Banking Ad Aimed at Engineers

Several weeks ago I blogged about an article in Professional Engineering Magazine on how engineers are good at building wealth. An ad for a bank in the Jan 2010 issue of IEEE Spectrum Magazine (aimed at electrical engineers) made me think of this.

The ad designer did a good job. There’s an engineer in the foreground looking at a farm of windmills holding the plans in his hand. It reminds me of that slight feeling of disorientation I get when I first see something that I have been looking at on paper or the screen for months in its fully realized state. He’s holding the plans, and the text suggests he has "great plans for the future" for managing the money he’s earning. The information is organized into bullet points, similar to how they teach us to write in technical writing class. All the points are focused on saving money safely. There is nothing promoting debt.

I have no experience interacting with this company. I’m only commenting on the style of the ad.

This is such a contrast to some ads from local banks and credit unions, which focus on debt. My favorite one has a family in front of a really nice house. The text reads: Dream Home – Dream Mortgage. That’s one way to put it!

Gateworks: Excellent Embedded Wireless Platforms with Great Service

A few years ago I helped my main client design in a Gateworks CPU board into the next revision of one of their best-selling products. Gateworks sells CPU boards with Intel XScale processors. They have mini-PCI slots intended to be used with mPCI radio cards. (Despite mPCI being an old technology, there are many flavors of radio cards available in mPCI form factor.)

Gateworks is one of the best vendors I’ve worked with:

• Flexible population options – Gateworks will purchase and populate any part you want on their boards, if you order at least 100 pieces. They have cool custom software they designed to highlight customization options to the people running the board assembly machines.
• Willingness to re-spin their boards for customer requests – Gateworks will change their boards’ design to accommodate customers ordering several thousand pieces.
• Problem solving – Gateworks goes out of its way to solve problems with products using their boards, even if it’s not clear their board is at fault.
• Reasonable prices – Gateworks has its own pick-and-place machine to stuff boards, so they’re not paying overhead to CMs.
• Privately Held – Gateworks is owned (as far as I know) by a couple friendly guys in San Luis Obispo, a town which vaguely reminds me of a smaller Madison. They do not face pressures from investors to focus on things that look good in the short run at the expense of not supporting their products well.

Here is the Gateworks holiday card this year:
My only relationship with them is that my main client buys from them, which makes my life easier. I've never done work for them or received any payment from them in any form.

Healthcare "System" Personal Experience from Madison, WI

For the past week my 16-month-old baby has had a bad cough. This afternoon I took him to his pediatrician, Dr. Rainwater, who works at Associated Physicians of Madison.

I only had to wait a few minutes to see the doctor. At that time I went straight to the doctor, not one of her staff. Dr. Rainwater ruled out any serious problems. She took time with me to explain her recommendations and the scientific reasoning behind them.

She called in a prescription to the Wallgreens on Whitney Way.

Estimated bill from Dr. Rainwater’s office = $120. If I have any questions, I can call any time of the day or night and talk to one of the M.D.’s who we personally know free of charge. I highly recommend Associated Physicians.

When we got to Wallgreens, the pharmacist went out in to the store to see if we could get the medicine less expensively in their over-the-counter section. It turns out the prescription was $12, but the same medicine was $11 over-the-counter. I highly recommend Wallgreens' pharmacy.

As I shut it down for the night, I think about claims that “the healthcare system” is in need of overhaul from Washington, DC. I want to help the needy, but I don't see why we have to overhaul everything to do that. For people who are not needy, it's hard to see how a healthplan, esp a gov't-run plan, involved would be of any benefit. If we have pricing issues, we sit down and talk to someone at our doctor’s office, just we would with any other service provider.

I do not agree with radical claims that healthcare overhaul will have dire consequences. I do think, though, that it will add a little bit of red tape to what should be a straight forward transaction between my family and our doctors.

Healthcare Debate Bring Out Nonsense Even from Sensible People

Every day I get messages from MoveOn regarding healthcare that I cannot understand. Yesterday’s MoveOn message was by Robert Reich, someone who I thought was a sensible, intelligent person who generally made sense. When it comes to healthcare, a lot of nonsense is flying around.

You've probably heard about a possible "deal" in the Senate to do away with the public option.

I'm here to tell you that this is no deal: it's a gift to Big Insurance, plain and simple.

The details are sketchy. The only thing that's really clear is the deal would drop the public option from the bill. With no public option, there's no guarantee of real competition. And without real competition, health care costs will continue to be out of control.
[snip]
Without competition from a public option, insurance companies have no incentive to compete—just like now.

So if the government does not have subsidized agency competing with your business, you are receiving a “gift”. Furthermore, if the government is not competing with you, your industry has no competition.

How can this be? I shopped my health insurance twice over the past few years when my premiums increased. There were a lot of options, but ended up staying with BlueCross despite the premium hike. My rough estimate of the risk of someone in my family making a huge claim is that it’s consistent with premiums we’re paying. I would love to believe someone can do it for way less, but I think they would have done it by now if they could. You can monkey around with how the risk is spread, but one way or the other a percentage of the population is going to need expensive treatments costing well beyond a typical $5,000 deductible. Someone has to pay for that. The problem is not that some politically connected companies have a monopoly on insurance products.

All of this makes me wonder why they’re not going after other insurance products. For example, it “feels” like disability insurance is expensive considering my estimation of my chance of becoming disabled for longer than the exclusion period. I also can’t understand why the life insurance on my wife, who appears to be as healthy as I am or healthier, costs significantly more than mine. I can’t understand why my auto insurance was twice as expensive when I lived in Florida than it was when I moved back to Madison.

None of that calls for government intervention. People should keep track of their costs, shop them if they seem out of line, and focus on producing value in their own field. If they really think some industry is on the gravy train, why not compete with that industry instead of bringing the government into the business?

Consider how bizarre the claims are. Suppose the health insurance industry really were on the gravy train. That means large businesses or churches could create their own plan open to their members. They could do a quick underwriting assessment of their members and work out a premium for their own health insurance. They could adjust the premiums each year based on last year’s claims. In other words, they could become an improvised insurance company. All of this is nonsense because the original claim isn’t true. Premiums of real insurance companies are generally fair. An inexperienced organization would not be able to provide what insurance companies provide for the same price.

All of the nonsense takes away from the real problems: a) people who can’t buy insurance because they got a chronic condition and had to change insurance for a job change or other reason beyond their control and b) people who can’t afford to pay for their basic needs. These are real problems, but politicians keep talking as if we could solve this problem and save everyone money just by re-jiggering how we spread the risk and by getting the government in the insurance business.

If it weren’t so serious, it would be laughable. I would love to get inside the heads of people advocating for a gov’t-run insurance agency. Do they just think the government does things better in general? Or do they think claiming they’re working on a way to get people’s premiums down is the only way to sell a healthcare subsidy for the poor to the broad public?

The Silver Bullet

Between circuit designs, I keep seeing stories about the government trying to do things to improve unemployment, healthcare, and real estate.

All of these issues are primarily issues for people who had no money to begin with. One thing the government could do to improve all of these things is to encourage people to save money. I propose that the government make savings accounts operate similarly to other tax-advantaged accounts such as IRA, Roth IRA, or HSA. The simplest approach would be to exempt savings accounts up to some limit from all taxes. It wouldn’t reduce people’s taxes that much, but it would be something the government could do to promote saving.

Most stories of problems people are having with unemployment, heathcare, or real estate would be mostly solved if the people or families in question had a savings account with $25,000 in it set aside to deal with trouble when it comes up.

This suggestion would do nothing to help the poor. People living at or near the federal poverty line will not be able to set aside $25,000. Poverty is a separate problem not addressed by this program.

It seems to me having a little money is a silver bullet that solves a lot of middle-class problems that the government is trying to address separately. If the entire population except for the poor save $10,000 to $50,000, depending on their estimation of the risks in their lives, the next recession, banking crisis, 10% unemployment will not be a big deal at all. People will be free to focus on their lives, part of which include activities that are productive for the economy.

