Coyote Blog

I am, perhaps surprisingly to many readers, NOT going to go on a rant about the Supreme Court's decision yesterday that states can collect sales tax on interstate sales over the Internet, at least I am not going to rant about taxing internet sales per se.  Realistically, it was never realistic to think the government would keep its hands off this piggy bank, especially as Internet sales have skyrocketed.  However, this decision creates absolutely enormous practical problems for small businesses and Congress needs to act quickly to mitigate some of these.

The problem is the management problem this presents, particularly for many small retailers, and I don't think most consumers understand this.  Sales taxes seem simple from the consumer point of view -- say your sales tax rate is 7%, the cash register collects 7% and it all seems to be handled automatically.  But even at your local store, things can get complicated.  Your food purchases may well be taxed at a different rate (perhaps even 0%) than your other purchases.  You probably don't notice, but if you go over the city limits into a neighboring town or unincorporated area, the rates may suddenly be different.

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.

So it's a hassle for my business, but a one time hassle when we open a new location.  Now imagine that you are a small retailer on the internet selling fruit cakes.  You don't go out and establish sales tax locations, in some sense the location comes to you.  John Smith wants to buy a fruitcake and has an address that says Thatcher, AZ, but in the rural world one can easily have a town's name in your address but live outside of the town  (we have a campground with a Grant, Alabama address that is well outside of the city and tax limits of Grant but the town fathers come after us every year or so trying to see why we are not collecting their sales tax).  What sales tax do I collect from this customer?  Is there even a tax on food in that location?  If there is, there might be separate rates (as in California, for example) for prepared vs. packaged food.  What kind of food is my fruitcake?

But it actually gets even worse.  Because now all I have done is collect some amount of tax.  That is the easy part!  The hard part is registering with all the sales tax authorities to collect and pay the tax.  Well, you say, I guess I have to grit my teeth and register 50 times, which I can tell you is a gigantic pain in the ass because every state manages the process differently.

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.

By the way, you might be thinking, "well, if I am a small business, I can just file with such and such authority in the months I have a sale there." Wrong.  Once you register and file once, you will be expected to file every time, even if they are zero reports.  The one source of relief is some states allow less frequent reporting.  It used to be there were states where I had low volume we filed once a year, but that seems to be a thing of the past.   Most states seem to have a minimum of quarterly reporting, no matter the volume.  Politicians want their money NOW (last sentence should be pronounced using Veruca Salt voice).

This is why businesses tend to have to sign up for very expensive sales tax management services.  But even that is not the end of difficulties, because registering for sales tax in an authority also forces one to register and pay other taxes and fees.  For example, Tennessee has another tax called the state and county business tax, which is essentially a revenue tax.  Even if you are an out of state company, you must file and pay this tax on any revenues.  If you sell in all of TN, that is one additional state registration and 95 different county registrations and 95 different county tax forms  (our company has to do about 8).  But wait, there is more!  Because a business also has to register with any of about 200+ cities in TN for payment of city business tax.  If you are selling all over TN, that is another 200+ registrations and 200+ annual reports (if this seems all very complex in TN, remember that TN has no income tax and note what I said earlier about the sales and business tax systems of states with no income tax).

I have written many times that regulation tends to benefit larger companies at the expense of smaller companies.  Who is more likely to be able to comply in this world I have described, Amazon or the fruitcake company?  Jeff Bezos is turning handsprings today because a) this kills a lot of his competition and b) to survive, many small venders will have to move to larger retailing platforms that can do some of the sales tax work, of which the largest and best is.... Amazon.

Congress needs to act.  It is going to have to be a compromise, because states are going to be putting a lot of pressure to let this situation stand because they want the money.  I would propose a national sales tax system on interstate retail sales that preempts any state sales taxes.  It will be hard to keep it from growing out of hand but it would be nice to establish a principal in law that the tax would be some sort of weighted average of the states' internal sales taxes.  The Feds would add a percent or two for themselves and there would be one registration for all -- as easy for me to do as it is for Bezos.  Yes, I know all the problems with this, but I don't think the status quo is tenable and I don't think Congress has the votes to go back to the old untaxed system, so this is the best we can expect.

Someone called one of our locations claiming to be the local utility company (they had the correct name, phone number and service address) said our power was going to be shut off that day for non-payment unless they were paid immediately over the phone.  Fortunately our managers hung up and called the utility main number and found out we were fully paid up and that this was a scam.

Here is the simplest protection for you in your personal and professional life: never give anything -- any information, any passwords, any numbers, any money -- to someone who calls you. If they claim to be the FBI or the IRS or the power company or whoever, you should hang up and if you are worried it might be real, look up their number and call them back. Sometimes a credit card company will call you with legitimate fraud alerts but I still never talk to them when they call me. I hang up and then call the number on the back of the card.

You guys know me, I am not calling for some new law or government program.  But I would like to see the telephone companies exercise a little bit of basic professionalism.  The last several spam marketing calls (50/50 it is either for toner or credit card processing) have had legitimate-looking caller IDs that have caused me to actually pick up the phone when I would have normally let it ring through.  This morning's call from a credit card processor showed up as "Pediatric Urology" in Phoenix.  Really?  I guess they are pissing on my time, but other than that I think this is BS.  I don't think it is too much to ask that the caller ID match the business name or individual who is paying for the phone line.  I have this problem even more on calls to my cell phone where spam businesses have somehow obtained caller IDs that are just for individual's names.

Postscript:  It is amazing to me, given the sheer volume of calls I get for merchant (credit card processing) services that there actually seems to be an expectation someone might actually say, "wow, I never ever thought of accepting credit cards, tell me how it works?"  I find this super hard to believe but it must happen or else people wouldn't be paying a lot of real money to make these calls.  So PLEASE, all you business people out there, do not buy things from cold callers.  I promise you can just google whatever they are selling and likely find a better deal online.

