Love for Ellen Pao

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One of my classmates from MIT (we graduated when the Wisconsin ice sheet still covered most of Massachusetts) emailed to say how excited she was that young women were suing employers more frequently than women had in the past (unclear that this is true; it could just be that Ellen Pao-style lawsuits now get more press coverage than previously). Ellen Pao in particular is a hero to her. Why? “Lawsuits force men to listen up.”

I responded with “ask yourself why a U.S. company would want to hire women at this point at the same wage as a man. If every female employee comes with a statistical risk of being sued and spending $10 million defending the discrimination lawsuit, then the only way for the female employee to be equally valuable to the company if she is paid a lower wage. … So women like Ellen Pao actually lower the wages of other women in the workforce.”

Was she persuaded by this Econ 101/Accounting 201 argument? Apparently not because she responded with “This email of yours is wrong and ignorant and sexist.”

Hillary Clinton’s College Affordability Plan

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Hillary Clinton has proposed to change the way Americans pay for college. The money collected by universities will stay the same, the teaching methods will be unaltered, and students will do the same things for the same amount of time. The big difference is that about $350 billion in additional taxes will be paid by Americans and then the government will make sure that (at least most of) the money gets to the colleges. Paying taxes instead of tuition will make college more “affordable” for Americans, according to Clinton and most of the media (e.g., nytimes), just as Obamacare made health care more “affordable” despite the overall cost remaining roughly constant as a percentage of GDP.

It occurred to me that a politician could promise to raise the average American’s tax bill by $70,000 and then buy each family a Mercedes or BMW at list price. This would be called “The Mercedes and BMW affordability plan.”

One of the interesting provisions of the bill is that, if not paid back via a modest percentage of “income,” loans will be entirely forgiven after 20 years (or 10 years, if working in an official do-gooder job). Consider a Massachusetts citizen who goes through 10 years of college and grad school or professional school, learning a lot of interesting but not very practical material. Towards the end of grad school, the citizen has casual encounters with two different members of the opposite sex earning $250,000 each, and retains custody of the two resulting children. Under the Massachusetts child support system, this will lead to a comfortable $80,000 per year in tax-free payments, none of which count as “income,” plus additional court-ordered amounts to pay for direct expenses of the child, such as daycare while in grad school or college tuition if it isn’t entirely free by then. The payments end when the youngest child turns 23, at which point all of the student loan debt has been forgiven.

What can the well-educated child support profiteer do during those 10 or 20 years post-graduation to maintain skills and also accumulate savings for retirement? How about… work? To get the 10-year “do-gooder” schedule of forgiveness, the citizen starts a non-profit corporation and accumulates tax-free profits inside the corp. (see this article for some numbers on Planned Parenthood, which is apparently able to bank over $100 million per year in profits) Perhaps the citizen pays himself or herself a minimum wage for 10-15 hours per week. After the loans have been forgiven, the citizen can then use the accumulated profit (“surplus” in non-profit argot) to contribute to a tax-deferred retirement account and/or to pay a much higher salary.

What if the citizen doesn’t have any non-profit ideas? The citizen forms a C corporation and works through the C corp., which pays corporate taxes on any profits but retains or reinvests nearly all after-tax earnings. This may not be tax-efficient because if the money is eventually taken out as salary the citizen will also have to pay individual income tax on previous years’ income (this pain could be reduced by moving to Puerto Rico (Forbes)). But, on the other hand, skipping out on hundreds of thousands of dollars in student loan debt should provide a boost to overall financial health. Essentially the citizen meets day-to-day personal expenses from child support and saves for retirement by building up value in the C corporation.

A separate question is how this would work for an American who graduates from college and emigrates to, e.g., Singapore. If he or she renounces U.S. citizenship how does the U.S. then get income data sufficient to calculate the former citizen’s student loan repayment liability?

Readers: What other interesting strategies and outcomes would you expect based on the percentage of income cap and the forgiveness-after-20-years policy?

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Learn about the Ferguson shooting

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One of my personal strategies is to ignore the most exciting news and wait until there is a New Yorker story explaining it all. It has been a year since the shooting of Michael Brown by Darren Wilson and Jake Halpern has delivered an excellent way to catch up: “The Cop.”

Readers: What new facts did you learn from this article?