The potential benefits are huge. We must move toward this and away from programs that try to fix each aspect of economic fluctuations separately.

How Healthcare Is Currently Rationed and Socialized

My electrical engineering colleague Chris Gammell shared an article on healthcare reform that is one of the best arguments I’ve seen for a healthcare overhaul.

The unemployed laborer severely injured in a car crash or the farmer who collapses will be given the best care possible. No expense will be spared, all needed consultants will be called, all necessary surgery and definitive care completed.

The patient who presents for planned, scheduled health care gets a different reception. Those needing elective heart surgery, or joint repair, for example, are filtered carefully. Care is rationed by ability to pay.

Insurance coverage, pre-approval, deductible, non-covered services, co-pays, will all be scrutinized. If the patient cannot pay, he or she will either not receive the needed care or will be directed to public facilities or programs that depend heavily on outside or tax-supported funding.

What is certain is that the hospital bill for the well-insured will be sufficiently high to cover expenses generated by poorly insured or uninsured patients.

If "spreading the wealth" is socialization, our system is already socialized, with the "haves" paying for the "have-nots" by a tax on the wealthier group. This explains a $15 aspirin, $10,000 to $15,000 antibiotic bills, and bills for heart surgery of $250,000 or more.

Dr. Maxwell uses this as an argument for more government involvement in healthcare.

Well-insured Americans say, "I got mine. To hell with you!"
Unless personal selfishness can be refocused to the common good, health care in the United States will remain with irrational rationing and inappropriate and financially unsustainable socialization by insurance, drug and medical supply industries.

He indirectly hit the nail on the head. Self-interest can indeed be focused for the common good. There is no substitute for self-interested buyers considering the amount of money they have to part with an weighing the value of what they’re getting. There is no substitute for self-interested providers trying to provide more value per unit cost to get more customers.

Nothing about this has to mean we do not care about the needy. On the contrary, everyone has a responsibility to help the needy. We do not, however, have to accomplish that by having the government overhaul the industry, just as we do not need to overhaul the food, clothing, shelter, utilities, education, and daycare industries to help the needy acquire those items/services.

Apart from the suggestion that opponents of overhaul don’t want to help the needy, Dr. Maxwell makes a powerful point: If we are going socialize and ration care for the needy, as we do today, we should at least do it in a well-thought-out way.

House Price Predictions Do Not Matter

Searches for house prices predictions are a frequent way people find their way to this blog. I imagine these are people considering buying or selling their residence. House price direction is less important to this decision than it might seem. What’s important is the amount of money tied up in a house vs the amount of value provided by owning the house.

Suppose the costs of interest plus taxes, insurance, and upkeep work out to 9% of a the cost of a home. The a $200,000 dollar home requires $18,000 a year or $1,500 per month. If rent on a comparable place is more than $1,500, owning it is providing net value. This formula works the same regardless of what percentage of the home is financed.

Generally houses that are well maintained stay at about the same inflation-adjusted price over time. Years where prices change 10% are an anomaly. They are rare, though, so you can safely focus on the calculation of the amount of money tied up in the house and ignore the unlikely possibility of price fluctuations.

A change in interest rate affects the whole formula. What if rates go from 5% to 10%? That 9% value becomes 14%. The reasonable price for a house drops considerably. Since rates are at an all time low, my guess is they will be going up and houses will be getting less expensive.

This guess on my part shouldn’t influence someone’s judgment. What should influence a decision is the comparison of the actual costs of ownership versus comparable rent in today’s market. If this formula tells you to buy a property and my prediction of falling house prices comes true, you still won’t get hurt unless you want sell that property and not buy another one. If my prediction is wrong and house prices rise, owning a house during that time won’t help unless you sell it and use the proceeds for something other than real estate.

The deciding factor should be “Does the property cash flow?” not “What will prices be in the future?”

I have never owned real estate investments apart from my own home. I would love comments from people successfully earning money in real estate who will certainly know more than I do.

Superconductors for Transporting Renewable Energy

My IEEE chapter hosted an interested talk from American Superconductor this week.

Superconductors are materials that when cooled to very low temperatures conduct electricity with very low resistance. Resistance turns electrical energy into heat.

One application for superconductors is transporting energy from renewable sources to populated areas. Most of the renewable energy in the US is in the desert or other sparsely populated areas. Another application is moving more modest amounts of power around densely populated areas where large power lines would be unsightly.

A 765kV power line made of superconductors costs the same per mile to install and maintain as a power line made of regular cables. The power capacity of a 765kV non-superconducting lines drops off at ranges over a couple hundred miles. Superconducting lines can be as long as you want. The only way to transmit power over long distances without superconductors is higher voltage power lines suspended from large towers.

Superconducting lines have the drawback of needing to be cooled all the way along the wire. If even one part of the wire is not refrigerated, the whole line is useless. Developers of superconducting equipment say redundant cables and cooling systems overcome this problem while keeping the cost similar to conventional power lines. If this is true, we could have an energy superhighway to move large amounts of energy around the country as needed without unsightly high-voltage power lines.

If someone invents and energy storage device that can be charged with electrical energy, can store energy with the same energy density as gasoline, and can discharge useful energy as fast as an internal combustion engine, such a device would be a killer app for superconductors. The energy could be generated by nuclear or a renewable source, transported, and used with no CO2 emissions. I am not predicting such a technology but something sort-of like it must be developed soon. The world is using oil faster than we can extract it, and there is no plan for how we’ll power our society going forward. If the right storage technologies are developed, superconductors could be a big component of the solution.

Cash for Caulkers? Can We Have Cash for PCBs?

Based on the success of the Cash for Clunkers program (at trashing perfectly good cars by burning up their motors), the White House is considering a Cash for Caulkers program to insulate homes. That sounds good because my method of reducing our natural gas use is to put plastic over our windows for the winter. Maybe they’ll give our landlord cash to update the windows.

What I want more than Cash for Caulking, though, is cash for printed circuit boards (PCBs), cash for estate plans, and cash for industrial wireless modules.

I seriously think if the American Bar Association and the Nation Society of Professional Engineers did a better job lobbying, my wife and I could have “cash” for the stuff we sell. After all, some of my circuit boards are in an Iraqi water plan protecting freedom from those who hate us because we’re so beautiful/good/free/etc. And planning for your children after you pass away is a family value.

All kidding aside, electronics and estate planning are important for society and the economy. If those are the criteria to receive cash from the government, my family should be sharing in the stimulus.

PE Magazine: Engineers Good at Building Wealth

The Nov 2009 edition of PE Magazine quotes a study showing engineers are good at building wealth:

Anyone looking for the secret to accumulating wealth should take some tips from engineers.

According to a new survey by author and researcher Thomas Stanley, engineers are more successful than doctors and lawyers at transforming income into wealth.

Estate data from the Internal Revenue Service shows that about 1 in 13 (7.6%) of all male decedents with a gross estate of $1 million or more was once an engineer. Yet engineers account for only 2.3% of the male working population in the U.S. Thus, engineers are overrepresented by a multiple of 3.3 times the expectation.

Engineering is also the highest paid profession that requires only a bachelor’s degree. It is also one of the few professions in which you can often get a master’s degree completely paid for by a school or employer. It’s unfortunate that “doctors and lawyers” are often seen as the only iconic well-paid professions.

For someone selecting a profession, all of this is only somewhat important. These are the averages. The average person in any profession, even the highest paid, does not earn that much money. In every industry, even ones with low average pay, the best in the industry earn more than the average person in all other professions. You're better off going into something at which you can be above average than picking a profession with a high average pay and planning on mediocrity.

Fathering is a Cultural Issue Well Under the Radar

The NYT ran a good story about the issue of father’s role in parenting: Fathers Gain Respect From Experts (and Mothers)

Full-on sexism is alive and well when it comes to parenting. I was completely oblivious to this until I had a baby.