Also, if you are starting your own business, do not -- whatever you do -- put any personal phone in your state business registration files.  These are the files all these spammers mine for prospects.  I finally had to change my home phone number because I made this mistake and we could not stop getting 5 phone calls a day from toner and credit card processing sales people.

A while back Bernie Sanders proposed a plan for "government jobs for all" -- a guarantee that the government would hire you at $15 an hour plus benefits and medical care.  All a worker has to do is bother to show up each day to get paid.

The Saudis have done something similar for years.  And now that the program has been in place for a generation, no one in the country has the skills or motivation to do productive private work any more

Nobu’s challenge points to one of the biggest obstacles to Saudi Arabia’s grand economic makeover: How to put Saudis to work.

The architect of Saudi Arabia’s economic overhaul, Crown Prince Mohammed bin Salman, wants to rev up growth and create more opportunities for citizens. Companies, however, are struggling to meet the government’s demands to employ them.

For decades, expatriate workers from countries such as India and the Philippines helped sustain Saudi Arabia’s high living standards by doing jobs Saudis wouldn’t do in kitchens, at construction sites and behind store counters. The oil-rich monarchy endowed citizens with what were essentially jobs for life in the public sector, which means the labor force doesn’t always have the skills, and sometimes lacks the motivation, to fill private-sector jobs.

The pressure to meet the quotas has pushed companies to offer Saudis better salaries and shorter working hours. Some businesses, risking fines and visa troubles, hire Saudis who count on the registered workforce but just sit at home.  Abdulmohsen, an executive at a Saudi logistics company, estimated that half of the Saudis on his payroll are employees in name only.

Trump supporters are complaining that similar immigration actions that were essentially ignored by the press under Obama are now taking up half the nightly news broadcast under Trump.  As an aside, this is only partially true -- the Trump Administration has antagonized and worsened what was previously a bad, admittedly ignored, situation.  But my main reaction is this:  Well, no sh*t.  What about the major news outlets reporting Republican actions differently than Democratic actions surprises you in the least?  Seriously, at what point do you accept this as totally expected behavior and plan around it?

If I were CEO of, say, Exxon-Mobil (XOM), and I had my PR guy come into the room after a PR debacle and tell me that the press was not being fair to oil companies, that Apple (say) did the same things, I would retort the same thing I did above:  "Well, no sh*t.  What planet have you been living on?  The media has hated us and attempted to score points off us since 1972.  That is a FACT and it is your job to help this company navigate given this FACT."  I would fire the guy immediately.  His complaint would merely demonstrate he was a terrible choice to do communications for us.

I don't understand why the Republican rank and file keep enabling this behavior from their party.  I am not going to tell them to support different policies, though I disagree with them.  But why do they keep accepting that these constant PR disasters are not the fault of their leadership, and that somehow the only way out is some sort of not-going-to-happen remaking of the media?  Conservatives like to think of themselves as hard-headed realists, but good God there is sure a lot of whining going on about stuff that ain't going to change any time soon.

The City of San Francisco seems to have odd litter preferences.  After a huge program to ban and/or charge for plastic bags to get them out of the litter stream ( a program that for all my whining about it seems to have achieved that goal pretty well), the city seems to have substituted used syringes:

City Health Director Barbara Garcia estimated in 2016 that there were 22,000 intravenous drug users in San Francisco - around one for every 38.9 residents, while the city hands out roughly 400,000 needles per month.

Of the 400,000 needles distributed monthly, San Francisco receives around 246,000 back - meaning that there are roughly 150,000 discarded needles floating around each month - or nearly 2 million per year, according to Curbed.

I am pretty sure if they were to divert some of their plastic bag tax revenue to paying 5 cents per needle on return (or about $20,000 a month) that the needles would disappear from the streets in a matter of days.  Not sure if this would create some problems with safety or new crime incentives, but I would l think it would be worth a try.

Republicans that used to lament the imperial presidency under Obama sure seem to be OK with Trump unilaterally levying tens of billions of dollars of new taxes on American consumers.  I presume since no one has seriously questioned his power to do so that he must have this power.  Yet another example in the shameful history of Congress delegating its powers to the Administration.

The following is a thought experiment:

Modern SJW's argue that it is impossible for one gender or ethnicity or sexual preference to understand another.  Taking that as a launching point, there appears to be a crisis in psychology that can only be fixed by government intervention. 

Begin with a basic fact:  Between 3 and 4 times more men in western nations, including the United States, commit suicide than women.  This is clearly a public health crisis of the highest magnitude(1).  

Unfortunately, it is getting harder and harder for these men to get the help they need.  Most psychologists today, and based on current graduation rates, almost all the psychologists of the future are women.  In fact, in 2016 22.4% -- less than one quarter! -- of all psychology graduates were men.  Men with existential crises in their lives are not going to be helped by someone woman-splaining the world to them.  How can any man be helped by psychologists who can't understand their most fundamental problems(2)?

Take this web page at the top of the google search on mental health and gender.   90% of the page covers only women's issues!  There is not even a single mention of suicide or the disproportionate male suicide crisis.  This is just further proof that the strong imbalance of the psychology profession to female providers inhibits any focus on or recognition of male issues.  You can see from this site that men are not even seeking help --"Women are more likely to have been treated for a mental health problem than men (29% compared to 17%)" -- almost certainly because men cannot find sympathetic male psychological help(3).

