We conduct four randomized field experiments among 1,801 hosts on Airbnb by creating fictitious guest accounts and sending accommodation requests to them. We find that requests from guests with African American-sounding names are 19.2 percentage points less likely to be accepted than those with white-sounding names. However, a positive review posted on a guest’s page significantly reduces discrimination: When guest accounts receive a positive review, the acceptance rates of guest accounts with white-sounding and African American-sounding names are statistically indistinguishable.
This is modest good news. It means that the original discrimination observed against people using Airbnb with black names had more to do with perceptions or stereotypes of unknown black people (e.g. "maybe they are more likely to be a criminal") than an out-and-out attitude of not wanting to have blacks set foot in their house. The former is not great but a hell of a lot easier to combat than the latter. I would argue the breakthrough in attitudes on gay marriage had a lot to do with so many people coming out of the closet over the last decade or two that almost everyone ended up having friends or family who were gay, and who they knew first hand to be good people. This overcame past attitudes about homosexuality which for many were based wholly on stereotypes within their local circle.
As I linked above, this result in the Airbnb study was similar to a study on how ban the box had the perverse effect of reducing hiring of African-Americans because it reduced information:
Jurisdictions across the United States have adopted “ban the box” (BTB) policies preventing employers from asking about job applicants’ criminal records until late in the hiring process. Their goal is to improve employment outcomes for those with criminal records, with a secondary goal of reducing racial disparities in employment. However, removing criminal history information could increase statistical discrimination against demographic groups that include more ex-offenders. We use variation in the timing of BTB policies to test BTB’s effects on employment. We find that BTB policies decrease the probability of employment by 3.4 percentage points (5.1%) for young, low-skilled black men.
In that case as well, when no information is available, people fall back on stereotypes. Employers recognized that stereotypes about criminal behavior were weak information and readily overcame them when better information (e.g. background checks) were available.
I was reading the USA Today story about a local guy who reported a local restaurant to the newspaper because it had a picture of guys in blackface they wouldn't take down -- what turns out to be a picture of Welsh coal miners covered in coal dust. Personally, I am sorry the guy has faced so much vulgar hostility and apparent outright racism in the letters he has received. But I still can't get past a judgement that his concern was historically ignorant, clueless virtue signalling. His concern failed even on the level of his own stated principles in that it tried to deny a voice to folks who were a lot more downtrodden and lacking in privilege (including a near certainty of early death from a variety of respiratory diseases) than are modern African-Americans.
The silver lining from all this is that I had forgotten that Phoenix had a Cornish pasty restaurant and I have since eaten there twice (well, one was delivered) and it is awesome.
All this is preface to an event that happened a week or two ago. My wife and I were at a small, ticketed event watching a preview of an upcoming Ballet Arizona performance of the Firebird. These take place in a small rehearsal theater and give ballet supporters a chance to see a preview and then hear from our artistic director (and in this case also the costume designer).
I have to give a bit of background on the ballet. We were previewing the opening scene, in which a prince and a group of his friends are hunting in the forest and discover a secret magical place where they encounter the firebird -- a sort of fantasy non-human creature played by a ballerina. They try to capture her, she nearly dies, she pleads for her life, and the prince revives her (which then leads to a sort of reward that leads to the rest of the story).
Anyway, in this performance the ballet tried to do something different. The artistic director Ib Anderson reimagined the scene as a sci fi scene from his childhood -- think of the prince being Captain Kirk on an away mission on a new planet and discovering an alien. All the new costumes are sci fi / alien themed.
OK, so we see this opening scene. I am only a middling ballet fan but the scene is beautifully done. Afterwards we had Q&A. Even I was thinking about asking about the idea, but geek that I am my mind had wandered from the ballet of an away team visiting a planet to imagining the original cast of Star Trek dancing ballet on a new planet to trying to figure out what Star Trek episode had the main characters dancing and playing air instruments ("I Mudd" by the way).
A hand goes up in the first row. Rather than a question, the guy goes into a monologue about how he really didn't like the fact that all the men attacked a defenseless woman and that the only way she got her powers back was because the man chose to give them to her. Now, I said that in about 20 seconds but this went one for a minute or two. It was excruciating. An enormous WTF moment.
First, it's a freaking alien that is being played by a woman. Second, to the extent it is a reflection of stereotyped gender roles by the original author, does this person monologuing to us really think the rest of the audience is unaware that writers 100 years ago had different visions of women's roles in society than we have today? Is his goal to whitewash the past by pretending authors never wrote this kind of thing, or is his goal merely to make sure that we all know that he knows? Even weirder, to be at this event the guy was presumably a ballet aficionado at some level -- has he never seen, say, any 19th century story ballet? Or better yet 19th century opera, where the main role of women seems to be to die of some sort of wasting disease in the third act? And finally, is he really concerned that the community of ballet choreographers and dancers is somehow a secret den of anti-wokeness that needs to be exposed?
I compare this need to publicly virtue signal like this to Tourette's because I don't think the guy could help himself. Had you carefully explained all of the above to him in advance, he still likely would have had to make his speech (just like the guy with the miner photo above still insists he did the right thing even now that it has been explained that its a freaking photo of downtrodden, soon to be dead of respiratory diseases, miners). By the way, it was sort of funny to see the reaction of the ballet folks on stage to this -- they tend to be way out there on social justice causes themselves and were clearly unused to being outflanked on these issues.
I got to thinking, what is the solution if this were really a problem? I suppose we could gender swap the whole thing, with a male in the lead of Swan Lake, say. But that does not really work, because in general in all these unwoke story ballets the females get all the best roles. Most of the men are just props. So gender swapping them would just take all the best roles away from women and hand them to men. Eek, what is a good SJW to do?
I am not a Lady Gaga fan. I could probably name a few of her songs if you put a gun to my head -- Poker face, uh that one in A Star is Born, uh, something something Romance. And I was actually a tad resentful of even going -- we were in Las Vegas during the freaking Superbowl and we are skipping the game and going to Lady Gaga?
She had two shows in Vegas at the Park Theater (by the way best large theater I have ever been in for a concert -- WAY better than some hockey rink). One show was her regular show with her pop music and one was a jazz show with American songbook classics. We saw the latter.
And it was amazing. In a world of autotune and pop singers who can't actually sing *cough* Katie Perry *cough*, Lada Gaga can sing her ass off. It was tremendously impressive. I don't know if she is doing this show again or in other locations but it is highly recommended.
