Small, medium, and large are subjective, and women’s numerical-yet-not-quantitative sizes aren’t much better, but it’s a bit of a shock to learn that your pants are lying to you even if they list a size in inches:
Your Pants are Lying to You
Friday, September 10th, 2010America’s weirdest government monopoly
Thursday, September 9th, 2010The Economist calls it America’s weirdest government monopoly. I don’t know about that, but this analysis does seem a bit weird:
Ever since the end of prohibition in 1934, to buy a bottle of Kentucky bourbon in the state of Virginia, you’ve had to go to a government-run ABC (Alcoholic Beverage Control) store. Republican Governor Bob McDonnell is trying to privatise the system, but is running into opposition in the legislature, because the state liquor monopoly is an important source of government revenue. (Just like in Soviet Russia!) The state makes at least $230m a year from the ABC stores, $110m from taxes and $120m in profit. For a sell-off plan to stay revenue-neutral, it would have to sharply raise taxes on alcohol, including a new tax on alcoholic drinks in restaurants and bars. Mr McDonnell says the sell-off of licenses to wholesalers and retailers would net a one-time revenue of $300m to $500m, which could be invested in transportation infrastructure. But legislators don’t think he’s driving a hard enough bargain.
“If you want more milk, you don’t sell the cow,” said [Democratic delegate Albert] Pollard, the great-grandson of the governor who created the ABC system, John Garland Pollard, who served from 1930-34.
“Any business person knows you ought to sell a business for five to seven times the yearly earnings,” Pollard said, meaning the state should be taking in more than $1 billion in franchise fees. “I don’t see that kind of return there.”
Some experts think it’s impossible for the state to make as much from taxes as it does from its sales monopoly, the Washington Post‘s Rosalind Helderman reported last month. Maryland has liquor prices nearly as high as Virginia’s, but made just $25m in excise taxes last year. A study by the Distilled Spirits Council of the United States found liquor taxes in Virginia would have to reach five times the average in privatised states to keep the revenue stream at current levels.
If the state makes $230m a year from the ABC stores — $110m from taxes and $120m in profit — then it should be able to do one of two things:
- It could double the excise tax on liquor. Normally this would drive up the price of liquor and reduce the quantity demanded — and thus tax revenues would not double — but in this case the state is already charging monopoly prices and making monopoly profits. This would simply shift money from state-store profits to state tax revenue — which would leave the state’s finances intact but would leave the about-to-be-privatized liquor stores with low profit potential. They thus would not sell for a high multiple of their current monopoly earnings.
- It could leave taxes as they are and sell off the profitable liquor stores. The liquor stores are currently quite profitable and might sell at a decent multiple of earnings — but they’d really sell at a premium if the state credibly promised to restrict liquor licenses. Then buying a store would mean buying a low-risk stream of cash flows — which would be worth far more than five to seven times earnings.
So, if you’re a politician, you threaten to hike excise taxes, sell state stores to your cronies at depressed prices, wisely come to see that excise taxes are regressive and thus bad, and then decide to restrict liquor store licenses instead, to make sure the scourge of liquor does not run wild — and to drive the value of those newly private liquor stores back up.
5 foods it’s cheaper to grow
Sunday, September 5th, 2010William Alexander did the math and realized that his garden tomatoes were costing him $64 to grow:
The title says it all, but the dirty details reveal he spent $16,565 building the perfect garden and $735 maintaining it for one year. Amortizing the initial costs over 20 years, adding this year’s expenses and dividing the result among all his produce, he figured his 19 Brandywine tomatoes cost $64 apiece.
Here are five crops that are cheaper to grow than to buy at the store:
- Fruit trees. If you really want a return on your garden investment, plant fruit trees. Alexander planted one $14 peach tree, and it gives him more than 200 pounds of peaches every year. Yes, he sprays it every year with about $3 worth of fungicide and pesticides. (The sprayer cost $30.) In the Hudson Valley, he doesn’t have to water fruit trees. At $1 per pound for the peaches, in the first year that he got a full crop, he had a 1,400% return (or a mere 339% if you throw in the cost of the sprayer and a few years’ worth of spray). Try getting a return like that on Wall Street. It took Alexander five years to get a full crop, so it does require patience.