As a first step, the government needs to step in and find ways to eliminate the barriers that young men are facing in entering the psychology profession.(4)

OK, I have no idea if this is a credible effort but other than the fact that it is pointing out a unique male issue, I feel like this is at least as viable as any other SJW article I have read.  You will note the four tricks I used in the article that are common in many other more serious articles of the same sort

(1)  I assert this a public health crisis, but compared to what?  Are the deaths a lot or a little compared to other preventable causes.  Are the numbers rising or falling?  And how preventable are suicides?

(2) This is the underlying assumption in the article, that a psychologist of one gender cannot well serve a patient of another gender.  Is that really true?  Is there any science on this?  I have had physicians of both genders and have not really noticed a difference.  Of the psychological interventions I am aware of in friends and family, the most successful was a female helping a male.

(3) This is twisting a fact around the opposite of how most people would interpret it.  Most folks would interpret this as women have more mental health issues over their life that they need help with, a finding that seems to be pretty consistent in the scientific literature as well.  The clever conspiracy builder, though, can use almost any fact in their favor.

(4) Why do we assume that a gender imbalance is the result of barriers and discrimination, rather than just preferences? Typically, the media treats such imbalances asymmetrically.  Professions that skew female such as health care or psychology or education are treated as skewed due to preferences.  Professions that skew male such as software programing are treated as skewed due to discrimination.

I often read articles that clarify my thinking on certain issues but this one helped clarify my thinking on why I come in conflict with people over a broad range of issues.  In-Groups, Out-Groups, and the IDW by Jacob Falkovich.  I will add that my one turn-off in this article is the focus on the so-called intellectual dark web or IDW.   I am suspicious of faddish-sounding things, particularly in the intellectual world.  At this point I am not even sure the IDW is even a real thing (many on whom this title has been slapped reject it).  What does seem to be real is that there is a budding resistance to post-modernism and intersectionality coming from folks it would be hard to label as traditional Conservatives (though Progressives and SJWs still try to label every one of their opponents as alt-right white nationalists).  I will accept IDW as a temporary and imperfect shorthand for this resistance.

Anyway, here is a sample from the article but I found the whole thing illuminating

In a thorough analysis of the Harris-Klein controversy, John Nerst suggests that what is actually at issue is whether the discussion of the racial IQ gap is a matter of science or of politics. Harris sees Murray as a scientist whose arguments and conclusions fall well within the academic consensus of genetic and cognitive science. Klein sees Murray as a ‘policy entrepreneur’ who advocates for reprehensible conservative policies. The notion that racial differences are genetic (and, in Klein’s understanding, therefore immutable), Klein argues, has historically been used to support destructive policies of bigotry and discrimination.

This isn’t merely a difference in emphasis. Underlying this debate is a divergence in modes of thought so wide that the two men were left practically at cross-purposes.

Harris is a scientist by training, and scientists depend on what rationality researcher Keith Stanovich¹ calls “cognitive decoupling.” Decoupling separates an idea from context and personal experience and considers it in the abstract. It is the approach used in the scientific method, when performing thought experiments, and when generalizing principles from individual examples. In decoupling thought, arguments follow one another according to the formal rules of deductive logic.

The contrary mode of thinking sees every argument embedded in a particular context. The context of an idea includes its associations, implications, and the motivations and identities of those who advance it.

Note that this is NOT an article about IQ differences, it is merely used as a convenient example to illustrate differences in two different ways of approaching the problem.  But I did think the author did something fun towards the end of the piece -- the author seems to argue that the tribal positions on this genetics issue(and I presume on other things) is almost arbitrary by running a thought experiment of reversing the tribal positions:

...one might re-imagine liberals embracing genetic differences and supporting their position in the following way:

IQ differences are purely genetic, a matter of luck for which neither the individual nor his community bears any responsibility. We should be generous with welfare and assistance towards those who lost out in the genetic lottery, just as we are towards the sick and disabled. Conservatives who argue that the IQ differences are ‘man-made’ are looking to shift the blame to the victims and excuse their own bigotry towards the least privileged.

And the conservative response:

IQ differences are purely environmental. According to evidence, the main environmental difference among blacks and whites is culture. We therefore need to replace the multicultural free-for-all that is hurting American children with traditional American family values, and limit immigration from countries with low-IQ cultures. We need to promote monogamy by cutting support for single mothers. We should probably outlaw hip-hop music too, just in case rap is what lowers black IQ.

This may look outlandish to you but it does not to me.  When I grew up in the 1970's, Republicans considered themselves a pro-business party (not to be confused with free market) and Democrats were much more dominated with labor and union concerns.  In those days, Republicans were much more pro-immigration, because it brought in cheap labor for its business supporters, and Democrats were much more anti-immigration, because it created low-wage competition for its union supporters.  I have seen the tribes reverse positions on a number of issues in my lifetime.

Brigham and Women's Hospital in Boston, the teaching hospital for Harvard Medical School, is going to remove pictures of medical luminaries from the walls of its auditorium because they are mostly all white guys.  Now, I don't really get freaked out about this the way some folks seem to.  I can totally understand why a University might not want to give the message to an incoming class that they somehow need to look like those pictures to be successful.  But I am exhausted with the notion that the way to handle uncomfortable things in society or in history is to hide them from students.  This seems the opposite of education.  I have had several great teachers in my life who would use uncomfortable facts as a springboard for learning.

I can't necessarily match the teaching greats, but here is how I might handle it.  Imagine a speech to an incoming group of Harvard Medical Students in this auditorium.

Welcome!  And congratulations!  All of you have followed very different paths to get here, but the one common denominator is that every one of you has the demonstrated intellectual and personal excellence required to meet the rigorous standards of this institution.  As I look around today, I see an incredible diversity of people -- a diversity of genders and ethnicities and home countries and family incomes but who all share in common the desire to help mankind through medicine.