The NYT article brings up excellent points regarding fathers’ role. The very language of fathers being “involved” highlights the sexism. You would never ask how involved a mother is. It’s expected she is more than “involved”. If a father is “involved”, it’s seen as a virtue.

Here are a few points I would add to this article:

• It used to irk Melissa Calapini when her 3-year-old daughter, Haley, hung around her father while he fixed his cars. Wow. I’m guessing it would have been okay if it had been a boy.
• Because mothering is their realm, some women micromanage fathers and expect them to do things their way. It is easy to fall into this trap. No one person is to blame when it happens.
• The article said low-income families benefited more from parenting classes with both parents attending than with father-only classes. This is interesting. The sexism of parenting is often less in low-income families because they often have no alternative to having one parent work while the other watches the children. In the future they should study more affluent parents who have a greater ability to separate parenting roles than poor families.

I am glad to see articles like this in the New York Times. These are huge issues that are barely talked about when a couple is having a baby. There’s a lot of talk about baby shower products and decorating the baby’s room. Regardless of what the couple wants each parent’s role to be, they should work out a detailed plan so that the rigors of parenting don’t lead them roles by default.

Florida Criminal Justice Problem Is Symptom of a Cultural Problem

From the NYT: Justices Weigh Life in Prison for Youths Who Never Killed
There are just over 100 people in the world serving sentences of life without parole for crimes they committed as juveniles in which no one was killed; 77 of them are in Florida.

I spent 22 years living in Florida, so Florida weirdness, which comes up on a regular basis in news stories always catches my eye.

I don’t know the best approach to dealing with young teenagers who commit heinous crimes. If we’re going to treat them as adults when they commit crimes, though, it seems like they should get all the other rights and responsibilities of adulthood without committing a crime. People naturally want to break away from their nuclear family at that age and find their own way. The very best thing about US culture IMHO is that we view people finding their own way as a fundamentally virtuous thing. The trouble is breaking away from the nuclear family at 13 years old is compatible with modern society.

I don’t have a program in mind to apply this idea to the goal of reducing juvenile crime. People knowledgeable about criminology should work on it though.

What advice do I have for Florida regarding this problem? Foment feelings of community. Florida is full of people who left places where generations of their families lived in the Midewest and East Coast. The void left by family is filled with the mass media, which largely are funded to promote products. So consumerism replaces family culture. Florida needs to work on making people feel part of something, especially the poor. People need to feel like citizens and neighbors, not just consumers. People need to feel that there are few laws, enforced vigorously and fairly by a criminal justice system that they have some role in managing.

Why Engineering Past Achievements and Future Goals Seem Different

I saw an article in IEEE Spectrum magazine (a magazine for electrical engineers) today that reminded me vaguely of recent partly tongue-in-cheek post asking why liberal politicians don’t have bigger dreams. Engineering Achievements: The Two Lists

The National Academy of Engineering put together lists of 20th century’s greatest engineering achievements and greatest engineering challenges for the 21st century. (I blogged about the energy-related items on the list two years ago.) The 20th century achievements include things like airplane and telephone. The challenges for this century include items like prevent nuclear terror and develop carbon sequestration methods.

The article asks why the old list involves discrete thing-like inventions that ushered in sweeping cultural changes while the new list involves social/cultural goals we’d like to see some sort of technology to address. The reason, IMHO, is the difference between hindsight and foresight. Looking forward we see a list of problems and risks we’d like to see addressed. The technologies of the future may solve those problems in ways we can’t foresee. For example, instead of finding ways to sequester carbon from burning fuel, we may find ways to adjust other areas of the environment to compensate for higher levels of CO2. The list of 21st century accomplishments, I suspect, will include discrete product-like technologies just as the our 20th century list does. “Carbon sequestration” and “Prevent nuclear terror” might be replaced by “nuclear fuel cell” and “subatomic particle scanner”.

When I consider our ability to produce things now that were unheard of 100 years ago, it makes me wonder how reasonable it is to compare GDP now with then. We are immeasurably wealthier now than then. The same thing will happen over the next 100 years. So we shouldn’t fret over GDP being flat for a few quarters, medicine getting a little more expensive, or houses getting a little less expensive. We need to keep teaching people math and science and to work hard, and in a century our great grand children will not even be able to measure how much wealthier they are.

Liberal Dreams

The Democrats are doing well politically partly because they offer to have government manage parts of people’s financial lives at a time when people feel like they cannot manage their lives on their own. This will end when the media start reporting positive stories about the economy and people feel like they’re more on top of their lives.

I would love to see Democrats take on something truly big and fund it as if it were a war. We have a war about every ten years, so this isn’t such a big deal. Here are ideas in rough order of decreasing merit:

• Massive anti-poverty program focused on nutrition (decreasing the death rate), housing, and educating girls (decreasing the birth rate)
• An alternative energy program aimed at helping the entire world, including the developing world, move to getting more than half its energy from renewable non- polluting energy sources.
• A network of high-speed trains
• Grants to any local government or private organization who can teach kids to be #1 in math, science, history, and language compared to all other countries
  
• An Apollo-style space program focused on sending people to Mars and beyond and/or putting a decent-sized permanent research facility and business incubator in low earth orbit.
• A program to end the drug war and all that comes with it by researching medications for addiction and more innocuous recreational drugs for those who insist on using them.
• Research into technology to incubate fetuses in vitro as an alternative to abortion – If successful, this would put an end to a contentious issue.

I know the government can’t do any of these things well, but they’re just potential alternatives to: We must spend $100 billion per year on fighting loosely-defined enemies who hate us because we’re so good/free/beautiful/etc. The answer would be, We’ll they’re really gonna hate us now because we’re striving to be even better. (It should go without saying, BTW, if you think people hate you because you're so good, you probably have some kind of psychological problem.)

I know this is just liberal dreaming, but it doesn’t seem that much worse than Democratic goals:

• Manage your healthcare spending
• Help people stay in $400,000 houses they can’t afford
• Help you out with a few bucks if fuel costs rise
• Manage part of your retirement savings
• Even out the economic cycle a bit through government borrowing and spending

Those are lame. If politicians are going to sell something, I want them to sell giving every human being access to food, water, education, right to own lands they’ve squatted on for decades, and contraception. I want a nano-tech project focused on materials strong enough to build an elevator literally to outer space. I thought liberals wanted to save the world. Why are we selling a plan for the government to borrow money to save us a few hundred bucks on insurance? Politicians should leave that to Geico and, if they refuse to offer simply to leave us alone, they should focus on some really momentous dreams.

Posts from Rortybomb on Libertarianism and Personal Spending Priorities

I am more efficient at circuit design than commentary, so I’ve been slow to post lately. Here are links to two excellent posts on Rortybomb.

Libertarianism and Culture: If libertarians could accept cultural values playing a role in public policy and be generally less radical, they would be the majority.

Spending and Inequality: We often hear about people saving money by going to the coffee shop less and worrying about spending a few dollars more for fuel, but oftentimes the real problem is in a few large budget items: housing and transportation. People irrationally spend large amounts on these and then scrimp on everything else they buy.

These are not directly related apart from the idea that if people took more charge of their personal/family budgets, they would be more inclined to libertarianism.

Lower Rents Due to Falling CPI Will Not Lead to Deflationary Psychology

Calculated Risk has been pointing out that the housing tax credit encourages renters to buy a house, which pushes rents down. This causes the CPI to appear lower.

In a post last week, CR wonders if this will lead to a deflationary psychology in which consumers delay purchases waiting for lower prices. I believe this will not happen and that the primary risk is inflation. The housing issue results in one part of the economy getting cheaper due to excess supply. It does not mean other things will get cheaper. The risk, IMHO, is that lower rent prices will mask inflation in the rest of the economy caused by loose monetary policy.

