whatever reason we have for formal campaign announcements in the first place.

This failure analysis from tweets by Trevor Sumner as picked up at Zero Hedge seem to fit the available facts -- Boeing called the problem as the wrong software response to an erroneous instrumentation input, clearly the angle of attack sensor.  It also fits my experience from my 3 years doing failure analysis in a refinery that most engineering failures are nuanced and results from multiple causes.  In short, a software fix was made to compensate for a basic design issue; and this fix could do the wrong thing when a sensor went bad, which it often does; and when airlines skimped on a redundant sensor and crew training, these shortcomings could be fatal.

In the college admissions bribery scandal that is unfolding (with almost certainly more to come), parents were willing to spend up to $500,000 for something whose list price is like $50 (ie the application fee).  When I see this happen, I immediately think that there must be some sort of artificial shortage.  After all, why wouldn't new suppliers jump into the market when such demand is apparently going unmet?

For years I have been pestering my alma mater to spend more of its endowment increasing capacity.  For example, several years ago I wrote:

...the Ivy League needs to find a way to increase capacity.  The number of kids that are "ivy-ready" has exploded over the last decades, but the class sizes at Ivy schools have remained flat.    For years I have been campaigning at Princeton for this, and I am happy to see they are increasing the class size, but only by a small amount.  Princeton has an endowment larger than the GNP of most countries.  To date, it has spent that money both well and poorly.  Well, because Princeton is one of just a handful of schools that guarantee that if you get in, they will make sure you can pay for it, and they do it with grants, leaving every student debt free at graduation.  Poorly, because they have been overly focused on increasingly what I call the "educational intensity" or the amount of physical plant and equipment and stuff per student.  In this latter case, we have got to be near the limit of spending an incremental $10 million to increase the education quality by .01%.  We should instead be looking for ways to offer this very high quality of education to more people, since so many more are qualified today.

To illustrate this point I used this example in another post on the same topic

Let's say an Ivy has 5,000 students and a 10 point (on some arbitrary scale) education advantage over other schools.  Let's consider two investments.  One would increase their educational advantage by 10% from 10 to 11 (an increase I would argue that is way larger than the increase from investments they have recently made).  The other investment would double the size of the school from 5,000 to 10,000 but let's say that through dilution and distraction it dropped the educational advantage by 10% from 10 to 9.   The first investment adds something like 5,000 education points to the world (5,000 kids x 11 minus 5,000 kids x 10).  The second adds  40,000  points to the world (10,000 x 9 minus 5,000 x 10).  It's not even close.  In fact, the expansion option is still favored even if the education advantage drops by 40%.

Here is a test.  Quick:  Name a well-known liberal arts college or university with a high academic reputation that was founded in the last 100 years.  Tick tick.  Give up?  The only one I can come up with is Claremont-McKenna.  When I started asking this question 10 years ago the answer also included Rice University, but it is now out of the window.  Compare that to top art schools -- some like RISD go back to the 19th century but CalArts and ArtCenter are both less than 75 years old and probably the hottest current art school SCAD is less than 50 years old.  SCAD is a great example.  SCAD is growing like crazy -- it owns half of downtown Savannah, it seems -- and has a great reputation despite its youth and despite its admissions policies that are far less restrictive than other colleges or even other art schools.   It is innovative and responsive to students in a way that few liberal arts colleges are.  It has clearly tapped into a huge unmet demand.  Why can't anyone do this in the liberal arts world??

The cynical view, which I lean towards more as I age, is that Ivy-type university degrees are all about signalling and not the education itself, and thus expansion just defeats the purpose because it dilutes the signalling value.  For years when I met gung ho kids who were impressed that I went to Princeton and depressed that they likely would not, I would tell them that Princeton differed from their state school in this way:  At your state school, you can get a really good education but you may have to work for it;  if you choose to slack, you won't get it.  In contrast, at an Ivy League school, you are going to get challenged whether you want to or not.  At least that is what I used to say.  I am not sure that is true any more of the Ivies, if it was ever true (I may have just been fooling myself).  We used to use "went to college" as a synonym for "educated", but I think that relationship is gone.  It's very clear you can go anywhere, Ivy League included, and fail to leave educated.