If you look around the room you will see a bunch of paintings of medical luminaries who all made great contributions to medicine and this institution, and in the process helped save lives and make the world a better place.  But the odds are that you will also notice that the men -- and they are all men -- may not look like you.  There is a reason for that.

The issue is not that these 30 men should not be on this wall -- they all made important contributions to the study of medicine and everything you study over the next 4 years will build in part on their work.  The issue is not with these pictures, but the ones that are missing.  For every one of these pictures there should be at least one more of a woman or a person of color.  But those pictures are missing.  Even worse, the contributions of those people are missing.  They are missing because our world, our country, and even this institution made it difficult or impossible for brilliant people who were not white and male to reach the place where you are all sitting.  Medicine -- and our society -- are far poorer for this loss.

There are those who have suggested that we take down these pictures and hide this legacy from you.  These people have good intentions and want to avoid demotivating people who might look at these paintings and assume success will be impossible for them because they look different.  But I say that these pictures-- and all the ones that are missing -- should be your motivation.  All of you who might have been left out of this institution in the past are here now.  Look around the room, the world is truly changing!  This is your chance to make those advances in medicine that we lost in the past because we so short-sightedly excluded so many outstanding people.

Imagine you are back at this school 50 years from now with your grandchild.  You have spent the day dodging Harvard's frequent entreaties to donate money and you duck into this auditorium for shelter.  You point up to the walls and tell your grandchild, "do you see, about halfway along that wall where all the faces go from looking the same to being quite varied -- that was when your grandma was here at school."

Over the weekend I read John Carreyrou's book Bad Blood, which is a narrative of the fraud at blood analyzer startup Theranos that Mr. Carrreyrou broke in the WSJ.  To save me summarizing the story, here is the Amazon description:

 In Bad Blood, the Wall Street Journal’s John Carreyrou takes us through the step-by-step history of Theranos, a Silicon Valley startup that became almost mythical, in no small part due to its young, charismatic founder Elizabeth Holmes. In fact, Theranos was mythical for a different reason, because the technological promise it was founded upon—that vital health information could be gleaned from a small drop of blood using handheld devices—was a lie. Carreyrou tracks the experiences of former employees to craft the fascinating story of a company run under a strict code of secrecy, a place where leadership was constantly throwing up smoke screens and making promises that it could not keep. Meanwhile, investors kept pouring in money, turning Elizabeth Holmes into a temporary billionaire. As companies like Walgreens and Safeway strike deals with Theranos, and as even the army tries to get in on the Theranos promise (there’s a brief cameo by James “Mad Dog” Mattis), the plot thickens and the proverbial noose grows tighter. Although I knew how the story ended, I found myself reading this book compulsively

In short, I really enjoyed the book and found it hard to put down.  Carreyrou has made it an interesting narrative, that gets bogged down only slightly by the fact that there are just so many people's names that pass through the narrative, an unavoidable problem given the huge employee turnover at Theranos.  There is a meta-narrative that repeats over and over:  new employee shows up full of passion, new employee starts seeing bad stuff, new employee reports bad stuff to visionary founder, visionary founder fires employee on the spot, employee gets harassed for months and years by Theranos lawyers.

I will warn you that a book like this was always going to be catnip for me.  I love business craziness and disaster stories (e.g. Barbarians at the Gate and the Devil's Candy).  Possibly this is just schadenfreude, or possibly it was from my personal brush with another one (I worked for Jeff Skilling briefly at McKinsey & Co. on the Enron study).  But I think many will enjoy it, if for no other reasons that while Skilling at Enron or Johnson at RJR were not well known to the average person, Elizabeth Holmes was a household name, almost a pop culture figure.  She was  on the cover of every magazine and on every talk show.  She was both admired and envied, both as a young female billionaire and as someone who had a real vision to help humanity.  How did she go so far off the rails?

I followed this story originally in the pages of Carreyrou's WSJ articles, and as it unfolded I was asking, like most everyone, could this be true?  As he continued to report, it became steadily clearer that there was real fraud involved.  So I wanted to read the book and see where the fraud started.  I assumed that the central mystery of the book would be when that fateful step over the line occured.

But it turned out that Holmes was going over the line almost from the very beginning.  The real mystery became:  when and how is someone finally going to blow the whistle on this?  And also, given that I knew the whole thing doesn't start to unravel until 2016 or so, how is it going to take that long for this to come out?  Part of the answer is the insane security and non-disclosures put in place in addition to borderline-unethical legal pressure brought on potential whistleblowers by lawyers like David Boies.  But there are other causes as well, including:

• People wanted her vision to be true.  My wife is a borderline diabetic who has to give a lot of blood -- she was very passionate about this technology.
• Companies like Walgreens operated from a fear of missing out.  They had a lot of clues there were problems, but if they didn't pursue it, what if it really did work and their competitors did the deal instead?
• The oddest cause of all (and one Carreyrou does not really dwell on) was that rich older men fell for Holmes hard.  Hardened, seasoned business people time and again fell under her sway and followed her almost like a cult leader and helped protect her from accountability.  The list is like a who's who:  Larry Ellison, Steven Burd (CEO of Safeway), Rupert Murdoch, David Bois, James Mattis, George Schultz, Henry Kissinger -- the list goes on and on.  She had the highest power board I have ever seen at any company ever and she completely dominated them.  On the other hand, I don't think there is a single young female in the story who fell for her BS for more than a few months.

One other note that I think is worth mentioning:  Rupert Murdoch gets a lot of cr*p for being the poster child of destructive corporatization of media.  In this story, he was the single largest investor in Theranos with $125 million of his money in the company.  He was one of the older men who fell totally for Holmes.  But when Holmes came to him several times asking him to shut down an out of control reporter at Murdoch-owned WSJ, Murdoch said no, despite the fact that this reporting would eventually make Murdoch's $125 million investment worthless.

