Coyote Blog

One of the arguments Democrats have made for nationalized health care is that government expenses will be much lower than private companies.  This is on its face absurd, given most people's experience with government agencies, but is nominally supported by low expense ratios in Medicare.  I won't go into this today, but this is more an artifact of the way government does accounting as well as operations decisions at Medicare which may be non-optimal (e.g. Medicare does much less claims verification and investigation than private companies, which is why we see huge fraud cases from time to time).

Anyway, we get a fresh example of private vs. public expenses on a very comparable basis in California workers comp.  The public State Fund acts as an insurer of last resort as well as a competitor to many private providers.  The fact that it is an insurer of last resort will increase its loss ratios, but its expense ratios of management or "claims adjustment" expenses should be similar.  But of course they are not.

State Fund's unallocated loss adjustment expense ratio was a whopping 51.4% last year compared to 8.9% for private carriers, while State Funds allocated loss adjustment expenses were 9.8% compared to the industry's 13.8% respectively.

This means the management expense ration of the state agency is 61.2% of premiums vs. 18.7% for private companies.  This just makes laughable the pious requirement in Obamacare that insurance companies keep their expense ratios under 20% -- or else the more efficient government agency will take over.

We are facing a huge 29.6% increase in workers comp rates in California, in part because the very high State Fund expense ratios are averaged into the calculation.

My column for Forbes is up this week, and yet again I address issues related to the stimulus.  This time, rather than questioning the Keynesian multiplier, I observe that Congress has passed several pieces of legislation which act as "anti-stimulus" whose magnitudes dwarf that of any fiscal stimulus programs, even at multipliers greater than one.

Larger corporations are going to face different economics, but they too seem to be anticipating higher future costs from this legislation. For example, while they may not face the penalty for having no health care plan, they will face higher Medicare taxes, taxes on overly rich plans, and increases in health care premiums. If the average business is anticipating a 5% increase in payroll-related expenses, and given that total private payrolls in the U.S. are around $6 trillion, this implies that businesses may be planning for $3 trillion of health care anti-stimulus over the next 10 years.

Similar scale numbers can be found for the overall effects of cap-and-trade. Perhaps the best estimate we have is the CBO scoring of the Kerry-Lieberman bill, which estimated that payments for carbon allowances over the first ten years would total $751 billion. Assuming that the costs of most of these allowances are passed on to consumers, then this bill represents another three quarters of a trillion in anti-stimulus. In addition, expiration of the Bush tax cuts, card check, and a number of new regulatory initiatives all will drive this anti-stimulus expectation higher. Is it any wonder, then, that the private sector yawns when the Congress rushes back from vacation to pass a $26 billion jobs bill?

Congress just passed a new $26 billion payoff to state governments, easing the pressure on states to institute some sort of fiscal responsibility.  The follows on the heals of last year's tens of billions of dollars in direct aid to state budgets in the original stimulus bill.

Taking the pressure off states for real fiscal reform is bad enough, but this is worse:

Maintaining the salaries and generous benefit plans for members of teachers unions is indeed a top Democratic priority. That's why $10 billion of the bill's funding is allocated to education, and the money comes with strings that will multiply the benefits for this core Obama constituency.Specifically, the bill stipulates that federal funds must supplement, not replace, state spending on education. Also, in each state, next year's spending on elementary and secondary education as a percentage of total state revenues must be equal to or greater than the previous year's level.

This is roughly equivalent to the government telling mortgage holders that took on too much debt that the government will bail them out, a clear moral hazard.  But then it goes further to force the mortgage-holder to promise to take on a bigger mortgage next year.  Unbelievable.

In a move right out of Atlas Shrugged, Texas is singled out for special penalties in the law because, well, it seems to be doing better than all the other states economically and is one of the few that seem comitted to fiscal responsibility

For Texas, and only Texas, this funding rule will be in place through 2013 [rather than 2011]. This is a form of punishment because the Beltway crowd believes the Lone Star State didn't spend enough of its 2009 stimulus money.

So much for equal protection.  This Congress sure has set an incredible record for itself in choosing to reward and punish individual states (remember Nebraska and Louisiana) in its legislation.

The WSJ thinks perhaps a different kind of multiplier, other than the Keynesian one, is behind this legislation.

Keep in mind that this teacher bailout also amounts to a huge contribution by Democrats to their own election campaigns. The National Right to Work Committee estimates that two of every three teachers belong to unions. The average union dues payment varies, but a reasonable estimate is that between 1% and 1.5% of teacher salaries goes to dues. The National Education Association and other unions will thus get as much as $100 million in additional dues from this bill, much of which will flow immediately to endangered Democratic candidates in competitive House and Senate races this year.