PS- The night before we went to a little Italian restaurant that had Pia Zadora singing in the lounge. Spent the evening sitting at the bar chatting with the Liza Minnelli impersonator who spelled Pia from time to time. A very old-school Vegas evening. And did you know Pia Zadora has a freaking Warhol of her? And it's good. Way more flattering than most paintings Warhol did of women. Which is likely the product of her billionaire husband turning the screws on the artist.
PPS- Apparently we didn't miss much in the Superbowl.
Megan McArdle has a great WaPo article and tweet storm on high-speed rail in the US. In it she focuses on issues of distance and infrastructure barriers we have.
One thing she left out is that the US rail system is optimized for freight, vs. European and Japanese systems that are optimized for passengers (it is hard to do both well with the same network). The US situation is actually better, much better, for energy conservation. I wrote in detail about this before:
First, consider the last time you were on a passenger train. Add up the weight of all the folks in your car. Do you think they weighed more or less than the car itself? Unless you were packed into a subway train with Japanese sumo wrestlers, the answer is that the weight of the car dwarfs that of the passengers it is carrying. The average Amtrak passenger car apparently weighs about 65 tons (my guess is a high speed rail car weighs more). The capacity of a coach is 70-80 passengers, which at an average adult weight of 140 pounds yields a maximum passenger weight per car of 5.6 tons. This means that just 8% of the fuel in a passenger train is being used to move people -- the rest goes into moving the train itself.
Now consider a freight train. The typical car weight 25-30 tons empty and can carry between 70 and 120 tons of cargo. This means that 70-80% of the fuel in a freight train is being used to move the cargo.
This is another case of short-sighted analysis that looks only at the seen rather than the unseen. Coastal elites take trips to Europe and see the beautiful high-speed trains and in turn never spend a moment thinking about freight trains. So they fixate on beautiful sexy passenger trains rather than thinking about the system holistically. I titled a Forbes article I wrote on the effect as "Shifting Capital from the Productive to the Sexy."
PS- I am a train buff and have a whole room of my house filled with a model railroad, so I don't knee-jerk hate on rail. I have ridden European high-speed rail many times so I am familiar with the product. The London-Paris segment is great, and I have ridden the French TGV from Paris to Marseilles and the Italian line from Milan to Florence. What's not to love as a tourist -- we don't pay for them and they provide good service between the city centers of tourist destinations. But if you look at those trains they really have a ton of expensive infrastructure carrying not very many people over relatively (for the US) short distances.
I write this because after I criticized infrastructure triumphalism in Joel Epstein's article at Huffpo, he wrote me a one line retort: "You should get out of the country more often." LOL, if you had to enshrine a hall of fame of sneering coastal elite dismissive comments of critics, this would have to be on the list. I tried to follow up with him and ask him if he would have the US adopt China's infrastructure construction practices if the cost was adopting China's environmental and accountability standards, but I did not get a response.
“Let’s be real,” Newsom said in his first State of the State address on Tuesday. “The current project, as planned, would cost too much and respectfully take too long. There’s been too little oversight and not enough transparency.”
Hurray! This is long overdue. I was writing about how dumb an idea this was back in 2008. I remember it because I was on Fox and Friends in the worst time slot ever to talk about it. Not only was the interview at like 4AM Arizona time, but the segment immediately before I discussed economics and public policy *yawn* they had 8 cute maltese puppies frolicking on stage.
Everyone, including I would bet California officials but probably excepting elements of the fawning media, knew the cost estimates were a joke. In 2010 when CA said $30-$40 billion I said it would take at least $75 billion and when CA belatedly adopted that number I doubled it to $150 billion and I think that is still low for what it would have cost. This was all at a time when you could fly Burbank to Oakland on Southwest for $90.
But because it seems to be a rule that no CA politician can remain sane for more than 5 minutes straight, here are the next lines of the story:
Newsom, though, said he wants to finish construction already underway on a segment of the high-speed train through the Central Valley. The project would connect a 119-mile stretch from Merced to Bakersfield.
“I know that some critics are going to say, ‘Well, that’s a train to nowhere.’ But I think that’s wrong and I think that’s offensive,” Newsom said. “It’s about economic transformation. It’s about unlocking the enormous potential of the Valley.”
This is absolutely absurd. If you started with a clean sheet and studied what the Central Valley really needed for "economic transformation," I am willing to bet a high-speed rail line from Merced to Bakersfield would not be in the top 100 items, maybe not the top 1000. Probably first on the list for the Central Valley economy would be to stop applying minimum wage rates based on San Francisco to poorer rural areas of California. If you wanted to limit yourself to infrastructure projects, the Central Valley would probably beg for water infrastructure projects, not a silly overpriced train.
I missed the beginning because this is where voice mail picked up and started transcribing but it's definitely a classic:
...found some issue with your current Social Security number, so we have the started to suspend it and issue a new one to you now in order to get more details on it. I want you to give me a call back on 509-287-7296. I repeat. It's 509-287-7296 now if I do not get any call back from you then unfortunately, we need to proceed further. Thank you and have a blessed day.
PS- I use Hiya on my android phone but I am open to other solutions. My main problem is my work phone which rings all day with spam calls, not sure if there is a solution for that.
Readers have wondered why I have not really jumped on Alexandria Ocasio-Cortez's Green New Deal plan (which has since been endorsed by most major Democratic presidential candidates). Well, one-reason is that we had no details, at least until a formal resolution was introduced in Congress and an FAQ went up and then back down on AOC's website. The Ocasio-Cortez camp claims the FAQ went up by mistake (after previously claiming it was a Republican false flag operation), though I consider it more of a Kinsley Gaffe if it was a mistake at all.
The other reason I have ignored it to this point is the same reason I never enjoyed those American Idol episodes where they show all the people who can't sing but really think they are awesome embarrassing themselves. It's weird enough seeing people who are incompetent think that they are capable. It is even weirder seeing that person cheered on by a million other incompetent people on twitter.
But it appears that the entire Democratic Party has rapidly endorsed the plan, and every one of their Presidential candidates have said they are all for it, though site-unseen. So I guess I have to wallow in a bit. This may be the first of many posts, or maybe not. It depends on how much I want to shoot at fish in a barrel.
It's hard to know where to start. My first overall reaction is that there is no science and no economics in the plan at all. I find this ironic (though not surprising) given that it comes from the environmental community that has called me "anti-science" for years for doubting global warming forecast rates based on exceptionally high degrees of positive feedback built into computer models. AOC's entire plan feels like the results of a late-night policy brainstorming by a group of vegan poetry majors who chip in every idea they have seen someone post on Facebook.