- Lettuce. Can’t wait five years for results? Try lettuce. You’ll be eating the thinnings in two or three weeks. From a $2 package of mixed lettuce seed, you can have lettuce for months. A bag of spring greens costs about $3 at a store, so you recoup your investment with the first picking. Lettuce bolts — goes to seed — during the summer heat, so plant again in the fall.
- Herbs. These can give you the fastest payback of all. Buy a pot of parsley or mint and you can nibble on leaves on the way home. A parsley plant costs about the same amount as a bunch of cut parsley from the produce department. Parsley in a pot, kept out of reach of slugs, will provide fresh herbs all summer and can be brought inside in the fall. Thyme, rosemary, sage and other herbs come back on their own year after year in moderate climates.
- Vine vegetables. These are the most prolific crop producers by far. Zucchini and cucumbers are notorious. Put an 88-cent zucchini plant in your garden and, if cutworms don’t get it, it will try to take over the neighborhood. In most parts of the country, you can grow more zucchini from one plant than you’ll ever eat. The Alexanders grow a couple of cucumber plants, from which they make a dozen jars of pickles. They never buy pickles.
- Bell peppers. You can pay $1.50 for one pepper, or you can use your $1.50 to buy one pepper plant that can produce six peppers or more. But first make sure peppers will grow in your part of the country.
Here are five more that are better left to the real farmers:
- Potatoes. Homegrown spuds are great, but by midsummer, farmers are almost giving them away. Alexander says, “For the $30 I spent on seed potatoes this year I could probably buy 100 pounds of white potatoes in August (and trust me, my harvest won’t be anywhere near 100 pounds).”
- Carrots. Carrots are popular, but they grow slowly and are fussy about soil conditions. Carrots in grocery stores are cheap and taste about the same.
- Celery. This vegetable doesn’t like sand or clay, requires plenty of water and grows slowly. Steve Solomon, in “Gardening When It Counts,” says he considers regular celery one of the “difficult” vegetables to grow. He recommends easier-to-grow Chinese, or cutting, celery.
- Asparagus. Solomon also considers it to be difficult. If you’re looking for a fast payback in the garden, asparagus is not for you. Asparagus requires the right mulch at the right time and weed-free beds. (It’s doomed at my house!) You might get some asparagus the second year, but it can take several years to get a real crop.
- Wheat. You can buy a 50-pound bag of whole-wheat flour for $62. Other grains and dried beans can also be purchased more easily than they can be grown. Alexander grew almost 20 pounds of wheat from two packets of seed that cost next to nothing — except about 40 hours of backbreaking, never-again labor. Don’t try to compete with thousand-acre farms with combines.
When Quality Doesn’t Matter
Friday, September 3rd, 2010Back when the Web was young, Paul Graham demonstrated a new algorithm to Yahoo’s Jerry Yang, one that ranked search results by user behavior and differentiated between clicks and clicks leading to purchases. Yang didn’t seem to care, and this confused Graham:
I was showing him technology that extracted the maximum value from search traffic, and he didn’t care? I couldn’t tell whether I was explaining it badly, or he was just very poker faced.
I didn’t realize the answer till later, after I went to work at Yahoo. It was neither of my guesses. The reason Yahoo didn’t care about a technique that extracted the full value of traffic was that advertisers were already overpaying for it. If they merely extracted the actual value, they’d have made less.
This, Eric Falkenstain notes, is just one example of when quality doesn’t matter:
There are many stories about real-estate brokers setting up shop in the early aughts, not caring about whether homebuyers would actually pay their mortgage because it did not matter. This was a signal that rot was rampant. Basically, if quality doesn’t matter, and there’s free entry, there’s a bubble.
When people have positions that don’t do what they say they do, and make a lot of money, there are myriad bad effects. Once when I was a risk manager, I remember showing a swaps book trader a more efficient way for him to hedge his portfolio. As I had to calculate his value-at-risk I had all the data to demonstrate conclusively my superior algorithm. He found this annoying. As a market maker, his Sharpe was already well above 10, so decreasing his value-at-risk by 20% did not really matter. Like Graham’s encounter, I discovered it was all marketing.
