Listen HERE.

Takeway quote: “Change your leaders, not your lightbulbs.”

Also, the interview with Jerry Coyne on evolution and creationism is worth a listen.

• 340,000: barrels of oil burned by the US military per day [1].
• 0.2: grams of CO2 produced by each Google search [3].
• 140: grams of CO2 produced by traveling one kilometer in a car that meets latest EU emission standards [3].
• 36: average CEO pay as a multiple of average worker’s pay in 1976 [2].
• 131: average CEO pay as a multiple of average worker’s pay in 1993 before legislation requiring CEO salaries of public companies to be published [2].
• 369: average CEO pay as a multiple of average worker’s pay in 2008, 15 years after the legislation to correct the “problem” [2].
• 525 million: total cost in dollars of all robberies in the US in 2004 [2].
• 16 billion: total cost in dollars of all robbery, larceny-theft, and automobile theft in the US in 2004 [2].
• 24 billion: total cost in dollars of bogus insurance claims in the US in 2004 [2].
• 350 billion: total cost in dollars estimated by the IRS of underreporting on taxes in the US [2].
• 600 billion: total cost in dollars of employee theft and fraud in the workplace [2].

Sources:

• 1. “Rubber Tracks Make Military Vehicles More Efficient, Durable, Quieter”, Treehugger, Dec 15, 2008.
• 2. Dan Ariely, Predictably Irrational, pp. 17, 195–96.
• 3. Powering a Google search, Official Google Blog, Jan. 11, 2009. These figures from Google are in response to an article in the Sunday Times (London) which said that it took 7gms per search and cited research of Harvard physicist Alex Wissner-Gross. Unfortunately for the Times, Wissner-Gross emphatically states that he never even studied Google but did calculate that every second one spends online generates 200 milligrams of CO2, but that’s total for all aspects included and doesn’t consider search specifically. Wissner-Gross runs the CO2 Stats website

• 60: percentage of the 53.3 billion dollars the government spends each year that is covered by gasoline taxes and fees and vehicle registration fees.
• 60: percentage of costs on Amtrack covered by passenger fees according to a 1997 Cato Institute study.
• 14: percentage of damage caused by trucks paid for by the taxes and fees on trucks.
• 150,000: miles of railroad track in the US currently (approx).
• 429,883: miles of railroad track in the US in 1930.

How many miles of track might we have today and what might the relative ticket prices be if our streets and highways were not so heavily subsidized? Or what level of subsidy is appropriate for maintaining infrastructure? Those are open questions, but let’s not pretend that passenger rail subsidies are abnormal and some supposedly free-market highways system is normal.

Sources:

• “America in Motion,” Lorraine Moffa and Nigel Holmes, American History, vol. 43, n. 6 (Feb 2009), pp. 42–43.
• “Amtrack Subsidies:This is no Way to Run a Railroad,” Stephen Moore, on Cato.org

Hillary Clinton just denounced the Nobel-winning economists’ advice as elitist talk and said she won’t be throwing her lot in with economists. Bill Clinton was criticized as a closet Republican because he hired the best economists he could find and tended to follow their advice whether it fit his ideology or not. Some people say he went too far, but one can make a good argument that part of the reason that the economy was so strong under Bill was because, less than most presidents, he didn’t play politics with the economy. Apparently, Hillary would rather adopt ill-advised policies that will do little or no good for working people rather than taking the tough road and doing what makes sense.

By the way, if you have a car that gets 20mpg and commute 40 miles per day, the gas tax holiday will save you 36 cents per day. Most people could save that much by using cruise control and checking tire inflation. For the people who can’t afford gas, this won’t fix it. If you really want to help working class people, give them a transportation subsidy, which can be used for gas or mass transit, and phases out as income rises, so that people who make more than a certain amount don’t get the subsidy. That way, unlike Hillary and John, my plan does not give a tax break to Bill Gates. Nothing personal Bill, I just don’t think you or Steve Jobs (or The Ranter for that matter) need the $0.18 per gallon tax break (assuming the oil companies don’t just skim that profit).

Every once in a while, something comes along that is jaw-dropping. And over at TED.com it comes along so often, that they have a whole category for stuff that is jaw-dropping. And it is. I’ve been a fan of William McDonough for a long time (see my review of Cradle to Cradle), so I wasn’t surprised to find that his TED video was awesome. But I had never even heard of Hans Rosling, co-founder of Doctors without Borders, sword-swallower (really) and poverty researcher. I’ve never seen anyone with a similar ability to make statistics as gripping as the climax scene in an action movie.

