Tuesday, September 09, 2014

The best case scenario for the Chinese economy?

A kind of scary if fascinating read by Michael Pettis, mapping out the challenges China faces:

GDP growth must drop every year for the next five or six years by at least 1 percentage point a year. If it drops faster, the period of low growth will be shorter. If it drops more slowly, the period of low growth will be stretched out. On average, GDP growth during President Xi’s administration will not exceed 3-4%.

[...]If investment growth falls sharply, especially investment in the real estate sector, it should cause unemployment to surge, which of course puts downward pressure on household income growth as well as on consumption growth, potentially pushing China into a self-reinforcing downward spiral. This, I think, is one of the biggest risks to an orderly adjustment. The good news is that if large initial wealth transfers to households can kick start a rise in consumption, growth driven by household consumption, especially growth in services, tends to be much more labor intensive than the capital-intensive investment growth that too-low interest rates have forced onto China. A transfer of domestic demand from investment to consumption implies, in other words, that employment growth can be maintained at much lower levels of GDP growth.

Saturday, August 30, 2014

One emerging and successful healthcare model post 'Obamacare'

It's thriving specifically because of Obamacare - unintentionally. This may be the good news of the failing Affordable Care Act (aka 'Obamacare') that it may pave the way for models that are sustainable (Xeniagazette):

The Surgery Center of Oklahoma (SCO) has been open for 17 years, but 5 years ago decided to publish online the fees charged for various operations. Drs. Keith Smith and Steven Lantier, both anesthesiologists, felt the need to provide quality healthcare at reasonable prices. They contact local specialists and negotiate the fees charged. They include a reasonable fee for their services and add in a fair profit."

There are no hidden fees or charges.

They do not accept government funding for anything; your medical history and information are therefore not available online to the federal government – or anyone else. Most doctors agreed to computerize patient medical records and make them available online to the federal government, in return for reimbursements of the approximately $100,000 it cost them to do so.

Best of all, SCO’s maintains a zero or near-zero infection rate. Dr. Smith, CEO and managing partner of SCO believes their unbelievable low infection rate is due to their near-zero turnover rate in personnel. He commented, “Many of the people – in fact all of the people that worked for me 17 years ago – are either [still] working here, or they’re completely retired…. They just feel like it’s the best job they’ve ever had. People that are working in the same environment every day know the routine.”

Friday, August 29, 2014

Not sure what your purpose is in life? Pivot

It's not just for startups. Useful advice from Barking Up the Wrong Tree.

Delaying self driving cars: How regulations kill

Human error causes the large majority of accidents. While this isn't to say that computers can't be worse than humans (the buggy nature of most software being emblematic of this), this isn't to say technology can't also be a lot better and a lot more robust. So why won't regulators let car makers at least try?

Federal regulators are also putting the brakes on self-driving cars, which are closely related to the Uber innovation—enabling riders to order a car service using their smartphone app. If fast-moving technology hadn't collided with slow-moving regulators, this might have been the last summer you'd have to drive your own car.

Self-driving technology is reaching the limits of what U.S. regulators will allow. The 2014 Mercedes Benz S-Class sedan uses digital technology to be the first car most of the way to being self-driving. The S-Class combines active cruise control, automatic braking and lane-keeping technologies to offer what an industry analyst calls "70% autonomous driving." The car steers, accelerates and brakes on its own in congested traffic up to 40 miles an hour. On the highway, it uses numerous cameras and radars to remain centered in its lane at a safe distance from the car ahead, up to 120 miles an hour.

But U.S. regulators won't let car manufacturers go much beyond what Mercedes now offers. That means car makers can't roll out technologies they already have, and auto makers in Europe, which has fewer regulations limiting technology, have surpassed their U.S. competitors.

Wednesday, August 27, 2014

Why Britain is poorer than any US state, other than Mississippi

A story that's somewhat disruptive to a few narratives out there (TheSpectator):

It’s not surprising that America’s best-paid 10 per cent are wealthier than top 10 per cent. That fits our general idea of America: a country where the richest do best while the poorest are left to hang. The figures just don’t support this. As the below chart shows, middle-earning Americans are better-off than Brits. Even lower-income Americans, those at the bottom 20 per cent, are better-off than their British counterparts. The only group actually worse-off are the bottom 5 per cent.
Update: Maybe the Brits are poorer than even Mississippi (Forbes)

Monday, August 18, 2014

Wired's profile of Stewart Butterfield, Founder of Slack

An interesting profile of Stewart Butterfield and how he accidentally developed Flickr and now Slack which were both offspring of failed gaming projects (Wired).

Monday, August 11, 2014

Emerging consumer/market based healthcare in the US?

For the record, I think the Affordable Care Act (ACA), aka 'Obamacare' is a disaster and things will get worse before before it gets better but there are still a number of interesting experiments emerging.