Some of my thinking on this was fast-forwarded given the experience of one of my kids.  We had classic suburban expectations for our smart kids, and were proud our daughter got into a top 20 university.  She really even then wanted to go to art school, but we worried she would end up living in a refrigerator box on the street with an art degree (well, not literally, but that was the family joke).  But after a year she hated the university**.  She did fine academically, but it wasn't what she wanted to do.  And after she took the reigns and worked on a do-over for herself at art school, I started thinking a bit more about it.  She works really hard at art school -- way harder than I or her brother worked in college -- and she is learning an actual craft that people value and pay for.  She has a heck of a lot more prospects on graduating than the Brown grad who majored in Ecuadorian feminist poetry.

I don't want to be disingenuous here -- I traded on the value of my degrees and the schools they came from until I was 40 (after that I was running on my business and they became largely irrelevant, even a bit of a handicap). But when I think back on what I gained most in my education, I would list these three things first:

• The ability to clearly define a problem -- drawing a box around the system, defining inputs and outputs, etc
• The ability to write (some examples on this blog notwithstanding)
• The joy of learning -- at last count I have complete about 85 Teaching Company courses of an average 36 lectures each and 13 Pimsleur language courses of 30 lessons each.

By the way, if I had to define my main privilege in all of this, Princeton would not be first, because in fact I really developed the three above in a great private high school my parents were able to afford.

Postscript: Many have assumed these kids who got in fraudulently displaced some low income minority.  I find that hard to believe, knowing how admissions offices work and the general philosophical outlook of universities.  Much more likely that the marginal candidate cut was a midle class Asian-American.

** One of the interesting features of top schools is that it may be hard to get in, but they work to get every kid over the finish line.  That is why the real credential of an Ivy League school is as much admission as graduation.  To illustrate this, my daughter is in her third year at art school but her university she started at is still sending her emails saying that its not too late to come back.

The Wapo had a story about Danish theaters showing movies with subtitles, even for movies in Danish

In recent weeks, many Danish have finally been able to understand their country's actors again — thanks to subtitles.

According to European news site The Local, Danish actors were criticized for mumbling to such an extent that many moviegoers had a hard time following the story plot. In reaction to the complaints, cinema owners promised to provide people with the option to either choose movie screenings with subtitles or without. All films produced in Denmark will be available in both versions in the future....

Pedersen blames the necessity for subtitles on the evolution of the use of Danish in movies. Whereas in the past, actors were focused on articulating themselves in a way understandable for everyone, their main emphasis has now shifted to being as authentic as possible. Hence, many actors have chosen not to imitate more common dialects and have stuck to local versions of Danish. "It's a small country, but there are big differences between the Danish dialects," Pedersen explained.

I suppose this is supposed to be surprising but frankly at home I turn subtitles on for a number of shows that have dialog in English but have unfamiliar accents or dialects -- a range of shows from the Crown to the Wire.   I remember a cocktail party conversation with a group of white suburban liberals in which, after much alcohol, everyone admitted their secret vice of turning on subtitles for the Wire.

I have argued that another problem with dialogue is the way movie sound is mixed.  The dialog track can be overwhelmed with the other sound and music tracks.  This works OK in a theater with good acoustics and lots of sound absorption (e.g. those curtains on the wall) but is a disaster when it comes to showings at home where most living rooms are way more "live" than movie theaters.  The result is a lot of extra reflections and delays that serve to further muddy even well articulated dialog.

Also, to be honest, my tinnitus and too many rock concerts in the 70's and 80's probably play a factor too.

The other day I got stuck in Orlando for a day and took the opportunity to sit it out at DisneyWorld.  Despite being essentially a walk-up guest, the hotel upgraded me to a beautiful room looking out at the Magic Kingdom and the lake in front of it.

The Magic Kingdom is an interesting public transit case.  It is located miles away, across a lake, from its parking lot and can be quite a distance from many of the Disney hotels.  So most everyone comes to the Magic Kingdom in some sort of mass transit.

The most eye catching is the DisneyWorld monorail.  This version, designed in the late 1980's but fairly similar in outline to the original early-70's version, is clearly beautiful.  When I talk about industrial design, I often use a scale where 1 is the Boston City Hall and 10 is the Disneyworld monorail.  Not only are the trains themselves beautiful, but the spindly monorail beams are clearly better looking than most any other overhead rail arrangement.