The problem with this situation is that when you really understand the game, you have to never talk about it, which is easiest to do if you really don’t understand it. So, the best brokers or brokers-who-call-themselves-traders are blithely ignorant, because they don’t generate ‘tells’ that make everyone engaging in the game uncomfortable. When they talk about trade ideas that are totally unfounded, they can’t be convincing if aware of its lack of statistical evidence, or how their qualifications make everything said meaningless (this could lead to a retracement). Once you swallow the red pill, you can’t go back to enjoying the Matrix.
Similarly in the corporate borg, especially in places like the new Office of Minority and Women Inclusion that is now mandated to be part of each of our 30(!) financial regulatory bodies. As true discrimination is about as rare as a Klan rally, this is all just a sop to the Indian-like ethnic group spoils system the US is becoming (are there really any bankers who hate minorities enough to forgo extra profits?). So, the Chief Diversity officer’s real role is not to rid financial discrimination, but rather to spout cliches about diversity, and put a pretext on the patronage daisy-chain that led to the 2008 housing crisis. However, if you really understood this, you would go crazy, so earnest dolts plague the aristocracy because the dupes actually believe their job is about what it says it’s about.
E-Cigarettes Spark New Smoking War
Friday, September 3rd, 2010Electronic cigarettes are battery-powered tubes that vaporize a nicotine-laced liquid — e-cigarette juice — instead of burning dried tobacco and producing known carcinogens. Naturally the FDA wants this stopped:
The FDA began detaining some shipments from China in June 2008 on the grounds that the products were unapproved drug devices aimed at treating nicotine addiction. Smoking Everywhere Inc., a Florida distributor of e-cigarettes, sued the agency in April 2009, claiming that the FDA had no jurisdiction over the products. Another purveyor, Sottera Inc. of Scottsdale, Ariz., later joined the case as a plaintiff.
While the case was pending, Congress, in an unrelated move, passed landmark legislation that gave the FDA authority to regulate tobacco products, which lawmakers broadly defined as “any product made or derived from tobacco that is intended for human consumption.” But the agency continued to maintain that e-cigarettes were drug devices, not a tobacco product like a pack of cigarettes or can of snuff.
Richard J. Leon, a judge in the U.S. District Court for the District of Columbia, issued a preliminary injunction against the FDA in January, ruling that Smoking Everywhere and Sottera generally marketed their e-cigarettes as recreational alternatives to cigarettes, rather than as quit-smoking aids. The judge called the FDA’s approach a “tenacious drive to maximize its regulatory power.” He noted that e-cigarettes contained nicotine derived from tobacco and said they appeared to fall under the provisions of the new tobacco law.
The FDA won a stay of Judge Leon’s ruling, pending an appeal to the U.S. Court of Appeals for the District of Columbia Circuit. The agency is still detaining and refusing entry of e-cigarettes, a spokeswoman says.
[...]
Ms. Vasconcellos says that she has lost tens of thousands of dollars on shipments from China that were blocked by the FDA and that the agency’s actions make it tough to do business. The FDA has refused to allow e-cigarette battery chargers and other products Ms. Vasconcellos has ordered from China and other countries, according to FDA documents reviewed by The Wall Street Journal. To try to stay under the radar, Ms. Vasconcellos orders shipments in smaller packages and has them sent to friends’ homes around the U.S.The FDA spokeswoman says the agency has refused the entry of more than 700 shipments of e-cigarettes nationally since it began detaining and reviewing the products two years ago.
Steve McVey, owner of PureSmoker.com in Goodlettsville, Tenn., near Nashville, had $59,000 in shipments from China seized last year and has faced lengthy delays on other shipments as federal inspectors scrutinized them.
“We’ve almost closed up shop three or four times,” Mr. McVey says.
Nevertheless, Mr. McVey says his company, Pure Enterprises Inc., collected $1.3 million in revenue last year.
