Mark Gongloff and Binyamin Appelbaum - mendacious gits

The Huffington Post's Mark Gongloff turns conventional wisdom on its head by arguing that the USA is already undergoing austerity:

The consistent fear of all of our recent stupid federal-budget crises has been that the U.S. economy is about to get slapped by a wave of sudden austerity. The little-remembered truth is that austerity is already with us. Has been for years.
Government spending as a percentage of GDP has been shrinking for the past two years at the fastest pace since the government shut down the Vietnam war, Binyamin Appelbaum of the New York Times writes today.

Really? Wow! Let's look at US government spending as % of GDP from 2000. The raw data looks like this:

Year / % GDP
2000: 32.56
2001: 33.33
2002: 34.74
2003: 35.31
2004: 34.86
2005: 34.83
2006: 35.12
2007: 35.09
2008: 37.16
2009: 42.83
2010: 40.96
2011: 40.51
2012: 39.94

So yes, Gongloff and Appelbaum are technically correct. From the peak of 42.8% in 2009 we've dropped to just under 40% in 3 years. But this conveniently omits the equally large rise in 2007 from 35% to 37%, and then a 5.6 percentage points leap to 42.8% in 2008.

So our "austerity" consists of spending 5 more percentage points of GDP than our pre-2008 peak. Oh my goodness. Won't someone please think of the children?

I refuse to believe that Appelbaum or Gongloff are ignorant of the GDP figures from the years before 2009, and so this qualifies them as mendacious gits of the first order.

Lies, damn lies and entrance statistics

Shock! Horror! Oxford University appears to be discriminating in favour of white students and against ethnic minorities:

In medicine, 43 per cent of white students who went on to receive three or more A* grades at A-level got offers, compared with 22.1 per cent of minority students with the same grades, according to data obtained by The Guardian newspaper.

Now, let's bear in mind that as A-level grade inflation has taken hold, three A* grades is no longer the talent indicator that even three A grades might have been 25 years ago:

In a 2007 report Robert Coe compared students scores in the ALIS ability test with equivalent grades achieved in A level exams between 1988 and 2006. He found that students of similar ability were achieving on average about 2 grades higher in 2006 than they were in 1988. In the case of maths it was nearer to 3.5 grades higher.[24]

i.e. an 'A' in 2006, which is presumably near an A* in 2013, was a 'C' in 1988. But that 43% vs 22% relative percentage seems to be damning, surely?

Assuming, just for the moment, that Oxford University medical professors aren't rampant racists, what could be the explanation? An Oxford University spokesperson hints:

"We do know that a tendency by students from certain ethnic groups to apply disproportionately for the most competitive subjects reduces the success rate of those ethnic groups overall."

Chinese and South Asian (Indian, Pakistani, Bangladeshi) students are disproportionately likely to apply to become doctors; you can tell this because they are disproportionately (compared to % of UK population) likely to be medical students. This is inversely true for Afro-Caribbean students who are rarely found in the professional medicine track. What the Daily Mail fails to supply is the raw stats on applicant and successful applicant numbers broken down by ethnic group, which could then be analysed based on the ethnic distribution of 18 year old students. I would be very interested in those numbers, which I suspect would tell a very different story to the DM's angle.

I invite the reader to inspect the list of Oxford University physiology lecturers. It's not obvious that they are prejudiced against South Asian or Oriental medical experts. Out of 53 staff, 6 match that ethnic background (11%) which is much greater than the 5% you'd expect even given the most favourable reading of the UK ethnic breakdown.

Working hard? Hardly working!

Slightly dinged high-tech firm Yahoo! has decided to pull the plug on working from home:

"Speed and quality are often sacrificed when we work from home," Rese, who was hired last fall by Chief Executive Officer Marissa Mayer, explained in the memo

This is interesting because ex-Googler Mayer is firing on all cylinders trying to turn around Yahoo! - so why is she picking on this particular "perk"? After all, in a modern digital workplace, can't you do everything from home that you can do in your office?