[The article touches on a couple of issues that have previously appeared in this weblog. Darren Wilson isn’t highly employable currently. How do he and his wife pay the grocery bill? The 37-year-old wife retired from her police officer job and collects a public employee pension. She previously obtained custody of two children and presumably collects Missouri child support. As has become standard for a lot of American child support plaintiffs, she secured a custody victory with a domestic violence allegation against the father of one of her children (Missouri’s child support formula makes two children more profitable when they have different fathers). What happened to the gun-carrying police officer who was patrolling some of the country’s toughest neighborhoods? “Barb testified in court that John ‘pulled my hair,’ ‘choked me,’ and ‘punched me in the face.'”]

Michael Moore sells one of his nine houses

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A friend from this Midwest sent me this… Michael Moore is selling a house that a realtor characterizes as “an appealing spot for corporate retreats” (nypost). The lakefront house near Traverse City, Michigan is 11,058 square feet and is on the market for $5.2 million. The value was listed as $2 million during 2014 divorce litigation (“MICHAEL MOORE OWNS 9 HOMES”). (Moore sued his wife in Michigan and, despite the 9 houses, apparently there wasn’t a major dispute regarding venue because the trial was also scheduled to be in Michigan)

How does this house compare to Al Gore’s? The Gore mansion is just 10,000 square feet (snopes.com).

What do readers think? Does the celebrity ownership raise or lower the value of this particular mansion?

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Learn about China and Egypt at the same time from Peter Hessler

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The August 10 & 17, 2015 New Yorker starts off with an article about a New York City public school, the Urban Assembly Institute of Math and Science for Young Women, where tax dollars are used to train students to think of themselves as victims:

 “My girls are freaking awesome, but they’re trapped in teen-age bodies,” Kiri Soares, the school’s principal, said later. A year ago, she noticed that the girls “would have these really deep-seated feelings about unjust things that were happening to them, but they don’t always know how to identify or articulate it.” An activist friend named Cathy O’Neil suggested that Soares start the class, which they call Occupy Summer School. Union members, political economists, and organizers drop in to discuss protest strategies. … The initial idea had been to engage passersby with a bake sale at which men would be charged a dollar for a cupcake or a brownie and women would be charged seventy-eight cents. The girls hoped this would spark conversations about wage discrimination.

[Unclear if the students were also informed that if they want the spending power of a man holding Job X, the New York child support formula will enable them to obtain that by having sex with three men holding Job X. Or that, if they went to work for Hillary Clinton, they could earn 87 cents for every man’s dollar. Or even that an employee who starts off on the first day of work believing him- or herself to be a victim may have a lower value to an employer (increased risk of costly litigation, bad attitude on the job, victim attitude turning off customers, etc.).]

The same issue has an article about a country in which, at least for a manufacturing worker, there is no market-clearing wage for a man (under the 21st century draft horse theory). Some excerpts from Peter Hessler’s article on Chinese entrepreneurs in Egypt:

Lin quickly realized that people in Asyut cared little for pearls and they did not wear neckties with galabiya. But they liked women’s underwear, so he began to specialize, and soon his wife came over from China to help. In Cairo and northern Egypt, the network of Chinese lingerie importers and producers quickly grew, and eventually Lin and Chen rented a storefront in Asyut. They invited a relative and a friend to open the two other shops in town. While Lin and Chen were building their small lingerie empire, they noticed that there was a lot of garbage sitting in open piles around Asyut. They were not the first people to make this observation. But they were the first to respond by importing a polyethylene-terephthalate bottle-flake washing production line, which is manufactured in Jiangsu province, and which allows an entrepreneur to grind up plastic bottles, wash and dry the regrind at high temperatures, and sell it as recycled material.

“I saw that it was just lying around, so I decided that I could recycle it and make money,” Lin told me. He and his wife had no experience in the industry, but in 2007 they established the first plastic-bottle recycling facility in Upper Egypt. Their plant is in a small industrial zone in the desert west of Asyut, where it currently employs thirty people and grinds up about four tons of plastic every day. Lin and Chen sell the processed material to Chinese people in Cairo, who use it to manufacture thread. This thread is then sold to entrepreneurs in the Egyptian garment industry, including a number of Chinese. It’s possible that a bottle tossed onto the side of the road in Asyut will pass through three stages of Chinese processing before returning to town in the form of lingerie, also to be sold by Chinese.

… Here in Egypt, home to eighty-five million people, where Western development workers and billions of dollars of foreign aid have poured in for decades, the first plastic-recycling center in the south is a thriving business that employs thirty people, reimburses others for reducing landfill waste, and earns a significant profit. So why was it established by two lingerie-fuelled Chinese migrants, one of them illiterate and the other with a fifth-grade education?