Readers know that despite my skepticism that manmade CO2 will cause a climate catastrophe, I have presented a CO2-reduction plan on these pages. You can read it here, but the three most relevant planks were:
A revenue-neutral carbon tax that increased the price of producing CO2 and then let individuals and markets figure out how to do that most efficiently. Since the point of the carbon tax is not to raise money for politicians but to send pricing signals to fuel users, the proceeds were netted against reductions in other regressive taxes, such as the payroll tax
Elimination of all the command and control government programs where politicians pretend they know they best solution to technical-industrial problems and then mandate that scarces resources flow to their preferred solutions. These are counter-productive, and not necessary since the carbon tax does the work for us
Make regulatory changes to unleash a new generation of safe nuclear power, since this is the only high-production, reliable, not time-of-day dependent source of electrical power that we know about.
I did not think it was possible -- I presented the plan above as a transpartisan plan intended to bridge the gaps between Left and Right -- but the Green New Deal is EXACTLY opposite this plan
First, as with many on the Left, AOC does not understand much about economics, so she does not understand the carbon tax. For the Left, the point of a carbon tax is not to send pricing signals in the marketplace but to raise money for politicians to spend on pet projects. We saw this back in the Washington State carbon tax proposal, where environmentalists rejected a carbon tax because it was revenue neutral. In her FAQ, AOC does exactly the opposite of my point 1 and 2. She wants people just as smart and economically-savvy and scientific and stuff like herself at the top to redesign the US economy and to do this she needs a LOT more money than just a carbon tax:
The Green New Deal is a massive investment in the production of renewable energy industries and infrastructure. We cannot simply tax gas and expect workers to figure out another way to get to work unless we’ve first created a better, more affordable option. So we’re not ruling a carbon tax out, but a carbon tax would be a tiny part of a Green New Deal in the face of the gigantic expansion of our productive economy and would have to be preceded by first creating the solutions necessary so that workers and working class communities are not affected. While a carbon tax may be a part of the Green New Deal, it misses the point and would be off the table unless we create the clean, affordable options first.
Do you start to see the Great Leap Forward analogy? Just to finish off the thought, AOC also goes the opposite direction of my nuclear point, proposing to ban nuclear power and dismantle all that carbon-free electricity production. Ask Germany how well that has worked out for them, as they have been forced into a rush of new coal-fired plants, or New York that is building three new large natural gas plants to replace the nuclear plants it is closing. I will bet a thousand dollars that AOC has no real knowledge of nuclear safety nor has she spent probably 5 minutes studying the new generation of nuclear technologies. Frankly, I bet as far as she has thought about it is that it is expected to be anti-nuclear on the Left so she is anti-nuclear like the other cool kids.
Every dumb, unscientific nostrum for energy-use reduction has at one time or another over the last several months been attached to the plan. One example is the call for dismantling industrial agriculture and promoting local food production. This is easily one of the silliest ideas (for fuel reduction) I can imagine and have written about it before. I have no problem if you want to buy locally and don't want to buy from Kraft or Cargill. Power to you. But the conclusion that local food production will save energy is exactly the sort of conclusion that people with no experience rigorously analyzing scientific problems come up with. They jump from the fact that Agriculture uses a lot of energy to "it must all be in transportation" and thus conclude "local agriculture will save lots of fuel." But this is absurd. First, fuel use in agriculture is not mostly transport to the end consumer. The actual growing process consumes most of the fuel, and this fuel use is much more related to land productivity and economies of scale that would be destroyed by a local agriculture mandate. And even if it did actually improve fuel use, think of the other environmental effects of growing food locally on land less-suited to its production -- you would greatly increase land and water use, just to start, both likely creating more environmental problems.
I am reminded of Mao's idea during the Great Leap Forward that China needed to produce all its steel locally in home-based backyard furnaces (I kid you not). I think most of us can predict the obvious result - steel production crashed because you can't produce steel in any kind of amount or quality in the backyard. But there were two less obvious results as well. One, this contributed to the crash in agricultural output as skilled agricultural labor and resources was diverted to this silly steel-making scheme. And two, whole forests were denuded as people sought out fuel for these furnaces. China is still recovering from environmental messes this caused. India barely avoided the same disaster as Ghandi wanted to eschew industrial production in favor of home spinning and weaving. THIS is what you get when you let ignorant people command and control the economy. Heck, this is what you get even when you let really, really smart people command and control the economy.
Update: Since I have eschewed Twitter, mostly, of late, I missed the fact that #greenleapforward is the term folks are converging on. Happy to go with that.
In the spirit of something John Scalzi has done in the past -- he posts some of his 1-star Amazon book reviews online as a sort of therapy -- I like to share some of my favorites. This one is not quite a one-star review but it made me laugh this morning:
Lol, we are closed for the winter (the TVA, who owns this campground, requires that the campgrounds near its dams be closed in winter).
By the way, this is from my daily report at Reputology.com. They work well for me managing reviews over multiple locations.
Today after the market closed was Tesla's analyst conference call to review fourth quarter earnings. TL:DR It was as weird as ever, maybe weirder. Even before the call, Elon Musk said that the numbers released today would be un-audited, and the call ended by saying -- in a sort of "oh by the way" over the shoulder parting shot -- that their CFO was leaving and being replaced by a 36-year-old with only Tesla experience and no prior CFO role (not unlike the random young dude that the Arizona Cardinals just hired as their coach, but that is another story). Neither Musk statement was a big confidence boost given the myriad questions swirling around the legitimacy of Tesla's reported financials. But the REALLY weird stuff was in between.
Tesla faces questions about whether enough new Model 3 sedans can be sold to generate substantial profits.
“The demand for the Model 3 is insanely high. The inhibitor is that people don’t have the money to buy one,” Tesla Chief Executive Elon Musk told analysts on the call.
This is really hilarious. The same could be said of Ferrari's, Manhattan Penthouses, and bone-in rib-eyes at most top steakhouses. Once you get past the absurdity of the statement, you realize that Musk essentially admitted the demand cliff many have suspected for the Model 3, as Tesla has burned through its entire multi-year order book for the Model 3 in just 6 months.
Yet, Musk said, the new [China] factory [which is currently a bare patch of dirt] will be building cars at an annual rate of 300,000 vehicles by the end of the year, at an expenditure of $500 million — much less than a typical auto plant normally costs.
And much faster, by the way, than any automotive company in history has ever started up a new production plant.
It turns out, by the way, the Tesla still seems to be running itself like a free-wheeling largely-unplanned software startup rather than like a capital-intensive automobile manufacturer. Imagine this from Daimler or Volkswagen or GM:
Musk said Tesla might build the Model Y at its Nevada battery factory but indicated no one should count on it. ”It’s not a for-sure thing, but it’s quite likely, and it’s our default plan,” he said.
