Category Archives: Politics

Basic Idea Economics

[note: I have been sitting on this post for a long time. I did take the opportunity to comment on software patents but still sat on it. Time to just let it go and take my beatings]

While traveling in Scotland a few years back, I had a sense of history like nowhere I’ve ever been before. It had a lot to do with the its mixture of medieval castles, grass, and sheep, dotted with a few little towns. It just had this feeling to it that many parts of life in Scotland had not changed for hundreds of years. For some reason this got me thinking about the evolution of what we think of capital and it’s new incarnation, intellectual capital. I also had the pleasure one of my many nights learning about single malt scotch to discuss this with an English industrialist. While I have may have glossed over many important details, I think my basic premise is sound. Capital is changing from buying shares in factories and other producers to buying ideas.


I see it something like this. In feudal times, wealth was based on owning property. Property was the only capital worth anything. If you had property, the property supported agriculture, like crops and the sheep I saw every day. Agriculture produces produce, and the produce was split between the tenants and the owners. The owners sell their portion for income. As a landowner, the more land you owned the  more tenants you could have living on the that land. This led to more production and thus more product you kept for yourself. Grass grew, it was processed by animals, the animals are processed by humans and viola, produce, sales and income. There was one key idea, the production of goods in the traditional way producing the traditional results. The intellectual capital in this was minimal and traditional. I would guess that the very idea would have seemed strange to people of the time.

In the industrial age, things did change. Capital was used to own the means of production in the form of factories. While prestige may have still been associated with ownership of property, the real bang for your buck was in amassing enough capital to build a factory. The factory typically organized a combination of labor and machines into the specialization needed to mass produce a small variety of products. After the factory was built the task of the manufacturer is to try to preserve existing markets, tune the process and equipment where possible to reduce ongoing costs to maximize the investment. This is mostly because of the large expense in building the facility and training the workforce. In this era, the number of working ideas went up quite a lot, but was still somewhat small. You needed the starting idea of the factory, the skills needed to run the equipment, and then after that,  just like in the days of sheep, you would try to preserve your environment and get away with as few changes as possible because change was expensive. Intellectual capital was alive however. Patents got their start, mostly as a way to encourage the large investment in factories by protecting them from competition for awhile, a little monopoly.

The age we are in now, probably dating back to the 1950’s, has had another major shift. I don’t think many entrepreneurs think about building a factory and making it produce for 50 years. Ownership of production is still important of course, but capitalists now own many shares of many companies, all representing many different products, ideas, markets and companies. More and more companies are valued on the ideas and people they represent. The term intellectual capital has become widely used, if not widely understood.

As a person that got his start in the software field working on open source software, the traditional meaning of the term, patents on ideas enforceable by law, has always seemed pretty repugnant to me. The idea is to exercise control much the same way a factory would exercise control over it’s physical assets: don’t use my ideas without my permission. Times have changed. Raw ideas are cheap to get and cheap to copy, and the enforcement effort is rarely worth the expense. Many ideas are encoded into software but software is better served by copyright than patents. In software most of the actual bits of a program are the shared libraries, device drivers, hardware and operating systems of the underlying general computer system. There are absolutely innovative ideas in software, but these are built on the shoulders of other’s works in smaller and smaller increments. The real intellectual capital exists in the heads of people who hold, nurture and grow the ideas and is inherently not patentable.

As I wrote in my letter to the USPTO, I think rather than focus so much on the specifics of how to judge whether an idea represented in software is patentable, we should go back to the reasons the patent was created in the first place. It was to create incentive for investment. Many intelligent people will argue that today that investment is in intellectual capital and it should be protected in the same way as the machinery of a factory was protected in the past. I think the fact is that the patent was to allow for the investment in the machinery that was very expensive and deserved the short term monopoly to patent provided. Today however we are better off focusing on faster delivery of more competing ideas without restrictions. The rapid growth of the internet is a wonderful example of this approach in practice and no one can argue against its overall economic benefits.

I will be a Wells Fargo customer for life

Say what?

Banks in general have not gotten much good press these last few years, heck not for this last decade. I have shared the feeling that many have had that the newly unregulated banks had a big part to play in our financial crisis, though I think they were not the only parties responsible by a long shot. I’m not prone to conspiracy theories or deep class suspicion though, and view banks as a necessary service. I don’t love or hate them, just a commodity type of service one uses to handle money. So why would I choose to stay with one bank for life?

