Coyote Blog

I really thought this article (editorial? letter?) by Donna Brazille in Politico was fascinating.  First, it is not that often that partisans of either flavor air their internal dirty laundry in public.  And second, it is a pretty interesting story.  Apparently Obama left the party deeply in debt (that is probably not unusual after a campaign, since politicians do the same thing with public budgets when they actually hold office).  Debbie Wasserman-Schultz "had outsourced a lot of the management of the party and had not been the greatest at fundraising" and thus was doing little to pay down the debt.   Eventually, Wasserman-Schultz and a few other party leaders turned to the Clinton campaign to bail them out, which they did -- over a year before the convention when Clinton became the actual Democratic nominee -- in exchange for an agreement that:

Hillary would control the party’s finances, strategy, and all the money raised. Her campaign had the right of refusal of who would be the party communications director, and it would make final decisions on all the other staff. The DNC also was required to consult with the campaign about all other staffing, budgeting, data, analytics, and mailings.

Apparently Wasserman-Schulz could not be reached for comment in her current location under the bus.

My relatively snarky post on hedge fund fees and passive management got a lot of response, including a few of challenging emails from friends and acquaintances.  So I wanted to cover a few followups here.

One of the interesting features of passive investment management is that it doesn't work if everyone does it.  I vaguely remember there is some name for this in the game theory world but I can't for the life of me remember.  Anyway, passive investment is based on the theory that the market for financial products is relatively transparent and efficient.  While one stock will certainly perform better than another, it is almost impossible (or at least really expensive) in a mostly-efficient market for a regular investor, or even an average fund manager, to parse this out.  As a  result, high fees or expenses one might incur to find these opportunities generally don't pay for themselves, and it is better to just invest in a broad basket of securities and accept the average market return.

But note that this is predicated on the assumption that someone, somewhere is actively managing.  Someone must be looking for good stocks and bad stocks and buying the former and selling the latter.  Without these folks actively managing, it would not be an efficient market.  [I am reminded at this point of the old joke about a man walking down the street with an economist.  The economist steps right over a $100 bill on the sidewalk without stopping.  The man asks the economist, "why didn't you stop and pick up that money?" and the economist answers, "in an efficient market it can't really be there."]

I remember a while back reading economic research about shopping.  What percentage of customers have to be active price-shoppers to make a market efficient?  I personally don't price shop for the small stuff.  If I need a bunch of cheap bulk stuff, I just run to Wal-Mart or Costco and buy it with confidence I am getting a pretty good price.  But why can I do that?  Because I trust these large corporations to honor their promise for low prices?  Hah!  No way.  What I trust is that there are people who clip coupons and price every dang item to the penny, and it is these folks who keep Costco and Walmart honest.  Government interventionists like to talk about the free rider problem all the time, but most all of us are free riders on these hard core shoppers.

The same is true with us passive investors.   I like to get snarky about the fees certain active investors charge, but I am still dependent on their work.  And I don't particularly doubt that there are hedge funds and private equity firms that make consistently above market returns, but I do think they are a minority.  I would equate it to max-contract players in the NBA.  No one doubts Lebron James merits a max contract -- any of the teams in the NBA would sign that deal in five seconds.  But a max deal for, say, Chandler Parsons?  Joakim Noah?  The problem with hedge funds is that the few of these folks who merit the two and twenty max contract have very likely been closed to new investors for years, in the same way it is impossible to get LeBron James to play for Memphis.  It is frustrating for me to see public and private institutions chasing yield and continuing to pay 2 and 20 to folks with an unproven algorithm and a marketing plan.  If I am going to pay 2 and 20, its more likely to be to someone in private equity or an LBO fund who is doing more than stock picking.  That's because I do think that stocks are generally well-valued on the market based on their current management, investment plans, culture, etc.  But they may contain opportunities for smart people who can come in and, for example, apply different management and culture and strategy to the people and assets.  A box that is half Kale and half candy corns might not sell for a good price because no one wants the combination, so value can be created splitting it up.

A couple of other thoughts that came up in discussions since yesterday:

• I am willing to believe that passive investing looks so good vis a vis active investing because central banks have inflated assets and compressed volatility.  If all the boats are rising with the tide of state actions that are raising the tide, then one is less likely to be fussy about which boat he is on.  What's the point of value investing when the market treats stocks as commodities?  But I can certainly see that in markets like the late 70's or pre-market-boom early 80's that stock pickers might have had more room to differentiate themselves.
• I am also willing to concede that passive investing may turn out to be a terrible trend for corporate governance.  If all your shareholders are just holding your stock as part of a basket of 500 stocks, who is going to hold you accountable?  It is very awkward for a Vanguard agitate for changes in a company, even when they might be the largest single shareholder.  Also, ironically, passive investing may be opening the door for single lone wolf activist investors to impose their will on companies, sometimes to the other shareholders' detriment.  If one person with 5% cares a lot and the other 95% are passive, that one person might be able to raise a lot of hell.

As a final note, I am a screaming hypocrite on the whole passive investing thing, since with most of my net worth I am the ultimate in active investors.  I have most of my savings in one company, the one I run.

In retrospect, this is a pretty amazing cover from 2014.  They even had the MVP right.

I will admit to some bias, having grown up in Houston, but I have always loved that striped Astros uniform.

Game 5 was the most entertaining baseball game I ever saw, but probably not the best.  The best probably would have to have things like pitching and defense too.  The best game I ever saw was probably game 7 between the Yankees and the Diamondbacks back in 2001.

From the WSJ:

Some $333 billion moved into all U.S.-listed ETFs [exchange traded funds] in 2017 through September, a figure that eclipses last year’s $288 billion all-time high with three months yet to be tallied, according to Morningstar.