But let's get to my thesis I have been arguing for a while. Tesla has a lot of problems, but the one I have been most focused on is that Tesla is a growth company that has stopped managing itself for growth. Both R&D and capital spending have dried up, especially in relation to revenues -- a particularly vexing problem because Tesla has chosen a strategy of owning the sales, service, and fueling networks (not just manufacturing) so growth is even more capital intensive for Tesla than it is for other automobile manufacturers (see the earlier article for details). Tesla's stock price is close to $300, but its current auto business is likely not worth more than $50 share -- the other $250 is hopes and dreams of growth, valuation that goes away if Tesla is no longer perceived as a growth story.
Beyond the fact listed above that Musk essentially admitted the demand problem in the US for Model 3, here is what else we heard:
Tesla owed much of its cash-flow improvement to a drastic reduction in capital expenses — which can signal either a reduced need to buy, say, factory robots or a slowdown of investment in future growth. In the last three quarters, capital spending has shrunk from $786 million to $510 million to $324 million.
This number is insanely low. As @teslacharts showed today, this is equal to 4.5% capex as a percent of revenues!
The mature non-growing auto companies typically spend 5-5.5% or revenues on capex just to maintain their position. 4.5% is NOT a growth number.
In a conference call with analysts, Musk said he still plans to build a factory in China this year and begin building a Model Y subcompact next year. Asked where the money would come from, CFO Ahuja said cutting costs and careful spending would do the trick.
Musk was unusually subdued but his usual speculative self. The China factory site remains a bare patch of ground, and no news was offered on loans from Chinese banks that Tesla is hunting for.
Beyond the fact that Musk is almost criminally full of sh*t on his projections for his China factory production, why the hell is Tesla digging around in the couch cushions to fund their Asian expansion? Their valuation is at freaking 60-80x earnings. Why aren't they raising capital for this and a thousand other things they need to be doing?
But in fact, Tesla is actually planning to contract its capital base, announcing in the call they will likely pay the upcoming ~$1 billion bond redemption in cash.
At the same time, past announced growth projects are falling by the wayside. The semi truck, which was announced to great fanfare and helped pump up the stock price at a critical time, has essentially been dropped from the product plan (Musk did something very similar with the solar shingle at SolarCity, touting the technology and leveraging it to sell the company to Tesla, and then essentially dropping the product).
In the Model S & X, Tesla has already acknowledged that no effort has been started to update these aging products, and in fact production is being cut and much of the manufacturing workforce for these products has been laid off. These two products have always been the main source of Tesla's gross margins and its unclear how they will make up the lost margin and sales from these core products that Tesla seems to be essentially abandoning rather than investing in and refreshing. We also learned that prices are being cut on these vehicles:
On Tuesday, Tesla offered an $8,000 discount on S and X cars for customers who let Tesla limit the range of the car’s battery pack using custom software. The range for the software-limited Model S, for example, would be cut by 20 miles, to 310. That car cost $96,000 at the end of 2018. Tesla cut that price by $2,000 this month. Tuesday’s deal puts the price down to $85,000 — a reduction of $11,000 for 20 miles less range.
Note the software limitation does ZERO to cut Tesla's costs, so these are 100% hits to Tesla's margins.
Because the batteries themselves wouldn’t differ, production costs would stay the same as in the higher-range car. The gross profit margin falls by $11,000 per car. (A Tesla spokesman told The Times that improved efficiencies on the assembly line would help address that problem.)
The next milestone for Tesla will be release of fully audited 2018 numbers. I have no idea when these will appear and would not be surprised if they are delayed. There are still some real financial question marks in the numbers we have seen to date, and only the 10-K will begin to answer some of them.
In the past I have been careful to say that Tesla is a dangerous short and that you should not take my non-expert advice investing, and I repeat all that now. I understand business strategy and I am more sure than ever that Tesla's strategy is falling apart and the wheels are very likely to come completely off in the first quarter. However, I do not understand the stock market's ins and outs and whether Tesla's failings get translated now or later to the stock price is not something I can predict well. Trump could bail them out, some sucker could buy them, they could fudge their numbers for years, etc. So be careful.
One More: I forgot to mention that Tesla has reduced its SG&A expenses over the previous two quarters in absolute terms, and thus substantially on a percent of revenue basis. For a mature company this is good news. For a growth company, this is a sign that growth may not be the goal any longer. SG&A staffing represents a company's capacity to do new things and take on new projects and enter new markets and add new services. No way companies like Google or Facebook would have been trimming SG&A in the height of their growth years. Cutting SG&A is what you do when growth is over or when there is a cash crunch or both.
Postscript: Not to be too much of a pedant on myself, but I said "parting shot" which I think is OK but I believe the original term was actually "Parthian Shot" named for that army's technique of riding full on towards the enemy, then turning tail and riding away but firing backwards with a bow and arrow off their horse as they rode away. Really used to piss off the Romans.
Who says that professional sports have nothing to teach businesses? Pro sports team owners have perfected the art of promising the world to local citizens to get taxpayers to pay for their billion dollar stadiums (which in the case of NFL teams are used approximately 30 hours a year). The Miami Marlins in particular have perfected the art of building a good team, leveraging its success to get a new stadium deal, and then immediately dismantling the team and buying cheap replacement players.
In the business world many corporations have taken the Miami Marlins strategy. Tesla took $3/4 of a billion dollars form NY taxpayers to build a factory in Western New York, only to employ a tiny fraction of the promised employees. In fact, one academic studied all the relocation subsidies NY has made in the recent past and found none of the gifted companies fulfilled their employment promises. In Mesa, AZ there is a factory that I call the graveyard of cronyism where not one but two sexy high-profile companies have gotten subsidies to move in (FirstSolar and Apple) only to both bail on their promises after banking the money.
Foxconn Technology Group, a major supplier to Apple Inc., is backing down on plans to build a liquid-crystal display factory in Wisconsin, a major change to a deal that the state promised billions to secure.
Louis Woo, special assistant to Foxconn Chairman Terry Gou, said high costs in the U.S. would make it difficult for Foxconn to compete with rivals if it manufactured LCD displays in Wisconsin. In the future, around three-quarters of Foxconn’s Wisconsin jobs would be in research, development and design, he said.
They added this:
The company remains committed to its plan to create 13,000 jobs in Wisconsin, the company said in a statement.
Yeah, sure. Anyone want to establish a prop bet on this one? I will take the under.