The word is out around town that Ben Quayle (yes, from that Quayle family) who is running for the Republican nomination for Congress, may be one of the founders and chief writers for local (very sleazy) gossip site Dirty Scottsdale  (which has since gone national as the Dirty -- barely SFW).  The site seems to specialize in printing pictures of club-hopping local girls and calling them out for either their looks, plastic surgery, or sexual preferences.

Update: Quayle denies it.  Either this is an incredible revelation of a secret life whose writing marks him as a real sleazy loser or it is an incredibly brazen (given that the accusation comes from his supposed partner) political hit-job.  Either way its a really interesting story.

Update #2: Quayle, uh, un-denies it.

This week in Forbes, I argue that tallying up the taxpayer money that has been poured into GM actually under-estimates the price of the bailout.

So what if the U.S. government had let GM's bankruptcy proceed unhindered? Allowing the GMs of the world be liquidated, with their assets and employees taken up by more vital entities, is critical to the health of our economy and the wealth of our nation. Assuming GM's DNA has a multiplier below one, releasing GM's assets from GM's control actually increases value. New owners of the assets might take radically different approaches to the automobile market. Talented employees who lose their jobs in the transition, after some admittedly painful personal dislocation, can find jobs designing and building things people want and value. Their output has more value, which in the long run helps everyone, including themselves....

This is the real cost of the GM bailout--not just tens of billions of dollars of wasted taxpayer money, but continued unimaginative use of one of the largest aggregations of wealth and talent in the world.

I am not sure that Tiger Mike Davis was really missed in the business world after his bankruptcy, but I have to say that my reaction to these memos of his (via Tom Kirkendall) waiver back and forth between "what an asshole, glad I never worked for him" and "too bad political correctness has purged the world of a lot of real characters."

The memos seem to have a common theme of reminding everyone who is boss.  I run a 500-person business and have never in 10 years felt the need to remind any employee that I was boss, or to make it clear that I was somehow subject to different rules.  I could subject myself to different rules, but the downsides of doing so would be large and fairly predictable.  I try to work at least as hard as everyone who works for me.

If I was, say, LeBron James and 99% of the value created among myself and the circle of people working for me was created by me, I might see copping an attitude.  But since 99% of the value in my company is created by someone who works for me, I spend most of my time convincing my employees that I don't know everything and that I am therefore reliant on their ideas and initiative.  A long while back I wrote that I tend to hide my degrees from Ivy League schools from my employees, as these tend to intimidate people into assuming I know more than they do.  This may be a correct assumption about, say, the origins of the reformation or solution approaches to partial differential equations.  It is not correct, however, when it comes to knowledge of day to day operating issues (and their potential solution) at our facilities my employees manage for me.

Interestingly, and almost inevitably, Tiger Mike seems to have a problem with his employees not sharing information or ideas with him, as evidenced by this memo:

I have written before about carbon offset scams -- even well intentioned programs are unlikely to achieve their promised benefits because

• The projects they fund are typically not incremental -- many likely would have proceeded without the offset funds, so that the benefits are effectively double counted.
• I have never seen any of these programs submit themselves to 3rd party offset of their supposed CO2 reductions.  In most cases, these are faith-based programs where it is impolite to ask if the promised reductions actually occur.

Randal O'Toole has a good example of a program that makes all these mistakes, and compounds them with absurdly high administrative costs.  One is left to wonder whether the Oregon state-run program is actually reducing CO2 or simply making sure a number of government salaries get paid.

In 2006, Climate Trust spent about two-thirds of its funds on carbon offsets, while most of the rest went for payroll and professional fees. In 2007, the share going to carbon offsets declined to 64 percent. By 2008, as near as I can tell, none of Climate Trust's money went for carbon offsets. Instead, 73 percent of its $1.65 million budget went for salaries, fees, and other compensation. It also spent more than $120,000 on travel and conferences and $95,000 on rent and office expenses. In 2008, Climate Trust paid its executive director $154,000, not counting health insurance and other fringe benefits. At least one other staff member whose title was "director of offset programs" was paid more than $100,000 and a third one received $88,000.

I am back from the family reunion (my wife's family) which was held on a cruise last week.  The cruise was a really good venue for a family reunion -- small enough that you run into people, but large enough to escape them too.  Every night we had 4 large tables to ourselves in the restaurant.