Of that amount, 73% has gone into ETFs that boast expense ratios less than or equal to 0.2%, or $20 per $10,000 invested, according to Morningstar data through September. Such low-fee funds account for just 15% of the more than 2,000 exchange-traded funds and notes on the market....

The market for low-cost funds, long dominated by BlackRock, Vanguard Group and State Street Global Advisors, is getting increasingly crowded as other players attempt to muscle in. State Street last month slashed management fees on more than a dozen of its funds. Franklin Templeton Investments, a unit of Franklin Resources, this week announced 16 ultra-low-cost foreign stock ETFs that will undercut the management fees of nearly every rival product currently on the market.

“It’s become insanely competitive,” said Ben Johnson, head of ETF research at Morningstar.” Mr. Johnson said that advisers and other intermediaries are feeling the pressure to emphasize the lowest prices available. “This has upped the ante for providers of products that have really been commoditized.”

If you are a typical investor, you too are likely investing in lower-cost funds, and for most of us that is a great choice.  But large public pension funds are still the #1 largest investors in hedge funds, whose absurd 2 and 20 (2% of the assets invested, 20% of the gains, 0% of the losses) fee schedules still exist, incredibly, despite their systematic under-performance of the market.  I have always wondered how these fees don't get competed down.  But beset by under-funding, public pension funds are so desperate for yield to try to close the gap that they will still fall for the hedge fund pitch.  Which is why your local public teacher pension fund probably helped build a number of the mansions in Greenwich.  You do have to sort of respect folks who figured out a financial model for profiting in direct proportion to government fecklessness.  Talk about hitting the mother load!

Like many folks, including Mark Perry, I would tend to agree with the following statements

• Past performance is not a very good indicator of likely future performance
• One should generally eschew managed funds in favor of low-cost index funds

However, I think a lot of folks who believe these same things are applying confirmation bias when looking at the data in a recent WSJ story on Morningstar.  Morningstar analyzes mutual funds and rates them based on their past 1/3/5/10-years performance in relation to other funds of the same type.  Funds in the upper quintile of past performance get 5 stars, the next quintile gets 4 stars, etc.

Morningstar is sort of coy about whether the ratings are supposed to have predictive value.  They will say that of course they only measure past performance, but there would be no way to sell these ratings to folks for millions of dollars (as they do) without there being some implication the ratings were at least partially indicative of future performance.

So the WSJ did something interesting -- they went back 10 years and took all the 5 star funds and looked at how they have done since (as measured by Morningstar itself with its star ratings).  So how many 5-star funds ten years ago actually had 5-star performance over the subsequent years, and so on.  And it turns out that a lot of the 5-star funds have not performed very well.  This is a good reminder to us all.

BUT.  Look at their own data:

Yes, the 5-star funds from 10 years ago only average 3 today.   Everything regresses towards the mean, as we random walk folks might expect.

But the 5-star funds did better than the 4, which did better than the 3, which did better than the 2, which did better than the 1.  This actually understates the difference, because many of the lowest performing funds in the lower star categories closed in this 10 year period, so are not in the final metrics, which likely raises the scores of some of the lower buckets because they dropped out (59% of the 1-star funds closed or merged in this period while only 22% of the 5-star funds did so).

This is actually -- to someone who doesn't really buy into the whole stock-picking thing -- a pretty impressive achievement.  I challenge you to take stocks or bonds or mutual funds of roughly the same type and divide them into 5 buckets, rank the buckets by expected performance, and actually have this ranking hold for 10 years.

I know that many of my readers have more skepticism than I about open immigration.  We will leave that for another day.  But I am not sure how any American who prides themselves on American exceptionalism and our leading role in the world promoting freedom wouldn't cringe at seeing these pictures.  What a terrible image they will make running for thousands of unbroken miles.

I am not sure why we are going through all this engineering effort when we could just be borrowing from the experts:

Postscript:  Congrats to our local entrants from the Phoenix area firm that submitted by far t

he ugliest design.

Update:  Just to confirm, based on the comments:  Yes, I do not see an ethical difference between stopping people from coming in and stopping them from going out.    Others of you do see a difference, and we will have to disagree.  I don't think the Berlin Wall would have shifted from evil to OK had it been built by the West Germans instead to keep communists bottled up on their side.  I know folks love to use the home analogy, that it is OK to fence folks out of your home but a federal crime to fence them in.  But I have always thought equating a whole country to private property is a bad analogy.  Basically, such an assumption rests on socialist community property ownership assumptions.   A Mexican man wants to drive a car he owns, using gas he buys along the highway, along a road paid for with the gas taxes he just paid, to take a job at my company I freely offer him and rent an apartment I freely lease to him.  Voting, government benefits, holding office -- we don't necessarily have an obligation to offer any of those things, at least initially.  But I don't think it is ethical to erect this wall in his path to exercising free exchange.

My last phone was a Droid Turbo (or some variant of that).  It was a tank (and btw the battery was so large it would last a week).  It was also butt-ugly, but you could drop that thing from an airplane and it would probably keep working.  I never bothered with a case.

My new phone is a Galaxy S8.  It is probably, looks-wise, the acme of phone design right now and the polar opposite in attractiveness from the Droid Turbo.  But it is literally almost all glass.  The front is glass.  The back is glass.  The sides, dues to the curved bezel, are mostly glass.  If you drop this thing you are going to hit -- wait for it -- glass.  I was changing cases on it and dropped it from a height of no more than three feet and both the front and back glass shattered.  So you MUST put this expensive phone in a relatively bulky case.  You can have a slim case that may or may not protect the screen and sort of retains some of the feel of the curved bezel or a bulky case that probably will protect the phone but makes the entire phone design moot.

My point is that companies seem to be designing phones for how good they look and feel in the Verizon store**, rather than how they will actually look bundled up in a large case in real life.  Once you provide reasonable life-protection for the S8, all its expensive design features are covered up.