But what makes for a good theme park ride does not necessarily make for good public transportation.  Here is why:

1. Monorails like this give up all the efficiency of trains.  Rail is efficient because the rolling friction of a flanged metal wheel on a metal rail is so much lower than, say, a tire on concrete.  But these monorails and most others ride on tires -- there is rolling friction of the tires on the top of the concrete beam as well as with the tires that stabilize the train on the sides of the beam.  These monorails are basically long busses up on a rail.
2. Monorails have lower capacity per car than trains.  For stability reasons on the narrow beam, monorails must be shorter and narrower than most rail trains (even given the world's too-narrow rail gauge standard).  This means for roughly the same car length and weight, they carry fewer passengers.
3. Monorails have the same downsides of trains.  They have capacity restrictions -- specifically they need much longer headways between trains for safety than busses do on the road.  And they are inflexible -- once you spend billions of dollars to put them on one route they are going to stay on that route.

As I sat on the lake, I could see all three modes of transit that Disney uses at the Magic Kingdom.  Both monorails and high capacity double-deck ferries run from the parking lot to the park, and busses run from most of the hotels to a bus depot at the park.  I could be wrong because it was not scientific, but I believe that the ferry boats had a lot more capacity per hour than the monorails -- particularly since Disney had to lengthen the distance between trains several years ago after an accident (yes, they actually have a single loop of track with no switching a couple of miles long and with perfect visibility ahead and they actually had a collision).

More telling is the fact that Disney has essentially abandoned the monorail for all its future expansions.  Yes, they built one to Epcot, but they have reduced service to one every 15 minutes or so and it brings in an absolutely trivial portion of the guests.  With its growing network of parks and hotels and all the possible point to point destination pairs, it relies on busses now almost exclusively for internal transport.

I was listening this evening to the excellent Hidden Forces podcast on Tesla and they said something that really resonated with me -- its hard to discuss Tesla because there is so much crazy stuff going on:  A CEO who in many ways channels Donald Trump's worst characteristics; multiple SEC investigations, an ongoing contempt hearing; a story yesterday about thuggish behavior towards a whistle blower; strategic moves that are made, unmade, and then changed again in just a few weeks; astoundingly high turnover in management ranks, including an esteemed general counsel who couldn't hung around for even 60 days and then purged all reference to Tesla from his CV; fantastically passionate bull and bear communities; expansive promises that are seldom kept; outright fraud -- all in a company valued at $60 billion dollars and whose stock price rose 2% today under a barrage of negative news that would melt companies that have 100-year track records.  I have been meaning to do an update on Tesla but where to start?  How can I even bring readers unfamiliar with the story up to date?  I have started and stopped this article about three times, but now I am going to plow through and get something out.  If it is not entirely coherent and far from complete, my apologies.  If you want more, go to @teslacharts on Twitter as a starting point and you will discover a lot of really smart people who are, believe it or not, even more obsessed by the Tesla train wreck than I.

In the past I have limited myself to two issues.  The first is the outright fraud of the Tesla acquisition of SolarCity, another Musk company that was going down the drain until Tesla bailed it out.  The transaction appeared (even at the time) so transparently self-serving to Musk and his family that it just screamed fraud, and time has only made this clearer.  Musk sold the synergy-less acquisition to Tesla shareholders based on a solar shingle technology he portrayed as ready to go, but that still has not seen the light of day 2 years later.  In retrospect, it is crystal clear the solar shingle was a sham that was fraudulently hyped to make the deal go through.  This fire and forget approach to new product announcements has become very familiar at Tesla -- Musk scored extra subsidies from California with a battery swap technology he demonstrated one time and then has never been seen again, and Musk announced a new Semi truck and harvested a number of deposits for the vehicle and then has not even mentioned the product for months.  Since the acquisition, SolarCity new installations have fallen precipitously every quarter, demonstrating that Tesla had no real commitment to the enterprise, and this is only going to get worse as Musk announced that its last remaining sales channel is going to be closed.

The second Tesla issue I have tangled with is the strategic dead end that Tesla has reached, and the bizarre fact that a company in a capital intensive industry that is valued as a growth company has, over the last 12 months, virtually shut down R&D spending and now does less capital spending for its size than does even staid companies like Ford.  I won't cover all this ground again, I refer you to posts here and here-- If you are new to the Tesla story, start with these.   But in short, Musk made the fateful choice to take what was already destined to be an uphill climb for a new company to penetrate an extraordinarily capital intensive industry and made it an order of magnitude more capital intensive by his strategic decisions.  Specifically, Musk chose not only to start up car manufacturing from scratch, but to also build out his own sales and service network AND build out his own fueling network.  Kia was the last brand I can remember that penetrated the US market, and it only had to worry about investing in building cars -- it relied on third parties like Roger Penske and Exxon to build the sales, service, and fueling networks.  But Tesla is committed to building out all three.