Well, not really. There are a number of dirty secrets about working from home:

• You can't do as much as you can in the office. Unless you have a home machine and monitor set-up which is at least as well-specc'd as your office hardware, you're going find yourself more restricted in the space you can use, and the latency between clicking a mouse and seeing the result will be higher. You'll therefore be working at a lower rate.
• You have a similar number of interruptions as you do in the office, but none of the home interruptions are productive. They're not co-workers asking how to get things done or sounding off ideas - they're the postman delivering your copy of "War and Peace", someone calling your home phone, a particularly interesting programme on morning TV.
• There are some tasks which can be done more effectively at home than at work - certain focused tasks benefit from a relatively interrupt-controlled environment, e.g. writing performance feedback reports. However those tasks are limited in number and sparse in occurrence; the more days you work at home in a given period, the less able you are to make effective use of your home environment.
• Every day away from the office is a day missing ideas from your co-workers. While it's possible that everyone you work with is a moron, this is not the norm - nor should it be in a high-tech company like Yahoo! Cut yourself off from your colleagues and you can find yourself doing work that is no longer useful, could be done in 10% of the time using a new tool or system, or helping a team whose project is about to be shut down. If you view your job as being paid by the hour, this may be fine, but your company wants you to maximise company productivity.
• You mentally subtract the time you spend commuting, so your 10 hour work day becomes an 8 hour working day. This is fine as far as it goes - but that saving gets used and re-used as justification for doing other things (popping out to the shops, for instance) so that you still end up working fewer hours than at work despite spending nominally longer "working".
• There are some tasks that you can only effectively do in the office, so you end up organising them around your work-at-home days rather than vice versa, inconveniencing others by delays for your own benefit.

In short, the benefits from working from home are few, overstated, accrue disproportionately to the home-worker rather than the company, and rapidly vanish as more days are worked at home.

I think that the Business Week journo misses the point of Mayer's plan, though:

In fact, what's most telling about this decision is that it highlights Yahoo's apparent inability to keep tabs on its employees unless they're physically at their desks.

I think it's more likely that Yahoo! already has a good idea of what its employees are doing, but the effort required to build a paper trail to fire them (and therefore cause their accumulated shares to vest) is too great. Better by far to use this approach to winnow out the slackers by making them quit in disgust at the end of the easy times, apply a little discretion in the case of superstars that Yahoo! doesn't want to lose, and come out ahead. I do think it will hurt Yahoo! a little by discouraging some good engineers from applying, but my guess is that Mayer wants to reduce headcount overall and is willing to take a recruiting hit in exchange for no longer paying for the slackers.

Having said all that, I value the option of working at home; I hope that I am at least as productive at home as at work, but then I make sure that my home working is planned, appropriate and infrequent.

A small localised joke

A Herefordshire farmer was selected for an audit by the Department for Work and Pensions. They sent a representative out to interview him.

"I need a list of your employees, and how much you pay them," demanded the officious civil servant.

"Well," replied the farmer, "there's my farm hand who's been with me for three years. I pay him £200 a week plus free room and board. The cook has been here for 18 months, and I pay her £150 per week plus free room and board. Then there's the half-wit. He works about 18 hours every day and does about 90% of all the work around here. He makes about £10 per week, pays his own room and board, and I buy him a bottle of Glenfiddich every now and then."

"That's the guy I want to talk to... the half-wit." says the DwP representative.

"That would be me," replied the farmer.

On the European financial transactions tax

EU tax commissioner Algirdas Šemeta[1] is telling us that the 11-nation Financial Transactions Tax scheme is a brilliant money-raiser:

[...] the tax offers substantial new revenues. Around €30-35bn (£26-30bn) per year will be generated from this small tax of just 0.1% on bonds and shares and 0.01% on derivatives.

Even better, he seems to claim that it's free money for regular citizens:

Will the tax be borne by ordinary citizens? We have taken every measure to ensure that it isn't. [my italics] This is a tax on the financial sector, and 85% of liable transactions are purely between financial institutions. Day-to-day financial activities of citizens and businesses are outside its scope.

I do like that weasel "we have taken every measure" quote, which to me seems to be a long way from the "no" which you might assume he means.

