Coyote Blog

Quite a while ago I wrote an article about climate publication bias called Summer of the Shark.

let's take a step back to 2001 and the "Summer of the Shark." The media hysteria began in early July, when a young boy was bitten by a shark on a beach in Florida. Subsequent attacks received breathless media coverage, up to and including near-nightly footage from TV helicopters of swimming sharks. Until the 9/11 attacks, sharks were the third biggest story of the year as measured by the time dedicated to it on the three major broadcast networks' news shows.

Through this coverage, Americans were left with a strong impression that something unusual was happening -- that an unprecedented number of shark attacks were occurring in that year, and the media dedicated endless coverage to speculation by various "experts" as to the cause of this sharp increase in attacks.

Except there was one problem -- there was no sharp increase in attacks.  In the year 2001, five people died in 76 shark attacks.  However, just a year earlier, 12 people had died in 85 attacks.  The data showed that 2001 actually was  a down year for shark attacks.

The point is that it is easy for people to mistake the frequency of publication about a certain phenomenon for the frequency of occurrence of the phenomenon itself.  Here is a good example I saw the other day:

An emaciated polar bear was spotted in a Russian industrial city this week, just the latest account of polar bears wandering far from their hunting grounds to look for food.

Officials in the Russian city of Norilsk warned residents about the bear Tuesday.  They added that it was the first spotted in the area in over 40 years.

I am willing to bet my entire bourbon collection that a) hungry polar bears occasionally invaded Siberian towns in previous decades and b) news of such polar bear activity from towns like Norilsk did NOT make the American news.  But readers (even the author of the article) are left to believe there is a trend here because they remember seeing similar stories recently but don't remember seeing such stories earlier in their life.

A while back I took at Teaching Company course on Victorian Great Britain.  The professor said something about the Victorians that really stuck with me -- he said that the British never understood the soft power they had in the world.   The world wanted to dress British and emulate British manners.  They read British authors.  They desperately wanted to send their children to British schools.  Even the native revolutionaries in their colonies sometimes revolted in very British ways.  Sure the leaders of the Indian National Congress harbored enormous resentments against the arrogance of British power, but all their leaders were British-schooled and cast many of their arguments in terms from the British enlightenment.

I was thinking about this a while back when I was in France and attended a show of local French artists.  As with much modern art, much of it incorporated bits of pop culture.  And about 98% of that was American and to a lesser extent British pop culture.  Sure, some of it was used ironically, but American culture is consumed everywhere in the world.  I must have seen 5 or 6 artists using Captain America imagery alone in their art in a not-at-all hostile or ironic way..  America in the 20th and 21st century is in the same position as the British in the 19th century, and we are probably just as unaware of that soft power and pissing it away just as surely with our slamming around the world like a bull in a china shop.

And speaking of China, it is simply insane in my mind to turn them into our enemies.  Whatever the top Chinese officials are after, much of the population wants to be like Americans.  They want to come to our schools and wear our fashions and watch our movies and TV.  We have had several exchange students from China live with us and they treat getting to spend time living in America like having hit the lottery.  We have watched one woman who goes by "Cat" in the US all the way from high school to college in America to getting a good banking job.  She first showed up at our house looking exactly like Ching "Honey" Huan from Doonesbury -- the hair, glasses, clothes, everything.  She now looks, dresses, and talks like any young American.  For a while her Instagram was dominated by pictures of her and her friends at Big 10 football games.

I have been consumed of late with other things in my life, and really have not had the chance to address the increasingly insane extent of the Trump Administration's economic nationalism. But go to Don Boudreax's and Mark Perry's blogs and scroll through them -- they do a much more eloquent job of defending free trade than I can.

I do truly think we are living in the Golden Age of TV.  There are so many great shows -- Game of Thrones, the Crown, Counterpart, even a few guilty pleasures like Outlander.  I wanted to recommend one I just watched and I have not heard a lot about before -- Wolf Hall, a retelling (yes, yet again) of the Henry the VIII era from the perspective of Thomas Cromwell.  I thought it was really terrific, with Mark Rylance's quirky take on Thomas Cromwell and Clare Foy as Anne Boleyn and Damien Lewis as Henry (best casting ever as Henry, but I really like Damien Lewis).  Plus a great supporting cast including folks like Jonathon Pryce and Mark Gatiss.  Only 6 episodes and it seems like the logical season 2 is missing, but I really enjoyed it.  The acting is great, but I must confess I liked Natalie Dormer as Anne Boleyn in the Tudors better, probably because I have a thing for Natalie Dormer (which my wife does NOT understand).  The Wolf Hall take on the protagonists is quirky -- it is probably the most sympathetic take on Wolsey you will ever see and the least sympathetic take on Moore you will see.  Very intelligent and avoids (for good and for bad) the Skinemax aspects of the Tudors series.

Most of you know I agree there is man-made global warming but am skeptical the extent will be anywhere near most forecasts you see in the media.  For some reason, this earns me the title of "denier."  However, I find that the climate discussion has become boring in the extreme, and I have mostly moved on from it.  But I am still interested in analytical abuses in the media, and long-time readers will know that my favorite is the positing of a trend using but a single data point.  My example today happens to be from climate.

It starts with this tweet:

As extreme weather events become more common, we're living through "once in lifetime storms" every year. Our most immediate understanding of their severity is loss of life and damages.

— March for Science (@ScienceMarchDC) September 18, 2018

Obviously he is reacting to the recent hurricane in North Carolina, which turns out to be pretty run of the mill but the media has portrayed as some sort of armageddon.  I could have pulled roughly similar quotes from all kinds of sources.  Several networks did long pieces over the weekend claiming an upward trend in hurricanes without any trend data, but merely from the fact that one made landfall recently.  But anyone who claims be defending science should be held, I think, to a higher standard in making scientific claims.

As I asked the March for Science tweeter:  If, say, there is a trend towards more or stronger hurricanes, why does no one ever show a trend chart? They just declare the trend from one data point, like a single hurricane landfall. Every long-term hurricane & cyclonic energy trend chart I have seen is flat to down.  (This is not primarily a climate post but I will post some hurricane trend charts at the end).

There is certainly an upwards trend in the media labelling storms as "once in a lifetime" but it is doubtful that there is actually an underlying trend in storm severity. Even the slightly more meaningful term "100-year _____" is abused.