In order to go to a really great school, Oberlin College, my daughter Claire used a variety of funding sources: academic grants, savings, federal and private student loans. Her dual degrees in Creative Writing and Computer Science were very likely to make her employable and able to pay back her share of the loans. Like everybody else, we don’t understand why college tuition is going up faster than the rest of the economy, or why private student loan interest rates are so high. When many parts of the developed world give college education for free, how will we compete as students are choosing not to go at all, or leave school with enough dept to severely limit their economic mobility or to risk taking on new ventures or joining innovative start-ups? Well, regardless of all the negative aspects of borrowing for college, Claire like many, probably most of her generation, borrowed some money for college. Some if it from Wells Fargo.

College costs have been a big political football too, but not one many in congress have been willing to catch and run with. In 201o, there was some movement going on in congress to provided relief for student debt in the worst of cases: after the death or disability of the student. In these cases the co-signer of the loans, generally the parents who may not have really expected to fully bear a burden like this, becomes responsible, and with less rights than a regular borrower. Here is a link to more information about this. The proposed laws so far have not passed through congress. If you are a parent or family member helping a student out with these enormous debts by co-signing a loan, you had better think really hard about some sort of life insurance or you may find yourself in a terrible position should the worst happen to your child.

Wells Fargo decided to do something without a congressional mandate. At that time in 2010, though they said it was not related to the bills going through congress at the time, Wells Fargo quietly announced they would forgive loans in the event of death or permanent disability. They weren’t forced to do this by congress, nor did most of their competitors make a similar policy shift. I knew nothing about it at the time, nor would I have likely paid much attention if had known. As far as I was concerned, my daughter was doing great at school and would be paying back her student loans along with us as we had planned.

And then, in May 2013, she died unexpectedly, one year into a phd program at USC.

This unimaginable turn of events was the most wrenching, grueling, rip away your faith in all good things a parent could ever experience.  But wait, there’s more. If you are not careful, as I wasn’t, you are also now responsible for all of your child’s private student loan debt. Federal loans are already forgiven, but most private loans fall to the co-signer. There is no built in insurance policy like you might have gotten on a car loan.

This did not happen to us, thanks to Wells Fargo. There were two phone calls, an exchange of  legal documents, a condolence letter, and it was over. We still had our grief and our memories. But we were not also looking at a decade of debt.

So there it is. I’ve been a customer for over a decade anyway, had ups and downs, but have been generally satisfied the last few years. After this experience, I think I’ll stick around a lot longer. If you are a parent of a student with student loan debt, I’d recommend you pay careful attention to what could happen if the unimaginable happens to you.

“My retirement plan is free”. uh, not so much

There has started to be and will continue to be some news regarding new fee disclosure regulations that kick in beginning 7/1/2012 that will probably come as quite a shock to apparently 71% of you with retirement plans. You are going find out a lot more about what your retirement plan costs you. The bad news may come in the form of fees that you realize are subtracting from your piggy bank and that you didn’t know about before. The good news is that now you will know about them, and can make better decisions about how you select and manage your retirement plan if you are a business. As an employee in one of these plans, you will know more about what to suggest to your employer who really does have some legal responsibilities to you and your retirement savings.

Full Disclosure of my own: My day job is working for PAi and I make my living from fees that PAi charges to run micro and small business retirement plans, maybe even yours as PAi often runs as a back office to larger partners and brands.

I wanted to add my 2 cents to this conversation because it is hard to make sense of all the various opinions out there, some of which while well intended, fail on a key mantra of mine: be really careful what you delegate to a single point of control or failure. Yes of course, this is the software geek coming out. And of course I have my own biases.

The prevailing anti-private market solution, aka anti-401k plan opinions out there focus on a centrally or government run plan with guaranteed returns and  an annuity to pay it out over time at retirement. There are millions and millions of possible investments out there, and it takes thousands to possibly millions of people to evaluate the best investments. This is a worst case example for a centrally run retirement plan. Putting artificial massive demand the small number of investments a centrally run plan could reasonably expected to evaluate would actually change the outcome for those investments, completely independent of the merit of the underlying investment. Simple supply and demand would affect the valuation. The best you could ever hope for is average returns as anything currently losing value is automatically out, and anything remotely risky is probably automatically out. Whether government run, or privately run would make no difference.