One thing I have learned during this experience is that the vast majority of the millennials who rate cell phones on review sites like Engadget are wildly over-influenced by aesthetics.  For example they all seem to downgrade phones that have larger bezels and metal rather than glass packaging, irregardless of reliability. I am still looking for a site that publishes a good list of drop test results and ratings.  I don't think I will buy another phone without seeing these results (I was considering a pixel 2 until I saw is horrible drop results).  I would also like to see someone who grades phone aesthetics in the sort of cases we are all going to put on them.  Honestly if I had time I would probably start my own review site focused on real-world use, emphasizing characteristics like reliability, repair costs, drop test results, and battery life.

** For a long, long, long time, TV manufacturers ruined TV pictures so they would look better in a store.  Every TV you could buy, at least in the pre-LCD era, had super-high color temperatures shifted way up into the blues.  The colors looked like crap in a dark room watching a movie, but the picture appeared brighter in the TV showroom.  Back in the day, one of the first things one would do with a good TV if one was a movie snob was to get the TV color calibrated or look for a TV that had a color temperature setting.

A few days ago I wrote:

Speech codes are written by and for the privileged.  They are written by the oppressor to shut up the oppressed.  George Wallace did not need the First Amendment, black kids trying to go to the University of Alabama needed it.  So the progressive opposition to free speech (e.g BLM shouting down the ACLU over free speech) is either 1) completely misguided, as the oppressed need these protections the most or 2) an acknowledgement that progressives and their allies are now the privileged, that they are the ones in power, and that they wish to use speech codes as they have always been used, to shut up those not in power.  In our broader society the situation is probably #1 but on university campuses we may have evolved to situation #2.

Example of #1 (via Overlawyered)

A woman has been questioned by police and could face a hate crime prosecution after she waved a banner at Belfast’s Pride parade reading “Fuck the DUP”.

In a case that could have consequences for free speech and the right to offend across the UK, the Police Service of Northern Ireland (PSNI) says it will pass a file to the region’s public prosecution service (PPS) after Ellie Evans, 24, held up the placard at the August parade to protest against the party’s policies on gay marriage.

The investigation was prompted by a complaint from DUP politician Jim Wells, who told the Guardian that the slogan constituted “incitement to hatred and potential public disorder”.

Example of #2

A few months later, I received a letter from two Reed students of colour that was being distributed among alumni like a piece of samizdat. The students didn’t reveal their names for fear of being ostracised, but they described a campus that had been overtaken by militants who routinely shamed as racists anyone who didn’t agree with them. One of those singled out had been a freshman named Hunter Dillman who had been branded a racist after asking the organiser of a Latina student group an innocent question. He was ultimately hounded off campus.

The students said the Facebook shaming became even more virulent as the year went on. When another white student apologised to Amanda for being unable to attend a particular protest because he was behind on his schoolwork, Amanda accused him of being the kind of white guy who would ‘laugh at a lynching’. The students felt Amanda’s charge was so outrageous that they decided to take a big step: they would all ‘like’ the student’s apology on Facebook, even though they might be called racists as well. ‘As students of colour we felt that we had to do it’, one of them later told me. ‘It would have been 100 times worse if somebody white liked it.’

 

On the Dell web site, at the head of a no-export agreement I had to sign:

The U.S. government views exporting as a privilege, not a right.

Of course, my home state of Arizona considers every commercial transaction to be a privilege, not a right.

I am working with Dell to create a starting computer image for laptops I buy from them that will have all our computers set up the way we want them to be right out of the factory.  This will save an hour or so of work for me on each computer.

This works really well EXCEPT for Microsoft's heavy-handed intervention.   As part of the setup process before I create the default image, I switch the windows default browser to Chrome and the default app for opening pdf files to Adobe Reader.  No matter what we do, when the new computer boots up with this image, windows switches the default browser and PDF app to Microsoft Edge (apparently via 'sysprep".)  I might be able to live with this for the browser, but Edge is defective in opening PDF files, specifically it does not allow pdf's with form fields to be saved in a way that retains the form entry.  My users will never be able to figure out how to reset this themselves so now I have to figure out how to write batch files so I can override the Microsoft override after it runs.  Less intrusive but still irritating is the fact that Microsoft also adds back all their sales spam I deleted, including their "get office" and "try skype" apps.

As an aside, it is really sort of funny nowadays to put Chrome or Firefox on a new Microsoft computer.   If you try to make these other browsers the default, you get this message that says something like "wouldn't you like to try Edge, it is way better than our old browser that we tried for years and years to make you use and then abandoned."  I am paraphrasing of course, but that is the gist.

Well, it appears the common Conservative critique that many university race and gender programs have really low standards has a new supporter:  The University of North Carolina.  UNC successfully argued that it was not giving its athletes special treatment in the African-American studies department -- they had low standards for all students in that department.

A years-long probe into widespread academic fraud in North Carolina’s athletic program, including its storied basketball powerhouse, reached an unexpected end on Friday when the NCAA announced it would not issue major sanctions against the school.

The prolonged investigation focused on a major at the university, African and Afro-American Studies, where about 1,500 athletes over 18 years took advantage to make good grades with little to no work involved. The university’s defense did not focus on the legitimacy of the courses—the NCAA said “generally, the facts of this case are not in dispute.”

UNC instead argued that any problem was university wide, not limited to the athletic department, because the courses were available to all students. On Friday, the NCAA accepted the university’s explanation. .

“A Division I Committee on Infractions hearing panel could not conclude that the University of North Carolina violated NCAA academic rules when it made available deficient Department of African and Afro-American Studies ‘paper courses’ to the general student body, including student-athletes,” the NCAA said Friday.