Consider a 100-year flood in North Carolina, almost certainly a once in a lifetime event for someone in that state unless they live really long.  Since North Carolina is .027% of the world's landmass, there will be, on average, 37 hundred-year floods over land areas the size of North Carolina every single year.   That's 37 once-in-a-lifetime North-Carolina-sized floods somewhere in the world every single year.  Heck, there should be 3-4 thousand-year floods of North Carolina size somewhere in the world every year -- that's three or four once in a millenium floods!  And this same math applies to 100-year heat waves, droughts, snow storms -- you name it.

We can learn a couple of things from this.  First, living through "once in a lifetime" storms every year, somewhere in the world, is not abnormal -- it is expected.  Second, one can see how choices in media coverage could drive an apparent trend.  If the media covered maybe 3 or 4 of these 37 floods when I was young, but covers every one today, it will appear that there is a trend since I hear so much more about them.  But in fact, nothing will have changed except the media.  I will remind you what I wrote on this topic waaaay back in 2012.

Let's take a step back to 2001 and the "Summer of the Shark." The media hysteria began in early July, when a young boy was bitten by a shark on a beach in Florida. Subsequent attacks received breathless media coverage, up to and including near-nightly footage from TV helicopters of swimming sharks. Until the 9/11 attacks, sharks were the third biggest story of the year as measured by the time dedicated to it on the three major broadcast networks' news shows.

Through this coverage, Americans were left with a strong impression that something unusual was happening -- that an unprecedented number of shark attacks were occurring in that year, and the media dedicated endless coverage to speculation by various "experts" as to the cause of this sharp increase in attacks.

Except there was one problem -- there was no sharp increase in attacks.  In the year 2001, five people died in 76 shark attacks.  However, just a year earlier, 12 people had died in 85 attacks.  The data showed that 2001 actually was  a down year for shark attacks.

Once you start looking for this type of thing, the extrapolation of a trend from at most one data point, you will see it everywhere.

For those still hanging around to the end, here are a couple of actual trend charts on hurricanes (the adjusted line attempts to correct for the fact that earlier eras with no satellites or radar tended to miss some hurricanes) (source at NOAA):

Below are two charts that look beyond just the Atlantic at global cyclones, both from this source.  The first is frequency:

The second looks at accumulated cyclonic energy, which is a sort of time integral of the energy in all active cyclonic storms around the world

Later in the tweetstorm, the same tweeter mentioned as a fact, again without data, "Climate change is increasing drought frequency, impacting everything from agriculture to health. Some studies suggest the consequences of droughts include increased violence and war."  There has been no upward trend in US droughts (negative is more drought-y.

Finally, in the spirit of full disclosure, of all the zillions of things (not directly related to temperature) in weather effects that are blamed on global warming, this is the only one I have found that shows an upward trend recently and could logically be attributed to warming.  Whether this is related to warming or independent or a data measurement issue is (if folks were honest) not well understood

From Market Watch, but you see the same article everywhere:

This year, like last year, Social Security’s trustees said the program’s two trust funds would be depleted in 2034.

For the first time since 1982, Social Security has to dip into the trust fund to pay for the program this year.

This is like sticking a knitting needle in my eye every time I read it.  Repeat after me:  There is no trust fund.  If it ever existed, it is gone.

OK, I will admit that it does technically exist -- there is a government account for it.  But the trust fund is full of just one asset:  government IOU's to itself.  When Social Security was collecting more money in taxes than it spent on benefits, the extra cash flowed into the trust fund.  Then Congress immediately took the cash out and spent it on... whatever, and left behind an IOU.   I suppose the government pays interest to itself on this debt, but this interest just goes back around in a circle to cover the interest that was just paid out.

Imagine you had a piggy bank where you collected money for a rainy day.  Then one day you wanted a new TV and you took $1000 out of the piggy bank to pay for it, leaving an IOU in the piggy bank for $1000.  I guess you could technically say to yourself that you still had $1000 in assets in the bank, but what good is an IOU to yourself?  I suppose you could even pay yourself interest.  You could take $20 out and then put it back in as interest.  Wouldn't that feel like progress!

This is what the government has done.  You can read numerous articles online that will say that in the case of the trust fund these IOU's are somehow different and really have value.  Here is the simplest way to think about it:  Imagine to cover benefits in a particular year the Social Security Administration needs $1 billion above and beyond Social Security taxes.  If the trust fund exists, the government takes a billion dollars of government bonds out and sells them to private buyers on the open market.  If the trust fund didn't exist, the government would .... issue a billion dollars in bonds and sell them to private buyers on the open market.  In either case, the government's indebtedness to the outside world goes up by a billion dollars.  I will confess there are some technical issues that might differ in the two cases -- perhaps there are different implications for the two approaches on the government debt limit.  But that is just a procedural issue -- in reality there is no economic difference between the two cases.  If there is no economic difference between the trust fund existing and not existing, then in my mind is effectively does not exist.

Via Don Boudreaux:

Greg Ip writes that “The U.S. runs a trade deficit because it consumes more than it produces while its trading partners, collectively, do the opposite” (“How the Tax Cut President Trump Loves Will Deepen Trade Deficits He Hates,” April 19).

Here is how I like to explain why this is wrong.  The trade deficit exists in large part because foreigners are more likely to consume the American-made goods and services they buy right here in the US, rather than take them back to their home country, while US consumers tend to bring foreign goods back to America to consume them.  Let me unpack this.

First, over any reasonable length of time, payments between countries are going to balance.  If this were not true, there would be some mattress in China that has trillions of dollar bills stuffed in it, and no reasonable person nowadays just lets money sit around lying fallow.  There are some payments between countries for each others' goods.   And there are some payments for each others' services.   And there are some payments for various investments.  All these ultimately balance, which makes fixating on just one part of this circular flow, the payments for physical goods, sort of insane.  If we have a trade "deficit" in physical goods, then we must have a trade surplus in services (which we do) and in investments (which we do) to balance things out.

But what do we mean by an investment surplus?  It means that, for example, folks from China are spending more money in the US for things like real estate and buildings and equipment -- either directly or through purchases of American equity and debt securities -- than US citizens are buying in China.  But note that another name for investment is just stuff that foreigners buy in this country that stays in this country and they don't take back home.  If a Chinese citizen buys a house in Los Angeles (something that apparently happens quite a bit), that is just as much "consumption" as when I buy a TV made in China.  But unlike my TV purchase (which counts as an import), because of the arbitrary way trade statistics are calculated, selling a Chinese citizen a house in LA does not count as an export because they keep and use the house here.  Let's say one Chinese person sells 10,000 TV's to Americans, and then uses the proceeds to build a multi-million dollar house in Hawaii.  This would show up as a huge trade deficit, but there is no asymmetry of consumption or production -- Chinese and American citizens involved in this example are producing and consuming the same amounts.  The same is true when the Chinese build a manufacturing plant here.  Or when then invest capital in a company like Tesla and it builds a manufacturing plant here.