While VentureBeat credits the ACA for "li[ghting] a fire under the movement to rethink they way we deliver and pay for healthcare," the examples they cite seem to show that this is despite - not because of the Act.

Cato recently highlighted the Direct Primary Care model:

“Direct primary care” is a rapidly growing alternative to the traditional “fee-for-service” model of paying for medical care. Instead of the patient or his insurance plan paying the doctor separately for each visit or service, the patient pays the physician a set monthly fee. In exchange, the physician is available to consult with and treat the patient as necessary.

For patients, the benefits of direct primary care are greater access to their doctors and more convenient and personalized care. Under direct primary care, patients can generally expect “all primary care services covered, including care management and care coordination…seven-day-a-week, around the clock access to doctors, same-day appointments, office visits of at least 30 minutes, basic tests at no additional charge, and phone and email access to the physician.” Some practices may offer additional services under the arrangement, such as EKGs or medications at wholesale cost.
In fact, studies are showing that a number of doctors abandoning the onerous demands of filing to get insurance claims in favor of cash (Forbes). Interestingly, the very first company that VentureBeat cites - Evolent Health, supports doctors who move towards a direct pay/subscription model. Healthgrades, another company cited, rates and ranks hospitals - further empowering consumers. The others - Doximity, a Linked-In for Doctors, MindForce, a CRM for health and wellness firms, and Best Doctors, a service providing expert opinions for the employees of compaanies, all operate outside the ACA. If the business models of Evolent and Healthgrades thrive, this could be the positive legacy of the Affordable Care Act.

How tax inversions have helped the US economy

A contrarian opinion from Diana Furchtgott-Roth, considering some prominent liberals have called for corporations to take a loyalty oath (TheDailyBeast) in light of recent tax inversions:

U.S.-based multinationals face a federal corporate tax rate of 35% on worldwide income, not just income generated in the United States. State taxes are extra. America is one of only seven Organisation for Economic Cooperation and Development countries that taxes companies on worldwide income, and the others have significantly lower corporate tax rates.

The United States, in fact, charges the highest tax rate in the developed world. The average of OECD countries is 24%. Some countries, such as Ireland, have corporate tax rates that are closer to half that.

If a foreign-based multinational had headquarters in Ireland, and wanted to bring back $100 million to invest in its plant in Detroit, then all the $100 million would be invested. None would go to the Treasury. Residents of Detroit would be better off, and the shareholders of the company would be better off. America would grow because companies generally spend money more effectively than does the government.

Since inverting to Panama in 1982, McDermott International MDR +2.22% has created American jobs by constructing pipelines and oil platforms in the Gulf of Mexico and across the country. Panama’s lower corporate income tax rate, 25%, leaves McDermott with more funds to hire the workers to complete those projects.

Saturday, August 09, 2014

Was Argentina bullied? Why does it matter?

So first off, anyone who reads/watches/listens to the CBC for actual business analysis deserves the returns they get. I'm not sure what is so difficult to understand: when you borrow money, the people you borrow the money from expect to be paid back in full. It doesn't seem like an unreasonable expectation that you should repay those who you owed money to first (so long as they are of the same class of debt holders) - and that is more or less what a New York court decided in the case of Argentina.

Argentina used to be incredibly wealthy. So what happened? Governments spent money it didn't have to effectively bribe their own electorate. This was their own doing (Cato). Argentina is a sovereign nation with a democratically elected government. No matter how much the CBC wants to paint them as an underdog (presumably as a historical defense of their own largesse off the backs of Canadians?), this was their own doing. Other countries should take note.

"Austerity" in the European Union

Nope, these governments couldn't possibly make any further cuts... (Cato):

Thursday, August 07, 2014

What if public transit didn't need to be... well, public?

Technology may drive public transit out of business. Uber has launched a service similar to Hitch (TechCrunch) that aims to help commuters carpool/pool cab money when they're going to similar places.

It doesn't seem like a far leap to imagine a day that you could have small mini buses or even driverless cars/buses that have the capacity to pick up more people while competing against each other (and maybe what governments should do is just create pick up points?). Market driven technology tends to save time and/or money - and in this case, it promises to do both.

Given how expensive and slow moving most public transit systems are - not to mention probably bad for the environment (Freakonomics), that may be a good thing.

Wednesday, August 06, 2014

More companies are still closing than opening in the US

Troubling (WSJ):


Especially because it's not small businesses that are the biggest creators of jobs in the US - it's new businesses (Kauffman).

A reminder that being pro-business isn't the same as being pro-markets

At least in this case, the good guys won - Justin Amash wins against opponent heavily funded by crony capitalists at the US Chamber of Commerce (DailyCaller). From Adam Smith's Wealth of Nations:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice.