Although I don't see it causing deflation, the credit doesn't do much good. It just moves the problem around. The problem is banks and individuals entered loan agreements that would only work if houses prices rose. The only way to make houses expensive is to limit building them and to destroy some housing units. (Other ways are immigration and getting people who live together to form separate households.) All of this is crazy. The government should stay out of this for two reasons: a) it’s wrong to bail out failed business deals and b) it won’t work. If they succeed it making houses expensive suppliers find some way to come in and produce more, making the excess supply problem worse.

Spam That Claims to Be "Legit"

I wonder if people who sent out spam (not just unwanted e-mails, but out-and-out spam) ever get any replies. This one managed to get through a spam filter:

I am Mr Merlin Arthur a legit loan lender, I give the loan in various species, any body interested should contact me and if you want the loan, then the application must be filled out and returned.

I don’t know how many people reply, but I doubt saying you’re a legit lender helps. Do they think some readers are going to say, “This sounds like a scam! Wait, though, it says he’s a legit lender. I'll go ahead and fill out this application and e-mail it to Bulgaria.” (The country code on the e-mail really was Bulgarian.)

Move-On Publicizes a Moving Story of a Dispute Over Life-Saving Medical Care

Move-On sent me a link to a blog they sponsor that features a woman who is lobbying her health insurance company to pay for critical medical treatments. The clinics that she believes have a treatment for her condition are out-of-network, so the insurance company refused to pay for it. There is no discussion of how much the treatment costs, how much money the woman has or could scrape together, and whether the providers might accept less if she shows them evidence of financial hardship. In the Move-On mindset, the insurer "didn't approve the treatment" so you keep asking without ever thinking of putting together some money and working out a deal on your own.

Move-On believes a government-run health plan would prevent disputes like this one. Most everyone would want the government running insurance if that were true. Unfortunately, there is no reason to think a government-run insurance plan would be better than a private one.

If the government can’t do the job and sometimes private contracts don’t do it, how can people of modest means get state-of-the-art treatments?
1. Prior to a peril that you can’t afford financially (an illness in this case), you need to insure against it. Buy health insurance before getting sick. This same thing holds true for homeowners/renters insurance, auto insurance, life/disability insurance, and liability umbrella insurance.
2. Make sure the contract covers payments to out-of-network providers, even if the percentage it pays is less. Pay a little extra for a high life-time maximum.
3. Save money. It always comes in handy. If the insurance company won’t pay on a claim, you can use the cash and fight the insurance company at a later date. The more money you accumulate, the higher deductible you can select, saving money on premiums.
4. Negotiate. Look for less expensive alternatives (not inferior ones) to a suggested medical treatment. Think creatively.

The counterargument is that some people neglect to buy insurance, can’t save money, and don’t have the skills to figure out contracts and evaluate potential medical treatments. It is very important we do everything we can to help people in these situations though government programs and just helping people we know personally. Most people, though, can and should manage their own lives. (If most people cannot, and we just have to turn it over to the government, we are in big trouble.)

Move-On’s story about someone who is sick and fighting a battle with an insurance company being publicized by a political organization brings up so many feelings. I shutter to think of an insurer’s bureaucracy causing someone to delay treatment for a life-threatening illness. My heart goes out to anyone caught up in such a mess. I hope Move-On is not intentionally discouraging this person from pursuing normal avenues in such as case, such as working a little carrot-and-stick using an attorney to get at least a partial payment from the insurer, scraping together a little cash, and offering this partial payment to the medical provider; so that Move-On can make a political case in favor of government-run insurance.

Wishful Thinking on Climate Change

Someone happened upon my blog by searching for info on CO2. They arrived on a page with an off-topic comment from last summer on climate change. The commenter says CO2 emissions are not a threat because pure CO2 is denser than air, which is made up of nitrogen, oxygen, and CO2. It’s true that CO2 is denser than air. CO2 is one of the components of air, and CO2 emissions rapidly mix in with air, adding to the percentage of CO2 comprising air. The commenter wrongly thought that CO2 emissions would go “into the ground” because of the density of pure CO2.

I never responded to this wishful notion partly because I share the same wish. Most of the huge increase in GDP the world has seen in the last two centuries and the huge increase in population that came with it has been made possible by energy from burning things. The price of this energy is climate change: temperatures rising faster than they would have without human activities. It’s very hard to calculate how much this will cost in the future versus the benefit we get to today. All we know is the thing that makes our way of life possible will make us pay a price in the future. The magnitude and uncertainty of the threat is so unnerving that it’s tempting to fall into wishful thinking.

I’m not keen to shatter people’s comforting fantasies, but when I saw someone come to my blog looking for information I realized I ought to shatter this one.

Human activities are changing the environment in ways that will certainly be costly to future generations. There is no magic trick that will make the problem disappear. Solving this problem will be as hard as finding a way to the moon and back before modern computers or as hard as winning WWII, things that look easier in retrospect than they did going into them. We must do our utmost to minimize anthropogenic climate change (i.e. control emissions and deforestation), prepare to deal with the repercussions of climate change, and work on technologies that might be able to reverse or control climate change.

Not All Slack Is Due to the Economic Cycle

An article in the WSJ today deals with the relationship between excess production capacity (slack) and inflation: Slack Attack: Fed Faces Test on Inflation. It examines whether the evidence slack in our economy will protect us from inflation.

I suspect inflation is more likely than people realize. We haven’t had it for a few decades, so it seems like we never will have a problem with it.

I wonder if economists have a way to differentiate the effects of macroeconomic factors from cultural changes in what people are demanding. For example, the factory in this article that makes doors isn’t producing nearly at its full capacity. Is that a sign that the Fed should inject more money into the economy, or might it be that ten years ago new doors were a popular product but now people want some other product or service?

When I read about sales of manufactured goods being down, I wonder if they might be being replaced by things totally unrelated. Maybe people feel like they have enough cars big-screen TVs in their lives, for example, and now they want to spend their money on $5-a-cup fair-trade coffee. (This is certainly true for my enclave on the near west side of Madison, WI.)

I feel sorry for the town of Bend, OR suffering from massive layoffs at its door and window factory. I question how much of that effect is due to the economic cycle and how much of it is certain types products and services falling into and out of fashion over time.

We should be very cautious about our loose monetary and fiscal policy. Once inflation comes back, it will be hard to get rid of.

Healthcare Band-Aids

This article explains two bona fide problems with healthcare and uses them as a reason to support healthcare overhaul as it stands today: You Do Not Have Health Insurance

The main points of the article, in my words, are:

• People who buy their insurance through their employer are not truly insured against health problems because a change at their job could end their insurance at any time.
• Health overhaul should not be viewed as a program for the poor (as I say it should be) because most Americans are poor when it comes to healthcare in the sense that they would have trouble paying their expenses in the event of a job loss or other emergency.

These two claims are true problems. We should be solving them rather than looking for a work-around.

If we had to choose between doing health insurance through employers or doing the overhaul proposed by Congress, maybe we should go with the overhaul. An easier solution is to transition away from employers providing benefits. Money was invented so people would not have to be paid in bartered services. Much of this problem would disappear if people were paid in money. Employer-captive is the real problem.

The part about many Americans being unprepared for life’s financial ups-and-downs is true too. Again, the solution is not to find a Band-Aid to manage this fact. The better approach is for people to be prepared, i.e. set aside money to cover life’s ups-and-downs.

It seems like supporters of the current overhaul proposal offer complicated Band-Aids to deal with healthcare problems but do not address the problems themselves.

Are Bizarre Criticisms of Healthcare Reform Part of a Conspiracy?

It’s interesting that the debate on the proposed healthcare overhaul seems to be focused on stupid urban-legend-style e-mails about putting the ill in concentration camps. I also read about people shouting “socialism” in public forums about the overhaul. The White House sends regular e-mails debunking the stupidest criticisms imaginable.