The cruise itself was a little disappointing, but it was chosen more for being low cost and accesible to the entire group, so I can live with that.   There were way too many people in my space for my personal taste.  Someday I want to take a much smaller boat, maybe in the Greek Isles.

A couple of things amazed me.  One, the port of call in Mexico was really a dump.  And this is from someone who has spent time in Mexico, good places and bad, and has some fondness for the country.  I figured out the reason when I was laying on the deck and saw the Panamanian flag flying form the back of the boat.  By US law, for a non-US flagged ship to leave and return to a port (in this case Long Beach), it must stop in between in another country.  I am sure the cruise line would love to run four day cruises say between San Diego and Santa Barbara or San Francisco, but that would be illegal unless they took on the prohibitive cost of operating a US-flagged ship.  So we stopped in a little industrial town just over the border to make it all legal.

The other thing that amazed me was the decor of the ship.  I would have bet money that the ship was designed in the 1970's.  Our room, which had a balcony, was nice, but the common areas were right out of bad 1970's casino ambiance.  Amazingly, though, the nameplate said it was built in 1998.  Not sure what these guys were thinking.  I called it the great floating leisure suit.

Internet service was $24 per hour, so I did not do any blogging, but the good news is I got a ton of writing done on my new novel.

Beautiful color photography from the 30's and 40s.

At a family reunion (my wife's side) all this week.  Joy.  May or may not get to blog.

... the other auto-makers are not going to be treated very fairly.

Senior officials at the U.S. Department of Transportation have at least temporarily blocked the release of findings by auto-safety regulators that could favor Toyota Motor Corp. in some crashes related to unintended acceleration, according to a recently retired agency official.George Person, who retired July 3 after 27 years at the National Highway Traffic Safety Administration, said in an interview that the decision to not go public with the data for now was made over the objections of some officials at NHTSA.

"The information was compiled. The report was finished and submitted," Mr. Person said. "When I asked why it hadn't been published, I was told that the secretary's office didn't want to release it," he added, referring to Transportation Secretary Ray LaHood.

Welcome to the corporate state, Obama-style.   Not to mention some old-fashioned bureaucratic CYA:

Since March, the agency has examined 40 Toyota vehicles where unintended acceleration was cited as the cause of an accident, Mr. Person said. NHTSA determined 23 of the vehicles had accelerated suddenly, Mr. Person said.

In all 23, he added, the vehicles' electronic data recorders or black boxes showed the car's throttle was wide open and the brake was not depressed at the moment of impact, suggesting the drivers mistakenly stepped on the gas pedal instead of the brake, Mr. Person said.

"The agency has for too long ignored what I believe is the root cause of these unintended acceleration cases," he said. "It's driver error. It's pedal misapplication and that's what this data shows."

Mr. Person said he believes Transportation Department officials are "sitting on" this data because it could revive criticism that NHTSA is too close to the auto maker and has not looked hard enough for electrical flaws in Toyota vehicles.

"It has become very political. There is a lot of anger towards Toyota," Mr. Person said. Transportation officials "are hoping against hope that they find something that points back to a flaw in Toyota vehicles."

The existence of this report is one reason, suggests Walter Olson, why the Democrats in Congress (abetted by the NY Times) seem in an enormous hurry to pass a new auto regulatory bill.  After all, automobiles have been sold in this country for only about 100 years, so every day counts in getting new regulatory infrastructure in place

The recall of millions of Toyota cars and trucks because of persistent problems of uncontrolled acceleration has exposed unacceptable weaknesses in the regulatory system. These weaknesses are allowing potentially fatal flaws to remain undetected. Democrats in Congress are pushing legislation to improve regulation and oversight of auto safety. It should be passed into law without delay.

As Olson points out, the NY Times has bent over backwards to ignore recent NHTSA findings in its reporting. This in particular is the enormously flawed logic of the regulator:

N.H.T.S.A. could fine Toyota only $16.4 million for delays in revealing problems with defective accelerator pedals that left the throttle open after being released. That's pocket change for a company of its size.

Pay no attention to that free market behind the curtain.  The billions of dollars this acceleration problem has cost Toyota in recalls, repairs, lost sales, and damage to reputation are irrelevant -- only fines imposed by the Administration (and torts by its allies in the litigation industry) matter.  And if the same problem beset government-owned GM, anyone want to bet what the penalty would be?  They would probably get a new bailout from Obama to pay for the recall costs.   In fact, even without the NHTSA findings, this Toyota problem is really no worse in terms of incidence rates or costs than any number of other recalls by US manufacturers.  The only difference is the media attention lavished on the problem.