Our bizarre fixation on the trade deficit number would imply that, if trade deficits are inherently bad, then we would be better off if the Chinese person who bought the house in LA dismantled it and then shipped the material back to China.  Then it would show up as an export.  Same with the factory -- if we fixated on reducing the trade deficit then we should prefer that the Chinese buy the equipment for their factory here but have it all shipped home and built in China rather than built here.   Is this really what you want?

I am willing to concede one exception -- when Chinese use trade proceeds to buy US government debt securities.   This is where my lack of formal economics training may lead me astray, but I would say that the US government is the one major American institution that is able to consume more than it produces.  Specifically, by running enormous deficits it is able to -- year in and year out -- allow people to consume more than they produce.  Trade proceeds from foreigners that buy this debt in some sense help subsidize this.

However, I don't think one can blame trade for this situation.  Government deficits are enabled by feckless politicians who pander to the electorate in order to be re-elected, a dynamic that has little to do with trade.  I suppose one could argue that by increasing the demand for government securities, foreigners are reducing the cost of debt and thus perhaps enabling more spending, though I am not sure politicians are at all price sensitive to interest rates when they run up debt -- as a minimum their demand curve is really, really steep.   There is a relation between government borrowing and trade but the relationship is reversed -- Increased borrowing will tend, all things being equal, to increase the value of the dollar which will in turn make imports cheaper and exports more expensive, perhaps increasing the trade deficit.

I have been a home theater hobbyist for years, though with projection TV's rather than LCD panel TV's.  However, from what I know, this appears to be a good list of things to do and not do in setting up your TV.  TV's have historically been set up to look good in very bright showrooms under fluorescent lighting, but this is not how you likely watch the TV at home.  In fact, the best thing you can do to improve the look of your picture for cinematic content actually has nothing to do with the TV -- darken your viewing room.  They key to a really good picture is in the dark areas of the picture, not the bright areas.  Tricks to up the contrast and brightness of the TV can kill the detail in the dark areas.  The only way to really see what is there is to watch in a dark room.

The hardest thing to do at first is to get the color temperature correct.  Thankfully, most TV's today generally have a color temperature setting that is correct (20 years ago one had to have a technician do a manual re-calibration).  The right color temperature is around 6500K but TV's and computer monitors often ship with color temperatures boosted way up above 9000K, well up into the blue range because this makes the TV appear brighter in a TV showroom (at higher temperatures a neutral grey will look bluer, at lower temperatures it will look redder).  Unfortunately, your eyes are used to looking at high temperature monitors and TVs and so when you first change to the correct setting things may look to red.  Live with it a while.

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.

I use the term "publication bias" to describe how easy it is to confuse the frequency with which the media reports on a phenomena with the underlying frequency of the phenomena itself.  A great example is Summer of the Shark:

...let's take a step back to 2001 and the "Summer of the Shark." The media hysteria began in early July, when a young boy was bitten by a shark on a beach in Florida. Subsequent attacks received breathless media coverage, up to and including near-nightly footage from TV helicopters of swimming sharks. Until the 9/11 attacks, sharks were the third biggest story of the year as measured by the time dedicated to it on the three major broadcast networks' news shows.

Through this coverage, Americans were left with a strong impression that something unusual was happening -- that an unprecedented number of shark attacks were occurring in that year, and the media dedicated endless coverage to speculation by various "experts" as to the cause of this sharp increase in attacks.

Except there was one problem -- there was no sharp increase in attacks. In the year 2001, five people died in 76 shark attacks. However, just a year earlier, 12 people had died in 85 attacks. The data showed that 2001 actually was a down year for shark attacks.

A lot of folks are now commenting on the apparent "spate" of airline incidents.  This "spate" began with United dragging Dr. David Dao, a man who would not give up his seat for a United employee, off an aircraft.  Seemingly every day sees a new story.  This headline about "yet another airline incident" is typical.

I have no data on the underlying phenomenon here, but I would be willing to bet there is no upward trend in airline incidents of this sort.  My guess is that the combination of increasingly ubiquitous cell phone cameras, publication platforms like Instagram and Facebook, and most importantly a focus by the media on looking for this sort of story after the United incident are causing an uptick in coverage rather than an uptick in actual incidents.

Here is what you are paying your government to spend time on:

The age-old question has finally been answered: No, Snuggies are not clothing.

Earlier this month, a federal court ruled that Snuggies, the As Seen on TV 'blanket with sleeves', should be classified as blankets, and live as a separate entity from robes or priestly vestments.

The ruling followed the Justice Department's argument that Snuggies are apparel and not blankets, so they should be 'subjected to higher duties than blankets', reports Bloomberg.

Judge Mark Barnett of the Court of International Trade said during the trial that the Customs and Border Protection was in the wrong to classify Snuggies as apparel. Barnett cited the Snuggies' use of marketing as a blanket, specifically referencing its packaging with the phrase, "The Blanket With Sleeves!".

The judge added that those who purchase Snuggies may likely be "in the types of situations one might use a blanket; for example, while seated or reclining on a couch or bed, or outside cheering a sports team."

In Barnett's opinion, the addition of sleeves 'was not enough' to have the Snuggie be considered a piece of clothing. He added the use of sleeves allowed the Snuggie "to remain in place and keep the user warm while allowing the user to engage in certain activities requiring the use of their hands."

More so, Judge Barnett rejected the idea a Snuggie may also be similar in fashion to priestly vestments or scholastic robes which also use wide sleeves and a loose fit around the body. In his ruling, the judge argued that robes open from the front, and priestly vestments and scholastic robes have no opening on either side, so the role of a Snuggie as a garment is invalid.

Years ago, in Ventura County California (where I am thankfully no longer doing business), a loyal employee approached our manager and told her of a meeting that had been held the night before for our employees at a local attorney's office.  The attorney was holding the meeting mainly because he was trying to drum up business, brainstorming with my employees how they might sue the company for a variety of fanciful wage and hour violations.  Fortunately, we tend to be squeaky clean on labor compliance, and the only vulnerable spot they found was on California break law, where shifting court decisions gave them an opening to extract a bit of money from the company over how we were managing lunch breaks.