A perfectly reasonable way to read this chart is to note the high correlation between state taxation and regulatory intensity and states that are gaining or losing population
Unfortunately, my experience in Arizona (one of the "inbound" states above) has been that people have zero ability to correlate specific elements of public policy with particular outcomes. In particular, people who flee California because it is too expensive and dysfunctional come to Arizona and immediately begin voting for exactly the same policies that made California expensive and dysfunctional. Therefore, I tend to read being in an "inbound" state with dread, knowing that folks are moving in right now to make us the next Illinois or California.
Tags: Arizona Category: Regulation |
Comments Off on The Next States to Get Hammered by the Blue State Model
Quiz: Since 1066, name an English queen consort who was not the monarch (e.g. not Mary I, Mary II, Liz 1, Liz II, Anne, Victoria) who was the biological daughter of another English Queen consort, also not the monarch.
Obviously this takes an unusual situation as in a normal succession this would require her to be married to her brother, uncle, or nephew.
Tags: English Queen, William Mary Category: History |
Comments Off on English History Quiz -- Nobody on Twitter Got This One Yet
Several years ago my knees started hurting a lot and eventually I was diagnosed with somewhat early but not bad osteoarthritis in both knees. After years of running, I decided that my career was almost over, so I geared up with some cortisone injections and ran my first and last marathon. The doctor may have said it was not severe yet but my knees hurt like hell for the months afterwards.
But I missed running. Yes, many of you think running is stupid and boring. Which is fine. I think weight-lifting is a boring chore, but others love it. Anyway, I love running not just for activity but to enjoy a nice day or explore new places. I tried biking and an elliptical scooter and neither scratched the same itch.
But for almost a full year I never ran once. I did a lot of hiking, and when that seemed to not be active enough I started adding my old textbooks to a day pack until I was walking and hiking with a 40+ pound pack and felt great. So I was tempted to run again but knew I had to change something up to make it work.
At first I tried that old man marathon runners gate, which looks like a fast walk. It worked OK but it was not that fun. Then I read something about barefoot running, which I still think is dumb. But the article talked about different sorts of strides and how they land differently -- some heel first, some toe first. Apparently a benefit of barefoot running is it supports toe first landing, which some think is more beneficial. Mostly I wrote all this off, as runners forums are jammed with people who have these pet theories that don't really stand up to study.
Anyway, the learning for me was that toe first landing even existed. I started thinking about it and experimenting, and found that I had a strong heel first landing that was so forceful it was pile-driving my knees and spine. What if I got off my heels? I had already noticed that my knees seldom hurt running up a steep slope, and I realized I was on my toes doing so. Couldn't hurt to try.
Well, changing your running gate after decades of running the same way is just as hard as you might expect. The first few outings must have looked stupid. Basically I was trying to run on my tip toes, as if I was doing the high-stepping tire exercise you see football players doing.
The breakthrough came with some practice and when I read somewhere that 1) toe first landing is about toe first, not toe only and 2) you have to sort of lean out a bit over your skis to run toe first.
Over time, it has gotten more natural and my knees feel great. My progress was delayed a bit as I really was exhausting something in the back of my calves, but more practice and a more natural gate and some strengthening and I am back where I can run 3-4 miles at my old pace. Actually a bit faster, as I think I was never leaning forward enough and wasting a lot of energy.
So we shall see. This may all be temporary. Heck, it may all be a placebo (readers who spend too much time in the comments trying to undo the placebo effect by convincing me it's a placebo will be blocked -- just kidding, in 15 years I have never blocked anyone).
By the way, I am not a doctor and PLEASE do not take any medical advice from me.
Tags: football, PLEASE, running Category: Sports |
Comments Off on Adventures in Running with Osteoarthritis in My Knees
Yes, I am like an addict on Tesla but I find the company absolutely fascinating. Books and HBS case studies will be written on this saga some day (a couple are being written right now but seem to be headed for Musk hagiography rather than a real accounting ala business classics like Barbarians at the Gate or Bad Blood).
I still stand by my past thoughts here, where I predicted in advance of results that 3Q2018 was probably going to be Tesla's high water mark, and explained the reasons why. I won't go into them all. There are more than one. But I do want to give an update on one of them, which is the growth and investment story.
First, I want to explain that I have nothing against electric vehicles. I actually have solar panels on my roof and a deposit down on an EV, though it is months away from being available. What Tesla bulls don't really understand about the short position on Tesla is that most of us don't hate on the concept -- I respect them for really bootstrapping the mass EV market into existence. If they were valued in the market at five or even ten billion dollars, you would not hear a peep out of me. But they are valued (depending on the day, it is a volatile stock) between $55 to $65 billion.
The difference in valuation is entirely due to the charisma and relentless promotion by the 21st century's PT Barnum -- Elon Musk. I used to get super excited by Musk as well, until two things happened. One, he committed what I consider outright fraud in bailing out friends and family by getting Tesla to buy out SolarCity when SolarCity was days or weeks from falling apart. And two, he started talking about things I know about and I realized he was totally full of sh*t. That is a common reaction from people I read about Musk -- "I found him totally spellbinding until he was discussing something I am an expert in, and I then realized he was a fraud."
Elon Musk spins great technology visions. Like Popular Mechanics magazine covers from the sixties and seventies (e.g. a flying RV! a mile long blimp will change logging!) he spins exciting visions that geeky males in particular resonate with. Long time readers will know I identify as one of this tribe -- my most lamented two lost products in the marketplace are Omni Magazine and the Firefly TV series. So I see his appeal, but I have also seen his BS -- something I think a lot more people have caught on to after his embarrassing Boring Company tunnel reveal.
Anyway, after a couple thousand words of introduction, here is the update: In my last post linked above, I argued that Tesla is a growth company that is not investing in growth. Sure, it is seeing growth in current quarters due to investments made over the last decade, but there is little evidence it is actually spending money to do anything new. It stopped managing itself like a growth company trying to maintain its first-mover advantage.
Tesla has explicitly chosen to pursue a strategy that needs a TON of capital. Everyone understands, I think, that building a new major automobile franchise takes a ton of investment -- that's why they are not popping up all the time. But Tesla actually has made choices that increase the capital needed even beyond these huge numbers. Specifically, they chose not just to manufacture cars, but to also own the sales and service network and to own the fueling network. Kia was the last major new brand in the US that I can remember, but when it started it relied on 3rd parties to build and operate the dealer/service network and relied on Exxon and Shell to build out and operate the fueling network. So Tesla has pursued a strategy that they need all the capital of Kia and of the Penske auto group and of Exxon. Eek.
And for years, they were valiantly trying to pull it off. They created showrooms in malls and created a new online selling process. They built some service locations but as has been proven of late, not enough. They built a supercharger network. It was a gutsy call that seemed to be paying off.