What about the legitimate criticisms? What about citizens who agree with elements of the proposal but want to lobby for changes to the still in-progress plan? There is not much discussion of that. It makes me wonder if somehow supporters of the overhaul are behind some of the bizarre and obviously silly attacks. It helps push the debate toward straw men and decreases serious discussion. Supporters come off looking good just by dismissing claims about death squads for the elderly. They don't have to get into the finer points.

All things being equal, if something looks like a complex machination or sheer stupidity, it's usually just stupidity. But I’m keeping an open mind. These criticism are so stupid that they work mostly in overhaul proponents’ favor. I suspect at least some supporters of the healthcare overhaul plan welcome these bizarre criticism-- the stupider, the better.

Comments on NYT Health Overhaul Primer

The New York Times ran a nice primer on the details of health reform. Based on what I learned, I oppose the overhaul in its present form. Here are some points

The claim that the reform will not affect existing insurance is an out-and-out lie.
The House bill sets limits on deductibles and copays. The Senate bill allows plans outside the limits to be grandfathered in, with no new contracts made outside the limits. If either bill passes, if I want insurance against very expensive illnesses, I will need to buy insurance against trivial expenses too. This matters because it will bring insurance companies into the deals I make with my healthcare providers on small expenses. Bringing another party to table just complicates things and increases inefficiency.

Because of incentives and penalties for employers, about 3 million more people will go on employer-captive insurance plans.
We will have to see more details as the legislation congeals. In general, employer-captive limits people’s right to buy the insurance they want and are a bad thing.

An additional 10 million people would enroll in Medicaid.
This is very good. The point should be to provide healthcare to people who can’t afford it. Medicaid is program tasked to do just that. There are more than 10 million people without adequate healthcare. Hopefully they will be picked up by other elements of the package.

Overhaul will attempt to be deficit neutral.
This is very good. I don’t mind the surtax as long as it doesn’t cause marginal rates to exceed 45%.

The plan will massively cut Medicare.
After watching the battle with Gingrich in 1995 over this issue, it is ironic that the Democrats want to cut Medicare more than Republicans did in ‘95. I thought it was lame that Republicans called it “saving Medicare” instead of cutting Medicare. I am unclear as to whether these proposed cuts would be used to ensure Medicare’s long-term solvency or so that Medicare tax monies could be used for non-Medicare programs. Medicare’s long-term solvency is an important issue. Democrats should be honest with people, though, that cutting the budget 40% will result in at least some decrease in services.

I support only the part of this plan that makes more people eligible for Medicaid. The vast majority of people should handle their own expenses and pay reasonable taxes to help the needy. Yes, people might not do a perfect job of buying healthcare, but the government doesn’t always do a perfect job either. In life, just as in engineering, you have to accept some inefficiencies.

Reality Check Debunks Every Straw Man Criticism of Health Reform

The Obama administration sent out an e-mail today debunking some of the scare tactics being used against healthcare reform. It links to a website called Reality Check, which reads at the junvenile level of someone who might actually believe the scare tactics.

It was nice that they addressed the main concern I have – that the contract I have with my insurance company will be proscribed by the new law. This "Reality Check" website promises, in no uncertain terms, that there will be no changes for people who like their plan. In the administration’s previous e-mailing, they said that high deductibles would be disallowed. Maybe they meant they would not be allowed in the gov’t option, but people who currently choose a higher deductible can keep their policy.

I want to support this thing. The administration's 10-year-old-reading-level website has no effect either way. The plan costs $100 billion per year, and we need to understand exactly what they are planning to do with that money. How are they going to keep the public option from becoming like states' existing high-cost public options (HIRSP, in my state) for those who are already sick? We need details.

Breastfeeding Dogma Used to Promote Paid Maternity Leave

I received another e-mail from Momsrising.org. I’m not sure how I got on their list.

This message was calling for paid maternity leave based on the argument that it supports breastfeeding. For followers of the breastfeeding dogma, nothing in life is more important than breastfeeding.

My friend was dedicated to breastfeeding exclusively for the 6 months recommended by doctors, but she shared with me that, "If I hadn't had time off work, I probably would have given up."
[snip]
Breastfeeding expert Dr. Jerry Calnen argues, "If we are serious about improving our breastfeeding rates, a national paid maternity leave policy will be absolutely necessary."

There is some scientific evidence to suggest breastfeeding is better than formula feeding, but scientists have not been able to prove causality. If more affluent parents tend to breastfeed, we can’t be sure there’s not something else associated with affluence besides breastfeeding responsible for improved infant health. The preponderance of evidence, though, is that there is at least some minute benefit to breast milk over formula milk. Breastfeeding dogmatists turn this fact into a 21st century version of “a woman’s place is in the home”.

Setting aside the breastfeeding argument, I have mixed thoughts on paid leave. It has worked well for other countries. I don’t understand, though, who pays for it. If employers need to eat the cost and just need to understand that when hiring a women, you’re likely not to get as much work per year, we should expect employers to pay women less. That’s equal pay for equal work, expect for women who don’t use the benefit.

I don’t have a good program in mind to help the poor deal with the costs in time and money of having a baby, although I see the potential benefits to society of having one.

The reason I am writing this post, however, is so much modern advice on parenting indirectly calls for women to focus on child-related things. The advice doesn’t say where the money comes from while the woman is focused on breastfeeding.

The issue of how much parent time will be dedicated to caring for infants is a huge question. The most obvious choices are a) one parent quits work and focuses on the baby or b) the baby spends most of his waking hours with someone else caring for him while his parent(s) work. Breastfeeding dogma and proposed policies that would pay women not to work push us toward option A with the "one parent" being the woman.

We should be cautious of any policy that pushes us back toward the restrictive gender roles of the past.

Cash for Clunkers Program Is a Disgrace

I hope the Senate does not authorize further funding for the “Cash for Clunkers” CARS program. This program pays people several thousand dollars to destroy cars by running their motors with sodium silicate in the oil. These are cars that could have been sold (or perhaps given) to poorer people who need cheap transportation. Instead we’re purposely burning up their motors.

The program pays people a few thousand dollars to trade in an old car for one with good fuel economy. The person buying the new car receives a few thousand dollars from the government plus whatever salvage value their old car is worth after having its motor intentionally trashed.

Environmentalists say: Reduce, Reuse, Recycle. Trashing working items is the opposite of reusing. We should reuse stuff where possible because it takes energy to make new products and to salvage the old ones. The justification for the CARS program is improved fuel economy, but does this really offset the loss of value from trashing decent old cars? Why doesn’t the government simply buy carbon offset credits to offset the emissions from older cars?

This is just a give away to car manufacturers. We need to get away from building so many cars. We need to get away from throwing stuff away and replacing it with new items for questionable reasons. We need to use our money wisely where it can have the most impact on the environment, because the impact of carbon emissions today will be very costly to future generations. The CARS program goes against everything environmentalism stands for.

Healthcare Reform Needs Clearer End Goals

This week President Obama’s administration sent tweets and e-mails touting the benefits of healthcare reform. It’s clear that they haven’t worked out the details of what they’re calling for, perhaps because they do not know what’s politically palatable in Congress. As a result, the list of eight basic consumer protections is vague.

No discrimination for pre-existing conditions
This makes no sense to me. What’s to stop someone from carrying no insurance or little insurance, and then buying a high-end plan once they get sick? The idea behind insurance is that you pay on a regular basis and make a claim in the unlikely event a peril affects you. If there truly is no discrimination for people who are already sick, premiums will be significantly higher.

No exorbitant out-of-pocket expenses, deductibles or co-pays
My insurance policy has a $4800 deductible. I’m guessing they’d consider that exorbitant. So even though the insurance company and my family are happy with the contract we have had for the past four years, the agreement would be disallowed. We would have to buy a more expensive plan with a higher premium even though we don’t want to pay for insuring minor things.