Two years ago, I wrote about the acquisition of SolarCity by Tesla.  I thought this represented near-criminal self-dealing at the time and there has been little since to convince me otherwise.  As I wrote then:

This is honestly one of the weirdest acquisition proposals I have seen in a long time:  Elon Musk's Tesla offers to buy Elon Musk's Solar City.

This makes zero business sense to me.    This is from the press release:

We would be the world’s only vertically integrated energy company offering end-to-end clean energy products to our customers. This would start with the car that you drive and the energy that you use to charge it, and would extend to how everything else in your home or business is powered. With your Model S, Model X, or Model 3, your solar panel system, and your Powerwall all in place, you would be able to deploy and consume energy in the most efficient and sustainable way possible, lowering your costs and minimizing your dependence on fossil fuels and the grid.

I am sure there are probably some hippy-dippy green types that nod their head and say that this is an amazing idea, but any business person is going to say this is madness.  It makes no more sense than to say GM should buy an oil production company.  These companies reach customers through different channels, they have completely different sales models, and people buy their products at completely different times and have no need to integrate these two purchases.  It is possible there may be some overlap in customers (virtue-signalling rich people) but you could get at this by having some joint marketing agreements, you don't need an acquisition.  Besides, probably the last thing that people's solar panels will ever be used for is charging cars, since cars tend to charge in the garage at night when solar isn't producing.

One might argue that some of the technologies are the same, and I suppose some of the battery and electricity management tech overlaps.  But again, a simple sourcing agreement or a battery JV would likely be sufficient.

So what do these companies share?

I went on to discuss several possible reasons for the deal but settled on this one as the best explanation:

I have no inside information here, but this is the best hypothesis I can put together for this deal.  SolarCity has huge cash needs to continue to grow at the same time its operating margins are shrinking (or getting more negative).  They are having trouble finding investors to provide the cash.  But hey!  Our Chairman Elon Musk is also Chairman of this other company called Tesla whom investors line up to invest in.  Maybe Tesla can be our investor!

The reason I call this two drunks propping each other up is that Tesla also is also burning cash like crazy.  It is OK for now as long as it has access to the capital markets, but if it suddenly lost that, Tesla would survive less than 6 months on what it has on hand.  Remember, SolarCity was a golden child just 3 years ago, just like Tesla is today.  Or if you really don't believe that high-flying companies that depend on access to the capital markets can go belly up in the snap of a finger when they lose their luster with investors, I have one word for you:  Enron.

Essentially, I saw the SolarCity deal as a bailout of Musk's and his friends' and family's investments in SolarCity by Musk-controlled Tesla.  Nothing that has happened since has convinced me this is wrong.  The most prominent evidence has been the dog that never barks -- SolarCity, or Tesla Energy as it is called, is almost never mentioned in conference calls and investor communications by Tesla any more -- certainly the rooftop business is not.  The only thing that ever seems to get a mention are a few big standby battery installations in Australia.   Turns out there was a reason (via Seeking Alpha):

This was a dying business when Tesla bought it an insiders all knew it.

Disclosure:  I tend to short Tesla when it reaches the 350/360 level and cover when it drops into the 200's.

Update:  Here is a great timeline of the whole sorry history of the SolarCity acquisition by Tesla.  This paints an even worse picture than I was aware of.

Trump:  I'm going to raise taxes on the consumers and businesses in the US that buy things from overseas.

China: Oh yeah?  I will show you, I will raise taxes on my citizens even more!

From the vaults:  Our sister publication in China complains about Chinese tariffs.  Note the date, way back in 2006.  If history doesn't repeat itself, it at least rhymes.

Milton Friedman once wrote, "If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand."

Today Simon Constable writes that Venezuela "which has the largest oil reserves in the world, is now considering the idea of importing the stuff."

Long time readers will know that several years ago I became convinced that Princeton was discriminating against Asian-Americans in their admissions process, a process I had participated in for over a decade.  Princeton, as far as I am concerned, can bake its academic cake for whoever they want, but I in turn don't have to participate in it so I quit.  I found the disconnect between Princeton's pious words on diversity and the reality of their actions to be distasteful, and I really really did not like having to toe the party line when Asian interviewees asked me if I thought they had an equal chance of admission with other students.

More data on this issue is just becoming public as various briefs that have been filed in a lawsuit representing Asian-American students against Harvard are being released.   I thought this bit from the Wall Street Journal looks pretty ugly.

Asian-American applicants have higher academic and extracurricular scores than any other racial group, as well as the highest overall rating from alumni interviewers, according to the plaintiffs. However, Harvard’s admissions officers assign Asian-Americans the lowest score of any racial group on the personal rating, which includes a subjective assessment of character traits such as whether the student has a “positive personality,” the plaintiffs said.

Do you think they mark them down as "inscrutable?"  Remember, this is from an institution that criticizes pretty much everyone else on the planet for propagating racial stereotypes.

I am going to show you this chart from the New York Times and you tell me the lede:

If your first reaction was something like "wow, the gender gap in favor of girls in English simply dwarfs any gender gap that exists in favor of boys in math," you had the same reaction as I did.  All I could think was that all this discussion of getting more girls in STEM is a fine aspiration, but my God, boys in English are a dumpster fire.

I saw the chart standalone like this before I flipped to the source New York Times article and read more.  And, incredibly, this is the title of the article: "Where Boys Outperform Girls in Math:  Rich, White and Suburban Districts."  That's right, the authors look at this chart and all they want to talk about is the small area in the lower right quadrant of the chart, the only place where boys out-perform girls (and even there the maximum boy advantage perhaps a third of the girl advantage across the board in English).  This is bizarre beyond belief.