Greg Sankey, the head of the Southeastern Conference who was the chief hearing officer on the panel, said athletes “likely benefited from the so-called ‘paper courses’” but that “the information available in the record did not establish that the courses were solely created, offered and maintained as an orchestrated effort to benefit student-athletes.”

A reader sent me a link to this critique, sort of, of free speech in the Daily Princetonian.  I say "sort of" because I thought the thinking and logic of the article was pretty muddled, so much so that I am not even totally sure what point they are trying to make, exactly, though it clearly is meant as a critique of Conservatives defending free speech.   Frankly I was pretty depressed that a Princeton philosophy major couldn't write in such a way as to make even their thesis clear.

Anyway, the comments are closed and I still feel enough of a connection to Princeton that I wanted to at least try to engage the students, so I wrote this back:

I didn't find your Daily Princetonian article of 9/25 particularly compelling, in part because you don't engage with defining an alternate regime if you toss out free speech.  "we don't need to hear any more form group x or y" is a fine policy for setting up your personal Twitter block list, but how does it work in a democracy?  Everyone assumes when they advocate for such controls that they and their fellow believers will be the ones controlling, but do you really believe that?  After the last election?  What if a President Lindsey Graham (god forbid) were to take your rules advocating for getting rid of hate speech and define hate speech as advocating for abortion rights?  The ACLU didn't famously defend the speech rights of the American Nazi party because it liked Nazis -- it defended them because they were justifiably afraid that the precedent of speech limitation might someday be used to restrict speech far more dear to them.

This is why I think Progressives are making a huge mistake in opposing free speech, on their own terms.

Speech codes are written by and for the privileged.  They are written by the oppressor to shut up the oppressed.  George Wallace did not need the First Amendment, black kids trying to go to the University of Alabama needed it.  So the progressive opposition to free speech (e.g BLM shouting down the ACLU over free speech) is either 1) completely misguided, as the oppressed need these protections the most or 2) an acknowledgement that progresives and their allies are now the privileged, that they are the ones in power, and that they wish to use speech codes as they have always been used, to shut up those not in power.  In our broader society the situation is probably #1 but on university campuses we may have evolved to situation #2.

The folks who wrote the first amendment were thinking about this dynamic.  Had they instead decided to write a speech code, it likely would not have been good.  It might well have banned the criticism of slavery, for example, if Jefferson and his Virginians had anything to say about it.  But they didn't create a speech code, thank god.  In fact, I am trying to think of any time in history I would have been comfortable with the ruling elite locking down the then-current norms of their society into a speech code, and I can't think of one.  What gives you confidence, vs. the evidence of all history, that you can do so today with good results?

I like reading Zero Hedge, though their laudable cynicism about government and financial markets sometimes edges into conspiracy theory.

Anyway, I wanted to highlight something in a post there today about BLS data.  Various writers at the site have claimed for years that government economic data is being manipulated.  I am not sure I buy it -- I distrust government a lot but am not sure their employees could sustain such a fraud over months and years.  And besides, once you manipulate data one time to juice some metric, you have to keep doing it or the metric just reverses the next month.   Corporations that play special quarter-end inventory games to increase reported sales learn this very quickly.  Where there are apparent errors, I am much more willing to assume incompetence than conspiracy.

The example this week is from the BLS payrolls data, and I will quote from the article and show their chart:

Another way of showing the July to August data:

• Goods-Producing Weekly Earnings declined -0.8% from $1,118.68 to $1,109.92
• Private Service-Providing Weekly Earnings declined -0.1% from $868.80 to $868.18
• And yet, Total Private Hourly Earnings rose 0.2% from $907.82 to %909.19

What the above shows is, in a word, impossible: one can not have the two subcomponents of a sum-total decline, while the total increases. The math does not work.

Certainly this is an interesting catch and if I were producing the data I would take these observations as a reason to check my work.  But the author is wrong to say that this is "impossible".  The reason is that these are not, as he says, two sub-components of a sum. They are two sub-components of a weighted average.  Total private average weekly earnings is going to be the goods producing weekly average times number of goods producing hours plus service producing weekly average times the number of service producing hours all over the total combined hours.

From this I hope you can see that even if the both sub averages go down, the total average can go up if the weights change.  Specifically, the total average can still go up if there is a mix shift from service providing to goods producing hours, since the average weekly wages of the latter are much higher than the former.  I will confess it would have to be a pretty big jump in mix.  The percent goods producing hours would have to rise from 15.6% to almost 17%, which strikes me as a very large jump for one month.  So I am not claiming this is what happened, but people miss the mix changes all the time.  I had to explain it constantly back in my corporate days.   Another example here.

1.  BLM highlights a real problem and creates a pretty decent plan for addressing that problem

2.  BLM totally abandons their reasonable plan and concentrates on acting as a virtue signalling vehicle

3.  BLM completely loses their minds by antagonizing a natural ally and opposing important minority rights protections

An ACLU free speech event was shut down at @williamandmary. The reason? The ACLU's stance on the First Amendment. https://t.co/vUEWIyduJA

— FIRE (@TheFIREorg) October 4, 2017

A few days ago I said I did not understand this anti-free-speech position well enough to pass an ideological Touring test.  Several commenters took a pretty good shot at making the argument for it from the perspective of the oppressor-oppressed political axis.  Let me, though, explain why I think the BLM argument does not work on their own terms.

The key thing to understand is this:  Speech codes are written by and for the privileged.  They are written by the oppressor to shut up the oppressed.  George Wallace did not need the First Amendment, black kids trying to go to the University of Alabama needed it.  So the BLM opposition to free speech is either 1) completely misguided, as the oppressed need these protections the most or 2) an acknowledgement that they and their allies are now the privileged, they are the ones in power, and they wish to use speech codes as they have always been used, to shut up those not in power.  In broader society the situation is probably #1 but on University campuses we may have evolved to situation #2.