This strategic decision really began to drag on the company in 2018.  Tesla's decision to do its own manufacturing -- in freaking California no less -- held back its growth as it spent years relearning auto manufacturing lessons already well-known to other players.  It has fallen behind in Model 3 production vs. its own stated goals and there is no apparent progress adding manufacturing capacity for a raft of announced but still theoretical products (semi, coupe, Model  crossover, pickup truck, revamped S&X).   A better approach might have been to contract for manufacturing like Apple does with the iPhone, especially since there seems to be a lot of excess capacity right now in Chinese auto production.  Even worse, as their fleet grew with the Model 3 ramp, Tesla was not able to invest fast enough to grow its sales, distribution, and service networks in proportion, leading to a lot of disgruntled customers that had bad delivery and servicing experiences.  The same is true for their charger network, where they have again not been able to keep up with investment and are now falling behind technologically as new entrants have faster charging times, times Tesla can't match without a major investment in upgrade of its network.  More manufacturing capacity, a better distribution network, more sales locations, more servicing capacity, more body shop capacity, more parts production capacity, more chargers and massive charger upgrades -- Tesla fell behind on ALL of these in 2018.

And then the really weird thing happened.  Sometimes growth companies fall behind when they grow to fast, but Tesla seemed to have stopped even trying to keep up with capital needs in the second half of 2018.  Their R&D fell, despite many promised new products that were a long way from delivery.  Their Capex levels fell to barely maintenance levels (what might be expected to just keep current plant running) and were reduced to levels as a percentage of sales that were lower than staid, traditional, non-growth auto makers.  Right when they really needed to make a capex push to make their strategy a reality, they stopped spending.

Tesla claimed, and claims to this day, that any slowdown is just the result of efficiency and responsible management.  But this is crazy.  Growth companies slow down and focus on profitability when the market is saturated and the growth phase is over.  Uber has not slowed down.  Even Amazon 20+ years in has not slowed down.  Slowing down is death for the stock price of a growth company, and Musk is -- if anything -- obsessively focused on the stock price.  Tesla is currently valued north of $60 billion. Without enormous growth expectations, a $20 billion valuation might be too high.  Added to this is the fact that after having the luxury EV market to itself for years, competition is finally coming from nearly every luxury care maker.  Tesla's 10-year moat is down to maybe 6 months.  It needs to be updating the S & X and rushing new products out ahead of competitors.  But they have almost given up on the S & X and Audi has beaten them to the market by at least a year and maybe two with a crossover model (the e-tron), a very popular format in the US right now.

And at first there does not appear to be any reason for this slowdown in spending.  Tesla has a stock that a dedicated group of fans gorge themselves on.  With a $60 billion valuation and a passionate fan base that thinks the company is still undervalued by at least a third, this company should be able to raise billions of capital easily.  They could theoretically raise $5 billion with less than 10% dilution -- Tesla almost dilutes itself that much every few years just from employee stock-based compensation.  Add its lofty valuation to what was reportedly $3.5 billion or so of cash on their balance sheet at the end of last year and consumer demand that the CEO describes as near-infinite, and this does not look like a company that should be slowing down.

How do we reconcile these facts  -- a near halt in growth investments despite lots of cash and a sky-high stock valuation?  Here are a few things going on under the surface:

• While Tesla had over $3 billion in cash, they also had over $2 billion in payables.  The company has a reputation of stretching payables to the absolute limit.  It may well be that the end of year cash number was the result of a lot of window dressing.  In fact, Tesla skeptics have looked at the interest they earned on their free cash in the fourth quarter and have argued that for this number to be as low as it was, Tesla's average cash balance must have been much lower than their end of year reported number.
• Savvy observers (of which I am not one) who know Wall Street argue that Tesla may well have either regulatory (e.g. SEC investigations) or practical (e.g. information they do not want to disclose in a prospectus) barriers to raising capital, and that the lack of a capital raise for many months can only mean that for some reason Tesla can't raise.
• Tesla just had to pay off nearly a billion dollars in convertible bonds when the stock price was not high enough to trigger the conversion
• Demand for Tesla cars in the US has fallen substantially in the first 2 months of this quarter.  Musk liked to portray the huge Model 3 sales ramp in 3Q18 and 4Q18 as the start of an S-curve, but now those quarters look more like a one-time bulge as Tesla blew through over 2 years in orders in just a few months.  Aggressive pull-forwards of demand by Tesla in the fourth quarter as well as the reduction in US and Dutch EV subsidies have also hurt.  [I have to add one note here just for color.  The Tesla fan boys have argued to me on Twitter that Musk has already explained this to their satisfaction -- that Tesla is diverting cars away from the US for their European Model 3 introduction.  This makes ZERO strategic sense.  What company ever enters a new market by giving up hard-won market share in their core market?  There is plenty of evidence that everyone who wants to buy a Tesla in the US is getting one with a very short lead time, implying this is a real demand drop and not Musk's typical supply-constraint story.]

A month or so ago I thought it very possible given these headwinds that Tesla may soon be facing a cash crunch if it cannot do an equity raise.  However, new events that have occurred over the last week convince me that this cash crush is almost a certainty.  There is no way I can explain Tesla's most recent actions as anything but a company desperately trying to stave off a near-term bankruptcy.  These actions include:

• In early March, Tesla's February sales numbers in the US were announced, and they were a disaster.  Within mere hours of this reveal, Musk teased an announcement (on Twitter, where else).  This event turned out to be a quasi-secret invite-only conference call involving what appeared to be hand-selected media members who had historically been generous to Tesla (only a later uproar by bulls and bears alike forced Musk to release a transcript. On the call Musk announced two things --
  1. Tesla would begin taking deposits for the long-awaited $35,000 Model 3 (though delivery dates were hard to pin down).  Musk had said not too long ago that Tesla was not able to make this car yet profitably, and he refused to discuss margins on the vehicle.  Skeptics like myself suspected that the car can't be made right now for a positive gross margin, and instead this was a back-door attempt to gain new financing via customer deposits.  A couple hundred thousand (theoretically) deposits of $2000 each could yield some real money for a cash-strapped company.  The only thing Musk would say about controlling costs on this product was #2:
  2. In a totally unexpected (even to most of Tesla employees and management) announcement, Musk said Tesla was closing its stores and going to an online-only sales model.  This would supposedly save 6% of the cost of the new cheaper Model 3's, ignoring of course that SG&A reductions do nothing to fix a zero or negative gross margin.  Everyone, including most especially Tesla store employees and maybe even the Tesla BOD, was stunned.  Here is a company whose US sales are going over a demand cliff and they respond by ... eliminating their stores and sales force?
• Simultaneously, Tesla has been announcing a series of price cuts on, worryingly, many of their highest margin products including the S and X and high-margin upgrades like paint and autopilot on the Model 3.  Almost no one can see how the company makes any sort of viable gross margin at these prices, and they have the look of desperation.  All these cuts did was aggravate buyers who had just paid the higher prices and who faced a suddenly lowered resale value for their car.
• Within days of the store closing announcement, the WSJ and others published stories about how Tesla was unlikely to see much savings from these closures as their leases all had expensive cancellation clauses that Tesla could still be on the hook for as much as $1.5+ billion.  Incredibly, this seemed to come as a surprise to Musk and helped reveal just how slapdash these announcements were.  Since then Tesla has announced that maybe some stores would stay open and maybe some sales people would not be fired but just have their bonus eliminated.  As I write this, no one really knows what Tesla is going to do, but to many observers this move looks more like what one does in a bankruptcy than in the normal course of growing a business (in fact, bankruptcy is the one time lease cancellation costs can sometimes be evaded).
• Tesla, furthering their management Abbot and Costello act, partially reversed their price cuts saying that prices would now rise a few percent, barely days after they were cut.  The net of the two announcements still result in vehicle prices substantially lower than in 4Q2018.
• In an incredibly bizarre move (and there is a pretty high, or low, bar with Tesla for saying something is truly bizarre), it was recently revealed that Tesla last November bought a trucking company, or really they bought a bunch of trucks, with stock.  Essentially, this is a $60 billion company with supposedly $3+ billion in cash and they are paying their suppliers in stock.  Oh, and by the way, remember when I said above that Tesla had already vertically integrated too much and could not afford their capital needs already?  Well, this is yet another silly vertical integration.  Tesla has no business being in the trucking business, a highly competitive business with a lot of incentives to offer good deals and great service for an incremental bit of demand from a growing company like Tesla.  My sense was always that there is plenty of 3rd party trucking capacity out there, but that truckers just did not like serving Tesla because Tesla pays its bills so slowly and acts so unpredictably and imperiously.
• Tesla continues to produce Model 3's near full volume (around 5500 a week, despite what the nutty Bloomberg model says) even given a fall in demand.  Tesla seems to be building inventory, and certainly the recent price cuts are not a sign they are supply constrained (as Musk continues to insist).  Tesla skeptics believe that Musk has signed a number of supplier deals where Tesla got rebates and price cuts in exchange for volume guarantees, and that Tesla is stuck over-producing cars or it will have to return a lot of money.  [update: @Paul91701736 who goes by Machine Planet on Twitter spends a lot of time observing and researching Model 3 production and says "there's one thing in this piece I can't agree with, a 5500/wk Model 3 production rate. I think ~4700 is the absolute max sustainable rate and it's been well below that most of the quarter"]
• Tesla is asking customers in Europe, as they did late in 4Q18 in the US, to pay Tesla the full price of the car even before they see it or schedule a delivery.  Frankly, I am staggered anyone would buy a car this way, especially with the fit and finish problems Tesla model 3 customers have found on delivery.
• Tesla added about $500 millon to its asset-back bank line of credit and continues to roll over some SolarCity debt.
• When it was obvious that the Model 3 announcement had not created enough deposit activity, Musk then announced they would introduce the long-awaited Model Y crossover, in a reveal set for Thursday afternoon March 14.