Of course, we can trust Algirdas's judgement about the impact on business given his no doubt no doubt substantial experience in the financial sector. Let's look at his professional career list on his CV:

• 2001-2008: Director; General of the Department of Statistics under the Government of Lithuania
• 1998-1999: Vice-president of the Public Limited Company "Nalšia"
• 1996-1997: Chairman of the Securities Commission of Lithuania
• 1992-1996: Chairman of the Securities Commission under the Ministry of Finance of Lithuania
• 1991-1992: Deputy Head of Privatisation Unit, Government Office of Lithuania
• 1990-1991: Head of the Subdivision of the Economy Development Strategy Division of the Ministry of Economics of Lithuania
• 1985-1990: Economist, Younger Fellowship at the Lithuanian Economy Institute

Given that he graduated in 1985, the only even vaguely commercial experience is his 1 year VP stint at the construction firm Nalšia which seems bizarrely unrelated to anything else he did - and why was he only there a year? The company's website is just a shell, claiming that it is under construction. I'd love to know why they wanted Algirdas on board - and why he left.

Back to the FTT: one wonders, if the €35bn is effectively for free, why he doesn't double or even triple the rates. Surely if €35bn is good, €70bn is better, and the citizens still aren't paying according to Algirdas. Free money! Or perhaps, just maybe, TANSTAAFAL and Algirdas and his cohorts know this.

I'm with the esteemed Mr. Worstall on this article:

The route to the pockets of the citizenry is via the higher cost of capital for corporates leading to less capital investment. As your own fucking EU briefing paper pointed out.

The financial drag on the economies of these 11 countries (and those trading with them) is going to be a lot higher than €35bn annually - all taxes have deadweight costs - but I'd bet that it's going to be diffuse enough that it will be hard to point to any one statistic in 1-2 years time and blame the FTT. Make no mistake, though, the drag will be very real. There are also the opportunity costs of passing this legislation - the companies that decide not to invest in the participating nations because of the increased costs of capital.

The really insidious and destructive impact is going to come from the extra-territoriality clause:

If there is an economic link to the FTT zone, it will apply, regardless of whether the other parties to the transaction are based in London, Singapore, Copenhagen or New York

I would love to know what Deutsche Bank, SocGen, Santander and other large financial entities are thinking and planning right now. This looks to me as if e.g. the UK entity of Santander will be able to trade normally within the UK and US, but any transfers between the UK and Spanish entities are going to be hit by the tax. If I were Deutsche Bank, I'd be planning to do a whole lot less with my Germany-based operations and staff.

What I would like to see is how Algirdas is going to spend the revenue:

Our economic studies show that it will have no impact on jobs, and could even have a positive impact on growth if revenues are reinvested wisely.

Yes, and if my mother's sister had testicles she'd be my mother's brother. The FTT spending is what the FTT opponents should demand to see in 2-3 years - it's unrelated to the actual impact of the FTT but would be a great stick with which to beat the FTT proponents. You can bet your bottom dollar that it's mainly going to be pissed away on subsidising sinking industries, funding dubious political movements, make-work employment schemes and grants for white elephant construction projects. When Algirdas suggests "growth-friendly investment, stabilising public finances or wider commitments such as development aid" I hear "green energy subsidies, bailing out Spanish cajas, and building railways to nowhere."

[1] Since Algirdas is from Lithuania, he has an inconvenient diacritical mark on the 'S' of his surname for which I do not recall offhand the corresponding HTML entity; I am including the UTF-8 character in this blog and hoping that older browsers can cope.

Prince Philip tells it like it is

Much frothing and indignation over the Duke of Edinburgh's latest "gaffe" that the Philippines must be half empty because the natives are all here running the NHS. Oh, would that this were true. If Filipino nurses really were running the NHS, it would be doing a damn sight better job of caring for its patients.

There are about 12.5M Filipinos working overseas and about 200K of them are in the UK - I'd suspect at least 50% working in the NHS, and of those 50% as nurses, 50% as carers or auxiliary staff. Given 410K qualified nurses in the UK, that implies about 1 NHS nurse in 8 is Filipino; my admittedly limited encounters with the NHS support this data. They tend to be more competent than the average UK-educated nurse; all Filipino-educated nurses must hold a Bachelor's degree in Nursing, but this tends to have a much more practical and technical focus than the UK nursing degrees. One can't imagine a Filipino nursing tutor teaching his students about diversity, for instance. If you tried to sell a Filipino nurse on the University of Nottingham's nursing curriculum, she'd think you were making some sort of practical joke.