And then something weird happened. Somewhere in late 2017 or early 2018 they stopped raising capital and greatly slowed down both R&D and capital investment.
They slowed expanding the service network at the very time that their installed base of cars was going up exponentially and they were getting bad press for slow service. Elon Musk promised that Tesla would create its own body shops but nothing has been done on this promise.
They slowed the Supercharger network expansion at the same time their installed base has dramatically increased and at the same time new competitive networks were begun by major players like Volkswagen.
They stopped expanding the Model 3 production line at the same time it was clear the current factory could produce only about 5,000 cars per day (with some quality tradeoffs at that) and Musk continued to promise 10,000 a day
They promised production in China by the end of this year but so far the only investment has been a groundbreaking ceremony in a still muddy field
They promised huge European sales but only just now got European regulatory approval for sales, dragging their feet for some reason on this approval despite lots of new EV competition starting to hit the European market.
They pumped up excitement with new product concepts like the semi and the coupe and the pickup truck but there is no evidence they have a place to build them or even have started to tool up.
Everyone thinks of Tesla as having leadership in battery technology but that is the one area they have actually outsourced, to Panasonic.
Through all of this, through all these huge needs for capital and despite Tesla's souring stock price and fanboy shareholders begging to throw money at the company, they have not raised any capital for a year.
Since my initial post, we have seen a few new pieces of news
Tesla still has not raised capital and in fact faces a $1 billion bond repayment in just over 30 days
Tesla admitted that it has not even started working on a refreshed design for the aging Model S and X, despite increasing EV competition coming at this high end from Audi, Porche, and others. These refreshes should have been started years ago.
In fact, Tesla announced it was cutting back on production of the S and X. Ostensibly this was to focus on the Model 3. Most skeptics think this is BS, and the real reason is falling demand. But it doesn't matter -- growth companies with great access to the capital markets don't make these kinds of tradeoffs. This is further proof that Tesla is no longer managing itself like a growth company. These cuts are particularly troubling because the S and X are where Tesla gets most of its gross margins -- the Model 3 margins are much worse.
Tesla laid off 7% of its work force. Again, this is not the act of a company that is behind in implementing its growth initiatives, growth initiatives that perhaps 80% of its stock market valuation depends on.
Tesla has always had an execution problem, or more rightly an over-promising problem. But it was still actually investing and doing stuff, even if it was disorganized and behind in doing so. Now, however, it is a company valued as an exponential growth company that is no longer managing itself like a growth company. It has billions of investments that are overdue -- in new products, in product refreshes, in the service network, in a second generation supercharger -- that should have been started 2-3 years ago and for which there isn't any major activity even today.
As a disclosure, Tesla stock is one of the most dangerous in the world to trade, either way. You really need to understand it before you trade it and no one really understands it. I have a couple of long-dated put options on Tesla that I consider more of a bar bet than anything else. I also have a couple of cheap short-dated calls as I usually do in the runup to the quarterly Tesla earnings call. Musk is great at the last minute stock pump during earnings call week, and the stock often pops only to fall soon afterwards as people dig into the numbers. But again, these are "investments" that are less than 0.1% of my portfolio.
Postrcript: When I wrote "Tesla is a growth company that is not investing in growth" I was picturing the Jim Cramer cameo in Ironman -- "That's a weapons company that doesn't make any weapons!" Of course it took a work of fiction to see Jim Cramer advocate for the short side. Doubly ironic given Musk sometimes styles himself as the real life Tony Stark.
I know I have not been blogging serious topics much of late. In part this is due to just being busy -- holidays, end of year accounting closeouts for the business, and some geeky projects (a few raspberry pi things I will share soon). In part this is due to the fact that whenever I engage with social media too long I become a worse person and back away again. In part this is because my daughter said I needed to lighten up on my blog for a while. And in part this is to my not wanting my obsessive fascination with the trainwreck that is Tesla to dominate my blogging (though there are a couple of updates coming).
As I close in on my 15th(!) year on this blog, this sort of ebb and flow happens from time to time. I will be back in force soon.
Yes, I know that blogging women's hair care products is not really in my wheelhouse but my wife reports that the Dyson Airwrap she gave herself for Christmas is the greatest hair dryer-like product ever. Expensive though.
Tags: blogging, Dyson Airwrap Category: Other |
Comments Off on Your Once-A-Decade Coyoteblog Beauty Products Recommendation
I can't get enough of pre-CGI special effects back stories, particularly those involving models and matte paintings. I have yet to find a really good book on building models for movies (the best documentaries I have seen have been extras on original trilogy Star Wars movie disks). But there are several good collections of great matte painting work, including at this blog called the Matte Shot. He writes few but very long posts usually dedicated to a particular artist. This one is part two of a series on Albert Whitlock. This guy was simply amazingly prolific and a great artist whose work you have seen but did not know it (e.g. Earthquake). One example below:
I thought this study was very interesting, as highlighted by Alex Tabarrok. I usually try not to publish highlights from research papers without actually reading them (the divergence between press releases on papers and the papers themselves is shocking and constitutes what may be one of the worst current academic practices). But in this case I have learned to trust Mr. Tabarrok's judgement:
The best paper I have read in a long time is Hopenhayn, Neira and Singhania’s From Population Growth to Firm Demographics: Implications for Concentration, Entrepreneurship and the Labor Share. HNS do a great job at combining empirics and theory to explain an important fact about the world in an innovative and surprising way. The question the paper addresses is, Why is dynamism declining? As you may recall, my paper with Nathan Goldschlag, Is regulation to blame for the decline in American entrepreneurship?, somewhat surprisingly answered that the decline in dynamism was too widespread across too many industries to be explained by regulation. HNS point to a factor which is widespread across the entire economy, declining labor force growth.
Figure Two of the paper (at right) looks complicated but it tells a consistent and significant story. The top row of the figure shows three measures of declining dynamism: the rise in concentration which is measured as the share of employment accounted for by large (250+) firms, the increase in average firm size, and the declining exit rate. The bottom row of the figure shows the same measures but this time conditional on firm age. What we see in the bottom figure is two things. First, most of the lines jump around a bit but are generally flat or not increasing. In other words, once we control for firm age we do not see, for example, increasing concentration. Peering closer at the bottom row the second thing it shows is that older firms account for a larger share of employment, are bigger and have lower exit rates. Putting these two facts together suggests that we might be able to explain all the trends in the top row by one fact, aging firms.
So what explains aging firms? Changes in labor force growth have a big influence on the age distribution of firms. Assume, for example, that labor force growth increases. An increase in labor force growth means we need more firms. Current firms cannot absorb all new workers because of diminishing returns to scale. Thus, new workers lead to new firms. New firms are small and young. In contrast, declining labor force growth means fewer new firms. Thus, the average firm is bigger and older.