“I just can’t hire men,” Xu Xin, who had started a cell-phone factory, told me bluntly. After many years with Motorola in China, Xu had come to Egypt in the hope of producing inexpensive phones for the local market. “This work requires discipline,” he said. “A cell phone has more than a hundred parts, and, if you make one mistake, then the whole thing doesn’t work. The men here in Egypt are too restless; they like to move around. They can’t focus.”

I met Wang Weiqiang, who had built a profitable business in eastern China producing the white ghotra head coverings worn by Saudis and other Gulf Arabs. After more than a decade, Wang decided to start an operation in Egypt. “I have very good-quality Egyptian cotton here,” he said. “My machinery is very modern. My investment is more than a million dollars for the factory here. But during these two years I’ve lost a lot. It’s all the problem of labor—the mentality of the workers. Our factory needs to run twenty-four hours a day; it’s not just for one shift. In order to do this in Egypt, we have to hire male workers, and the men are really lazy.” He continued, “Now I reject ninety per cent of the men who apply. I use only girls and women. They are very good workers. But the problem is that they will work only during the daytime.” He intends to introduce greater mechanization in hopes of maximizing the short workday.

Hessler is a great writer and both China and Egypt are exotic lands from our point of view. I would highly recommend the article.

How did the Boeing 777 flaperon from MH370 float?

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Friends have been asking me “How did a metal chunk of an airplane float to Réunion? Why didn’t it sink?” Or, as Monty Python might have asked, “What also floats in water?”

I talked to a former Boeing engineer. It seems that the 777 flaperon is hollow, comprising ribs and an aluminum skin. The same riveting techniques used on the pressure vessel are used on on the flaperon and therefore everything is airtight by default and therefore water-tight. He didn’t remember if there were any drain holes in the flaperon, as there are for some control surfaces, but they would have been very small and easily clogged, thus trapping air.

Trivia: The 777 was originally designed with folding wingtips so that it could fit into gates designed for the B767. This was abandoned at some point but the idea is back with the 777X (gizmodo).

Where is the French bike industry now?

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In the western suburbs of Boston I ran into a guy of about 60 who was riding a 1970s 10-speed marked “Motobecane” and “Made in France” in big letters on the frame. Motobecane went bankrupt in 1981 and no longer makes bicycles (though you can buy Taiwanese bikes with this brand name today).  No country was more enthusiastic about the early days of cycling than France (history) and it used to be possible to buy a competitively priced mainstream road bike with all-French components (Mavic or Super Champion rims, Simplex derailleurs, Christophe toe clips, Mafac brakes, TA cranks, Zefal pump, Ideale saddle, etc.).

I was reminded of this heritage once again at Verrill Farm in Concord, Massachusetts, a popular stopping point for summer road bike rides. Two very fit guys with French-made Cyfac frames parked their machines next to my Trek. One had started the ride in Jamaica Plain and the other in Foxborough, so they were both committed to 70-100-mile round trips. They said that Cyfac was a leading manufacturer of carbon fiber tandem frames for the Paralympics (a blind stoker can thus compete). Their bikes were close to $9,000 each including a lot of deluxe components. The tandem would be at least $15,000 by the time it was all done.

What do expert readers have to say about French bicycles today? Does the country make competitive products for ordinary riders? Or at least have a Trek- or Specialized-like company that is based in France and designs popular bikes that are manufactured in Asia? If not, why not?

Slam-dunk employment discrimination case against hospital maternity operations?

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I recently spent two days at Mt. Auburn Hospital in Cambridge. We got a healthy baby out of the deal so I am not complaining about their operation from a consumer perspective. However, I am thinking that there is an opportunity for litigators there.

Kleiner Perkins has a workforce that is 30-percent female (20 percent of partners are women) and that made them a target for legal buccaneer Ellen Pao and as well as guilty in the eyes of the New York Times, both before and after a five-week trial.  What would the jury have made of an operation where 100 percent of the employees (that we saw, over a 53-hour period) were of a single gender?

Health care jobs are the best in the U.S. The chart linked from “Software engineering = meaningless job?” shows that being in health care offers the best combination of pay and meaning. If these jobs don’t pay as well as collecting child support in Massachusetts (see Kosow v. Shuman in this chapter, for example), they certainly pay more than the median Massachusetts hourly wage of $21.48 (BLS May 2014). There is great protection from foreign competition and virtually unlimited demand for services, especially since the government made it illegal not to purchase health insurance.

How can it not be a lucrative field for litigators when the maternity and labor/delivery departments were both 100-percent staffed by women? Let the defense argue that men don’t want to experience the joy of working around newborns and helping women realize their dreams of motherhood. The plaintiffs will argue that these departments created a hostile environment for men.