I know the title of this post will come as a surprise to virtually no one.  I gave up on Craigslist years ago.  However, I had no idea how bad it has become.  My contractor had some left over materials.  My wife and I said to just drop it off at Habitat for Humanity but the contractor said they thought I could sell some of it for real money.  So the contractor listed it on Craigslist.  I so far have gotten 8 responses, and all 8 have turned out to be scams.  They are all variations of this theme:

i really appreciate your quick response to my text. I will be buying
the item from you, kindly withdraw the advert from C.LIST and
considered it sold. My husband will be overnight the payment asap but
he will be payingwith a certified check from his Bank and it will
deliver to you via United Parcel Service (UPS), so I'll need you to
provide me with the following information to facilitate the mailing of
the check... And am offering additional $50 with the original price to
have this asap. Name to be on the payment......Address to mail the check to.....
Cell phone # to contact you ......Final Asking price....

I will make arrangements for the pick up as soon as you have your
check clear, due to my work frame and my Kids, I will not be able to
come with the cash and pick it up myself , so my husband will mail the
check and have someone pick up the item after the check clear.,
Reference to your CL post am completely satisfied with it and the
payment will be deliver within 24hours.

Any reply will yield bot or script responses that make little sense.  For example I said:

Ok, I now believe this to be fake as I have gotten the same response word for word with the 50 dollars offer from multiple people.  This sale is cancelled.

The response was:

Thanks , I got the Details and the payment will be sent out tomorrow
and as soon as it sent out i will get back to you, Please keep the
other buyer off and the payment will get to you asap and the item will
be pick up after you have the payment

Apparently bots and Asian click factories send a trolling response to every sale on Craigslist nowadays.   I left a telephone number only in the ad (a burner cell phone thank goodness) and in turn I got urges to immediately email them back.  And then this script with small variations 8 times, but always with the certified check thing, the offer of $50, and an urge to take down the ad immediately.  Apparently the check is fake but you learn this only after you have shipped the goods.  Sites like this urge face to face meetings in cash, but I have little desire to meet Craigslist readers face to face, which is confirmed by the advice in this article to "meet the buyer in a police station" lol.  Might as well post the advice never to use craigslist.

If it has not already been written, this is the epitaph in my mind for Craigslist.  Possible moral of this story:  You can't build a trust-based system just by trusting people.  The lesson from places like Amazon and ebay are "trust but verify".

Update:  From commenters, part of our mistake seems to be to have let a third party put up the add because then we lose out on some of the internal Craigslist communication avenues that provide some protection.  A number feel like Craigslist is still a useful place to transact.  I will add that in addition to 8 cashiers check scammers I also got one paypal scammer later in the evening making contact.  Zero legitimate contacts to date.

I pride myself on being able, generally, to craft arguments on various issues along any of Arnold Kling's three axes of political discourse.  But I can't come up with an argument for why college students (likely Progressives on the oppressor-oppressed axis) would be legitimately afraid of the beach ball (via Maggies Farm).  My libertarian axis explanation of course is that having found that the "those guys' speech scares us" approach has been successful at shutting down speech of their opponents in the past, they are rationally pursuing a proven winning strategy.  But what is the Progressive argument here?

In general, the whole Russia Facebook ad purchase story has been a huge yawner.  In an election where Hillary Clinton and her supporting PACs spent $1.2 billion and Trump spent about half that, are we really concerned about the impact of $100,000 in ad spend on Facebook?  Has there been anyone other than Russia and the Koch Brothers who the media could seriously write stories about manipulating an election by spending 0.0055% of the total advertising in the election? If that 0.0055% really turned the election, please send me the name of their ad agency.

The really interesting part of this story is that absolutely no one has said anything about that $100,000 actually having been spent on Trump.  People talk about the story as if they obviously were for Trump, but perhaps tellingly no one has actually confirmed this.  Certainly if you had asked me to guess in June of 2016 who Russia would have been making ads for, I would not have assumed Trump rather than Hillary was a sure bet.  And then there is this today from CNN

At least one of the Facebook ads bought by Russians during the 2016 presidential campaign referenced Black Lives Matter and was specifically targeted to reach audiences in Ferguson, Missouri and Baltimore, sources with knowledge of the ads told CNN.

Ferguson and Baltimore had gained widespread attention for the large and violent protests over police shootings of black men. The decision to target the ad in those two cities offers the first look at how accounts linked to the Russian government-affiliated troll farm known as the Internet Research Agency used geographically targeted advertising to sow political chaos in the United States, the sources said.

Hmmm.  I guess the apple does not fall far from the tree.  In the Cold War this is exactly the kind of thing the Soviets would have funded.  Though given how tribalized politics are I am not sure that spending money to target a political tribe to reinforce them in their already strongly-held beliefs is a super-productive way to spend money.  More to follow I am sure.

I have asked this question before:

Taking the government's current size and tax base as a given, is there a segment of the progressive community that gets uncomfortable with the proportion of these resources that are channeled into government employee hands rather than into actual services for the public?

I don't think this is an unfair question.  People ask lots of unfair questions in politics that try to impose the questioner's assumptions and worldview on the respondent (You want open immigration?  Don't you care about terrorism?  You don't want a $15 minimum wage?  Don't you care about the poor?)  But I am honestly trying to ask this of Progressives from the Progressive worldview -- Increasingly privileged government workers, who typically make more in pay in benefits for less work than the rest of us, are claiming for themselves so many of the resources of the government that services and programs Progressives favor are being cut back.  In the Progressive oppressor-oppressed model, how does $100,000 pensions for government workers get prioritized over homeless shelters?