How to tell when management is lying
Thursday, September 2nd, 2010David Larcker and Anastasia Zakolyukina analyzed the transcripts of nearly 30,000 conference calls by American CEOs and CFOs whose company profits later had to be “materially restated” — and from this analysis they determined how to tell when management is lying:
Deceptive bosses, it transpires, tend to make more references to general knowledge (“as you know…”), and refer less to shareholder value (perhaps to minimise the risk of a lawsuit, the authors hypothesise). They also use fewer “non-extreme positive emotion words”. That is, instead of describing something as “good”, they call it “fantastic”. The aim is to “sound more persuasive” while talking horsefeathers.
When they are lying, bosses avoid the word “I”, opting instead for the third person. They use fewer “hesitation words”, such as “um” and “er”, suggesting that they may have been coached in their deception. As with Mr Skilling’s “asshole”, more frequent use of swear words indicates deception.
Investors Head for Bunkers
Wednesday, September 1st, 2010As investors head for the bunkers, certain stocks perform well — the so-called shelter shares:
Between them, they provide an investor with essentials for any respectable fallout shelter — makers of bottled water, canned goods, dehydrated broth, gas masks and auxiliary generators.
A portfolio of the 18 companies that reached their peaks in the past month would be up about 24% this year, compared with the broader market’s 4.5% decline, a sign some investors may be taking the prospects of financial Armageddon more seriously than one might think.
Hormel Foods Inc., the 120-year-old producer of that dugout staple, Spam, is up 12% this year, and hit an all-time high of $43.95 in recent weeks. The company’s stable of long-life provisions, from instant packets of dehydrated broth to wrapped sausages, are critical for weathering even the most prolonged storm.
Bottled-drink maker Dr Pepper Snapple Group Inc., whose brands include DejaBlue purified drinking water, has soared 32% this year. The company also makes Schweppes ginger ale, great for any gnawing queasiness.
Also in the bunker club, Cummins Inc. The maker of a wide range of auxiliary power generators in addition to truck engines is up 66% this year. Shares of the Columbus, Ind., manufacturer hit a record $81.83 last Wednesday.
Hard hats and gas masks? Airgas Inc. makes both. Shares of the Radnor, Pa.-based company, which spiked in February after a hostile bid from rival Air Products & Chemicals Inc., has since added to those gains, hitting its best-ever close, at $66.72, on Friday.
“If it’s the end of the world, what do you buy? Canned foods, guns and the generators,” said Keith Springer, president of Capital Financial Advisory Services. “There are a huge number of people who feel this is the end of the world.”
The article doesn’t mention gun companies.
How Our Professional Elites Are Hired
Wednesday, September 1st, 2010Conor Friedersdorf continues to be astonished by how our professional elites are hired:
Even getting an interview often requires attending an Ivy League professional school or a very few top tier equivalents. Folks who succeed in that round are invited to spend a summer working at the firm, the most sane aspect of the process.
But subsequently, they participate in sell events where they’re plied with food and alcohol in the most lavish settings imaginable: five star resort hotels, fine cigar bars, the priciest restaurants. A fancy dinner will be scheduled in a faraway city. Summer associates will fly there that evening, spend several hundred dollars on the meal, spend the night in a hotel, and fly back the next morning in time for a 10 am client meeting. They’ll expense steak dinners or $150 cab rides without a second thought. The whole process is designed to appeal to their status conscious side, to accustom them to a kind of luxury that requires them to retain highly paying jobs, and to keep them busy enough during their summer tryout that anyone unable to commit their whole lives to the firm won’t stick around.
The prize firms are after: talented people, to be sure, but also the ability to tell clients, “We can put together a team for your company that is entirely made up of Ivy League graduates.” Apparently this is enormously appealing to companies, which makes sense, given that law firms and especially consulting firms are often used as a kind of responsibility deferral system, allowing managers to fall back on some variation on, Yes, technically I approved this consequential decision that didn’t actually work out for the company, but as you can see we hired the most prestigious consulting firm in America — a whole room full of Harvard graduates! — who affirmed that this was the best option.
Tech startups are changing the way workers are screened and hired
Tuesday, August 31st, 2010Tech startups are changing the way workers are screened and hired:
Recruiters, who have transformed the corporate hiring landscape for the past 20 years, are touted for their ability to sift through candidates. But as more jobs require sitting in front of a screen, many recruiters are in a technology fog, which alienates gifted candidates. While they can ask potential hires whether they know certain programs, recruiters in the technology space often can’t assess what the applicants know. “They can’t tell the difference between the competent ones and the stars,” said Paul Graham, founder of Y Combinator, an early stage venture firm in Mountain View, Calif.