My column this week in Forbes is up.  Been getting a lot of mail today as it was picked up at RealClearPolitics.  An excerpt:

Here is my first law of economic growth: When we encourage more investment, and ensure this investment is being channeled to the most productive uses, growth will follow.

For all the talk about fiscal stimulus and jobs creation at the federal and state level, almost no one in government is doing anything about reducing the roadblocks to investment.

Been doing research on grain elevators for my model railroad.  Ran across this video that I thought was pretty interesting.  I liked seeing the guy trying to keep the old technology working, and it was interesting to me to see this one guy do everything.  In the city, OSHA and the DOL would probably require 6 different guys on the shift.  The best part was seeing this older dude shoving a boxcar around by hand to position it for loading (around 8:40).

These guys sell a 1/4-scale RC King Tiger tank, perfect for tearing around the neighborhood.  Six feet long, nearly 600 pounds.  Uses electric motor rather than gasoline, which seems odd to me -- probably takes more juice to recharge it than a Chevy Volt  (and that's OK).  This would almost be wasted here in Arizona, where people would just think it was cool.  I would have to take it back to Cambridge to have any real fun.  (Yes, your neighbor can get a T-34/85 if they feel the need to respond).

Natural seeps in the Gulf of Mexico release more oil each year than even the most recent oil spill.  Somehow, nature consumes this oil with only a few tar ball showing up on beaches.  Which is why this is not hugely surprising

The oil slick in the Gulf of Mexico appears to be dissolving far more rapidly than anyone expected, a piece of good news that raises tricky new questions about how fast the government should scale back its response to the Deepwater Horizon disaster.

The immense patches of surface oil that covered thousands of square miles of the gulf after the April 20 oil rig explosion are largely gone, though sightings of tar balls and emulsified oil continue here and there.

Reporters flying over the area Sunday spotted only a few patches of sheen and an occasional streak of thicker oil, and radar images taken since then suggest that these few remaining patches are quickly breaking down in the warm surface waters of the gulf.

Some scientists claim to be able to make room temperature ice (yes, I presume at 1 atm pressure).  Not sure what to make of it:

Earth's climate is strongly influenced by the presence of particles of different shapes and origins "” in the form of dust, ice and pollutants "” that find their way into the lowest portion of the atmosphere, the troposphere. There, water adsorbed on the surface of these particles can freeze at higher temperatures than pure water droplets, triggering rain and snow.Researchers at Spain's Centre d'Investigació en Nanociència i Nanotecnologia (CIN2) have studied the underlying mechanisms of water condensation in the troposphere and found a way to make artificial materials to control water condensation and trigger ice formation at room temperature. Described in the Journal of Chemical Physics, which is published by the American Institute of Physics, their work may lead to new additives for snowmaking, improved freezer systems, or new coatings that help grow ice for skating rinks.

The next step? The researchers' goal now is to produce environmentally-friendly synthetic materials for efficiently inducing snow. "If water condenses in an ordered way, such as a hexagonal structure, on such surfaces at ambient conditions, the term "˜room temperature ice' would be fully justified," adds Verdaguer. "The solid phase, ice, would be produced by a surface effect rather than as a consequence of temperature. In the long term, we intend to prepare smart materials, "˜intelligent surfaces,' that will react to water in a predefined way."

I remember some work on how water boiling could be suppressed by polishing surfaces where bubbles form (watch a pot of water boiling, the bubbles appear on the pan surfaces).  I presume this may be a related effect.

Today's episode -- the shut down of the new debt market

Ford Motor Co.'s financing arm pulled plans to issue new debt, the first casualty of a bond market thrown into turmoil by the financial overhaul signed into law Wednesday.

Market participants said the auto maker pulled a recent deal, backed by packages of auto loans, because it was unable to use credit ratings in its offering documents, a legal requirement for such sales. The company declined to comment.

The nation's dominant ratings firms have in recent days refused to allow their ratings to be used in bond registration statements. The firms, including Moody's Investors Service, Standard & Poor's and Fitch Ratings, fear they will be exposed to new liability created by the Dodd-Frank law.

The law says that the ratings firms can be held legally liable for the quality of their ratings. In response, the firms yanked their consent to use the ratings, hoping for a reprieve from the Securities and Exchange Commission or Congress. The trouble is that asset-backed bonds are required by law to include ratings in official documents.

The result has been a shutdown of the market for asset-backed securities, a $1.4 trillion market that only recently clawed its way back to health after being nearly shuttered by the financial crisis.