Here is another example:

We have written frequently over the past couple of weeks about the disastrous public pension funds in Kentucky that are anywhere from $42 - $84 billion underfunded, depending on which discount rate you feel inclined to use. As we've argued before, these pensions, like the ones in Illinois and other states, are so hopelessly underfunded that they haven't a prayer of ever again being made whole.

That said, logic and math have never before stopped pissed off teachers and/or clueless legislators from throwing good money after bad in an effort to 'kick the can down the road' on their pension crises. As such, it should come as no surprise at all that the Lexington Herald Leader reported today that Kentucky's 365,000 teachers and other public employees are now demanding that taxpayers contribute a staggering $5.4 billion to their insolvent ponzi schemes over the next two years alone. To put that number in perspective, $5.4 billion is roughly $3,200 for each household in the state of Kentucky and 25% of the state's entire budget over a two-year period.

A lot of people on Twitter get freaked out when they see football players kneeling for the national anthem, or detect obscure micro-agressions in some online statement.  When I venture onto Twitter, which I am still not sure is good for my mental health, I get freaked out by this:

Electric motors are the unsung hero of clean energy - the latest are 97% efficient, vs. 45% for internal combustion. https://t.co/p1DjeMf6bL

— Eric Schmidt (@ericschmidt) September 21, 2017

My initial response on Twitter was "Of course they are if you leave out the efficiency of converting fuel to electricity".  I will explain this response more in this post.

It would be impossible to say that Eric Schmidt is not a smart guy or lacks technical training.  I'd like to think that he would quickly understand his error and say that he would have said it better when he has 280 characters.  But soooo many people make this mistake, including the folks who write the electric vehicle MPGe standards for the government, that it is worth explaining why Mr. Schmidt's statement, as written, is silly.

Let's first look at what the terms here mean.

• When we say that electric motors are 97% efficient, we mean that the actual physical work produced per unit of time is 97% of the electrical power used by the motor, which equals the current flowing to the motor times its voltage.
• When we say that the internal combustion engine is 45% efficient, we mean that the physical work we get out of the engine is 45% of the heat liberated from burning its fuel.

By the way, both these efficiency numbers are the top end of current technology running at an ideal speed and percentage load.  In real life, efficiencies of both are going to be much lower.  Of the two numbers, the efficiency number for internal combustion is probably the most generous -- for non-diesel engines in most cars I would be surprised if the actual efficiency was much higher than half this figure.  Even average electric motors will still be in the 80's.

Here is the problem with what he tweeted

The problem with Schmidt's statement on its face is that he is comparing apples and oranges -- he has left out the efficiency in actually producing the electricity.  And for the vast, vast majority of the country, the marginal fuel -- the fuel providing the electricity for the next increment of load -- is going to be natural gas or coal.  His numbers leave out that conversion step, so let's add it in.

Actual power plants, depending on their age and use, have a wide range of efficiency numbers.  For example, a big combined cycle plan is more efficient that a gas turbine, but a gas turbine is useful because it can be started and stopped really quickly to react to changes in load.  Schmidt used leading-edge efficiency numbers so I will do the same.  For a coal plant the best numbers are in the high forties.  For a gas plant, this can reach into the 50's (this site says 60% but that is the highest I have ever seen).  We will take 50% as a reasonable number for a very very efficient power plant.  Power plants, by the way, since they tend to run constantly at ideal speeds and loads can get much closer to their ideal efficiency in real life than can, say, internal combustion engines.

After the electricity is produced, we have to take into account line and transformer losses (and in the case of electric cars the battery charging losses).  This obviously varies a lot but I have always used a figure of 10% losses so a 90% efficiency number.

Taking these numbers, let's convert the 97% efficiency number for electric motors to an efficiency number all the way back to the fuel so it is apples to apples with internal combustion.  We take 97% times 90% transmission efficiency times 50% electricity production efficiency equals 43.6%.  This is actually less than his 45% figure.  By his own numbers, the electric motor is worse, though I think in reality with realistic efficiency numbers rather than best-possible numbers the electric motor would look better.   The hard step where one is really fighting the laws of thermodynamics is the conversion of heat to work or electricity.  So it is amazing that a tiny power plant in your car can even be in the ballpark of giant optimized multi-stage power plants.

Here is why electric motor efficiency is almost irrelevant to getting rid of fossil fuels

Very efficient electric motors are necessary to moving to a non-fossil fuel economy, but not because of small increments in efficiency.  The reason is that large parts of our energy-using technology, mostly vehicles, run on a liquid fuel directly and this distribution for the fuel is already in place.  To replace this liquid fuel distribution system with something else is really expensive.  But there does exist one other energy distribution system that has already been built out -- for electricity.  So having efficient electric motors allows use of non-gasoline energy sources if those sources can be turned into electricity.  For example, there are real advantages to running vehicles on CNG, but there is no distribution system for that and so its use has been limited to large fleets (like city busses) where they can build their own fueling station.  But electric cars can use electricity from natural gas, as well as solar and wind of course that have no other distribution method other than by electricity.

The problem with all this is that most of the barriers to using electricity in more applications are not related to motor efficiency.  For vehicles, the problem is in energy storage density.  Many different approaches to powering automobiles were tried in the early days, including electric and steam powered cars.  The main reason, I think, that gasoline won out was due to energy storage density.  15 gallons of gasoline weighs 90 pounds and takes up 2 cubic feet.  This will carry a 40 mpg car 600 miles.   The Tesla Model S  85kwh battery pack weighs 1200 pounds and will carry the car 265 miles (from this article the cells themselves occupy about 4 cubic feet if packed perfectly but in this video the whole pack looks much larger).  We can see that even with what Musk claims is twice the energy density of other batteries, the Tesla gets  0.22 miles per pound of fuel/battery while the regular car can get 6.7.  More than an order of magnitude, that is simply an enormous difference, and explains the continued existence of internal combustion engines much better than electric motor inefficiencies.

