Friday, July 20, 2018

Economic Connections

Last time I checked into a hotel or motel, it was quite simple. I parked temporarily in front, walked in and told the desk clerk my name and handed over my credit card. In short order I got my credit card back along with my room key and was politely given directions to the room along with other information, such as breakfast or pool hours. I parked my car or drove it to the most convenient doorway. It was easy and pleasant.

The last time I boarded an airplane was a different story. If someone dropped me off, parking was limited and patrolled – and don’t leave the car unattended. I had to show an ID to get my boarding pass and check luggage, which was presumably inspected after the airline took control. I then took my carry-on bag to the security area where everyone lined up, showed an ID again, showed a boarding pass, took off shoes, emptied pockets, separated electronic devices, walked through a scanner, and sometimes had to be rescanned or even searched. I then picked up my belongings, refilled my pockets, put on my belt and shoes and walked to the gate.

It used to be much simpler. Relatives could even meet you at the gate when you arrived, but not any more. Now there is security everywhere, and for good reason. We don’t want terrorists or crazy people to be able to use the airports or airplanes for murder.

This came to mind when I read about  MGM "suing" the victims and survivors of the shooting massacre in Las Vegas where a lone gunman used the MGM-owned Mandalay Bay Resort and Casino as his base of operations to slaughter 58 concertgoers and wound many others. 

Suing these innocent people sounds heartless, but the word is not being used in the familiar sense. There will be no trial, no testimony, no demand for payment. MGM filed for a declaratory judgment, where a judge decides whether they can be held liable for damages. “Here, MGM is asking a federal court to pre-emptively determine whether a particular federal law prohibits a lawsuit by the victims against MGM, instead forcing them to sue only the vendor that provided security.” As people line up to sue someone, MGM wants a judge to move them out of the line of fire.

Of course there are lawyers already jumping into the fray looking for victims to represent and for deep pockets to exploit. In addition, because people either don’t understand the intent of the lawsuit and jump to the conclusion of heartless behavior or believe that the victims deserve as much compensation as possible regardless of real fault, boycotts are being encouraged.

Now I have no interest at all in MGM, but I can predict the ramifications of such a battle. Lawyers will argue that the hotel, and by extension MGM, did not do everything possible to avoid the situation – that’s the usual argument, “everything possible.” Everyone else in the hospitality industry will be put on notice. Their insurance will increase, and they will begin to take steps to do everything possible – which, by the way, is impossible when you can’t predict what threat(s) to anticipate.

As a result, all travelers will be affected in at least a couple of ways. First, things will cost more. Economic understanding tells us that when costs like insurance and precautions go up across an entire industry, there is no competitive incentive to absorb the costs. They are easily passed on to all customers.

Second, could checking into a motel become more like taking the plane, with some combination of heavily monitored parking, baggage inspections, metal detectors, photo IDs, take off your shoes and empty your pockets – with the same for all visitors and meeting attendees? 

The second outcome is not guaranteed, but it is possible. This lawsuit by the owner of a Vegas hotel may seem unfair and distant, but our world is connected in many unexpected ways.

Monday, July 16, 2018

Robots and Climate Change

There is something about adapting to a bad situation that makes a lot of sense.

This occurred to me when I ran across this article about robots coming to steal everyone’s job. It tells how a couple of economists are worried about the ability to adapt to the relentless march of automation. Their point is: “Too much time discussing whether robots can take your job; not enough time discussing what happens next.

A popular solution has been to “try to stall or reverse the trend of automation,” a kind of resistance movement to make it more difficult. Such measures include extra taxes on robot-produced goods or taxes on the robots themselves, which I wrote about in March of last year. Some propose new government regulations to make automation more difficult. The economists expect this approach to fail because consumers will naturally gravitate toward “cheaper goods or services” made possible by automation. (You don’t see anyone wanting to pay more for phone service to allow telephone operators to keep their jobs.)

Another proposed strategy is to “reduce the cost of human labor, by driving down wages or cutting benefits” making hiring workers preferable to buying robots. No one could seriously endorse this.

The other class of solutions they call “coping strategies.” These include teaching workers whose jobs are threatened new skills, skills less likely to be taken away by automation. Or the government could provide a guarantee to displaced workers, like a universal basic income (UBI). Both are iffy for various reasons: what skills fall into that category, how trainable are workers in mid-career, and how can any country, especially a poor one, support a UBI plan?