Anyway, in the course of the meeting, the attorney apparently advised our employees that if they ever thought they were about to get fired, they should quickly accuse someone in the company of harassment or discrimination or some other form of law-breaking.  By doing so, they made themselves suddenly much more difficult to fire, and left the company open to charges of retaliation if the company did indeed fire them.   In later years, we saw at least two employees at this location file discrimination or harassment claims literally hours before they were to be terminated for cause.   Since then, I have seen this behavior enough, all over the country, to believe that this is a strategy that is frequently taught to employees.

This terrible advice is obviously frustrating not only because it makes the firing process harder, but also because these charges all still have to be investigated seriously, a time-consuming process that has to involve me personally by our rules.   On at least two occasions that I can remember, we delayed a firing for cause by several weeks to complete investigations into what turned out to be bogus charges, only to have the employee do something really stupid in a customer reaction during these extra weeks that had substantial costs for the company.

Anyway, I was thinking about this in the case of Colin Kaepernick, the NFL quarterback currently employed by the 49ers but expected by many to be released (ie fired) in the coming weeks.  Last weekend he stirred up controversy when he refused to stand for the national anthem to protest treatment of blacks in America.   Personally, I barely noticed, as I am not a big fan of enforced loyalty oaths and patriotic rituals, finding these to historically be markers of unfree societies.  For these sorts of rituals to have any meaning at all, they have to be voluntary, which means that Kaepernick has every right to not participate, and everyone else has every right to criticize him for doing so, and I have the right to ignore it all as tedious virtue-signalling.

I mostly yawn and change the channel over all this, but it did make me wonder -- Kaepernick has to know that he is potentially on the chopping block.   Many folks believe that his performance last year was not good enough to earn a job on the 49ers this year.  It has been discussed on national TV for weeks, and probably for months in the local San Francisco market.  If he were to be cut, it would likely be in the next 7 days or so by the schedule the NFL sets for finalizing rosters.   So I wonder if part of Kaepernick's action the other day was to make it harder to fire him.   He and his supporters can now portray his firing as retaliation for his support of Black Lives Matters, something that would be an uncomfortable perception for any high profile organization in America but particularly in San Francisco.

I told my wife a number of times that my guess is that Trump won't release his taxes because they don't show nearly enough income to justify his ego.  Time and again I see he and his cohorts and even the media throwing around eye-popping revenue numbers for him.  Well, I can tell you from long, sad experience that merely having large revenue numbers won't get you anywhere - they have to actually be higher than expenses to be meaningful.  I was a part of several early Internet startups that rode tens of millions of revenue right into liquidation.

Here is my hypothesis of what makes Trump rich:

1. He started with family money.  No shame in that, lot's of people have done productive things with the capital accumulated by prior generations of their family.  But in Texas we used to have  a saying -- the best way to make a million dollars is to start with $10 million.  Is Trump's fortune larger today than it would have been if, say, he had just shoved all of dad's money into stocks?
2. He has the political clout to swing real estate deals average people cannot.  Real estate in New York and Atlantic City is entirely driven by crony capitalism, and Trump is a master.  Let's say I have a piece of land that is worth X.  It would be worth X+Y if I could build the building I want on it, but I can't get the permissions I need.  Trump can, buys it for X, and then makes Y profit from his political pull.  The example of his getting his cronies in the Atlantic City government to condemn a woman's home so he could pave it over for limo parking is just the ugliest of many, many such examples.
3. He extracts rents from investors, even when investors lose money.  I don't know if there is an economic name for this, but there should be.  Trump's investors, particularly his bondholders, have frequently lost millions on his real estate and casino investments -- both in his many bankruptcies and his frequent debt restructurings, which he brags about on the campaign trail.  These investments are losing money and going bankrupt, so they can't be generating free cash flow.  Somehow Trump is saddling investors with the losses AND extracting income for himself personally.  Steven Job's lifestyle was paid for by people who voluntarily bought iphones and valued them enough to pay more for them than it cost to make them.  I hypothesize that Trump's lifestyle is paid for out of invested capital, and not out of profits.  Which of course leaves open the question of why investors continue to sign up for this treatment.  I understand why donors give to the Clinton Foundation despite the fact that the Foundation does relatively little actual charity work -- donors are looking for influence with the Clintons.   But why do Trump investors keep dumping in more money?  Could it be charisma?  Certainly Trump has an excess.
4. Trump's best investments seem to be ones where his charisma comes into play -- his TV shows come to mind.  Beyond the TV shows, there is a long string of business failures, from steaks and schools to casinos.

Postscript:  To be fair, I will add that I have in the past been a fan of his hotel on the strip in Las Vegas.  The hotel provides a screaming good value (you can almost always get a huge discount off rack rate) for an exceptionally nice room in a good location -- and in a non-casino hotel to boot.  I used it for years as a low-cost location for manager meetings.  The staff there is great -- the only problem is one has to look past the tacky gold gilding on everything and the goofy Trump-branded swag in the gift shop.  I will add, though, apropos to this post, there is no way on God's green Earth that this hotel makes money, at least if it is paying all of its capital costs (it is possible there was a bankruptcy at one point where Trump said "you're fired" to the bondholders).  If you ever stay there, by the way, it has the best view of the strip in Vegas because it is right at a bend and can look straight down the street.  Ask for a high room on the south side.

Update:  LOL, looking at #3, I think we do already have a name for this phenomenon of extracting rents from investors even when the investments are losing money -- it is called a hedge fund.  Given that hedge funds generally do not consistently outperform the market and result in outsize compensation for their managers even when the fund loses money (pretty sure Chelsea Clinton's and her husband did not give back any of the management fees they pulled down despite their hedge fund tanking most of their investor's money).

Update #2:  Being a billionaire is no guarantee that one knows anything about even basic economics:  Nick Hanauer argues the way to prosperity is to impose a $28 minimum wage.

Sears is opening an all-appliance store:

Sears, which has been struggling financially due to falling sales, is opening a store that will be dedicated solely to the sale of appliances.

The retailer says that the 10,000 square foot store opening in Ft. Collins, Colorado on May 19th will be its first solely featuring appliances, the product category that has been one of its core businesses.  .