Prince Philip, once again, has put his finger on a salient issue of public policy. If the UK were serious about caring for its sick, it would be recruiting Filipino nurses hand over fist. Since it is not doing so, one can only conclude that the demands of the Royal College of Nursing for job security for its members have trumped the needs of NHS patients. I find it especially instructive that the RCN's view of supporting diversity is organising Gay Nursing Pride events given that 2-5% of the population is gay (depending on whose figures you believe) but 12% of the UK nursing profession is Filipino. Frankly, I would have thought that overseas nurses were in far greater need of support from the RCN than gay nurses. Since an influx of competent foreign nurses with a good command of English language and grammar would put downwards pressure on nursing wages and make the native nurses look uncaring, incompetent and badly educated, maybe it's not surprising that the RCN is not campaigning for this influx - we should, however, realise that the RCN does not concern itself with the best interests of patients.

Digital capitalist slavedrivers

John Naughton is professor of the public understanding of technology at the Open University. If I were the Open University head of HR, I'd be wondering which clown hired him after reading his muddle-headed article on "digital capitalism":

These vast revenues [produced by the scaling of digital goods], however, are not being widely shared. Instead, they are mostly enriching the founders and shareholders of Apple, Amazon, Google, Facebook et al. Of course, those who work at the heart of these organisations – the engineers, developers and the executives who manage them, for example – are richly rewarded in salaries, stock options and lavish perks. But these gilded employees constitute only a minority of the workforces of the big tech companies and most of their colleagues have decidedly more mundane terms of employment – and remuneration.

He starts off with Apple, complaining that 2/3 of Apple employees work in retail stores and have only regular retail wages. Well, John, yes they do. Of course they do. Their job has very little to do with the massively scaling digital distribution at which Apple excels (iOS, iTunes etc); why on earth would the profits from that business go to the Apple Stores which are all about selling physical hardware to real people in expensive-to-rent retail locations? They are entirely different businesses. For sure, selling an iPhone or MacBook to someone enables them to start spending money with Apple on iTunes purchases, but the Apple Store is competing for hardware sales with the likes of John Lewis, Apple's own online store, and phone retailers. The Apple employees there are pretty replaceable - more so these days as the previously excellent customer service has fallen off somewhat - so they get paid what they are worth. Let me add here that their store's Genius Bar is actually rather good in the main, and I hope that their Genii get paid quite a bit more than Naughton's quoted $25K. Still, Naughton's attempt to claim that the failure to pay retail store employees huge sums is a moral failing of digital capitalism is a dreadful stretch, and I'm sure that he knows this.

When he claims the same lack-of-sharing-of-wealth regarding Google and Facebook I really have to laugh. Those companies are packed with very good engineers, and boy do they get rewarded. Just look at the Facebook shares which are creating Facebook millionaires throughout the company. Bonnie Brown was Google's first masseuse, not even an engineer, and she made multiple millions of dollars from her share options. Has Naughton been to Silicon Valley, or even just checked the property prices around Cupertino (Apple) or Mountain View / Palo Alto (Google)? These prices aren't being pushed sky-high by an elite group - most of the engineers in those companies are paid extremely well, which is why the Bay Area economy is in a relatively healthy state while the rest of California is so far down economically that they have to pipe in the sunlight.

I think, though, that Google, Facebook and Apple are all side claims to try to bolster the core of his argument which relates to Amazon. He sees the elite core of Amazon (Jeff Bezos and his engineers) who benefit from profits from the Amazon store, and a vast network of distribution necessary to get the Amazon goods to the people who bought them. He focuses on the warehouse teams that pick the orders from the racks:

"You're sort of like a robot, but in human form," one manager told Ms O'Connor. "It's human automation, if you like."
Still, it's a job. Until it's replaced by a robot.

Well yes, John. Amazon is creating quite a lot of jobs, and most of them aren't high-paying engineering jobs. But they're still jobs which pay a living wage and are a sight better than being unemployed. Jobs don't have to pay double the median wage to be a benefit to society, you know. You may envy the engineer being paid huge sums and think it's not "fair" that she gets much more than you, perhaps because she was actually talented and worked hard at hard engineering rather than the "systems analysis" that you specialised in, but her work creates jobs for other people - that's something not to be sneezed at.