In a hiring climate in which companies find talented workers by seeing how they already perform, the RethinkDB founders turned to sites like Github.com and stackoverflow.com, where programmers collaborate and work on special projects. “You can see the code being written and how technically accurate they are,” said Glukhovsky, who inhabits a world where 95 percent of coders can’t complete basic computer-science tasks. Now, a few months from releasing their first product, RethinkDB is up to six people, a mix of full-timers and interns, both senior and junior.
Video is another underused tool. Screening candidates between the resume and the interview can help solve the “looks good on paper” problem, in which someone appears for an interview and it is clear that the candidate isn’t right for the job. A handful of Bay Area startups, such as Airbnb, a person-to-person site for finding a place to stay while traveling, have started using HireHive, a Y Combinator-funded company that offers monthly plans to pre-screen applicants on video. Another startup, RoundPegg, funded by TechStars, a seed-stage investment firm, assesses how a candidate will fit into the culture of a workplace. A series of short surveys and analysis by an organizational psychologist can tell the hirer whether an applicant will have a problem with the manager or team.
UFC Heads to Asia
Tuesday, August 31st, 2010The UFC is heading to Asia, where many other sports have failed to take off, the Wall Street Journal reports:
To manage UFC’s Asian business, the fight group owned by Las Vegas-based Zuffa LLC is turning to Fischer with the hope that some of his magic touch in marketing the NBA can rub off on their fledgling Asian franchise.
Basketball has been one of the few American sports imports to become a winner in China.
Under Fischer’s direction from 2003 to 2008, the NBA managed to ink more than 20 marketing partnerships with leading brands in the country. Tsingtao, for instance, is now the official beer of the NBA in China. The NBA has actually set up a separate corporate entity for its China operations, which was valued at $2.3 billion when it was set up in 2008.
Other sports, which came to the party a little later, just haven’t had the hot hand when it comes to gaining acceptance in the Chinese market.
National Association for Stock Car Auto Racing Inc. executives went on a China junket in 2007 to drum up sponsors and gauge what potential interest might exist for its brand of high-octane, fuel-fired racing thrills. So far, the answer appears to be very little. Meanwhile, the National Football League set its sights on China in 2009 and has been staging exhibitions and rebroadcasting games in the country with Chinese color-commentary. However it, too, seems to be getting blitzed in China.
Sports like auto-racing, football, and even baseball suffer from a want of attention in a country where the focus is on winning medals and national glory.
Major League Baseball has a 10-year development program that it has recently put in place in the country, but there are doubts about how successful it can be, according to reports in state media outlets. The marquee stadium in Beijing, built for the Olympic Games in 2008, has already been demolished to make room for new real estate developments.
This sounds like a job for Cung Le, who has successfully transitioned from sanshou to MMA.
Roll-Your-Own Cigarette Machines Evade Steep Tax
Monday, August 30th, 2010Roll-Your-Own cigarette machines are helping smokers and tobacconists evade steep taxes in a fairly predictable manner:
At Smoke Zone and other retailers, The Wall Street Journal found, store employees or customers insert into the machines tobacco labeled “pipe tobacco.” This substantially reduces the stores’ and smokers’ costs because the federal excise tax on pipe tobacco is $2.83 a pound — compared with $24.78 a pound for the rolling tobacco traditionally used to make hand-rolled cigarettes.
Congress in 2009 sharply raised the federal excise tax on rolling tobacco to help finance the expansion of a children’s health-insurance program backed by President Barack Obama.
The Rent-a-Womb Capital of the World
Monday, August 30th, 2010India has become the Rent-a-Womb capital of the world:
Reproductive tourism in India is now a half-a-billion-dollar-a-year industry, with surrogacy services offered in 350 clinics across the country since it was legalized in 2002. The primary appeal of India is that it is cheap, hardly regulated, and relatively safe. Surrogacy can cost up to $100,000 in the United States, while many Indian clinics charge $22,000 or less. Very few questions are asked. Same-sex couples, single parents and even busy women who just don’t have time to give birth are welcomed by doctors. As a bonus, many Indians speak English and Indian surrogate mothers are less likely to use illegal drugs. Plus medical standards in private hospitals are very high (not all good Indian doctors left in the brain drain).