There is a need for more creativity around coping strategies, but at this point most of the energy goes toward ways to slow progress, a futile strategy when automation looks inevitable.

Is there a parallel here with climate change? At present all the efforts seem to be directed toward convincing everyone that climate change is real, inevitable and driven largely by human activity. There are a lot of good arguments to back this up. The intention is to promote individual and governmental action to reduce the release of greenhouse gases into the atmosphere – a stalling, not a coping, strategy.

People put their hopes on things like the Paris Agreement to make this happen and many despair at the thought of America bowing out. But how familiar are most Americans with the agreement? It is voluntary. Each country gets to pick its own goals known as its Nationally Determined Contribution (NDC).

China, for example, commits “To achieve the peaking of carbon dioxide emissions around 2030 and making best efforts to peak early.” Peaking in 2030 means continuing to increase between now and then. India is no better: “India’s INDC do not bind it to any sector specific mitigation obligation or action.” They commit to decrease “emissions intensity” by 33% to 35% in an  economy where the demand for electricity expected to increase by more than 3 times – in other words, they plan meet much more energy need slightly more efficiently. In another instance, Norway commits to “a target of an at least 40% reduction of greenhouse gas emissions by 2030 compared to 1990 levels.” They get to pick the target and the comparison and when serious development will start, but there is no penalty for missing. (See all countries here.)

Many NDC commitments, when read in detail seem timid at best. Paris doesn’t look like the real solution, just a strategy to postpone the inevitable.

Where are the people talking about dikes and levees around the major coastal cities or better drainage systems for Houston? Why is the government still subsidizing flood insurance for new construction too close to oceans, rivers and streams? So many creative possibilities, adjustments and adaptations for coping are being ignored or overlooked.

In both cases, it makes sense to think critically about how to allocate our resources, putting up roadblocks or planning ahead.

Friday, July 13, 2018

How To Watch News

I found myself talking back to the CBS Evening News a couple of nights ago. Usually they are pretty good, although like most of their competitors they don’t seem to be working as hard as they used to – over trusting anonymous sources, not confirming stories in a rush to be the first to bring us breaking news and presenting a dismal view – until the end when they throw in the obligatory heartwarming story. So critical thinking dictates that I treat their information skeptically.

The story that got me going was about tariffs. Now generally, I am for free trade and against tariffs. American tariffs are merely an indirect tax on us. They raise the prices of imported goods that we all buy and make the trading relationship with other countries less efficient – we don’t get the best goods for the best price. It’s basic economics. When they say something negative about tariffs I’m totally on board, but it’s not what they said but how they said it.

Jeff Glor started by saying, “Many Americans are already feeling the effects” of the $34 billion in tariffs on Chinese goods, the ones that went into effect less than 5 days earlier – really? That's a very fast supply chain. “The US is now threatening tariffs on thousands more Chinese products.” Then he turns to Jill Schlesinger who “looks at the impact” – the impact of what, imposing tariffs that he characterized as “threatened” just seconds before? Are they jumping the gun?

We learn that the next round of Trump tariffs, 10% on $200 billion of Chinese goods, “could hurt consumers.” Wait a minute. We were just told that many were already feeling the effect – now we are told the next round could hurt. They show a list of sample products: shampoo, baseball gloves, refrigerators, soap and cameras. Some are frequent purchases and inexpensive, while others are expensive but might be put off until a “trade war” is over.

“Already the lumber tariffs have added about $9000 to home prices”, Jill continues. I had a few problems here. Lumber tariffs are between the US and Canada, not China. Prices are not the same as costs. Are builders taking advantage of trade war news to boost prices like gas stations raise prices in anticipation of holiday demand? Besides, home prices are not uniform across the US, so any estimate will have different effects in different locations. 

“The North American Food Equipment Manufacturers said tariffs could raise prices at Chick-fil-A simply by increasing the cost of a pressure cooker used by the restaurant.” It makes me wonder how many pressure cookers they buy per year, what they cost, how much food they prepare before a pressure cooker has to be replaced, and what that comes down to on a per meal basis – I’m betting it’s mere pennies. (Not unlike the beer can story I told back in April.)