One of the greatest benefits afforded to us by Amazon, and one not covered by Naughton for some reason, is to be able to find, compare and buy goods online at a substantial discount to those in High Street stores. This is a diffuse benefit - it has a small value to each individual - but benefits many millions of people. Google lets people find out where things are, what words mean, how to do something. Facebook puts people back in contact with friends and loved ones that distance or time previously separated. Apple put a usable Internet and access to movies and music in the pocket of millions of phone users. This, John Naughton, is the triumph of digital capitalism, and your whining about a few people making a lot of money from the phenomenon is just sour grapes.

A trial as the last resort

Much is being made in the USA of Senator Elizabeth "Fauxcahontas" Warren's inaugural session of the Senate Banking Committee where she grilled the SEC:

Sen. Elizabeth Warren from Massachusetts made federal regulators uncomfortable when she asked a simple question: When was the last time you took a big Wall Street bank all the way to trial?

Cue much applause by those who think that the "big Wall Street banks" get away with too much. Perhaps, though, Sen. Warren may be playing to the peanut gallery rather than actually making the financial industry behave better. Here's why.

A more thorough consideration of the SEC's actions at The New Republic points to a rather fundamental problem: winning financial misconduct trials turns out to be quite difficult.

While federal prosecutors recently won a landmark insider trading case to put top executives behind bars, fraud can be harder to prove. In 2009, a jury acquitted two former Bear Stearns bankers the government charged with deceiving investors about the risks associated with CDOs, complex securities manufactured from packages of mortgage loans. The SEC, in fact, has yet to convict anyone in court on charges related to causing the financial crisis.

This is a manifestation of a fundamental rule: going to court is almost always a bad idea. Going to court means that there is an asymmetric assessment of the situation. The prosecutor believes that the defendant has done something bad and has to pay; what's more, he has the evidence to demonstrate this, and he believes it sufficient to convince a jury (or judge, depending on the trial) of the defendant's guilt. Further, he believes that the penalty that the judge will award is substantially greater than that which the defendant is willing to pay pre-trial.

By contrast, the defendant must believe that the facts of the situation will be unlikely to convince the judge or jury of her guilt. The defendant has already heard the prosecution's allegations and will know what evidence she has turned over to the prosecution, and the defendant's lawyers will be at least as familiar with the relevant laws as the prosecution; thus, she will have a realistic assessment of what the prosecution can prove. If there's a reasonable chance of conviction, the defendant's best strategy by far is to negotiate a settlement with the prosecution based on the median penalty for the alleged offences; it's way cheaper than conducting a trial, let alone paying an inflated penalty. For this reason, banks are generally better advised to settle with the SEC even if they don't believe what they did was wrong - if the penalty is bearable, it's preferable to the expense and risk of a trial let alone all the negative public exposure.

I think it's reasonable to claim that the SEC's competence in financial regulation and enforcement is, at best, limited. They attract lawyers and administrators who are satisfied with government salaries and working conditions. Their staff members prefer porn surfing to working and are allowed to get away with it. They need a case to be a slam-dunk in order to proceed to prosecution with a reasonable chance of success - yet, a slam-dunk case should have the defence scrambling to negotiate a settlement pre-trial. If they don't settle, they're either idiots - possible, but unlikely given the target crowd of Wall Street corporate lawyers - or they have a very different assessment of the case, and likely the evidence or legal precedent to back it up.

If the SEC is forced to take more cases to trial, there are two likely outcomes. One is for the prosecution to be successful (a slam-dunk case) but the penalty to be not much more than the defendant offered to pay, in which case the prosecution (SEC) still has to pay its own legal fees and so the public purse is hit harder. The other is for the prosecution to fail, or be forced to negotiate a lesser charge, in which case the defence pays less than they originally offered and the prosecution pays its own legal fees and possibly also some of the defence's; the public purse in this case is hit much harder. Either way, there is little chance that the banks will be hit harder beyond having to pay their trial costs, and the SEC's trial costs will also rise sharply. And who benefits from trial cost spending?