Another of the issues I have moved a lot on in life has been trade sanctions. Back in the day, I was all for sanctioning the cr*p out of any country run by bad people, which is a pretty long list. Now, I am convinced this approach is totally counter-productive. First, the story via WSJ:
The U.S. is evaluating whether to impose tougher sanctions against Venezuela’s military and vital oil industry, a senior Trump administration official said Monday, as it seeks to ratchet up pressure on authoritarian leader Nicolás Maduro to hold free and fair elections.
The Trump administration is considering a range of measures including curtailing the flow of Venezuelan oil to the U.S., the official said, in what could be the harshest blow to the country's money supply. No final decision has been made.
The U.S. has already penalized a host of Venezuelan government heads, its gold sector and has blocked investors from renegotiating Caracas’s defaulted debt. The U.S. administration has held off on more draconian efforts like an oil embargo, weighing the humanitarian cost for economically devastated Venezuela, which depends almost entirely on crude exports. The U.S. also has been analyzing any potential harm to American businesses that buy Venezuelan crude.
Now, however, the Trump administration aims to up the ante after Mr. Maduro last week defied international calls to resign and was sworn in for a new six-year term following a May re-election that some 60 countries deemed fraudulent.
“Until now, we have been going around the edges,“ the official told The Wall Street Journal. “Now it’s a new dynamic. We are no longer going to be tinkering along the edges. Nowadays, everything will be put on the table.”
This is pretty much the same approach we took for years in Cuba to "punish" Castro and get him removed. For over 50 years these sanctions have made zero progress on their intended effect of regime change, and have instead:
Increased the socialist-created poverty and distress for ordinary people while Castro and other leaders partied it up on private islands and in total luxury
Given Marxist apologists like Bernie Sanders cover to claim that Cuba's obvious economic failure is not due to socialism, but due to American sanctions
Cut off business, economic, tourist, and cultural exchanges that might have brought liberal and enlightened thinking to the country.
Kevin Drum has a good roundup of immigration statistics that really help to demonstrate that there is no new crisis at the border, and in fact with the exception in a rise of asylum requests, the border has been getting quieter for 10 years.
I think there are clearly elements of immigration that are broken. I will highlight three that will likely alienate both sides of the political aisle. By the way, none of the three has to do with a wall.
I don't think we let in nearly enough legal immigrants each year -- all the Conservative talk that they just want people to follow the legal immigration process is all so much BS. The legal immigration numbers are such that it is simply impossible for many to qualify. But all this is unnecessary for many as they are not actually after permanent residence or a life of leisure on welfare. A lot of the people who cross the border illegally just want to work temporarily and go back home. We need a far larger guest worker program where workers can go back and forth as much as they like. Ironically, a lot of permanent settlement here by illegal immigrants is due to tougher border controls, not lax ones. They would rather go back and forth and just come over to work, but given the risks in crossing the border they have incentives to stay on this side.
A lot of the bad things Trump is trying to do at the border can trace back to the sanctuary city movement. I initially was sympathetic to the sanctuary movement, as I support more immigration and know illegal immigrants who are good people just trying to make a life for their family. I have turned against it as I have seen the reaction it has created. I think a lot of the impetus behind the stupid wall proposals is that Republicans feel like the traditional immigration defense-in-depth enforcement approaches have all been undermined fatally by the sanctuary movement and that the only way to stop illegal immigration is right at the border. The detainment and family separation issues last year seemed to be directly tied to the sanctuary movement, as Republicans most feared (probably rightly in many cases) that any border-crossers released waiting hearings would just run for a sanctuary city and be impossible to process at that point.
For years I believe we had a national consensus that admitting refugees is a good thing, and that consensus seems to be broken. Stories from Europe of violence and other issues stemming from the wave of mostly Muslim immigrants the last few years (the media is so polarized on this I still cannot figure out if these issues are real or imagined) have turned Conservatives against admitting refugees. I will say the Left has not helped at all by expanding the definition of what constitutes a refugee and by weaponizing Central American refugees in their resistance to Trump. We waste all kinds of money on foreign aid and other programs that, at best, don't work. But we have an incredible power to help the world. First and foremost by trade and dropping our trade barriers. But second by admitting a good number of the world's stomped-upon and destitute to this country. Our historic numbers of such folks admitted I would argue have always been miserly, but as a minimum we need to at least stick to those levels.
As with many of my posts, I am still thinking through this. I grew up an immigration restrictionist but today simply cannot think of a reason why (welfare state and public services aside) we have a right to restrict people's movement across borders. I don't have a problem limiting public services for some time period and voting rights, but if someone from Mexico and I contract to rent a room in my house or work for my company, I don't think the government can restrict that. I understand that there are perhaps limits to how many immigrants can be accomodated in a year for a variety of practical reasons, but we are way below those limits (as proven by our experience in the 19th century).
Disclosure: Like pretty much 100% of the Americans reading this, I am from a family of immigrants. And like pretty much every other immigrant group, at one time or another my group has had the exact same language used against it that Conservatives use against Hispanic immigrants today. My family happens to be German, and escaped the Kaiser in the late 19th century. We have had it pretty good as far as immigrant groups go, but we had our time in the barrell in WWI. I was at a party a while back and a woman who was a 2nd generation immigrant was railing at Mexicans for not being like other hard working immigrants who integrated into America. I asked her where her family was from, and she said Hungaria. I told her that early in the 20th Century Eastern Europeans like her family were treated to EXACTLY the same critiques and the strong immigration restrictions early in the century were mainly to stop eastern and southern (read: Italian) Europeans who were considered "bad" immigrants. Replacing the Chinese who were the previous "bad" immigrants. Replacing the Irish who were the "bad" immigrants before them.
Postscript: I did not mention it above because I was talking more about the Mexican border and I don't think there are a lot of PHD's swimming the Rio Grande, but we for sure should be raising or perhaps waiving entirely any restrictions on talented, highly educated people from coming to this country.
Postscript #2: I know folks have criticized me for my calling it a Berlin Wall on our border. Sorry, but I have seen the Berlin wall from both sides and the wall prototypes look like the Berlin Wall to me. I honestly am not sure why a border wall is immoral when set up by one side but moral when set up by the other. Its the same wall restricting the same movement. People respond that "its OK to wall people out of your house but not to be walled in." But the house analogy for immigration is totally flawed and drives me crazy. The country is not one property unless you have a Marxist definition of property. If you want a better analogy, the county is not a house but is an apartment building with 100 million apartments. I want to welcome people from outside up to my apartment to visit me or maybe live with me or work with me. You want to change the door code and keep my visitors out.