Readers: If Ellen Pao had what the New York Times thought was a great lawsuit, why isn’t there a truly superb lawsuit here?

[Sidenote 1: The value of healthcare IT was on display throughout the delivery process. Mt. Auburn has achieved all of the Obama Administration’s “meaningful use” hurdles. This was our second baby to be monitored through pregnancy by the midwives at this hospital. This was our second baby where a test from this group had informed us that we would be having a boy. Yet we were asked three times by three different people, each typing at a computer, whether we knew the sex of the baby and, if so, what it was. (Separately, at what age can gender dysphoria begin? If very young, is it medically meaningful to ask “Are you having a boy or a girl?”) While sharp labor pains tortured the mother-to-be, we were asked about mailing addresses, health insurance data, etc. (the same information collected exactly two days earlier at a checkup) While suffering labor pains severe enough to merit an epidural, the mom was asked to sign a consent form for an epidural. (Why wasn’t it signed, scanned, and in the computer weeks before?) Having been given a due date by this group within this hospital, we were asked what the expected due date was.]

[Sidenote 2: At a “meet the midwives” event and some similar gatherings of expectant mothers, all were talking about their own to-be-born babies as fully human individuals, e.g., when looking at a 2-month ultrasound. They would refer to the fetus by name in some cases, talk about the child kicking, etc. Yet, given that the hospital is in Cambridge, it is same to assume that most are supporters of the Massachusetts law permitting on-demand abortion of babies at any time through 24 weeks of pregnancy (Wikipedia says a fetus may be viable outside the womb at 23 weeks).]

[Sidenote 3: New mothers are provided with a stack of pamphlets regarding welfare programs for which she would be either newly eligible or eligible at a higher level of benefits. In theory, Cambridge provides free housing for all non-working adults, but there is a waiting list and a parent with a young child gets higher priority. Anyone with a low income is eligible for food stamps, but “Women, Infants, and Children (WIC)” is available in addition for women and young children, according to the federal site. Obamacare requires insurance companies to pay for a breast milk pump with each baby, so the mother of four children will eventually end up with a stack of Medelas in the closet.]

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Career/life outcomes for high school football heroes

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An article in Sports Illustrated by H.G. Bissinger follows up on six men who were high school football heroes in Odessa, Texas in 1988. If we define “football star” as “most successful male in high school society,” how does that translate to success in adult society?

Two are involved in the oil industry, one working “as a lease operator for Devon Energy, overseeing roughly 50 wells,” and the other having joined his family business of “dirt excavation and building roads and platforms in the oil fields.”  One became a criminal defense attorney and joined his family’s law firm. One became a “health-care consultant” for Protiviti.

Two of the six are black. Consistent with this chart, one is serving 10 years in prison after some encounters with the law, including “paternity suits were brought against him by women who thought he was now rich.” (He apparently lost at least one of these lawsuits because he was being pursued by the government for failure to pay at least one woman the court-ordered amount.) The other black former player workers as a trucker.

None of the players had enjoyed a significant college football career.

Perhaps worth showing to a high-school student who expresses disappointment at not making the varsity football team…

Rich old guy writes nostalgically about a time before income inequality

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“Capitalists, Arise: We Need to Deal With Income Inequality” is a nytimes piece by an old rich guy who immigrated here from Romania in 1954 and ultimately became head of a big ad agency. Readers comment that they want inequality cured with 1954 income tax rates, e.g,. 94%. They want this to kick in for incomes above about $1 million (not sure that their favored presidential candidate will go along with this; as noted in this May 2015 post, the Clintons have been earning about $22 million per year).

The old rich guy writes about how he got into elite schools: “I was invited by the headmaster of Phillips Exeter Academy to attend his school. From there I went to Princeton and the Stanford Business School.”

Nobody seems interested in the fact that the U.S. population in 1954 was 163 million, half of the present number. Thus there was a lot less competition for getting into elite schools (this was prior to the Jet Age that opened up these schools to foreign students as well).

There was a lot less country to country competition. Romania would not have been a viable location for a new business in 1954. Today it is part of the EU and ranks higher than average on economic freedom (Heritage Foundation). Romania has a lower tax burden as a percentage of GDP than does the U.S. For at least some companies or individuals it might well be a reasonable place to do business.

What do readers think? Is this screed against income inequality really a nostalgic desire to go back to the good old days when the U.S. was more favorably situated compared to other countries and before immigrants forced native-born Americans to work for stuff that had previously been theirs by right?

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