If the SEC takes more cases to court, the only people who will benefit will be the lawyers. And what did Sen. Warren do before she became a senator this year? She was an academic lawyer, specialising in bankruptcy protection. It appears that she is very aware of which side her profession's bread is buttered.

Once is bad luck, twice is careless

Rather embarrassing for Apple; even if your iOS 6.1 iPhone is locked, a simple sequence of keys gives the phone holder full calling rights. A thief can lift your locked iPhone from your bag, make and cancel an emergency call - because all smartphones allow 999/911 dialling without unlocking, for public safety reasons - and then press the power button twice to be granted the ability to call any number that your phone can normally call. The thief could spend an hour on a 0900 number with Big Brenda and her Bosoms, or if you have international dialling you will find twenty calls to Romania, Bulgaria and/or Nigeria on your bill. Apple is reportedly working on a fix. If you stand outside their HQ on Infinite Loop, Cupertino, you can probably hear the cracking of whips and the screams of user interface engineers.

Why is this embarrassing? Well, almost exactly the same flaw affected iOS 4.1 back in 2010. What this tells me is that phone security is not systematically tested by Apple. If it were, they would have been looking for precisely this flaw. One of the most basic principles of software testing is that you should never discover the same bug in production twice - after the first discovery you should create a test that reproduces the flaw, then make the fix, and verify that the fix actually addresses the test. The test is then re-run on every single build you make in the future - if the flaw returns, the test will fail.

The only difference between the original and new flaw is that in the original flaw you only had to hit the lock button once, whereas in the new one you need to hit it twice. If I were in charge of security testing in Apple - I'm not, by the way - I would have the emergency calling feature identified as a high-risk gateway to the phone's functionality and I'd be user-testing and code-scrutinising like crazy to try to spot flaws like this.

This flaw is not a big deal in and of itself - Apple will release a fix, the iPhones will auto-update via iTunes and the problem will be solved. Maybe a few thousand people will fall victim to the flaw before it is fixed. What the flaw indicates, however, is that Apple is pressuring phone development and skimping on testing and security. This is not going to be an isolated problem.

Coke - it's the real arrhythmia

Personal responsibility has reached a new low where a New Zealand woman, Natasha Harris, who drank 18 pints of Coca-Cola per day mysteriously died.

Yes, you read that right. 18 pints. For reference, if you drank that much fresh water daily you'd be at serious risk of euvolaemic hyponatremia a.k.a. too much fresh water excessively diluting the sodium in the body. So if you're going to drink anything at a rate of 18 pints per day, Coke - or indeed beer - is a far better choice than water. That does not, however, make it a good idea.

Consuming 18 pints of caffeinated sugar solution has its problems. Coke has about 34mg of caffeine per 12 oz, which is about 55mg per pint (assuming imperial pints); that's about 1g of caffeine per day. This is well under the mean lethal dose of 200mg/Kg body weight but equivalent to about 8 cups per day. 1 pint of Coca-Cola has about 65g of sugar so Ms. Harris was consuming well over 1Kg of sugar per day. I'm staggered that she didn't fall into a diabetic coma within a couple of weeks of starting this diet.

I'm sure that Ms. Harris was advised by her nearest and dearest that this wasn't a good idea, surely?

[Her partner] Mr Hodgkinson told the court that she had been unwell up to a year before her death, including vomiting six times a week, but they believed it was caused by the stress of looking after her eight children and gynecological problems.
...
'I didn't ever think about the Coke. I never considered it would do any harm to a person. It's just a soft drink, just like drinking water. I didn't think a drink's going to kill you,' he said.

As we saw, water is even more dangerous. But she had lost all her teeth to the drink, went "crazy" whenever she couldn't get it - couldn't someone who cared for her actually get her to stop?

Mr. Hodgkinson did try to take action, but his timing and direction were not helpful:

Coca-Cola confirmed it had hired a security firm to shadow its staff, after Mr Hodgkinson allegedly made death threats against the company before she died. He rejected claims he had made the threats, but said he held the company responsible for Harris' death.

<bangs head on table>. Mr. Hodgkinson, you were having to throw away four empty 2.5L bottles of Coke every single day. How could you and Ms. Harris not be aware that this was not normal, and really bad for both you?