I wrote the other day in a sort of toss-off conclusion that is looking more accurate today:

Look, I have no doubt that one could easily put together a book about all the ways the public education system fails girls because I think the public education system in many parts of this country fails EVERYONE.  But we seem to keep obsessively questioning whether we are doing enough for girls in education when the problem seems to be boys....

I am not an expert on why this is.   Shifting success norms from competition to cooperation, elimination of historic outlets for non-academic males like vocational programs, and huge amounts of money and counseling resources all dedicated to girls probably play a part.  But the frustrating thing is you almost never see a discussion of this topic.  Anyone who does try to address it is immediately pigeon-holed as some alt-right male rights extremist and defenestrated from the Overton Window.

Update:  Had "boys" and "girls" swapped in the third paragraph.  Thanks for those who pointed it out.  As one reader noted, I need to find a female to help me edit I guess.

Based on a Tyler Cowen pointer (who else), I thought this Twitter thread on how the Internet was changing sex work was really interesting.  This in particular caught my eye:

And now let's get to a third point: the internet has changed the economics of porn by gutting the industry through piracy, which means 3) there's increasing amounts of overlap between porn performers and escorts.

She makes this observation as part of a larger point that the Internet is breaking down some of the opposition to sex work (in addition to making it safer).  This would be a welcome change.  Sex work should be legal, and it has always been a weird thing to me that one of the stronger opponents of legalization has been parts of the keep-your-laws-off-my-body feminist community.

Anyway, what I found interesting was how parallel this is to the modern music business.  Piracy and streaming enabled by the Internet have killed the profits of the vast majority of the music recording business, meaning that top artists make a lot of their money in other ways, particularly from live performances.  In this business model, the published music is merely an advertisement and brand-building to encourage people to pay for the live performance.  If you consider pornography to be parallel to recorded music, and the escort business as the live performance, then the business models look surprisingly similar.

Over the last several years, there have been several proposals to split California into more than one state (I know what you are thinking:  Good God, more Californias?)  There was a proposal last year to split it into 6 states.  This election, there is a proposal on the ballot to split it into 3 states.  I am not sure what the entire process would be, but as a minimum either proposal would have to be approved by Congress.  For that latter to happen, the 3 state plan is probably more likely to get approved than the 6 state plan because it is an odd number.  Seriously.

For the rest of us, the main effect of a California split is that its current citizens would get more US Senators.  Each state gets 2 Senators so California would go from 2 to 6 Senators in a three-state proposal and 2 to 12 Senators in a 6-state proposal.  This also means that California would get some extra Electoral College votes, since a state's votes is the sum of its Representatives and Senators.

To some extent, this debate will be a flashback to the mid-19th Century when statehood decisions were made based on the north-south balance in the Senate.   This time around, it will be about shifting, or perhaps more accurately not shifting, the Republican-Democrat balance.  Right now CA is perceived by all to be +2 Senate seats for the Democrats for most of the foreseeable future.  The problem with even-number splits such as 2 or 4 or 6 states from CA is that they are almost guaranteed to shift the CA contribution away from +2D.  Take the two state solution.  If they were split north and south, you would likely get two blue states and the +2D from CA in the Senate would become +4D.  Republicans would barf.  If you split the state east-west, you might be able to create a red state and a blue state such that CA would shift from +2D to neutral, an effective gain for R's.  Democrats would hate this.  Neither party in Congress is going to agree on a solution here.  There is no way to gerrymander the thing without some party making a gain.  This is generally true for all even number state solutions.

Odd number state solutions could also be problematic, but they could also work depending on how the lines are drawn (making this probably the most watched gerrymander in US history).  A three state solution that creates two blue states and a red state would keep CA's total effect on the Senate as +2D.  I am not sure any split would clear Congress but this is probably the only possibility that might do so.   Two coastal states and one inland state would probably achieve this result, but I believe the current proposal is for three states split north to south, so a large heavily blue coastal city or two is in each state, which could push the thing into being +6D which the Senate would never buy short of a Democratic majority and elimination of the filibuster (which for a generation of +4 votes in the Senate they might consider).

All of this glosses over huge local problems in CA itself, like

• How do you split up state debts, such as Calpers obligations and assets
• Will current state officeholders (e.g. the governor and AG) who are incredibly powerful and have historically used these positions as springboards for national office (e.g. Kamala Harris, Jerry Brown, Ronald Reagan) accept a huge reduction in their power and budget
• If there is a red state created, how will blue urban areas put into this red state react?  (the opposite issue already exists with red rural areas already used to living in a blue state).

I was randomly browsing my blog history when I encountered a post from over 11 years ago when it was necessary to spend 1800+ words explaining why steel could still fail in the Twin Towers even when it did not actually melt.

Of late, Rosie [O'Donnell] has joined the "truthers," using her show to flog the notion that the WTC was brought down in a government-planned controlled demolition....

Rosie, as others have, made a point of observing that jet fuel does not burn hot enough to melt steel, and therefore the fire in the main towers could not have caused the structure to yield and collapse.  This is absurd.  It is a kindergartener's level of science.  It is ignorant of a reality that anyone who has had even one course in structural engineering or metallurgy will understand.  The argument made that "other buildings have burned and not collapsed" is only marginally more sophisticated, sort of equivalent to saying that seeing an iceberg melts proves global warming.  ...

Here is the reality that most 19-year-old engineering students understand:  Steel loses its strength rapidly with temperature, losing nearly all of its structural strength by 1000 degrees F, well below its melting point but also well below the temperature of burning jet fuel.