No cost-sharing for preventive care
This means insurers have to pay for most or all of preventative care. My plan already covers a good deal of preventative care, probably because the insurer thinks this will decrease claims that exceed the deductible. I don’t see why the government has to mandate this. I’m either going to pay for regular checkups when I get them or as part of my premium. Why does the government want to mandate that I pay it as part of my premium?

No dropping of coverage if you become seriously ill
I think this is already how it works. My understanding of the agreement I have with my insurer is that I pay them a significant bit of money each month, and they will pay if I get sick. They can’t end the agreement just because I get stick.

No gender discrimination
I do not know what this means. I guess it means they can’t charge women of child-bearing age more because of the increased risk associate with a possible pregnancy. This spreads the cost of this risk to men. I don’t think this is a big deal either way.

No annual or lifetime caps on coverage
Whenever I buy insurance, they always offer me different lifetime caps. I can choose a lower one to save money. I have always chosen a high cap. Under Obama’s plan, I won’t have a choice. I will have to buy the more expensive plan with a higher cap. It won’t affect me, but why take away my options?

Extended coverage for young adults (on family plans)
I don’t see how this matters one way or the other. This lets parents pay one big premium instead of having the parents and kids pay separately. This makes no difference.

Guaranteed insurance renewal so long as premiums are paid
This is a good policy. Employer plans always make me nervous because if I change jobs I will have to change insurers within 18 months. What if I got sick before changing jobs? The peril would have already happened, so I couldn’t buy insurance against it. I ought to be able to maintain the insurance I have. The risk of a protracted illness should be something the insurer takes on when they accept you as a client.

So what’s going on with this e-mail the administration sent out? My gut feeling is the problem is modern healthcare is expensive, but people wish it weren’t. Politicians are moving the pieces around as sort of a shell game hoping that if they can rearrange the rules just right, paying for this expensive service will seem less onerous. Here’s my impression of the front-runner plan politicians are cooking up to help people avoid reality:

1. Make basic inexpensive plans illegal.
2. Tax very expensive plans that provide for “executive” medical care.
3. Borrow $100 billion a year to offset the cost of premiums, pushing the cost of paying our premiums to the next generation.
4. Increase taxes on the wealthy to offset the cost of premiums.
5. Pretend premiums are being reduced through increased efficiency due to technology and through better bargaining with providers.

This is disgraceful. I always dreamed if someone like Obama were elected president and we had a Democratic Congress we would do something like declaring “war” on poverty again. Instead they’re spending all their efforts trying to offer the middle class ways to weasel out of paying for something they want.

The healthcare plan is still being worked out. I am optimistic it could be a lot better than what I’m imaging. Politicians need to write up something analogous to an engineer’s “product requirements document” calling out exactly what they’re trying to accomplish with this reform. Then they need to draw up a spec of how they’ll measure success. Every engineer knows it disastrous to start a project based on vague marketing promises. The president and groups within Congress need to state clearly what their end goals are with healthcare reform.

Struggling to Understand How Memristance is Analogous to Other Circuit Elements (Electrical Engineering)

After HP scientists created a memristor, articles appeared explaining how memristance deserves to be considered the 4th circuit element, alongside resistance, capacitance, and inductance. An article in IEEE Spectrum magazine, The Mysterious Memristor, last year attempted to explain the relationship between memristance and the other circuit elements.

Dr. Chua postulated the existence of memristance in 1971 using the idea that the basic circuit elements are relationships between voltage, current, flux, and charge. There was no circuit element relating charge and flux, so Chua proposed memristance to fill this hole.

Image: J. J. Yang/HP Labs via IEEE Spectrum

Trying to understand this, I looked at the math for the circuit elements we know well and then for memristors.

Resistor:
V=IR (ohm’s law).

Capacitor:
dq = C dv.
I is charge per unit time, so I = dq/dt.
Substituting for I dt for dq, I dt/dv = C.
Rearranging, dv/dt = I/C .
When I use a capacitor, I typically think of it this way. The rate of voltage change across the cap is I / C.
=
Inductor:
dφ = L di.
Because dφ = v dt, v dt = L di.
So di/dt = V/L.
When I use an inductor, I think of it as analogous to a capacitor. The rate of current change through the inductor is V/L.

Memristor:
dφ = M dq.
I should still be able to use dφ = v dt, so v dt = M dq.
dq/dt = I = V/M.
That is ohms law, except the value of M is a function of the amount of charge that has flowed through the memristor. Some websites refer to M as a function of q, M(q).

(I do not have access to Chua’s original paper on memristance or the paper last year on HP’s work, so all I have to go on articles referencing the papers.)

The other three circuit elements are constants, not functions. This makes M fundamentally different from the other circuit elements. I would love for someone to explain in a comment why I am wrong and why memristance is mathematically analogous to the other three circuit elements.

Even NPR Buys Into Banks' "Credit Score" Pitch

NPR’s Marketplace ran story a couple weeks ago about things to avoid charging on a credit card because banks or credit agencies might hold the charge against you if they don’t like the risk profile. I suspect this is not completely independent reporting. People involved in the banking industry actively promote “negative sell” ideas regarding their product. They want to sell loans. They say, “I don’t know if this product is for you unless our formula says it is.” You’re supposed to say, “Oh yes. The product is for me. I want to buy it!”

The banking industry has managed to get financial reporters to write articles about how worrying about your credit score is part of responsible personal finance. It is not. The credit score is based entirely on using their product (loans):

• Timely loan payments
• Outstanding loan balances
• Amount of time using loans
• Types of loans
• Number of loans opened/applied for recently.

Of course using their product makes them like you.

Net worth, income, and cash flow are not part of the formula, but they are way more important than whatever benefit you get from banks liking you as a customer.

I have amazingly heard of people in disputes who are more worried about the other party getting negative information on their credit report than they are worried about the other party suing them and taking their money. I certainly don’t want people giving me a bad reputation, but spreading lies via the credit report is far more innocuous than actually taking my money.

Banks have done an amazingly good job convincing people that to be responsible you should buy their product.

I have no axe to grind with banks or credit agencies. My report contains only accurate positive info, and as far as I know, their score for me would be decent even though I don't use loans. I am very satisfied with the local banks my wife and I use for personal and business banking. My complaint is with the industry as a whole.

House Health Care Plan Is Needlessly Broad and Costly

From the NYT: House Health Plan Outlines Higher Taxes on Rich

It sounds like a good thing that the government is proposing: a reasonable tax on the wealthy to provide healthcare for the poor. But is that what’s really going on? This tax is higher than it needs to be because part of the subsidy goes to the middle class. I suspect this is getting pushed through because the middle class has an emotional reaction to paying for healthcare. It’s a mistake for the government to treat that emotional paralysis by taking over that aspect of people’s lives.

The healthcare problem has two elements: the poor and the middle class. The poor can’t afford healthcare because not being able to pay for one’s expenses is the basic definition of poverty. Giving money to the poor, perhaps in the form of a healthcare subsidy, makes sense to me, esp if it is in some way geared toward helping people earn enough to get out of poverty. The House plan, by the way, doesn't even provide insurance for all the poor.

The middle-class healthcare problem is more subtle.

• Premiums paid by employers are deductible while premiums and healthcare expenses paid by individuals are not.
• Employees have to change plans within 18 months of changing jobs.
• Medical technology is getting better at predicting illness, which makes it harder to spread the risk of illness among a population.
• Some people get overwrought about the thought of buying healthcare services, even though they are emotionally capable of making other purchase. The media stoke their fears.

Creating a federal plan for the middle class, partially subsidized by the rich, causes multiple problems:

• It needlessly removes market forces from middle-class healthcare purchases.
• It makes the taxes on the richer more onerous. As marginal rates exceed around 50%, we start to see it affect people’s incentive to work and create value. Marginal rates are not that high yet, but this is a step in that direction.
• It gets the federal government involved in a big sector of the economy. It will be very difficult to extract the gov’t from this sector if we decide we want to in the future.