“Appliances is one of our best categories,’’ said Leena Munjal. senior vice president, customer experience and integrated retail, for Sears Holdings.  “We’re trying to figure out how you take the physical store and complement it with the online capability to make it a really powerful experience for our customers.’’

I essentially predicted this here several years ago:

 I see the same thing now at Best Buy, with workout equipment and other oddball products.  I told my son on a visit a year ago to Best Buy to expect to see the a larger appliance selection next time we visit.  He asked why, and I said "because Wal-Mart does not generally sell them, and not a lot of people buy their large appliances at Amazon."  Sure enough, you see more appliances nowadays.

And here:

But it probably was no accident that the article was illustrated with this picture:

What don't you see there?  CD's, DVD's, speakers, DVD players, computer games and most of the other stuff that used to make up a lot of Best Buy's floor space.  Because they have already been demolished by online retailers in those categories.   The picture above is of appliances, one of the few high dollar categories that has not migrated to the web.   Go to Best Buy and you will see appliances, health equipment, and TV's, all categories where bricks and mortar stores have some advantages over online.

This makes perfect sense, but don't tell me Best Buy is ready to take on the online retailers.  They are bobbing and weaving, ducking this competition wherever they can.

I wrote specifically about the Sears appliance business here

From the WSJ (emphasis added):

Netflix now admits that for the past five years, all through the debate on net neutrality, it was deliberately slowing its videos watched by users on AT&T and Verizon’s wireless networks. The company did so for good reason—to protect users from overage penalties. But it never told users at a time when Netflix was claiming carriers generally were deliberately slowing its service to protect their own TV businesses—a big lie, it turned out.

All this has brought considerable and well-deserved obloquy on the head of Netflix CEOReed Hastings for his role in inviting extreme Obama utility regulation of the Internet. Others deserve blame too. Google lobbied the administration privately but was too chicken to speak up publicly against utility regulation.

But Netfix appears to have acted out of especially puerile and venal motives. Netflix at the time was trying to use political pressure to cut favorable deals to connect directly to last-mile operators like Comcast and Verizon—a penny-ante consideration worth a few million dollars at best, for which Netflix helped create a major public policy wrong-turn.

This is what I wrote about net neutrality a couple of years ago:

Net Neutrality is one of those Orwellian words that mean exactly the opposite of what they sound like.  There is a battle that goes on in the marketplace in virtually every communication medium between content creators and content deliverers.  We can certainly see this in cable TV, as media companies and the cable companies that deliver their product occasionally have battles that break out in public.   But one could argue similar things go on even in, say, shipping, where magazine publishers push for special postal rates and Amazon negotiates special bulk UPS rates.

In fact, this fight for rents across a vertical supply chain exists in virtually every industry.  Consumers will pay so much for a finished product.  Any vertical supply chain is constantly battling over how much each step in the chain gets of the final consumer price.

What "net neutrality" actually means is that certain people, including apparently the President, want to tip the balance in this negotiation towards the content creators (no surprise given Hollywood's support for Democrats).  Netflix, for example, takes a huge amount of bandwidth that costs ISP's a lot of money to provide.  But Netflix doesn't want the ISP's to be be able to charge for this extra bandwidth Netflix uses - Netflix wants to get all the benefit of taking up the lion's share of ISP bandwidth investments without having to pay for it.  Net Neutrality is corporate welfare for content creators....

I am still pretty sure the net effect of these regulations, whether they really affect net neutrality or not, will be to disarm ISP's in favor of content providers in the typical supply chain vertical wars that occur in a free market.  At the end of the day, an ISP's last resort in negotiating with a content provider is to shut them out for a time, just as the content provider can do the same in reverse to the ISP's customers.  Banning an ISP from doing so is like banning a union from striking.

I totally understand why corporations may wish to push the envelope on earnings adjustments to make their stock look like a better buy.  But why is the financial media generally complicit with this?  Take any earnings announcement you read about or hear on the TV -- almost every single time it turns out that the earnings number quoted by the press, at least in the headline or the TV sound bite, is the company's non-GAAP adjusted number, not their actual GAAP number.

I might be OK with this if this were being done for good reasons, ie if the financial press thought the adjusted number was somehow more representative.  But I don't get this sense at all.  It feels more like the press is just lazy and accepts whatever number is in the press release without digging further.   Often in a longer story you will find the GAAP number, but buried many grafs in.

Oh, and by the way, the two numbers are diverging:

A good way to think about this chart is that, if you are not careful, you are paying for the bar on the right but getting the bar on the left.  Note that without adjustments, earnings fell pretty substantially in 2015.  It is not at all clear to me why we have not seen this story.

$10 million in diamonds get accidentally thrown away, then stolen out of the trash by the security guard.  

To me, this proves that crazy stuff can happy to anyone.  Jon is as bright and hard-working as anyone I know.  He is also entirely trustworthy and honorable in a business that often lacks these qualities.  The thief apparently sold one large stone, about 10 ct., to someone in the same building** who then cut it down to 9 ct. and resold it.  There would be no reason for a dealer to cut down an already cut stone, since it substantially reduced the value, unless he knew the stone to be stolen and was purposely trying to disguise the stone for resale.  Its like a thief robbing your house and selling your TV to your neighbor, who changes the label so you won't recognize it when you come over.

** all of the major diamond dealers in New York seem to work in just 2 buildings on Fifth Avenue.

Arnold Kling has a good question in this post on secular stagnation.  For most questions of the sort "would you rather the 1985 version of X for the 1985 (nominal) price or the 2015 version at the 2015 price, I would choose the latter.  TV's?  Cars?  Phones? Computers?  All way better for the price today.  This of course implies that for many of these items, the inflation rate is really negative if we could adequately take into account quality and technology changes.  Services are a different story.  For health care, I would take the 2015 version and price.  I would have to think about my answer for a while in air travel (I think folks overly romanticize their memory of air travel -- I was travelling PeopleExpress to Newark in the early 80's and that really, really sucked.   My seat and meal are worse nowadays but I am more likely to be on time).

So Kling then asks about college education.  These are convenient dates for me since I graduated in 1984.   So would I rather Princeton in 1984 at about $10,000 or Princeton today at $60,000.  I guess education-wise, the liberal arts course catalog at Princeton in 1984 was more closely matched to my interests, and I don't get any sense the faculty today is better or worse in either period but it likely was more politically diverse in 1984.  So academically, I would easily give the nod to 1984.  For the ancillary stuff, though, the change in quality has been substantial.  The dorms, the dining options, the residential college system, the student center -- all the non-academic stuff is way better today.  However, all that stuff is a lot of what is driving up the nominal price -- is it worth it?   Yes, I suppose so if someone else is paying, lol.  Probably not if I am paying my own way through.