And on and on from there.  Seriously,  I know its hard to believe this was even necessary, but it was a serious charge by some of our intellectual betters in the entertainment industry.  Actually, it brings me a certain comfort in encountering this again -- maybe our public discourse is not really getting substantially stupider.  Maybe it has always been that way.

Look, I am not mocking you if you don't know the material properties of steel and how they change with temperature.   Odds are, in your jobs, you do not need to know anything about it.  What bothers me are the people who know nothing about these topics who speak with such certainty.  In some ways it seems to go past Dunning-Krueger,   People making these absolute pronouncements not only don't know anything about the topic, but many have actively avoided ever finding themselves in a classroom where the topic (or more accurately the mathematical and scientific foundations of the topic) might have been discussed.

It's not like I am totally immune to this.   Here are a few topics that I may have blogged about a few times years and years ago but now I won't touch because I know I don't understand them:

• Central banking and monetary policy
• Almost anything having to do with chemistry, including ocean acidification (or more accurately, reduced ocean alkalinity).  I even had an A in Organic Chemistry but it did not stick at all.
• Literary criticism, except to say what I liked and I didn't like
• Anything about certain performance-based crafts, like singing and acting, except to say which performances I did and did not enjoy
• Ice hockey, horse racing, and soccer (which doesn't mean I don't enjoy watching them)
• 80% of what Tyler Cowen writes about
• Anything about music post-1985
• Anything on cooking or food
• Absolutely anything on wine

To the last point, I got invited to a wine tasting the other day.  Everyone was saying they tasted chicory or boysenberry or a hint of diatomaceous earth or whatever and I tasted .. wine.  Honestly I felt like a blind person sitting in on a discussion of the color wheel.  But I resist the temptation to scream that it is all just the emperor's new clothes -- I am sure the people around me can honestly taste differences that I can't.  I know I can taste differences in bourbon they cannot taste.  Good vodkas on the other hand, are a different matter.  Some day I am going to do a blind vodka tasting for my vodka-snob friends and see if they really can taste the difference.

Postscript:  I used to love the show Connections by James Burke.  He would start with something like the Defenestration of Prague and show a series of connections between it and, say, the invention of the telephone.  Perhaps you can see why I found it entertaining since I began a post about the structural strength of steel at different temperatures and ended it with whether good vodkas really taste different.

There are a lot of James Burke TV episodes on Youtube and I recommend them all.  Connections is recommended of course but I actually think his best series was season 1 of the Day the Universe Changed.  I believe this is episode 1.

The other day the indispensable Mark Perry wrote:

....women have earned a majority of bachelor’s degrees for the last 36 years starting in 1982. Not shown here, but women previously earned a majority of associate’s degrees starting in 1978 and a majority of master’s degrees starting in 1981. By 2006, women earned a majority of doctoral degrees and the “takeover” of higher education by women was complete for degrees at all levels! But instead of declaring “victory” and moving on, many women are still claiming “victim status” in higher education with the need for special gender preferences in the form of funding, scholarships, centers, commissions, fellowships, awards, programs, and initiatives that are only available for women, or are primarily for women.

I have annotated his chart (shown below) to amplify his last sentence.

One of the seminal books on the topic of girls in education was "Failing at Fairness" by Myra P Sadker and published in 1994.  The Google Books summary of the book is as follows:

Failing at Fairness, the result of two decades of research, shows how gender bias makes it impossible for girls to receive an education equal to that given to boys.

• Girls' learning problems are not identified as often as boys' are
• Boys receive more of their teachers' attention
• Girls start school testing higher in every academic subject, yet graduate from high school scoring 50 points lower than boys on the SAT

The book was very influential.  I know it sat on my feminist wife's night table for quite a while.  But note the publication date on Mark Perry's chart above.  For kids in high school when that book was published, a fair median date for their college graduation would be 6 years later, or around the year 2000.  It's fair to estimate that girls in high school at the time Sadker was writing were going to be 33% more likely to get a college degree than the boys in the same classes.   Anyone who had read that book alone and nothing else on the topic would have called you a liar for predicting that.

Look, I have no doubt that one could easily put together a book about all the ways the public education system fails girls because I think the public education system in many parts of this country fails EVERYONE.  But we seem to keep obsessively questioning whether we are doing enough for girls in education when the problem seems to be boys.

The New York Times actually talked about boys falling behind in education a few years ago, and had this telling chart about ways in which boys lagged in education.  The article forced on poor boys, but note that boys of all socioeconomic classes lagged.

And this is before we even get to the most disturbing metrics about boys and girls, such as youth crime.  While girls have closed the gender gap in crime somewhat, boys are still 10 times more likely than girls to be arrested for a homicide, and boys are more than twice as likely to be arrested for any sort of crime than girls (source).  Remember that last mass shooter who was female?  Neither do I.

I am not an expert on why this is.   Shifting success norms from competition to cooperation, elimination of historic outlets for non-academic males like vocational programs, and huge amounts of money and counseling resources all dedicated to girls probably play a part.  But the frustrating thing is you almost never see a discussion of this topic.  Anyone who does try to address it is immediately pigeon-holed as some alt-right male rights extremist and defenestrated from the Overton Window.

I do not know how to fix public discourse in this country.  In particular, I have no idea how to repair our growing tribalism.  But I do have one small suggestion for better Internet discourse, which is:  If you are going to comment on an article, or email about it to the author, could you actually read it first, and not just react to a 240-character tweet about it that was crafted by the author's intellectual opponent?

Thank you.

It has been a while since I blogged on my model railroad but unfortunately real life intervened and cruelly prevented me from working on my hobby for a while.  I have been making progress recently and thought I would post what I have been working on.  Believe it or not, there are one or two readers who actually write me for updates.