I discussed the shutdown and its effects on the parks my company operates here (spoiler: all are still open). Shawn Regan of PERC has a good article in the National Review on the same subject:
....under new shutdown guidelines established by the Trump administration, our parks have been rightfully spared from serving as pawns in Washington’s partisan budget battles as they did in the past.
Under a contingency plan created by the administration, park officials are allowed to keep sites accessible to visitors during the shutdown with skeletal staffs, rather than being forced to close them as was the case during the 2013 government shutdown presided over by President Obama. That means many important visitor activities and park operations — from snow-coach rides in Yellowstone run by private concessionaires to guided battlefield tours of Gettysburg — can continue yielding economic benefits for the surrounding communities. This week, the National Park Service also announced it will begin tapping unspent visitor-fee revenues to bolster operations at some parks.
These new plans are attracting criticism in the familiar anything-Trump-does-must-be-bad vein. Theresa Pierno of the National Parks Conservation Association slammed the administration’s decision to keep parks open, calling it “unrealistic and dangerous,” even though the NPCA repeatedly called for parks to be reopened during the 2013 shutdown. Representative Raúl Grijalva, the new Democratic chairman of the House Natural Resources Committee, pledged to hold hearingson the administration’s decision to support park operations with fee revenues....
The Trump administration’s approach is sensible. Why unnecessarily ruin visitors’ plans or jeopardize the millions of dollars in revenue that local communities receive from park visitation? If visitation begins to pose significant health or safety concerns, the contingency plan gives park superintendents the option to close areas or shut down parks entirely, as some parks have already done.
He goes on to make the very logical point that the vast majority of BLM lands and US Forest Service lands -- whose acreage dwarfs that under management by the National Park Service -- mostly all remain open in every shutdown. The large amounts of government staffing on NPS lands are needed to handle large visitor concentrations in small areas, something that really is not an issue in most parks in January.
Folks who have been hunting for pictures of overflowing trash cans to paint the current opening of parks as a bad idea could find just as many in the summertime on government lands when the government is not shut down. Remember, for all the love folks want to throw at the National Park Service at these times, it is an agency that has allowed many of its parks to fall apart, with perhaps $20 billion in deferred maintenance and very little new investment in the modern infrastructure visitors are demanding. And it has a labor model that is well suited to counting wolves but poorly suited to efficiently cleaning bathrooms and emptying trash cans even when the government is open. This shutdown is the least of the problems faced by public recreation lands.
I think people get confused about the purpose of the government shutdown. It is not a punishment, or a timeout, meted out by the law when Congress can't agree on a budget. It is a mechanical (and logical) requirement that spending on certain activities stop when that spending is no longer legally authorized. The media acts like it is supposed to be painful, and that Trump is somehow breaking the rules by making it less so. I often criticize this President, but this is one area Trump should be applauded. I think the wall funding issue is a dumb reason to go into budget gridlock, particularly when he had 2 years of Republican Congresses to get this done, but given the fact of the shutdown he should be applauded for attempting to reduce its impact on ordinary Americans. President Obama, for all his reputation of caring and hope, was to my mind overly callous in explicitly trying to make the shutdown more painful for average people.
The last thing we need now is even more expansion of executive power. I remember when, gosh it was like only two or three years ago, you Republicans were (rightly) bemoaning Obama's executive actions as unconstitutional expansions of Presidential power. You argued, again rightly, that just because Congress did not pass the President's cherished agenda items, that did not give the President some sort of right to do an end-around Congress.
But now, I hear many Republicans making exactly the same arguments on the wall that Obama made during his Presidency, with the added distasteful element of a proposed declaration of emergency to allow the army to go build the wall.
I personally think the wall is stupid, will solve nothing, and will be a moral blight on this country -- its ugly to think of use having our very own Berlin Wall. But forget all that, for now I am not arguing against the wall, but against the proposed process.
I can pretty much guarantee you that if Trump uses this emergency declaration dodge (and maybe even if he doesn't now that Republicans have helped to normalize the idea), the next Democratic President is going to use the same dodge. I can just see President Warren declaring a state of emergency to have the army build windmills or worse. In fact, if Trump declares a state of emergency on a hot-button Republican issue, Democratics partisans are going to DEMAND that their President do the same, if for no reason other than tribal tit for tat.
Postscript: Now that I am handing out political advice to Republicans, what is the deal with your Ocasio-Cortez fixation? I hear many folks on both sides of the aisle who attribute some of Trump's electoral success to the media fixation on him that kept him in the news constantly. I am reminded of the old Pepsi challenge, where Pepsi showed people choosing their product over Coke. But the thing was, while Pepsi's sales increased, so did Coke's because the commercials kept Coke's name prominent in people's minds and established it as the product to which everyone else compares themselves. Do you really want to do the same thing with Ocasio-Cortez?
There are a lot of reasons a tax can be dumb. It can be too damn high. It can create incentives for counter-productive behavior. But I want to propose another category of stupid taxes -- taxes that cost WAY more to do the paperwork than the tax actually collects. For this category I propose the dumbest tax award to the property tax many counties charge on business small equipment and moveable property. Here is one page from a sample county return we have to fill out.
This is just one page of many -- assets have to be reported in multiple classes -- but you get the idea. Every single business asset down to trivial things like office and cleaning supplies, screwdrivers, etc all have to be individually listed with year acquired and purchase price. We have nearly 150 locations across the county and waste a staggering amount of time staying on top of this.
AND, the real punch line is it raises about zero dollars in tax. Take something we have a lot of, a hand push mower. Let's say we bought a good one at $500 about 3 years ago. The property tax process generally discounts this -- the taxable value might be $200 or less today. Then they might charge a half percent annual tax, which would bring in a whopping $1. So tracking this mower and entering it on this form every year probably costs me more in labor and software we have to license than the tax itself. I would be willing to pay a higher amount of tax if when they sent the forms they said, "Fill out these forms by March 1 or you can alternatively pay $500 and be done with it."
I understand they want to be able to tax the crap out of the Exxon refinery, but there really needs to be some minimum cutoff. Florida did this years ago and it is great -- there is a card that you sign to certify your total personal property is under some number and you avoid the process altogether.
PS, we are tired of the old asset management software we have -- if someone out there knows a package that works well for this kind of thing, email me at the link above.
Tags: management Category: Taxes |
Comments Off on The Dumbest Tax -- Business Small Equipment Property Tax
I have not read it yet but I just bought it and may post a review.