John Scalzi tries to explain privilege to non-SJW-types by saying that being a white male is like playing life on "easy" difficulty.

I'll grant I benefited from a lot of things growing up others may not have had.  I had parents that set high standards, taught me a work ethic, taught me the value of education, had money, and helped send me to Ivy League schools (though the performance there, I would argue, was all my own).

Well, for those of you concerned about living down a similar life of privilege, I have a solution for you: start a business.  Doing so instantly converted me into a hated abused underclass.  Every government agency I work with treats me with a presumption of guilt -- when I get called by the California Department of Labor, I am suddenly the young black man in St. Louis called out on the street by an angry and unaccountable cop**.  Every movie and TV show and media outlet portrays me as a villain.  Every failing in the economy is somehow my fault.   When politicians make a proposal, it almost always depends on extracting something by force from me -- more wages for certain employees, more health care premiums, more hours of paperwork to comply with arcane laws, and always more taxes.

Postscript:  I will add an alternative for younger readers -- there is also a way to play college on a higher difficulty:  Try to be a vocal male libertarian there.  Write editorials for the paper that never get published.  Sit through hours of mindless sensitivity training explaining all the speech limitations you must live with on campus.  Learn how you can be charged with rape if your sex partner regrets the sex months later.  Wonder every time you honestly answer a question in class from a libertarian point of view if you are killing any chance of getting a good grade in that course.  Live every moment in a stew of intellectual opinion meant mainly to strip you of your individual liberties, while the self-same authoritarians weep and cry that your observation that minimum wage laws hurt low-skilled workers somehow is an aggression against them.

** OK, this is an exaggeration.  I won't likely get shot.  I don't want to understate how badly abused a lot of blacks and Hispanics are by the justice system.   I would much rather be in front of the DOL than be a Mexican ziptied by Sheriff Joe.  But it does give one the same feeling of helplessness, of inherent unfairness, of the unreasoning presumption of guilt and built-in bias.

After years and years of happy service, my Logitech MX Anywhere mouse finally gave up the ghost.  So I bought a new one, though I purchased the new MX 2 thinking it would be new and improved.

Wrong!  At least for me.  The old mouse used a single AA battery that lasted months and months.  By keeping 1 extra AA battery in my backpack, I was able to make sure my mouse would always work.  Now, though, the new MX 2 mouse has a built in battery that has to be charged with a charging cable.  And if it runs down (which is always possible since there is no charge indicator)?  Then you have to plug it in with a cable to recharge, and the mouse does not work while charging.  Basically, if you were planning to work in your hotel room that night, you are out of luck.

Already, I have to remember to plug in my cell phone, my iPod, my iPad, my TV remote, my Jabra earphone, etc.  I don't want to have to charge something else!!

A plug-in rechargeable battery is NOT necesarily better than using a couple of double A's.  I have the same problem with my home theater remote (also Logitech).  My old versions used to use replaceable batteries, so I could just leave it on the coffee table.  The new remote require a charger.  But I have no outlets within 10 feet of my coffee table, so now I have to keep the remote in the kitchen, one room over.  Stupid, stupid, stupid.

One of my critiques of global warming alarmists is that they are trying to use a type of observation bias to leave folks with the impression that weather is becoming more severe.  By hyping on every tail-of-the-distribution weather event in the media, they leave the impression that such events are becoming more frequent, when in fact they are just being reported more loudly and more frequently.  I dealt with this phenomenon in depth in an older Fortune article, where I made an analogy to the famous "summer of the shark"

...let’s take a step back to 2001 and the “Summer of the Shark.”  The media hysteria began in early July, when a young boy was bitten by a shark on a beach in Florida.  Subsequent attacks received breathless media coverage, up to and including near-nightly footage from TV helicopters of swimming sharks.  Until the 9/11 attacks, sharks were the third biggest story of the year as measured by the time dedicated to it on the three major broadcast networks’ news shows.

Through this coverage, Americans were left with a strong impression that something unusual was happening — that an unprecedented number of shark attacks were occurring in that year, and the media dedicated endless coverage to speculation by various “experts” as to the cause of this sharp increase in attacks.

Except there was one problem — there was no sharp increase in attacks.  In the year 2001, five people died in 76 shark attacks.  However, just a year earlier, 12 people had died in 85 attacks.  The data showed that 2001 actually was  a down year for shark attacks.

Yesterday I was stuck on a stationary bike in my health club with some Fox News show on the TV.  Not sure I know whose show it was (O'Reilly?  Hannity?) but the gist of the segment seemed to be that a recent murder by an illegal immigrant in San Francisco should be taken as proof positive of the Trump contention that such immigrants are all murderers and rapists.  The show then proceeded to show a couple of other nominally parallel cases.

Yawn.   It would be intriguing to flood an hour-long episode with stories of legal American citizens committing heinous crimes.  One wonders if folks would walk away wondering if there was something wrong with those Americans.

One could pick any group of human beings and do a thirty-minute segment showing all the bad things members of that group had done.  What this does not prove in the least is whether that group has any particular predilection towards doing bad things, or specifically in the case of Mexican immigrants, whether they commit crimes at a higher rate than any other group in this country.  In fact, everything I read says that they do not, which likely explains why immigration opponents use this technique, just as climate alarmists try to flood the airwaves with bad weather stories because the actual trend data for temperatures does not tell the story they want to tell.

Many of us casual fans were introduced to the culture war in baseball (i.e. Bill James / data-driven analysis vs. grizzled old scouts looking for five-tool players) by the book Moneyball.

Well, with the recent news that the St. Louis Cardinals may have been caught hacking the Houston Astros data base, it is pretty clear which side won.  This article explains why the until-recently hapless Astros were the target of hacking by one of the last decade's most successful teams.

If you remember the scene in the movie Moneyball where there were a bunch of traditional old scouts sitting around the table debating players, compare that image to this:

When the Astros plucked Colorado's Collin McHugh off the waiver wire after the 2013 season despite his career 8.94 ERA, the move might've surprised some folks. But today's major league stadiums are wired with systems such as PitchF/X and TrackMan that use Doppler radar to track the ball in three dimensions. For every pitch thrown in every game, teams now know the location, acceleration, movement, velocity and the axis of rotation of the ball. The Astros grabbed McHugh because they saw that while his sinker didn't play well at Coors Field, he had a superior curveball that rotated about 2,000 times a minute, or 500 times more than an average curve spins.