Finally, jobs could be impacted. They gave examples of Harley-Davidson and BMW saying that they would move more US production overseas. Do companies of this size hear about tariffs in April and 3 months later pull the trigger on an overseas move? This is very doubtful. It takes a lot of planning and many decisions. If they do move, it’s likely they had something in the works  a long time ago and the timing just happened to be coincidental (making the bosses look pretty smart).

But what can small businesses do? Jeff asks. “They can’t just move overseas and don’t have enough money to absorb price increases...” Wait another minute! What is this talk about absorbing increases? If any absorbing is going on, the consumer will be hurt less. How does this statement fit in at all with the rest of the piece?

All those unanswered questions and apparent discrepancies happened in a minute and a half. They don’t take any responsibility. (Jill Schlesinger is a financial planner, not an economist.) It’s up to us to be skeptical and think about what they are feeding us before swallowing it as indisputable fact. We must force them to do better than this as they try to make us panic.

Monday, July 9, 2018

Simple Calculations

I’ve always liked numbers. That’s why I was so disappointed when I got into the first grade and found they were not teaching arithmetic. In my school in my time, arithmetic didn’t happen until the second grade. Today not knowing your numbers and being able to do a little adding and subtracting when you start kindergarten means you missed out on the preschool or Head Start program that would have properly prepared you.

In any case I learned some arithmetic in the second grade.  The third grade had two classes taught by Mrs. Ener and Mrs. Bugbee. You were lucky if you got into Bigbee’s class because she was the “easy one.” But I got Mrs. Ener, who required every student to pick a day to stay after school, stand next to her at her desk and give the answers to the 100 addition facts on a book as she pointed to each one. If you missed a single one or took too long, you were out.  Come back and try again.  It was considerable pressure for an eight-year-old.  Besides, you had to give up your free time, staying after school and waiting in line behind others, giving you plenty of time to psyche yourself out.  After you successfully ran that gauntlet three times earning three stars on the bulletin board, the same routine followed with subtraction, multiplication and division – perfectly three times each.

As nerve-racking as it was, perhaps everyone needs a Mrs. Ener somewhere along the academic path, because so many problems we run into in daily life come down to simple arithmetic. One example was when I handed a cashier $22.59 to pay a $7.59 bill.  She thought the $20 bill was a $5 bill and rang up $7.59 on the cash register, which told her not to give me any change.  A co-worker pointed out that I had given her a twenty and panic set in. How much change should I get?  How about 20 – 5 dollars?  (The matter was resolved after a couple of wrong guesses.)

Here is another I came across in a magazine ad for a wristwatch selling for only $29 plus shipping and handling. The copy read: “Precision timing that’s accurate to four seconds a day – that’s more precise than a 27-jewel automatic priced at over $6000.”  That sure sounds impressive – until you do the numbers.

Four seconds a day means 4x30 seconds per month (approximately) = 120 seconds or 2 minutes. So far the calculations are easy. Two minutes a month will not make you late for very many appointments, although it might make catching a train in Tokyo a little iffy. But 2 minutes a month times 12 months (another easy, do-it-in-your-head calculation) comes out to 24 minutes a year – almost half an hour! Is that precision?

When we change time twice a year (from EST to EDT and back) and I have to reset the clock in my car, I just push the button to adjust the hours. I don’t expect the minutes to be about 12 minutes off. I expect the minutes to be pretty darn close, and they are! Does that mean the clock in my car is enormously more accurate than a $6000 wristwatch?  Maybe so, but it’s what I expect.

Doing simple calculations is a small part of critical thinking. Do the advertisers think that most people will breeze right by without thinking, accept their assurance of world-class accuracy, and  send in their $29 plus S&H? Apparently so. This great deal is limited to the first 1900 that call with the special offer code – better hurry (and not think about it too much)!

The simple-calculations habit can save a lot more than $30 over the course of a lifetime!

Friday, July 6, 2018

Effects of Social Media

I recently received an email from an astute reader with a link to an essay by a mom concerned about the negative effects of social media on children and puzzled about how to protect them from these dangers.