Tesla has admitted that it still has not even decided where to build the Model Y, much less started building the plant and tooling up for it.  Given that, the car HAS to be 18-24 months away.  So why reveal now?  Remember that Musk and Tesla have a history of using new product reveals as fund raising tools.  The fake solar shingle product got Tesla to buy SolarCity.  The fake battery change demonstration got Tesla millions in added subsidies from California.  The complete vaporware Tesla semi reveal gained Tesla millions in deposits from corporations that probably didn't expect to ever get the truck but wanted to virtue signal their green credentials (Tesla seldom mentions this product and has announced no plans for actually building it).  The announcement in April, 2016 of early reservations for a $35,000 Model 3 which turned out to be over 2 years ahead of it ever being available in volume occurred just ahead of a funding round.  I am sure experienced Tesla observers could list many more examples, but the point is that there is very good reason to believe that the Model Y reveal (and maybe a pickup reveal in the same way the coupe was thrown in on the semi reveal) is a cynical, desperate attempt by Tesla to raise some cash from consumer deposits.  My guess is that it will not work so well -- the recent $35,000 Model 3 announcement garnered few deposits and Tesla had disappointing deposit activity when they opened up Europe.  Surely folks have observed that putting down a deposit does not get one a car any faster, and just makes one an unsecured creditor of the company (and may even, as was the case recently, sign one up to pay a higher price than folks who come in only a few weeks later).

As an aside, you folks know that as a libertarian I do not advocate for a lot of extra regulation so take the following as a prediction rather than necessarily a recommendation.  Tesla has pioneered the deposit-taking, go-fund-me model for new car introductions, and I think that when this all blows up and the dust clears, one of the results will be tighter regulation of how companies handle deposits on their books.  I would expect the SEC to require better transparency on deposit numbers and that customer deposits be escrowed in some way and not co-mingled with general operating funds.  And while we are at it, I will recommend one regulatory / accounting change -- the ability of car companies to leave ZEV credits off their balance sheet entirely and use them like magic pixie dust out of the blue to spice up random quarters needs to end.  These are real assets and need to be disclosed on the books like real assets.

Disclosure:  I am short Tesla via long-dated puts.  Shorting Tesla seems to make a lot of sense but it can be dangerous and harrowing.  Yesterday we were looking at news of Elon Musk acting like a Mafia thug with whistleblowers and still dealing with the fallout of Tesla's rapidly changing and contradictory strategic announcements, and the stock was up 2%.  Be careful.