It was the baseball equivalent of noticing a needle in the data haystack.

Once he was in Houston, the coaches told McHugh to change his arsenal by throwing that terrific curve more and replacing the sinker with a high fastball.

The result? His ERA nosedived to 2.73 in his first season with the Astros.

By the way, given the technology described here, and the tech I see deployed on the typical baseball TV broadcast, why do we still have human beings calling balls and strikes?

For reasons I will not get into yet again, cheer-leading local sports subsidies is essentially built into the DNA of most big city newspapers.

Last week our paper ran this headline:

'15 Super Bowl visitors boosted tax revenue by double digits

Wow!

Combined sales tax revenue for January and February totaled $14 million in roughly similar categories for restaurants, bars, hotels and retail in downtown Phoenix, Westgate and Scottsdale. That was up 19.5 percent over the same time a year ago.

That sounds awesome.  Take that, all you public subsidy skeptics.   Giving the Superbowl the benefit of the doubt and ignoring things like growth and the really good weather this winter, that is $2.28 million increase in taxes which we will generously ascribe all to the Superbowl.  And probably mostly taken from non-Arizonans, so its like free money.

It is only later in the article that the paper sheepishly inserts this:

Phoenix, Glendale, Scottsdale and tourism bureaus from Phoenix, Scottsdale, Tempe and Mesa combined to spend more than $5.6 million on Super Bowl events and public safety.

So we spent $5.6 million (probably under-estimated) to make $2.28 million (probably not all Superbowl related).  The headline was thus a total crock of Sh*t but typical of how, in small ways and large, the media helps push for bigger and bigger government.  I am sure the hotels and restaurants did well -- if so, then they are free to form a consortium to pay for the Superbowl's cost next time.  Or better yet, have some other sucker city host it and I will happily watch on TV.

Update:  I missed this part:

The Arizona Sports and Tourism Authority and Glendale provided a $6.2 million rebate to the NFL on Super Bowl ticket sales, said Kevin Daniels, authority chief financial officer.

I can't tell from the article if that $6.2 million is or is not in the numbers above.  I presume it is netted out before hand so that the gain in sales tax would be $6.2 million higher than reported above if this provision did not exist.  But this does mean that another valid headline would be:

Nearly 75% of Superbowl Sales Tax Gains Given to the NFL

When I first offered my novel BMOC to readers, a lot of them assumed it was some libertarianish fantasy.  Actually, its not a particularly serious book, just your normal everyday mystery for reading at the beach.  The unique part of the book is the introduction of a number of oddball business models (I used to make these up as my occupation to share with people at cocktail parties when I got bored).

I am in the midst of a light edit of the book for a re-release  (like my last story, we will have a limited time free-on-Kindle promotion, so watch for that).  Anyway, I had forgotten this idea I had included for a reality TV show.  I think it holds up pretty well.

Gladstone knew that most of Cupcake’s best-known work was in a reality TV show called “Seven Deadly Sins.”  In that particular show, eight priests were brought together, tempted each week by one of the seven deadly sins. The viewing audience got to vote each week as to which priest succumbed the most and got kicked off the show. Cupcake was featured prominently in several of the weekly contests, including her now famous take-down of Father Stanley Vincenzo (who had up to that point been considered the shoe-in favorite to emerge victorious) in the “lust” episode.

It is amazing no sharp TV executive has yet snapped this idea up.  You are all welcome to it, go and make your fortune.

I am always amazed that the media will credulously run stories against "corporate welfare" for oil companies (which usually mostly includes things like LIFO accounting and investment tax credits that are not oil industry specific) but then beg and plead for us taxpayers to subsidize movie producers.

I wish I understood the reason for the proliferation of government subsidies for film production.  Is it as simple as politicians wanting to hobnob with Hollywood types?  Our local papers often go into full sales mode for sports team subsidies, but that is understandable from a bottom-line perspective -- sports are about the only thing that sells dead-tree papers any more, and so more local sports has a direct benefit on local newspapers.  Is it the same reasoning for proposed subsidies for Hollywood moguls?

Whatever the reason, our local paper made yet another pitch for throwing tax dollars at movie producers

Notwithstanding a recent flurry of Super Bowl-related documentaries and commercials that got 2015 off to a good start, Arizona appears to be falling behind in a competitive and lucrative business. The entertainment industry pays well, supports considerable indirect employment and offers the chance for cities and states to shine on a global stage.

Seriously?  I am sure setting up the craft table pays better than catering a party at my home, but it is a job that lasts 2 months and is then gone.  Ditto everything else on the production.   And I am sick of the "shines on the world stage thing."  Who cares?  And is this really even true?  The movie Chicago was filmed in Toronto -- did everyone who watched Chicago suddenly want to go to Toronto?  The TV animated series Archer gets a big subsidy from the state of Georgia.  Have they even mentioned Georgia in the series?  Given the tone of the show, would they even want to be mentioned?

When government subsidizes an industry, it is explicitly saying that resources are better and more productively invested in the subsidized industry than in other industries in which the money would have been spent in a free market.  Does the author really have evidence that the money I would have spent to improve the campgrounds we operate in Arizona is better taken from me and spent to get a Hollywood movie shot here instead?  Which investment will still be here 6 months from now?

Arizona is one of 11 states that don't offer tax incentives, primarily in the form of income-tax credits, and that's the core of the problem. There's also no state film office to help out-of-state crews obtain filming permits, locate vendors, hire temporary staff and so on.

Arizona's tax incentives expired after 2010 and the film office closed in the wake of a recession that hit the state especially hard and necessitated tough spending choices. Although bills to revive those programs have been introduced, they're not given high odds of success in the current session as the governor and lawmakers struggle to close $1.5 billion in deficits over this year and next.

"Right now, there's nobody to call, the phone isn't being answered and nobody responds to e-mails," said Mike Kucharo, a local producer and director who serves as the state-government liaison for the Arizona Production Association, an entertainment trade and networking group. "We need a film office."