This is just a sample though. There is a lot of good stuff at TED.com. If this works, you can watch the videos right from this page. If it doesn’t, the videos are:

• 2007 Statistical Pyrotechnics in Rosling’s Encore Performance. There’s quite a bit of overlap, but his first talk may be the Best Statistical Talk ever until the 2007 one
• Bill McDonough asks why rubber duckies have cancer warnings. And tells us how to buidl China

So assuming my attempt at using the TED embedding code is successful…

Rosling’s African Swedish Grandmother

Bill McDonough’s Duck

I’ve been meaning to look this up for a long time: what is middle class or, more appropriately, what counts as middle income? My thought was that middle income should be plus or minus one standard deviation from the median. But I was just saved the trouble of doing the research, because I’m listening right now to an interview with sociologist Claude Fischer, co-author of Century of Difference: How America Changed in the Last One Hundred Years, economist David Henderson, editor of The Concise Encyclopedia of Economics and Jean Ross, executive director of the California Budget Project.

Henderson started it all off by saying that he defines middle income as the middle 60% of households (so, in other words, he calls the bottom 20% lower income and the upper 20% upper income). That seems like a good definition. So, before I reveal the numbers — answer quick — are you middle income?

Why do I ask? Two reasons:

1. Politicians are always talking about helping the middle class, but never telling us who they actually mean by that.
2. Most Americans, no matter what they’re income, like to think of themselves as middle income. When you poll people who are in the 95th percentile, they will typically say they are middle income. Of course, if they score in the 95th percentile on, say, a grammar test, they will not tell you that they are middle of the pack on grammar issues. But with income, it’s different.

So then, here it is: you are middle income in America if your household income (so not your personal salary) is between $20,000 and $97,000.
Of course, there are a lot of variables. Where you live makes a big difference. California median household income is $70,000 for a family of four.

Anyway, an interesting hour on the idea of Middle Class on Forum on KQED. In theory, starting tomorrow that broadcast should be available in the Forum Archives for February 18, 2008.

I have to say that I find the numbers a bit surprising because if memory serves, the bottom end hasn’t risen much in the last 15 years, whereas the top end has. I remember back in the late 1980s when $85,000 put you in the top 1% and 114,000 dollars put you in the top 1%. I remember this, by the way, because of a multi-day argument with a doctor friend of mine who insisted that he couldn’t possibly be in the top 1%.

• 62% of American workers expect to receive a pension upon retirement
• 41% of American workers actually have a pension plan

Life just doesn’t work that way people.

Source: Employee Benefit Research Institute, 2007 Retirement Confidence Survey, cited in “In the Vanguard”, summer 2007.

That said, I can’t help but think of it in terms of William McDonough’s work (see my review of Cradle to Cradle). McDonough, one of the most brilliant and innovative environmental thinkers, argues that environmentalists are overly focused on efficiency. Of course, all things being equal, efficiency is better than inefficiency, but McDonough says that making a fundamentally unsustainable and dangerous process 4.7% more efficient, still leaves us using 95.3% of the same inputs and creating 95.3% of the waste products. That makes me think that what we really need to do is rethink the paper-making process.

We may be a long way off from biofuels that are truly practical. As I’ve said before, fueling our cars and homes off corn-based ethanol is absolutely unsustainable. Paper production takes a fair bit of energy from transporting the wood, to pulping it, to running the massive high-temperature dryers that dry the almost-finished product, to delivering the paper to market. Recycling only helps so much there, and we have to hope that the energy inputs can eventually come from algae, switchgrass, willow and other such sources that scientists are working on. That technology is still some way off.

On the other hand, there is no technical reason whatsoever for paper production to be raping virgin forest. This is pure economics: the US Forest Service and similar institutions in the US and Canada make virgin too cheap with cheap leases and subsidized roadways (the US Forest Service operates the largest network of roads in the world). Meanwhile, farmland lies fallow and gets turned over to shopping malls in the Midwest. This land, however, could be turned over from fallow to cultivating fast-growing, high-pulp plants that could make paper. Kenaf produces enough pulp that it is estimated that 5,000 acres could keep a 200-ton/day paper mill supplied. An acre of kenaf produces roughly three to five times as much pulp in one season as an acre of forest does in 7-40 years. In other words, it takes from one twentieth to one two hundredth as much land as growing pulp from trees, and none of it need be crucial forest habitat (see the Vision Paper site). This is mostly a matter of habit and an economy that is distorted due to a long history of indirect subsidies through USFS roadways. No doubt, the factories would require retooling and it’s not an instant change, but mills that run on yellow pine could be converted and cheap sources of pulp that are close to the plants should provide enough incentive for producers to eventually retool.