But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary. A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register, facilitates such assemblies. . . . A regulation which enables those of the same trade to tax themselves in order to provide for their poor, their sick, their widows, and orphans, by giving them a common interest to manage, renders such assemblies necessary. An incorporation not only renders them necessary, but makes the act of the majority binding upon the whole.

Thursday, July 31, 2014

When you think of the innovation economy, think rotisserie chicken

I have to say that I love getting rotisserie chicken particularly from Costco - from Megan McArdle (Bloomberg):

The rotisserie chickens were actually cheaper than buying and roasting my own. [...]

Grocery stores make them out of unsold chicken that is about to pass its expiration date. It’s an elegant way to make a profit out of food that would otherwise be a net loss. And it’s not just chicken -- according to Vasko, the ever-expanding prepared-foods section of the supermarket uses up all sorts of unsold produce and meat. It is, as she says, a bit like hunter-gatherers using every inch of the animal.

This is the sort of thing that no one talks about when they talk about innovation --and yet, it’s a major way in which our economy has become more efficient over the last few decades. Reducing spoilage means grocery stores can sell us raw chickens at lower prices -- and that we can get fresh, delicious prepared food at even lower prices. It’s a win for the grocer and the consumer.

Saturday, July 26, 2014

Study: Charter school students smarter, earn more

While I have little doubt that this is the case in the long run, I also don't doubt that in the short run, there are public schools or schooling systems that can leave students better off. Charters are in effect experiments and actual markets where individual schools can do much better or even more poorly than their publicly run counterparts.

I think the difference in charter schools is that there's a virtuous feedback loop - that the best survive and thrive while poorly performing public schools tend to live on to deliver immense harm to students. I think this an even more important moral argument to make. Reason.com quoting the study:

Comparing [National Assessment of Education Progress] achievement obtained in public charter schools versus TPS for 21 states and DC, we find the public charter school sector delivers a weighted average of an additional 17 NAEP points per $1000 invested in math, representing a productivity advantage of 40% for charters; In reading, the public charter sector delivers an additional 16 NAEP points per $1000 invested, representing a productivity advantage of 41% for charters.

... The analyses we present in this report indicate that charter schools are more productive than TPS, either because they produce higher student gains at a lower cost or because they produce similar or only slightly lower student outcomes at a significantly lower cost.

Prioritizing aid

An op-ed from Matt Ridley, the author of The Rational Optimist, on Born Lomborg's Copenhagen Consensus (WSJ):

The Copenhagen Consensus Center process has won world-wide respect for its scrupulously fair methods and startling conclusions. Its 2012 report, published in book form as "How to Spend $75 Billion to Make the World a Better Place," came to the conclusion that the top five priorities should be nutritional supplements to combat malnutrition, expanded immunization for children, and redoubled efforts against malaria, intestinal worms and tuberculosis.

Their point wasn't that these are the world's biggest problems, but that these are the problems for which each dollar spent on aid generates the most benefit. Enabling a sick child to regain her health and contribute to the world economy is in the child's interest—and the world's.

The numbers produced by this exercise are eye-catching. Every dollar spent to alleviate malnutrition can do $59 of good; on malaria, $35; on HIV, $11. As for fashionable goals such as programs intended to limit global warming to less than two degrees Celsius in the foreseeable future: just 2 cents of benefit for each dollar spent.

Figuring out the best way to help the world's poor isn't like solving a math problem. There are not right and wrong answers. But there are better and worse answers, and the only way to assign those priorities is to set aside our sentimental commitments and do the hard work of assessing costs and benefits.

Using property rights to protect local forests

Some environmentalists discover the power of property rights (NewScientist):

The best way to protect rainforests is to keep people out, right? Absolutely not. The best way to keep the trees, and prevent the carbon in them from entering the atmosphere, is by letting people into the forests: local people with the legal right to control what happens there.

Given the chance, most communities protect rather than plunder their forests, says a new study by the World Resources Institute and Rights and Resources Initiative, both in Washington DC. The forests provide food, water, shelter, medicines and much else.

The report, Securing Rights, Combating Climate Change collates many existing studies. It concludes that forest communities only have legal control over one-eighth of the world's forests. The rest is mostly controlled by governments or leased for logging or mining, often in defiance of community claims.

But community-owned forests are often the best-protected. In the Amazon rainforest, deforestation rates in community-owned areas are far lower than outside.