It began innocently enough when her daughter asked for permission to use an app called so she can make funny lip-sync videos like her friends were doing.  Before committing, the mom took time to review the app, which turned out to be not so innocent after all.

It was one of many websites without parental controls so she couldn't block overly adult and violent themes. As she points out: “Tweens and teens have an underdeveloped frontal cortex. They’re impulsive and self-centered. They make terrible decisions and they can be meaner than a bull shark.” Some content and behavior is clearly not appropriate for their immature minds.

Yet on this app the children who gain followers are the ones who dress and act in overly adult and sexy ways. “The kids who get it wrong – those not ‘sexy’ enough, funny enough, savvy enough –  are openly ridiculed in the comment section” and may find their embarrassment preserved forever on YouTube. Children are also exposed to subjects like self-harm, suicide and anorexia with no guidance except from other children.

So the answer was “no” on the app, but she has problems with the effects of social media on children in general.  Formerly, any bullying or embarrassment from a bad day at school could be left behind afterward. With social media, the bullying and teasing follow them home and can be with them all the time. “Online, there is no school bell, there is no escape” from reminders of mistakes. The ridicule is permanent. In addition kids may obsess about how many likes they get in this imaginary popularity contest, inspiring them to push the envelope in unhealthy ways.

That mom’s solution is to say no to social media for children and give them flip phones instead, despite the nerdy image.

But that’s just the kids. Don’t we have similar things going on with adults, especially since we’ve learned to weaponize social media?

In a recent example American Greetings was forced to pull a Father’s Day card that they intended as “playful,” when one customer “took to social media” (as the saying now goes).  According to CBS, her “post led to images of the card being circulated online, prompting a stream of commentary on social media and an attempt at making amends by American Greetings.”  The company released a statement saying, "We appreciate the feedback and apologize. It's never our intent to offend any of our guests with the products we sell” but they also felt that objections did not consider the affectionate wording on the inside of the card.

I assure you I am no prude, but I have seen any number of greeting cards on the racks that I would not send to any family member or friend. Someone may have thought the cards were playful but they struck me as crude, in poor taste and mostly not funny. On the other hand, I would never imagine taking to social media to stir up a bunch of disgruntled strangers – and there are plenty out there – to back me up in my attempt to shame the company into pulling them.  I am responsible for my own feelings, not some card company. I also have a responsibility to others whose tastes differ from mine to allow them to buy these cards if they so choose.  (Let the market decide, not a few fusspots with computers.)

But it doesn’t stop with attacks on corporations. Personal attacks abound on social media as those with opposite points of view are accused of being stupid, mean, evil and hateful (sometimes based on faulty information and sometimes based on purposely erroneous information). People excoriate cyber-friends, real friends and even family, arguing, insulting, shaming, un-friending, blocking and trolling. Social media may not have caused this behavior, but it certainly allows and encourages it.

With the speed of technological advances, where is it leading and what are we losing?  Maybe we would all be better off with flip-phones. 

Monday, July 2, 2018

A Hairy Subject

Men, are you suffering from hair loss? That’s the way the ad copy reads – suffering. A reader sent me this link a few weeks ago. Neither of us knew whether to laugh or cry.

The subject is the age-old search for a baldness cure. After the usual silly introductory story, The New Yorker, to show the seriousness of the situation, states that in 2013, “German researchers published a study indicating that men experienced hair loss as an ‘enormous emotional burden’ that could lead to an ‘impaired quality of life’ and ‘psychological disorders’.” Also mentioned was that people are more likely to vote for a (male) political candidate who has a full head of hair.

So this is scary for two reasons.  First, so many men are frightened of losing their hair that they support the hair-growth industry to the tune of $3.6 billion a year. But the only thing they are buying is the promise of slower hair loss – not actual hair growth – along with a “small risk of serious side effects.” Imagine what will happen when someone actually comes up with a way to grow back hair!  Imagine the suffering it will prevent!

Second, it’s just another indication that, despite what we try to teach our children about not judging a book by its cover, voters are so superficial that appearance wins out over competence.