Finally, there is the problem of water, which is a double problem. In much of the US, especially West of the Mississippi river, we are facing an impending water crisis. We are simply using it up faster than it is getting replaced and, if we are to avoid the collapse of the Western US, we need to conserve. Furthermore, pumping water around the country is one of our most energy-intensive activities (in Californian, water utilities are the largest users of electricity, which is why most are in the power generation business as well). As I type this, a brief soundbite from Schwarzenegger came across the radio and I caught the words “water crisis”! Making water turns out to be a little harder than growing hemp, but if we make water more expensive, large users will no doubt start doing grey water recycling. Personally, if my water bill rose by 50%, that would hardly affect me at all. It would only be a few dollars. Only domestic users who live in places where they have no business growing green lawns (i.e. almost anywhere West of the Mississippi), but insist on growing them anyway, would have a significant increase in their water bills and, frankly, that’s their stupid choice. I live in a place maladapted to growing lawns, so we do not grow one and neither to most of our neighbors. I don’t understand the American obsession with lawns no matter what the economic and environmental cost (most lawns are laced with a cocktail of poisons anyway). Large users like paper mills, though, would have great incentive to recycle their water and reuse it.

The final problem is waste. Paper recycling is simply not a continual process. Paper can get recycled once or twice and then it is just waste. Bill McDonough’s solution is simply not to be used at all. His book is printed using reusable synthetic paper and, at least in theory, reusable ink. That’s his vision anyway. Realistically, though, for low-value applications, it may be hard to match that. Perhaps there should be no low-value uses for paper. If prices rose, perhaps we would be forced into reusable and truly recyclable materials. In the meantime, one can hope that the same enzymatic processes that will eventually allow for energy production from willow and switchgrass will also make it possible to turn paper into fuel, rather than just burying it. There are, of course, many inefficiencies in that system, but it beats putting it in the ground.

In the meantime, go change your margins and print on both sides of the paper.

• It’s real estate, not like paper stocks, so it must always have some value right? Wrong! If nobody wants your house, it has no value. That thought makes people really nervous, but tell me what the value of house in Love Canal is?
• They’ve always been told that “they aren’t making more land” so the price has to appreciate. Of course, that’s wrong too – unfortunately, we are making more land through thousands of acres of wetlands destruction, but that’s another story. Again, it’s just supply and demand.
• People tend to see the huge gains made over the long-term of home ownership, not realizing that, in fact, stocks over the same period have historically gained twice as much value as a home. People typically fail to account for inflation, interest paid on the mortgage, taxes and other costs.

The sad fact is that for the 100 years prior to 1995, home prices basically tracked inflation. Now, that just concerns prices before subtracting debt service, taxes and so forth. Even at our historically low interest rates (now on the way up of course), debt service, the total interest paid, is typically more than the cost of the home itself on a 30-year loan. So take the price and double it. Then taxes of say 1% of purchase price per year for thirty years add 30% to the cost. Finally, of course, there is insurance and upkeep and so forth. When all of this is added up, housing tends to be a bad investment, plain and simple.

So who cares?. Unfortunately, a lot of Americans who have been told that home ownership is the path to the good life. This dream is a compelling lie that consumers tell themselves, encouraged by marketers, that is realtors and mortgage officers. The story sounds so good and makes so much sense, that people don’t crunch the numbers, they instead convince themselves of the lie. Check out Seth Godin’s book All Marketers Are Liars: The Power of Telling Authentic Stories in a Low-Trust World for an interesting perspective from one of today’s most famous marketers for a bit more on this phenomenon (BTW, I just finished reading it and would describe the book as thought-provoking and worth reading, but not on my “must read” list).

This has had the ill effect of encouraging people to spend based on the perceived value of their house and had driven consumer spending and, here’s where we get to the nasty part, consumer debt for all the stupid stuff that we don’t really need: 3000 square foot homes, widescreen tvs and luxury SUVs. In fact, I would say that homeownership myth is a major contributor to global warming as it fuels spending beyond our means, in particular by building mammoth, energy-intensive homes that take huge amounts of energy to build (concrete, for example, takes huge amounts of energy and those mammoth foundations don’t come cheap from a CO2 point of view) as well as to run (unless you are among the 0.01% of people building net-zero homes, that McMansion takes energy to heat and cool and illuminate).