The government is the first organization, given its unique powers to use force against citizens, that should be subject to surveillance and transparency.  Unfortunately, since it is the government itself that sets the rules, it is usually the last.  Following in the tradition of a Congress that exempts itself form most of its workplace regulation, comes the new financial bill which apparently exempts the SEC from most public scrutiny

Under a little-noticed provision of the recently passed financial-reform legislation, the Securities and Exchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.

The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from "surveillance, risk assessments, or other regulatory and oversight activities." Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.

That argument comes despite the President saying that one of the cornerstones of the sweeping new legislation was more transparent financial markets. Indeed, in touting the new law, Obama specifically said it would "increase transparency in financial dealings."

Apparently the children of the sixties, who once pushed for the Freedom of Information Act as a check to those in power, now are rolling it back once they are in power themselves.

Not since the Reese's Peanut Butter Cups have there been two great populist tastes that go so great together.  In an amazing bit of fact-free scare mongering gauged to panic everyone across the political spectrum, Michael Oppenheimer (embarrassingly a professor at my alma mater) manages to combine demagoguing against Mexican immigration with climate alarmism

Climbing temperatures are expected to raise sea levels and increase droughts, floods, heat waves and wildfires.

Now, scientists are predicting another consequence of climate change: mass migration to the United States.

Between 1.4 million and 6.7 million Mexicans could migrate to the U.S. by 2080 as climate change reduces crop yields and agricultural production in Mexico, according to a study published online this week in the Proceedings of the National Academy of Sciences. The number could amount to 10% of the current population of Mexicans ages 15 to 65.

The proceedings of the NAS has become a joke of late.  Roger Pielke Jr responded:

To be blunt, the paper is guesswork piled on top of "what ifs" built on a foundation of tenuous assumptions. The authors seem to want to have things both ways -- they readily acknowledge the many and important limitations of their study, but then go on to assert that "it is nevertheless instructive to predict future migrant flows for Mexico using the estimates at hand to assess the possible magnitude of climate change"“related emigration." It can't be both -- if the paper has many important limitations, then this means that that it is not particularly instructive. With respect to predicting immigration in 2080 (!), admitting limitations is no serious flaw.

To use this paper as a prediction of anything would be a mistake. It is a tentative sensitivity study of the effects of one variable on another, where the relationship between the two is itself questionable but more importantly, dependent upon many other far more important factors. The authors admit this when they write, "It is important to note that our projections should be interpreted in a ceteris paribus manner, as many other factors besides climate could potentially influence migration from Mexico to the United States." but then right after they assert, "Our projections are informative,nevertheless, in quantifying the potential magnitude of impacts of climate change on out-migration." It is almost as if the paper is written to be misinterpreted

I thought this response was instructive

Philip Martin, an expert in agricultural economics at UC Davis, said that he hadn't read the study but that making estimates based solely on climate change was virtually impossible.

"It is just awfully hard to separate climate change from the many, many other factors that affect people's decisions whether to stay in agriculture or move," he said.

The same exact statement, by the way, could be made as to the relationship of climate change to the single variable manmade CO2 without reference to the myriad of other factors that affect the complex climate system.

At first I thought Kevin Drum was re-branding "laissez faire" into "economic nihilism."  But after reading the linked article, which blames deficits 100% on Republican tax-cutting rather than either Democratic or Republican free spending, I suppose he is really equating the policy of opposing tax increases to economic nihilism.    For this to be true, given the definition of nihilism, it means that all meaning, purpose, and everything of intrinsic value flows from the government.  Denying government more money = nihilistic negation of reality.

I have blogged before about the absolute disaster that is the requirement (included in the health care bill) for businesses to submit 1099's for all goods and services purchases over $600.  We have hundreds of vendors who meet this criteria, and the process of filling out forms, collection tax ID's, etc. is insanely onerous.  Megan McArdle has more today.

Please stop talking about there being a fiscal crisis or a government debt crisis.  All this does is give Democrats the opening next year to raise taxes.  "See," they will say, "we care about reducing the deficit."

What we have currently is a government spending crisis.   And the only way to solve it is with less spending.

Thanks, and we now return you to your regular programming.

Megan McArdle writes:

There was a great deal of back-and-forth in the left half of the blogosphere this weekend over employers who use FICO scores as a way of weeding out job candidates.  In a sort of peculiarly American fashion, our nation seems to have decided that one's credit history is a good proxy for one's worth as a human being, and thus should be used to determine eligibility for everything from employment to excellent rates on car insurance.