The real message here is not about the hair but about the suffering. In the article they write about how the problem has a history all the way back to early Rome and Biblical times. But I doubt that common men, who were struggling to stay alive every day, were very worried about their hairiness or lack thereof. For most of recorded history the standard of living was relatively stagnant for ordinary people.  From generation to generation they had to struggle just to stay alive, to keep their family fed, clothed, sheltered and safe from bandits and raiders. The few technological advances prior to the industrial revolution primarily affected the wealthy.  Today things have changed and the regular working stiff has the luxury of “suffering” from hair loss – facing the “enormous emotional burden.”

Additionally, today, in contrast to the near-stagnant pace of progress in earlier times, changes take place from generation to generation at an ever-accelerating rate. I recently stopped in to see an 81-year-old friend. When he was born, a few Americans could buy a bulky, 12-inch black and white television for the equivalent of nearly $8,000 in today’s money. It was another 20 years before half the families in America owned a single television. Today almost no one is without access to at least one TV, to do without is considered a sacrifice. Last month the World Health Organization suggested that “gaming addiction” should be classified as a mental health condition. From TVs being exceedingly rare to gaming addiction within one lifetime, and that’s just one example.

Last week I stopped at Subway and took along the change container I keep in my car. When I paid, the woman behind the counter asked the young man she was working with if he recognized it. He hadn’t a clue. It was a plastic container used for 35mm (camera) film. Kids laugh at grandparents when they get confused using an iPhone; grandparents laugh at kids when they don’t comprehend terms like “dial the phone,” “roll down the car window” or even “floppy disk.”  That's the rate of change we have to keep up with in a single generation.

As a result of all this rapid change, the definition of suffering has been watered down to the point where losing one’s hair, not having air conditioning on a hot day, giving up TV for a week, back acnesinus problems or not having therapy dogs and teddy bears at final exam time are considered suffering. It makes people weep, protest or spend billions of dollars – all for lack of perspective.

Friday, June 29, 2018

The Importance of Behavior

Why all this talk about behavior?

A few days ago as I was out for the evening, I overheard a conversation at another table.  A small group was having a discussion about another member of their team or club.  The problem was that several members had complained that they were put off by the bossiness of this individual, and the group was discussing how to remedy the situation. 

Finally one of them bravely volunteered to address the problem. She said, “I will take her aside and tell her that several of us have a problem with her attitude, and that she should make a change or stop volunteering on the project.”

I wanted to jump up and yell, “No! It has nothing to do with attitude; the problem is behavior.”  You never tell someone to change their attitude. Attitude is something between the person and herself; it’s inside her head. What counts, in this case, is the assertive, bordering on aggressive behavior.

So you take the person aside and say instead, “We seem to have a problem. You have behaved in a way that makes some of the people you are working with uncomfortable and here are some examples.” The examples are very important. It focuses the conversation on something concrete, like words and actions.  (A good friend of mine who was well versed in this feedback process would say “DQ”, short for direct quote, and repeat exactly what the person said.  It left little room for argument.)

After the person hears the examples, admits they are valid and expresses an understanding of how that behavior could have a negative impact on the situation, it’s OK to name it – “overly assertive,” or something like that.  (The categorization becomes a shortcut in case further conversations are needed.) 

This can work. Talking about attitude is doomed to fail as the discussion shifts from a problematic behavior to an argument over who has a bad attitude. It puts opinions in place of observations.

This also works within families (parenting), in work situations and, as I am showing here, with a society where the majority has been telling pollsters for at least the last two decades that the country is headed in the wrong direction.

I have spent over seven years, laying out more than 700 examples – categorized by dimension to tie many similar behaviors together. 

The conclusions at this point are obvious. First, we must admit that most of the problems in America are generated by poor individual choices that pile up to become trends (some encouraged by the press and pop-culture). Second, we must solve them not by pointing to attitudes and characteristics but by talking about the behavior.  There are certainly a very few truly evil people in this country, but the prevailing opinion seems to be that about half the country is evil or stupid based on who they voted for, but who anyone voted for is not what is important.  It’s not going to fix the obesity epidemic or the retirement insecurity crisis or the stress based on economic misunderstanding or the poor buying decisions driven by obviously deceptive advertising or money wasted on junk-science cures and magical thinking or the inability to separate wants from needs or the sense of victimhood that paralyses Americans from trying to fix any problems.  

Not all my examples may be defensible, but when a dispute comes up, at least the conversation will be about examples of behavior and not about who is an idiot or a devil.