Yeah for us!  While all the lemmings in other states bid up the price of a few politicians being able to get their picture with Hollywood types on a production set, we have chosen not to play.  Good for us.  Only an industry insider clown with a straight face could say that we need a taxpayer-funded film office.  Really?  Do we need a taxpayer-funded florist office to attract flower sales?

Years ago I wrote an article calling sports team subsidies a prisoners dilemma game, where the only winning move was not to play.  The NFL has 32 teams, mostly in the largest cities.  Without subsidies the NFL would have ... 32 teams, mostly in the largest cities, and taxpayers would have saved billions of dollars.  The same is true for film:

Indeed, the number and size of incentives escalated from just two states offering $2 million in combined incentives in 2003 to 40 states offering $1.2 billion just six years later, according to the Tax Foundation.

So subsidies have gone up by over a billion dollars a year, and yet roughly the same films are being made.  This is one of the best examples I can think of where politicians are using taxpayer money to increase their personal prestige.  The AZ Republic should be embarrassed they are out front actively encouraging this behavior.

Postscript:  For all of its flaws in teaching real-world relevant business topics, the Harvard Business School was very good, at least when I was attending it, at teaching business strategy.  My memory may be fuzzy here, but I am pretty sure that "40 other groups have all jumped into this activity and have ramped up their spending by a factor of 50 in just six years and all 40 competitors are really focused on winning almost irregardless of the price they pay" is not a very good pitch for investing money in a new field.

Postscript #2:  All of this is a wonton violation of the AZ state Constitution, though of course big government advocates are really good at totally ignoring Constitutional limits on government power.  Here is what our Constitution says:

Section 7. Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation, or become a subscriber to, or a shareholder in, any company or corporation, or become a joint owner with any person, company, or corporation, except as to such ownerships as may accrue to the state by operation or provision of law or as authorized by law solely for investment of the monies in the various funds of the state.

Update:  From the Manhattan Institute, film tax breaks return 30 cents for every dollar spent

Similar to most targeted tax breaks, movie production incentives routinely fail to deliver on the economic promises made by their proponents. Supporters frequently claim movie incentives create jobs and lead to net gains in tax revenue. However, data from several states find movie production incentives generate less than 30 cents for every lost dollar in tax revenue.

Providing tax breaks specifically to the film industry is an example of government working to choose winners and losers in the marketplace. States could attract almost any industry if they paid for a quarter to a third of its expenditures, but such a policy would be fiscally unsustainable. A better system would be to lower state tax rates for everyone, encouraging economic growth.

Film is a particularly poor industry to subsidize because it does not create long-term employment and other lasting economic benefits for states. Even though a well-made film might boost tourism, productions only offer short-term employment and the workers are highly specialized. Production and workers can easily move from one location to wherever better deals are offered.

Update #2:  The AZ Free Enterprise Club was on this last month

Kevin Drum simply does not understand why Wall Street might be piling into broadband stocks despite proposed "tough new regulations."  He posits a number of hypotheses -- that Wall Street expected the rules to be worse than they turned out to be.  But this can't be it because the hundreds of pages of rules are still a secret.  He also hypothesizes there might be some nefarious secret loophole buried in the rules Wall Street knows about but we don't.

This is crazy!  How can a reasonably bright person like Drum who writes about the political economy not understand the issue of regulatory capture?  Seriously, I have always figured that the Left, which has a seemingly infinite appetite for regulation, must favor regulation because they find the benefits to out-weight the crony-ist downsides.  Is it really possible Drum is unfamiliar with the downsides altogether, or is he just being coy?

Here is what regulation, particularly utility-style regulation, tends to do -- it locks in current business models and competitors.  It makes it really hard for new entrants to challenge incumbents with innovative new business models or approaches, because regulations have been written based on the old business model and did not take the new one in account.  So a new entrant must begin business by getting regulators to allow their new model, which never happens because by this time incumbents have buildings full of lobbyists aimed at the regulatory process.  Go ask Tesla and Uber and Lyft about how easy it is to enter a heavily regulated business even with a superior new business model.

This is particularly true in the technology world.  The biggest threat to incumbency is someone with a new technology or approach to the technology.  Don't believe me?  I suggest you go to the offices of Netscape or AOL or Lycos or Borders or Circuit City or Radio Shack and interview them about the security of their multi-billion dollar businesses in the face of new online technologies.  At best, regulators put a huge speed bump in the way of competitors, costing them time and money to get their alternative business model approved.  At worst, regulators block new competitors altogether.

I will give you a thought experiment.  Let's say these exact same rules were adopted in the year 2000, when AOL and Earthlink dial-up ruled the internet access world.  Would cable and satellite and DSL have grown as quickly?  I can see the regulators now -- "hey, all the rules specify phone dial up.  There's nothing here about cable TV.  Sorry [Cox, Comcast, whoever] you are going to have to wait until we can write new rules.

The other thing that happens with utility-style regulation is that companies in the business tend to get their returns guaranteed.  Made a bad investment in a competitive market?  Well good luck getting customers to pay extra to bail you out from your bad decision when they have other options.  But what happens when your local power company wastes $10 billion on a nuclear plant that never opens -- it gets built into your rate base!

In the cast of broadband, they are locked in what business school students would see as a classic supply chain battle.  Upstream companies like Netflix supply content via downstream broadband companies.  Consumers are only willing to pay a certain amount for this content, so the upstream and downstream fight a lot over who gets what share of that consumer $.    This happens everywhere in the business world, from Cable TV to oil refining to selling TV's at Wal-Mart.  There is a real danger that broadband will lose this fight in the future -- but not now.  Regulated industries never die, they appeal to their regulators for help.

As of yesterday, Wall Street is looking at broadband companies and realizing that they are now largely immune from competition and some level of minimum returns are likely now gauranteed forever.  Consumers should hate this, but what's not to love for Wall Street?

Postscript:  Kevin Drum describes the new regulation this way:  "Basically, under Wheeler's proposal, cable companies would no longer be able to sign special deals to provide certain companies with faster service in return for higher payments."  This is a bit like describing the Patriot Act as a law to force people to take their shoes off at the airport.  Yes, it does that narrow thing, but it does a LOT else.  The proposal is hundreds of freaking pages long.  It does not take hundreds of pages to do the narrow little niche thing Drum (like most neutrality supporters) wants.

This Administration has cleverly taken this one tiny concern people have and have used it as an excuse to do a major regulatory takeover of the Internet.  This is a huge Trojan Horse. But I have already ranted about the details of that and you can read that here.