I’m really glad Obama is promoting healthcare reform. I just wish he could use a scalpel instead of a mallet.

Madison Should Maintain Community Development Authority Funding

The city of Madison should find a way to avoid cuts to its Section 8 housing program.

The program subsidizes poor families’ rent such that they pay 30% of their income toward rent. The Section 8 program pays the remaining rent up to a maximum. That maximum is being reduced. For a family of three, it’s going from $931 to $762.

Consider a family of three earning $20,000 per year, $1667 per month. The program aims for them to pay 30% of their income, $500, in rent, with program paying the rest up to a maximum of $931. If they were currently renting a $900 apartment, they will now have to come up with an extra $138 per month or move to a cheaper apartment.

$900 is not as much rent as it sounds. These families may be paying extra to live close to work and school to save on transportation costs. They may be struggling to keep their kids in a better neighborhood.

The federal government has many programs designed to keep people in their $250,000 houses they can’t afford. It’s a shame that they're not doing more for programs aimed at the poor. Madison should find a way to maintain funding for the program despite the recent decrease in anticipated federal funding.

Using the Web and Social Media to Promote Saving

On the most recent edition of the poorly-named Consumerism Commentary podcast, the show interviews a co-founder of a banking website called Smarty Pig. Smarty Pig is a website that helps people save up money for specific goals. Users can allow friends and family to track their progress toward the goal and even make contributions toward it. This could provide accountability for people who have trouble saving and provide a venue for relatives to provide monetary gifts toward important goals. Money contributed toward the goal goes to an FDIC-insured account based on funds Smarty Pig invests in CDs, so the rate of return is superior to a typical money market account.

Most people get no formal education in personal finance. All their knowledge comes from people selling financial products. They take on too much risk and therefore experience the slightest blip in the economy as a crisis. It’s nice to see a financial product that actually encourages good financial decisions. I have no experience with Smarty Pig apart from hearing a 10-minute interview, so I do not endorse the service. I personally wouldn’t be sanguine about sharing my family’s savings goals. I am happy, though, to see a financial business creatively promoting saving instead of using their creativity to get people into debt.

I would love to see the government get on this saving theme by creating tax-advantage accounts for various purposes like Emergency Fund, Saving for a Home, Saving for Transportation (a new bicycle in my case). We already have similar accounts for retirement, college savings, and healthcare.

Progressives off Track in Bemoaning Foreclosure

Somehow I got on the mailing list for Mom’s Rising. It’s a progressive newsletter focused on mothers’ issues. Today’s mailing was about foreclosure. Progressives are really on the wrong track with this issue. They show a person with a sympathetic-looking headshot but provide no details on why she can't pay her bills.

The unbelievable part of it is that OneWest — her bank — doesn’t even have to talk with my mom before selling her house right out from under her.

I wish they had said what they want the bank to talk about. Does Mom's Rising want them to call her and say, "So what did you do with all that money we gave you?" and then try to get her to give them a sob story?

Today, right now in fact, members of our partner organization, ACORN, are sitting-in at the offices of OneWest and the other three banks whose mortgage servicing companies won’t sign on to Obama’s Making Home Affordable plan.

I usually look up to people participating in a sit-in, but they're doing one to stand up for the right for people not to pay their bills? This position alienates everyone except for extremists who don’t believe in private property.

Foreclosure is a great thing for the consumer:

• The borrower usually is not responsible for the deficit balance if they owe more than the house is worth.
• The borrower doesn’t have to make payments during the foreclosure process.
• The foreclosure process takes several months, sometimes a year.
• In four year’s time the borrower will be eligible for another partially gov’t subsidized home loan, even though they didn’t pay their last home loan as agreed.
• Right now there are plenty of good deals on rentals because the real estate bubble led to excess supply.
  

What more do people want? This issue of how to handle people who don’t pay their mortgage humanely has been solved. Organizations like Moms Rising should focus on problems at that really exist. Complaining about foreclosure just furthers the erroneous image that liberals just want take wealth (in this case mortgage contracts) from productive people and give to the undeserving.

A Premier on Electromagnetic Interference (EMI)

The June 25, 2009 edition of Electronic Design magazine has a great four page primer on electromagnetic interference (EMI)- The Dark Force Of Evil In Electronics: Electromagnetic Interference.

The basics of EMI for non-engineers:
EMI is unwanted signals coming from (and occasionally getting into) electronic equipment. The most common type of EMI is noise from high-speed digital lines, i.e. lines that communicate a series of 1s and 0s. If the transition between 1s and 0s happen very fast and/or the wire carrying that signal is very long, the wire will radiate signals that can interfere with other electronic equipment. Signals normally travel down a wire at about 180ps (that’s 180 trillionths of a second) per inch. So if your wire is one inch long and a transition from 0 to 1 takes 1,000ps, you can treat the wire as a single element. If your wire is 10 inches long, however, one end of the wire can have completed its 1,000ps-long transition before the other end has seen even the beginning of this transition. A wire with a different signal on each side can act as an antenna transmitting unwanted signals. (This is just one possible cause of EMI.) A lot of electrical engineering is making sure high speed signals get from one place to another without being distorted or causing interference.

I like how the article begins with what sounds like engineers’ excuses when their product fails EMI testing:

Is there an electronic product or circuit that’s not susceptible to electromagnetic interference (EMI)? For that matter, are any devices EMI-free? Simply put, no.

Come on, nobody's perfect, hey?

On a more serious note, I like how it mentions that static discharges can cause EMI in a product (rather than the usual case of a product just emitting unwanted signals):

Don’t forget electrostatic discharge (ESD) as an interfering source. ESD, of course, is the momentary current flow that occurs when a high voltage between two points is dissipated. Lightning is the most powerful example, but any static discharge can produce EMI and damage unprotected circuits.

I experienced this the hard way last year on one of my projects.

A premier like the one in Electronic Design should be required reading for EE students.

Please Dismantle Employment Captive Healthcare

I would like to thank the health insurance industry for giving me an argument in favor of a government-run health plan.

From the AP:

The insurance industry Tuesday laid down a marker on health care, warning in stark terms that a proposed government insurance plan would dismantle the employer coverage Americans have relied on for a half century and overtake the system.

I am generally against a federal healthcare plan, but industry groups America's Health Insurance Plans and Blue Cross Blue Shield Association have pointed out one good thing about it: It would dismantle employment captive insurance.

See my earlier post about why employment captive insurance is so bad.

I don't want a federal program, but I have hopes that such a program would help the poor. The program’s availability to the middle class would be a fig leaf to distinguish the program from outright charity. Responsible middle class people would probably use it and then use their own money in cases where they want better service, just as the middle class uses Social Security's disability / life insurances and retirement benefits as a small supplement to products they buy in the market.

I suspect (but will never know) insurers would protest louder if we had a libertarian government making open plans to dismantle the employment captive system and encourage true competition at an individual level.

GOP Needs Positive Message on Healthcare

According to a CBS News poll, 72% of Americans and 50% of Republicans favor a government run health insurance plan. The would seem to be bad for the Republican party, whose platform is against government running any businesses.

I suspect the reason Americans appear to support government health insurance is that there are problems with the current system and the only option to fix it that they have heard is a government-run plan. The main problem with the current system is health insurance is often tied to employment. If someone gets sick, they may be afraid to change jobs because they will not be able to keep their current insurance plan and may not be able to get a comparable new policy because of their newly preexisting condition.

I propose the Republicans admit that this is a huge problem and propose a law that prevents insurers from canceling someone’s policy on account of a job change. When a company writes a policy, they would free to take into account the same risk factors they do now, but they would have to continue offering insurance as long as the insured continued to pay his bills.

Demonizing a government plan really turns me off. A government plan would be okay, and it would do something to help the poor and those who aren’t diligent about paying their bills. A positive message about a minor change that could fix what bothers people about their current insurance would be much better.