Friday, July 18, 2014

Surprise! Tech makes us happier

Peter Diamandis (Chairman/CEO of X-Prize Foundation) via Instapundit:

Regardless of what the naysayers believe about human interaction and social media, the data shows us that the abundance of technology is actually increasing the abundance of happiness all over the world.
Related: Is Silicon Valley Funding the Wrong Stuff? (TechCrunch)

Wednesday, July 16, 2014

Uber/Lyft: The best regulators are consumers

Except it means giving up control for actual regulators. Mark Perry via Instapundit:

As I’ve noted before, it’s important to remember that Uber and Lyft are already very heavily regulated ride-sharing services, and in some ways they are regulated even more intensely than traditional taxis by a very ruthless group of regulators – the consumers who use their services. The issue really isn’t regulated versus unregulated ride services; the issue really is who is the primary regulator: a) government bureaucrats and legislators who are often captured by the regulated taxi cartels or b) consumers. And there’s no question that captured regulators almost always put the special interests of the well-organized, concentrated groups of regulated producers like the taxi cartel over the public interest of the dis-organized, dispersed thousands/millions of consumers.

In defense of usury, part xxx

The US Obama Administration is attempting to decimate the pay day lending industry through regulation and coercion. Lawyer, Ronald L. Rubin argues in the WSJ why this is misguided - and these attacks hurt those they are most supposed to help:

The CFPB should only create programs to educate consumers about payday loans, pass regulations to ensure that lenders follow existing laws and prosecute businesses that don't treat borrowers honestly. The Dodd-Frank law requires these actions, and no more. The CFPB wasn't created to protect consumers from themselves.

Informed consumers who take out a loan have calculated that they are better off with that loan than without it. A borrower's desperation does not alter this equation. A man whose car is about to be repossessed may calculate that he is better off taking out a payday loan than losing his job because he lacks transportation. The government is blind to such motivations, and it can harm consumers by substituting its judgment for theirs. It is better to help consumers make good decisions than to make decisions for them.

China's looming bad debt crisis

Something to keep an eye on. From Michael Pettis:

[...] we cannot simply put the bad debt behind us once the economy is “reformed” and project growth as if nothing happened. Earlier losses are still unrecognized and hidden in the country’s various balance sheets. These losses will either be explicitly recognized or they will be implicitly amortized. The only interesting question, as I see it, is which sector will effectively be assigned the losses. This is a political question above all, and its answer will tell us a great deal about how the newly-constituted, “reformed” China will grow over the next few decades.

Monday, July 14, 2014

Too many entrepreneurs not enough factory workers?

While the article is provocatively titled "Please do not teach this woman to fish", Daniel Altman at ForeignPolicy asks if the microfinance industry is overfunded:

Along with them came the microfinance programs -- as well as many other aid schemes designed to promote entrepreneurship -- which were often based in rural villages where repayment would be enforced primarily by peer pressure among the members. These programs tended to target women, who were viewed as more reliable stewards of the groups' money. Some women did manage to start their own businesses with the loans they received, but the verdict of research into microfinance's ability to reduce poverty was decidedly mixed.

There was a simple reason for this. By trying to make microfinance less risky and more sustainable, the program managers also made it less effective. To understand why, consider a common-sense question: How big can a business be in a rural village? There aren't many customers there, and incomes aren't very high either. A business would have to serve several villages to start creating jobs in any significant numbers. Now, consider rural women with families. They may be reliable repayers of loans, but they're much less mobile than single men. Single men can move to cities, or at least cover a lot of ground in the countryside, in an effort to win new customers. By contrast, even women without children face constraints on their movements in plenty of countries.

Microfinance may have given a lot of people a little, but it was never designed to give anyone a lot. Unlike the microenterprises founded in rural villages, businesses that serve lots of customers take advantage of economies of scale in production and distribution. These economies of scale are essential for economic growth. After all, which economy is more productive -- one in which every single person is an entrepreneur, or one in which a minority of entrepreneurs employ the majority of people?

In fact, poor countries already have many more entrepreneurs per capita than rich countries. More entrepreneurship is not what they need; economies of scale are. Indeed, the most productive economies are the ones that balance economies of scale with the benefits of competition. Too many businesses, and workers will fall short of their maximum productivity. Too few businesses, and monopolists will gouge consumers, quash innovation, and fail to serve the entire market.
I don't think the problem is with entrepreneurship though - or even subsidies that are reducing the risk of 'subsistence entrepreneurship', but red tape/quagmire that bogs down successful entrepreneurs and an inability to access capital at the same costs as some of their smaller competitors thereby preventing them from scaling.

Chris Blattman: "Development must be seized, through struggle. It cannot be given."

Great quote. Blattman also quotes Owen Barder:

Too often we think of scaling up in development like rolling a new product line across an existing series of shops. That’s the wrong model. Scaling up in development is more like building a series of separate businesses from scratch, each in a different market.

…Instead of thinking that creating capable organisations will deliver results effectively, perhaps successful organisations are the consequence, not the cause, of success. Capability in formal organisations is what happens when successful folk practices, which evolve out of years of struggle and adaptation, are consolidated into formal processes.

Who does "Fairtrade" help?

Guild ridden liberals in the west? Because apparently it's not the low paid workers in developing countries (SOAS).