Anyway, all of this is a long-winded way of saying that the current meltdown in the housing market is basically a result of the same thing that resulted in the stock market meltdown. Namely, people fail to look at things in the long term and believe the rules have been rewritten.

Hopefully the current meltdown in the mortgage market will make people a little more rational. Will it keep people from owning their own house? Yes. Is that a bad thing? Not necessarily. In a market where homes can’t be sold, it should be an excellent time for great deals on rent. If the money saved by not owning a home gets put into a good international index fund, that’s probably better than putting it into a house anyway.

Of course, getting investment advice from me is like getting advice on scrupulous adherence to the Bill of Rights from Alberto Gonzales.

If Seth Godin’s book isn’t a must read, Dean Baker’s recent report on the Housing Meltdown is.

I have to say that I ended up at his site because I thought from the title that the post was about the wildflower named Chinese Houses (a beautiful flower from the pea family and of which I got some excellent photos on Friday out in Hite’s Cove near Yosemite). Anyway, after my initial disappointment and realizing that the article really was about houses that you live in, not flowers… I had some reactions.

First off, the comparison of TVs to houses is not appropriate. The main reason that the price of televisions has dropped is because instead of large pieces of hand-crafted furniture with huge an expensive vacuum tubes that are hand soldered to complicated circuit boards, we now have televisions that are essentially pounded out as integrated circuits using transistor technology of some sort, either to drive a CRT or an LCD. In other words, technology has revolutionized TV manufacturing in much the same way that it has changed computers and stereos. The correct comparison would be to something like furniture or cars or skis, which are all now produced abroad in some proportion and whose price has perhaps fallen relative to the price of a house, but not so dramatically as items that have gone from tube technology to transistor/semi-conductor and integrated circuit technology.

As it turns out, we are in the process of building a house and drawing near the end. We did look at a number of systems that would allow more of the process to take place off-site. Most pre-fab kits did not meet code for the snow loads we have in our area (120psf). The component systems really don’t save you that much labor anyway. Most of the labor is in attaching the walls and roof to each other, for example, rather than in building the walls. A good framing crew will put up walls to enclose a 1000sf storey in just a matter of hours. Doors and windows are perhaps one more day. Insulation another. Drywall another. So it’s hard to actually save a lot of money by moving your labor to China, especially when many of the same tasks have to get done onsite anyway and shipping from China remains quite expensive.

What is needed, in order to make housing more affordable for average people (we can only afford to build a house because we plan to rent it out to vacationers while we live in employee housing at our company and, eventually, a downstairs appartment when we get that finished off). The housing industry is still waiting for the equivlent of a semiconductor to replace the vacuum tube. There are systems that people are proposing. Ultimately the solution will look less like the solution for skis (make ‘em in China, as K2 now does) and more like the Whole House Machine which will simply build you a house, on-site, in a day, using inkjet technology. I’m not saying that this is the solution that will win, but it will be something more like this. Like furniture, this will create a segmented market where some people buy furniture that works, but is emotionally unsatisfying being made of melamine and partical board, while a few people will still buy fine, solid wood, hand-crafted furniture for a dramatically higher price. I don’t think the inkjet resin house will feel that much better or worse than the stick-built drywall house, but it will not have the feel of a beautifully-finished timberframe, which now seems like a luxury, but will seem much more so when true custom, onsite manufactured houses hit the market.

That said, a house is still complex, and that only puts of the shell, which the bank tells me is only 40% of a house (and of that 20% is the foundation). So there is still the other 60% of the house (electrical, plumbing, flooring, cabinets, painting, heating, AC, trim, etc etc) and that can’t ever effectively be sent to China or done by a robot without dramatically changing the feel of our houses. That may not sound like a big deal, but anyone who has read the work of Christopher Alexander (A Pattern Language or The Timeless Way of Building) will know that just because we might be able to create robots that can build houses doesn’t mean we should or will. Our environment, both constructed and natural, have a lot to do with how we feel and what we think. Ultimately, we need to meet the shelter needs of people of lesser means, but at the same time, we need to make that shelter emotionally satisfying. That doesn’t mean luxurious, but it does mean “homey” and that will almost certainly require a lot of onsite work.