And here is why electric vehicle equivalent MPG standards are still screwed up

I don't really have the energy to write about this again, but because these issues are so closely related I will quote myself from the past.  Suffice it to say that after years of development, the EPA made nearly the exact same mistake as did Mr. Schmidt's tweet.  This Despite the fact that the agency had already developed an accurate methodology and then abandoned it for a flawed methodology that produced inflated numbers for electric vehicles.  There is more than one way for the government to subsidize electric vehicles!

The Fisker Karma electric car, developed mainly with your tax money so that a bunch of rich VC's wouldn't have to risk any real money, has rolled out with an nominal EPA MPGe of 52 in all electric mode (we will ignore the gasoline engine for this analysis).

Not bad?  Unfortunately, it's a sham.  This figure is calculated using the grossly flawed EPA process that substantially underestimates the amount of fossil fuels required to power the electric car, as I showed in great depth in an earlier Forbes.com article.  In short, the EPA methodology leaves out, among other things, the conversion efficiency in generating the electricity from fossil fuels in the first place [by assuming perfect conversion of the potential energy in the fuel to electricity, the EPA is actually breaking the 2nd law of thermodynamics].

In the Clinton administration, the Department of Energy (DOE) created a far superior well to wheels MPGe metric that honestly compares the typical fossil fuel use of an electric vs. gasoline car, using real-world power plant efficiencies and fuel mixes to figure out how much fuel is used to produce the electricity that goes into the electric car.

As I calculated in my earlier Forbes article, one needs to multiply the EPA MPGe by .365 to get a number that truly compares fossil fuel use of an electric car with a traditional gasoline engine car on an apples to apples basis.  In the case of the Fisker Karma, we get a true MPGe of 19.  This makes it worse than even the city rating of a Ford Explorer SUV.

I can only guess that the article does a poor job of describing the plaintiffs' argument.  Because the argument that the pardon power impinges on the separation of powers, presumably because it voids a judicial ruling, would be true of any pardon in all of history.  The Constitution seems to be pretty open-ended in granting this power.  As much as it is heartening to see Democratic Congresspersons suddenly develop a concern about Constitutional limits on government power, this seems like a big waste of time and money.

A slate of congressional Democrats is asking a federal judge to invalidate former Sheriff Joe Arpaio's presidential pardon and move forward with sentencing.

Attorneys for 33 members of the U.S. House of Representatives aired their concerns in a "friend of the court" brief filed in federal court on Wednesday morning.

The brief argued that U.S. District Judge Susan Bolton should toss President Donald Trump's pardon of Arpaio, 85, in the interest of protecting the government's division of powers.

"The presidential pardon upon which that motion is based is an encroachment by the Executive on the independence of the Judiciary," the document stated. "The amici urge the Court to defend jealously against that encroachment as the framers intended."

The IPCC AR4 summary report had this critical conclusion:

Most of the observed increase in global average temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic GHG concentrations.[7] It is likely that there has been significant anthropogenic warming over the past 50 years averaged over each continent (except Antarctica)

I want to come back to this in a second, but here is a story the Bryan Caplan posted on his blog.  He is quoting from Tetlock and Gardner's Superforecasting

In March 1951 National Intelligence Estimate (NIE) 29-51 was published.  "Although it is impossible to determine which course of action the Kremlin is likely to adopt," the report concluded, "we believe that the extent of [Eastern European] military and propaganda preparations indicate that an attack on Yugoslavia in 1951 should be considered a serious possibility." ...But a few days later, [Sherman] Kent was chatting with a senior State Department official who casually asked, "By the way, what did you people mean by the expression 'serious possibility'?  What kind of odds did you have in mind?"  Kent said he was pessimistic.  He felt the odds were about 65 to 35 in favor of an attack.  The official was started.  He and his colleagues had taken "serious possibility" to mean much lower odds.

Disturbed, Kent went back to his team.  They had all agreed to use "serious possibility" in the NIE so Kent asked each person, in turn, what he thought it meant.  One analyst said it meant odds of about 80 to 20, or four times more likely than not that there would be an invasion.  Another thought it meant odds of 20 to 80 - exactly the opposite.  Other answers were scattered between these extremes.  Kent was floored.

Let's go back to the IPCC summary conclusion, which is quoted and used all over the place  (no one in the media ever actually digs into the charts and analysis, they just stop at this quote).  A few thoughts:

1. This kind of conclusion is typical of team process and perhaps is a reason that large teams shouldn't do scientific studies.  We wouldn't have aspirin if 500 people all had to agree on a recommendation to allow it.
2. Climate alarmists often claim "consensus".  Part of the way they get consensus is by excluding anyone who disagrees with them from the IPCC process and publication.  But even within the remaining core, scientists have vast differences in how they evaluate the data.  Consensus only exists because the conclusions use weasel words with uncertain meaning like "most"  and "significant"  (rather than a percentage) and "very likely" (rather than a probability).
3. Is "most" 51% or 95%?  The difference between these two is almost a doubling of the implied temperature sensitivity to CO2  -- close to the magnitude of difference between lukewarmer and IPCC estimates.  Many skeptics (including myself) think past warming due to man might be 0.3-0.4C which is very nearly encompassed by "most".
4. It may be that this uncertainty is treated as a feature, not a bug, by activists, who can take a word scientists meant to mean 51% and portray it as meaning nearly 100%.

For an example of this sort of thing taken to an extreme, arguably corrupt level, consider the original 97% global warming consensus survey which asked 77 scientists hand-selected from a pool of over 10,000 working on climate-related topics two questions.  Answering yes to the two questions put you in the 97%.  In the context of what was written above, note the wording:

That anything-but-scientific survey asked two questions. The first: “When compared with pre-1800s levels, do you think that mean global temperatures have generally risen, fallen, or remained relatively constant?”  Few would be expected to dispute this…the planet began thawing out of the “Little Ice Age” in the middle 19^th century, predating the Industrial Revolution. (That was the coldest period since the last real Ice Age ended roughly 10,000 years ago.)