Apple Looking To Slice Up Cable 99 Cents At A Time
Wednesday, August 25th, 2010MG Siegler suggests that Apple is looking to slice up cable 99 cents at a time:
The rumors have persisted for a while now that a new Apple TV (soon to be called “iTV”) is approaching. It’s thought to be a cheaper, smaller version of the current device that puts an emphasis on streaming rather than storage.
[...]
A report today in Bloomberg states that Apple is in “advanced talks” with News Corp. about a new television show rental program for iTunes. Viewers would get access to individual shows for $0.99 and they would be able to view them for 48 hours, according to the report. News Corp. is the parent of the Fox network (as well as other cable channels). Apple is also said to be in talks with CBS and Disney (which owns ABC, and counts Apple CEO Steve Jobs as its largest shareholder) for such a deal.
Siegler makes it clear that he still doesn’t understand the economics of television:
Let’s say you have five television shows you religiously watch each year. If Apple sold a season pass rental to each for $15, that would be $75. Already, that’s cheaper than most cable packages. But cable packages are per month. That $75 would be for the five shows you really want to watch all year! Even if you double the number of shows, it’s still an insanely good deal. And the cable industry knows it.
Cable companies charge so much because they shove a bunch of content down our throats that we don’t want and are not going to watch. But they get money to bundle all this junk together from various networks who sell ads on all this content that people mindlessly watch.
Inside the secret world of Trader Joe’s
Tuesday, August 24th, 2010Beth Kowitt of Fortune peers inside the secret world of Trader Joe’s:
The privately held company’s sales last year were roughly $8 billion, the same size as Whole Foods’ and bigger than those of Bed Bath & Beyond, No. 314 on the Fortune 500 list. Unlike those massive shopping emporiums, Trader Joe’s has a deliberately scaled-down strategy: It is opening just five more locations this year. The company selects relatively small stores with a carefully curated selection of items. (Typical grocery stores can carry 50,000 stock-keeping units, or SKUs; Trader Joe’s sells about 4,000 SKUs, and about 80% of the stock bears the Trader Joe’s brand.) The result: Its stores sell an estimated $1,750 in merchandise per square foot, more than double Whole Foods’. The company has no debt and funds all growth from its own coffers.
You’d think Trader Joe’s would be eager to trumpet its success, but management is obsessively secretive. There are no signs with the company’s name or logo at headquarters in Monrovia, about 25 miles east of downtown Los Angeles. Few customers realize the chain is owned by Germany’s ultra-private Albrecht family, the people behind the Aldi Nord supermarket empire.
Manga Downloads Take Off
Tuesday, August 17th, 2010
Manga (comic book) downloads have taken off in Japan since the May release of the iPad there. Some non-comic books are doing well too — including one title that seems like a caricature from those 1980s the-Japanese-are-going-to-beat-us business stories:
Sandwiched between two comics at number 38 in the rankings for the most downloaded book for the iPhone at Apple’s App Store in Japan is Japan’s surprise runaway bestseller this year, “What If the Female Manager of a High School Baseball Team Read Drucker’s Management”.
The book is about a high-school girl who applies late management guru Peter Drucker’s philosophy to turn around her school’s baseball team. Decorated with an eye-catching manga-style cover, the girl-power management novel ranks even higher among paid-for iPad applications where it sits at No. 13. About 57,000 copies of the 1.11 million printed were downloaded as e-books since the paperback was published in December 2009, according to Sadaaki Kato, associate editor at Diamond Inc., the book’s publishing house. The digital version became available for the iPhone on April 28 and in June for the iPad. Given the different release dates, Mr. Kato estimates over half of those downloads were made onto the iPhone. Mr. Kato said while the digital book easily clinched the No. 1 spot in the book category for most of May, the company was a little surprised that it gained similar standing when thrown into the wringer with other, cheaper apps like games. The book costs 800 yen, or $9.30, per download.
The Economist reported on the book’s popularity last month.