One thing I can do even when I am busy is make progress hand building turnouts.  These are some small #5 turnouts built with code 40 rail (perfect for eyesight destruction).  No way I could to this without the fabulous Fast Tracks construction jigs.

I built the main line out of code 55 flex track and am hand-building all the sidings and branch lines with code 40.  This lets me get the main line up and running fast while still being able to hand build some track, often the track closest to the front of the layout.  Below is the code 55 flex track main line after some test painting.  The one thing I do not like about flex track is that it always looks so uniform.  Even on good mainline track the rail and ties vary a lot in color, so I spray paint a base coat and use brushes to hand paint individual tiles and rail sections different colors to get some variation.

The switch in the foreground below is the first code 40 hand built track I have put on the layout.  It is a bit of a pain to join code 55 to code 40, so I wanted to experiment some.  Eventually I inserted a code 55 rail joiner in the mainline track, and the crushed the other end flat and soldered the code 40 rail to the top.  With some trial and error, this got both the rail tops at the same height.  I really love the look of real wood ties and the color variation you get naturally, which I accentuate some.

The biggest recent progress was I painted the back drop.  Since this is Phoenix I wanted some low haze but no clouds, so I used the tried and true method of blue at the top of the background and white and the bottom and blending them in between.  Came out pretty well, though this picture does not really do it justice because the lighting is not quite right yet.  I need to try it with a better camera.   The biggest problem I had was a classic Phoenix problem where the paint was drying too fast.  One of the hardest problems is that the Phoenix sky on certain days is so deep, deep blue that it looks unrealistic, even in real life, so I did not use the actual color for the top of sky that I see from my front yard, I backed it down a bit.

Oh, you can also see that I have put in the lighting.  As an experiment I used led light strings.  This avoids the directional shadow problem but I am not totally convinced I am happy with it yet.  I also have fluorescent lights installed for night effects, though I still struggle with the OBA / fluorescent paper problem here.  Anyone who has a source for matte (not gloss) OBA-free photo paper that is not too think (I often have to bend and shape the paper for projects) can certainly email me.   Paper models like these are more popular in the UK than in the US, but I have come to really like them in certain applications.  They just don't look good in night scenes when brick walls glow under black light.

In the plan I have locations vaguely blocked out for industries but I had not yet tested the sites against actual buildings I have in inventory or would like to put in.  Below I have a half-built grain elevator I was testing locations for.

That's it for now.  I am starting my big building project which is a scale refinery.  We actually don't have a refinery in Phoenix (closest is Yuma I think) but I worked in one years ago and love the look of them, especially lighted at night, so dammit I am going to have one.

The Union Pacific Railroad is attempting to restore and run a 4-8-8-4 Big Boy locomotive next year.  Seeing live steam locomotives run is a rare but fabulous spectacle, but most of what is still running is WAY smaller than this locomotive they are restoring.  I am not sure most people have a sense of scale for these beasts.  I chose the picture below because it has people in them for scale.

This business in San Diego was probably just minding its own business, smug in the confidence that Internet companies like Amazon were not going to threaten a local rental business when, bam:

Bikes and scooters suddenly show up literally just sitting there on every corner, ready to be rented via smartphone app for prices starting at a dollar an hour.  Interestingly, even in sunny healthy California, I saw more than 100 people riding rental scooters and about 1 riding a rental bike.  This was not just tourists -- though it was certainly popular with visitors -- but I saw many young locals riding the scooters downtown to work.  In the morning they piled up in front of office buildings (from which they would presumably disperse at the end of day to apartment buildings).

Below is another business that could be in trouble, charging $7 (rather than $1 on the street bikes) an hour for a rental and requiring the bike be returned to a defined location, rather than dropped anywhere (I see these in many cities -- I wonder how much investment the government has in these or if it is a concession where all the investment was private).

Of course, in the long run this may work out better from an operational standpoint because it seems to take a lot less labor.  Re-positioning scooters and picking them up and dropping them off for recharge struck me as labor intensive and costly (particularly in California).  I am not sure how it is sustainable at the rates that are charged.  Fortunately, that is not my problem and I tried both the bikes and the scooters and enjoyed both.  Despite my doubts about their profitability, I hope they are making a fortune because it seems to be a fun a popular service and I would like to see it last.

The International House of Pancakes announced the other day that they are changing their name to International House of Burgers, or IHOb.   I am 99% certain that this is just a marketing gimmick, a way to get social media buzz, after which they will "as a result of public pressure" go back to the old name.  A sort of intentional version of what Coke did years ago by accident with New Coke.

So far, I would judge it to be successful.  They were talked about on several national radio shows that I listen to (on sports talk radio, no less) and got a day's worth of media coverage (and presumably another day's worth when they change back).  This is a LOT of free advertising for a brand I have heard absolutely nothing about for years (except from my 21-year-old daughter who still makes me take her there from time to time for funny face pancakes.)

Brand strategy has really evolved a lot from when I was in B-school.  In the 1990's my wife was a brand manager at Frito-Lay and brand management at the time seemed incredibly conservative.  There were very defined, tightly-spaced rails that circumscribed what you could do with a brand.  But that is so boring it gets nowhere on social media.  "Fritos! They are... uh... everything they always have been."  This IHOP gimmick (and Budweiser's temporarily changing its name to America) demonstrate a lot less risk-aversion with core brands in a social media era where one has to be outrageous to get attention.

Postscript:  I was in Santa Monica the other day and saw something where they had a really lame, forgettable tag line for the city.  I wanted to help them with some catchier phrases.  Like, "Santa Monica:  World's Nicest Homeless Shelter" or "Santa Monica:  Watch Out For That Scooter!" or "Santa Monica:  You Want HOW MUCH for Rent??"