I have no trouble believing that the FICO score is often a proxy for what some researchers call conscientiousness; I've certainly had roommates and others around me who had terrible credit because, well, they didn't bother to pay their bills, and regarded rent as something optional that could be turned in if no more exciting commercial opportunities immediately presented themselves.

That said, it's going to be at best a weak proxy.  It's also a proxy for things that, as a society, we may not want employers to consider, like a past history of depression.  And for things that have nothing to do with your job performance, like a car accident that left you with huge medical bills and no job, or a sudden job loss.  Looking at our national savings rate, lots and lots of Americans live very close to the edge of their paychecks; they can't all be terrible employees.

I have never really even considered asking employees for their FICO score, in part because all small business people hate these scores as, even with perfect credit records, our scores tend to be smaller than people with similar income and history due to the constant credit checks made on us by vendors and other partners.

That being said, as someone who has 500 service employees working for me, I understand the insatiable desire for information on employee reliability and conscientiousness.  A large number of our employees we hire who interview well tend to get released within 60 days of their hire.  I can't tell you how many people who seem totally normal and friendly turn out to be raving maniacs in stressful customer contact situations.

The elephant in the room that neither McArdle or folks like Kevin Drum mention is that businesses are starved for reliability information on potential employees.  It used to be the best source was to check job references.  Nowadays, though, very few employers will give a honest job reference, or will provide any information at all.  I know I am guilty of that -- my company does not allow any manager to give out performance data on past employees.  I only needed to be sued once over somehow interfering with someone's living by giving honest information about that employee's reliability to change my behavior.

I understand that this is exactly what the Left is shooting for - an environment where the competent have no advantage over the incompetent.  If employers are resorting to FICO scores, it just demonstrates how all the other reasonable avenues of obtaining information have been closed to them.

The only saving grace in this country is that employment is still mostly at-will, meaning we can fire our hiring mistakes and move on.  Of course the Left wants a European-style system where it is impossible to fire anyone too -- this is the system the post office has, and one can see how well it works out.  If they are victorious on this final front, I will be forced into a game of Russian Roulette, where I can't find out anything about those I hire, I can't fire the incompetent people I do hire, and I am infinitely legally liable for any mistakes any of these employees make.

One of the geekier conversations I used to get drawn into (up there along with arguing about favorite Serenity episodes, lamenting the demise of Omni magazine, and coming to blows over D&D rules interpretations) was over the relative merits of various sorting algorithms.  Flowing Data has some links to some interesting visualization approaches to sorting algorithms.  This one is for quicksort (colors start out random on the left and must be sorted into Roy G Biv order).

In college I did a project on solving traveling-salesman-type problems with an algorithm called simulated annealing.  Many approaches to the traveling salesman problem pick a random path and then randomly switch pairs of routings on the path, and then stick with the alternative that gives the best score (in this case the shortest path).   Rinse, repeat a zillion times.  The problem is this approach can get stuck in, or converge on, a local optima that are not as good as the single grand optimum for the problem.

In simulated annealing, the algorithm is allowed to sometimes jump to a worse (ie longer) path, which lets it jump out of local minima.  The amount of the backwards jump that is allowed is slowly reduced over time as the algorithm runs.  It is called simulated annealing because this is very similar to the annealing process in metals, where temperature is decreased slowly to, initially, allow the metal molecules to jump to higher energy states so that the whole can settle into a more homogeneous structure.

Anyway, we tried to show how the algorithm proceeded to a solution over time and the visualizations looked a little like this.

I thought this was an interesting irony of our growing corporate state:

In my post "Attention Gov't: This Is How Businesses Are Created" I brought up the point that government regulations keep the average American from investing in ground floor business opportunities with rules specifying how much money someone must have before they can invest in start-ups (unless the start-up is being done by a friend or family member).  Government regulations also prevent start-ups from advertising their investment opportunity.  If you need ground-floor investment (as opposed to loans) to bring your business to the proverbial next level, there is a wall of regulation that keeps you from asking for it from the general public and specifies what "sophisticated investors" (the already rich) you can approach and how.

Those rules are there to protect us middle class rubes from being taken in by crafty and ill-intentioned businessmen.

I contrasted this protection the government so thoughtfully provides us"“keeping us from making possible bad investments"“with it's promotion of lotteries and acceptance of casino gambling.

Now these people who will not allow an entrepreneur to advertise or promote his start-up in order to get voluntary investment money from people willing to take a risk on the business idea or invention are looking at legalization of online gambling in the USA.