The second question asked: “Do you think human activity is a significant contributing factor in changing mean global temperatures?” So what constitutes “significant”? Does “changing” include both cooling and warming… and for both “better” and “worse”? And which contributions…does this include land use changes, such as agriculture and deforestation?

Good Lord, I am a hated skeptic frequently derided as a denier and I would answer both "yes" and be in the 97% consensus.  So would most all of the prominent science-based skeptics you have ever heard of.

Most folks, even those who say they are data-driven, are not data-driven.  They react to their perception.  If some sort of activity suddenly makes the news more, we assume that activity is increasing, even if all that is happening is that the activity is simply making the news more.

A lot of the folks who want to blame this year's landfalling hurricanes on global warming are making this mistake.  If you are 20, the last major hurricane landfalls were in 2005 when you were 8.  The last decade has seen a nearly unprecedented drought in US major hurricane landfalls, so against the backdrop of this drought, several major Atlantic storms seems highly unusual.  But I grew up in the 1960's to the 1980's on the Gulf Coast and hurricanes were a regular part of our life then.  When I lived in Clear Lake City, Texas, we had so many in a few years in the 1980's that I had a special spot picked out to park my car to keep it above flood waters.  In the 1990's, we had a memorable vacation where we rented a house on the North Carolina coast for a month and got hit by three hurricanes -- we spent the whole trip hiding in the laundry room from tornado warnings and evacuating back and forth to the interior of the state.

For those who like simple charts, the WSJ had a good one the other day:

Making this a chart of hurricane landfalls deals with the public perception issue, as landfalls tend to be the only ones we really remember.  But this is actually a terrible metric (even though it makes my point about Irma and Harvey not representing any sort of upward trend) because landfalls are random and may not really represent actual hurricane activity.  A better metric is accumulated cyclonic energy of tropical storms, which looks at a sort of integral of storm strength over time.  This does not show a trend either, but since I cannot find a chart of ACE updated with recent activity I am not going to put it up here.   Here it was as of June of this year, and this chart only goes back to 1970 -- if we had good data early in the 20th century it would have been much higher.

Microeconomics generally provides a powerful set of tools that have proven useful and successful predictors of how things work in the world.  But I am not sure I trust anything at all from macroeconomics.  Sure, I am fine with work about what contributes to or hinders wealth creation over long time periods -- Ricardo and Adam Smith and Julian Simon and Deirdre McCloskey and that sort of work.  But I am not sure macro is capable of any useful predictions on the 5-20 year scale.  Perhaps it is like climate and trying to isolate output effects of changing one input when millions of other variables are changing is simply impossible for us at this time.  Perhaps the stakes of macro, since it drives major public policy and government spending and regulator decisions, are simply too high for objective work.  I don't know, but I don't trust any of it.  Particularly when so many of the current recommendations for increasing near-term prosperity contradict what we know to have driven long-term prosperity.

About 15 years ago, I wrote something I wanted to repeat here just because I keep looking for it and a lot of my old Typepad blog era stuff is hard to find.  The original post is gone but I quoted from it in 2005.

Since 1700, the GDP per capita in places like the US has risen, in real terms, over 40 fold.  This is a real increase in total wealth, created by the human mind.  And it was unleashed because the world began to change in some fundamental ways around 1700 that allowed the human mind to truly flourish.  Among these changes, I will focus on two:

1. There was a philosophical and intellectual change where questioning established beliefs and social patterns went from being heresy and unthinkable to being acceptable, and even in vogue.  In other words, men, at first just the elite but soon everyone, were urged to use their mind rather than just relying on established beliefs
2. There were social and political changes that greatly increased the number of people capable of entrepreneurship.  Before this time, the vast vast majority of people were locked into social positions that allowed them no flexibility to act on a good idea, even if they had one.  By starting to create a large and free middle class, first in the Netherlands and England and then in the US, more people had the ability to use their mind to create new wealth.  Whereas before, perhaps 1% or less of any population really had the freedom to truly act on their ideas, after 1700 many more people began to have this freedom. 

So today's wealth, and everything that goes with it (from shorter work hours to longer life spans) is the result of more people using their minds more freely.

At the time, perhaps to my shame, I had never even heard of Deirdre McCloskey nor her work that has been published in three volumes called the Bourgeois Era explaining what she calls the "great enrichening" (which I am slowly plowing through).  My thinking when I wrote this seems reasonably consistent with her conclusions, though she has obviously been a lot more systematic in thinking about it.  This exchange with Gregory Waymire is a short but quite readable window on her thinking.  She writes in part:

You're adopting a conventional and somewhat silly view that the bourgeoisie were especially diligent, when it is not true as fact and is anyway not the character of the bourgeoisie that
mattered to the Great Enrichment (which by the way was a factor of 30 per capita in countries that fully adopted economic liberalism, not the factor of 10 you quote: look at the passage again, and read slower and longer). Weber sometimes got this right, sometimes wrong. But people tend to read him as saying that higher savings and more diligence, Ben Franklin style (and even Ben did not actually do it), is what made us rich.

One trouble which such a conventional argument is an economic one that Solow-type models (and Smith- and Marx- and Weber- type models) that reduce growth to savings and labor effort are radically mistaken. What matters is human creativity released from ancient trammels....

What made us rich, I argue at no doubt tedious and unreadable length in the Bourgeois Era trilogy, is imagination, ingenuity, radical ideas released. They were released in turn by liberalism, Smith's "liberal plan of [social] equality, [economic] liberty, and legal [justice]."