Renting Test Equipment Is Easier than You Might Think

I rented a piece of electronic test equipment this week from Electro Rent for a project I’m working on. I hadn't heard of Electro Rent until last week, when someone online referred me to them. The price was well under the typical rule-of-thumb saying that the monthly rental cost should be about 10% of the cost of buying the equipment new. The equipment arrived the next day. Once I started using it, however, I realized it didn’t have all the capabilities I needed. So I sent an e-mail yesterday afternoon to the sales person at Electro Rent saying I’d like to rent a different piece of equipment. I wondered if I could get a partial refund for the equipment I already rented and whether I would have to return what I had before we could look into renting something different.

It turns out they made it easy. Amazingly Electro Rent had the exact piece of equipment I asked about shipped to my office my office this morning, less than 24 hours after I sent an e-mail asking about different equipment, without me having to fill out any paperwork. Electro Rent will only charge for shipping and any difference in rental cost between the two pieces of equipment. It’s amazing how quick, painlessly, and inexpensively you can get a piece of test equipment.

Buffet's Comments in BRK's 2008 Annual Report

Warren Buffet’s letter to Berkshire Hathaway shareholders in the BRK annual report contains a remarkable amount of plain-language information on the financial meltdown and how it will affect the economy in the future.
I heard about the report from an IEEE article, which does a great job summarizing Buffet’s letter.

Here is a passage I liked: (emphasis added)

This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone “all in.” Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation. Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.

It goes on to explain how one Berkshire Hathaway subsidiary made good loans and is not in direct trouble, except for the fact it is now competing with politically-connected companies being rescued and subsidized by the government.

This unprecedented “spread” in the cost of money makes it unprofitable for any lender who doesn’t enjoy government-guaranteed funds to go up against those with a favored status. Government is determining the “haves” and “have-nots.”
[snip]
At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one.

Supporters of aggressive bailout measures tell us to understand that the money is not aimed at the deserving. It’s aimed at stabilizing the economy. If this situation of political connections determining business success goes on for long, it will hurt long-term growth. Before that happens, though, there will probably be a backlash. For believers in aggressive bailouts and stimuli, the measures had better work quickly before the backlash becomes widespread.

Mayor Dave and MG&E Promotes Renewable Energy

Madison was green before green was cool.




If Madison Gas and Electric can offer renewable energy, why can't any utility?

Too Many Homes

A bank destroys 16 partially built homes to end government fines. It’s too bad the government didn’t stop the fines and donate the homes to the homeless.



Our society's biggest short-term problem is we have too many places to live. It should be a good problem to have.

Stress Test House Price Predictions Right on the Money

Calculated Risk did an excellent post showing a graph of how house prices have tracked in comparison to the baseline and adverse estimates used on bank “stress testing”. Although it’s only been two months, the actual real estate prices are coming in in between the two estimates, closer to the adverse estimate.

The accuracy of the prediction (so far) highlights how much baloney is out there regarding real estate. From the NAR to many local Realtors, we’ve seen nothing but deception about the real estate market. I wondered if it was just because real estate is such an imperfect market that maybe even experts can’t work out what’s going on. It turns out they can.

If it is possible to work out future real estate prices and they are going to fall between 13% and 24%, why don’t they fall instantly? I suspect the answer is misinformation from Realtors. If everyone accepted these predictions, prices would fall instantly because there are not many people who are willing to pay 20% extra just to execute a transaction a year or two earlier. Enough people are spreading misinformation that market participants are confused as to what is going on.

I cannot explain why Realtors seem to lie more than other industry associations. The lies seem to be ones that would decrease sales volume, which is how they make their money. Maybe it’s because they know they’re at risk of becoming obsolete. Computers do some of what Realtors used to do. When you look at the fee taken by all the people involved in a real estate transaction (i.e. title company, title insurance, home inspector, loan fees, taxes) the amount the Realtors take is outrageously high.

There will always be a need for someone to help people find buyers for their property and to handle some of the administrative stuff. If Realtors want to continue this function and continue charging around 6% of sale price, they need to provide top notch help and to start being honest.

I don't mean to condemn Realtors. They have helped me in both of the two real estate transactions I have made in my life. My honest question, though, for the organization as a whole is, “Why do you guys lie so much?”

Populist Backlash Will be Against China and Inflation, Not Taxes

I've been hearing talk of a populist backlash against some of bailout measures started by President Bush and now carried on by President Obama. I would welcome a non-partisan backlash against growing government and deficit spending, but I don’t believe we'll see one. If we do have a backlash, it will be in the following areas:

• A nationalist backlash against US dependence on China – Lately they've been expressing concern about our loose monetary policy. Regardless of whether people agree with US monetary policy (or even know what monetary policy is), they might get tired of having to answer to China
• A backlash if inflation occurs – People remember the recessions of '02 and '91 more clearly than the inflation of the 70s. Inflation isn't all that bad, but since it's new it might seem scarier than a recession without inflation, which is fresher in people's minds. The higher nominal rates that come with inflation might make the housing bust more painful, as rising interest rates depress real estate prices.

If we push the fiscal and monetary stimuli levers too far, we will have these conditions and the political firestorm that comes with them.

MG&E Solar Systems

These engineers are out there getting nice views of Madison and saving the environment. They are right on the money about how a bunch of little things (solar panels don't produce that much individually) add up to significant savings.



One of the engineers is TJ, which is no relation to CJ.

I am really glad to see MG&E promoting renewable energy (RE) so aggressively. In the long run it would be nice to see most of Wisconsin's power come from RE. It only costs around 25% more to sign up for all RE electricity. Why not move everyone except for the poor to RE and keep the non-renewable plants around for peak demand and time when the wind's not blowing and the sun's not shining? Maybe power lines will eventually communicate with appliances to ask if they could postpone high-demand activities until more power is available. There are lot more pennies of CO2 to be squeezed out of our energy supply.

Credit Score Bliss

I have blogged in the past about how the value (to individuals) of credit scoring is mostly a myth that gets persists because it benefits banks.

Here is some unintentional humor from a company selling the service of finding your credit score. To promote their service they picked a stock photo of two young people looking excitedly at a computer. It was probably taken with the idea that wedding planners would buy it. It could be used to convey “OMG, this is perfect place to get married,” “OMG, I got an offer from my dream job,” or “OMG, they’re going to publish my book.”

(Click for a larger view)

OMG, here’s a number summarizing how much financial institutions like me! And here are three good points to remember:
1. Pay your debts on time.
2. Have a variety of types of debt.
3. Stay in debt. (Or at least keep the account open.)

This is obviously just a bad ad, but it unintentionally parodies a self-serving point of view promoted by financial institutions.

We Produce Less Crap Than a Few Years Ago

A Trashed Economy Foretold, March 14, 2009 Washington Post

In an extravagantly wasteful society that typically puts 254 million tons of unwanted stuff at the curb to be thrown away each year, landfill managers say they knew something was amiss in the economy when they saw trash levels start steadily dropping last year. Now, some are reporting declines as sharp as 30 percent.

The amount of crap we produce has decreased. Trash is correlated with GDP, but it doesn't have to be as tightly correlated as we usually think. We could produce stuff that doesn't involve trash, just as we can produce stuff that doesn't involve carbon emissions.

While we are doing everything possible to get production back up, we should try to see if we can get that production to come in a more environmentally friendly form. We might also stop to question what exactly we're trying to accomplish with making more stuff. Why do people say they're "scared" they won't get more? What things do we wish we could product but aren't producing? The answer has to be something more than "well the valuation models of my entire portfolio are based on ever increasing production, so I need people to consume as much as possible."

There are tangible things we like to do, some of which require economic production / consumption. Doing things we enjoy is what matters and producing things is just a means to that end. When we we want to produce stuff because of valuation models of businesses we own shares of, something is wrong with our system.