You must have an opinion on the investments your retirement plan is participating in. Cost is one of those factors to watch and the new fee regulations will allow you to see more about how it works and what is best for you. But this is important: when people keep talking about the power of the 1% to invest and help create jobs (or not), they forget that they themselves have this power of investment by the choices we make in what to invest our retirement in. The masses of retirement dollars out there are an important part of our economy and you actually have input on where those dollars are invested and how wisely they are managed.

So go for it, learn, talk to your friends, and use that power.

My centrist point of view

While idealogues from the left and right argue that their respective biases toward more government control, or more corporate control (aka less government) represent a coherent world view, I see them both as intellectually bankrupt. It is not a government bad, corporation good or visa versa characterization that really matters. A major move in either direction would not adequately address the issues we face in retirement, jobs, healthcare or many other problem areas. It would only change the players, but not fundamentally change the system. That type of opinion is really not about a better system at all, it is just about who is in control. My people, not my people, as simple as that.

I believe that large organizations, both public and private fail or succeed to deliver with equal likelihood. They grab  power and control with equal tenacity. The problem is that whether or not an organization is public or private, large organizations are controlled by too few people and as such have too few ideas that can be tried, evaluated and then discarded or promoted. Too few people with too many biases, needs and objectionable opinions of their own. Or perhaps narrowly guided opinions, opinions appropriate for one context but not another.  Too many bureaucracies public and corporate  are run by the person with the highest salary or highest rank. Most large organizations have too much inertia to change in spite of an army of consultants, authors and academics that exists to try and correct it.

We need to be mindful of a basic tenant of mine:

be wary of central control and single points of failure

Yes, this comes from the software and systems part of my brain.

What we need is continuous improvement of systems, not just shuffling control to nearly identical large systems to different people. By this I mean systems of government, systems that run our economy, systems that run our healthcare and so on. I do not mean the current systems with control changed from one party to another, public or private, left or right. I am talking about the structure of interactions between the participants in the these systems in ways that promote efficiency without overloading key parts or key participants. Flow and predictability are good. Being able to adapt and change flow is good. Requiring a lot of management of that flow comes at a very high cost and should be scrutinized very carefully before accepting it.

I wanted to write this down as I have referred to it often in conversation and writing. Hopefully I can improve it and articulate it better over time.

[note that this page will be updated over time!]

Health care solved?

My long time friend, RAAM teammate, skiing buddy and mentor for all things business, John Torinus, got his healthcare book published, “The Company that Solved Health Care”. I finished reading it this week and am pleased to suggest that you all do the same.

His ideas, many of which were partially presented while he was still a columnist at the Milwaukee Journal Sentinel, are presented better here in full with clear explanations, examples, and case studies from a number of Wisconsin companies that have really been trying to solve this problem. The snarky politics around this pits this type of solution, based on the idea of consumerism in healthcare and the use of high deductible health care plans, against the single payer solutions or tightly controlled insurance solutions that the new reforms were about. Just search on John’s name at Google and you will find all sorts of these references.

The book answers the questions the critics pose and I think convincingly. You should really read the whole thing and then decide. High deductible plans can work well when you don’ t actually have higher out of pocket expenses but do have in interest in how the money is spent. The money is recovered by finding lower cost and more effective places to have various procedures and treatments done. As I have posted before, I have been in a plan like this for a few years now and love it. The recent health care reform laws, really health insurance reform and which I supported in large part, have actually made my plan a bit worse by eliminating over the counter products unless prescribed by a doctor, essentially taking a bit more of my own health care decision making out of my hands. But it is still a good plan.

The shortcoming of consumer driven plans is the shortage of consumer oriented information for health care. How the heck do I find out where to get the most effective MRI at the best price? There are very few other large economic decisions we make in life, houses, cars, schools, investments, without knowledge of the costs. Ideas for this are a big part of the book, and a big part of any real cost controls for healthcare. If our third party payer systems were working, we could perhaps ignore healthcare costs longer, but they just aren’t. The new laws increase coverage, or we hope they will, but don’t address the costs at all unless there is a big effect from having more people insured somehow.

Go get the book, read it and open your mind to more ways to do health care.

Fun with

I spent the week with members of in Chicago at the Millennial ROI Summit. What a great week it was. I went representing one of the sponsors, ASPPA, and the company I am with PAi. ASPPA distributed some fliers about fee disclosure and the iOme Challenge that I got a chance to talk about whenever asked.

I was really impressed with the number of engaged, passionate and knowledgeable people there. Everybody was so open in spite of being from very different backgrounds, political orientations, and organizations. I consider myself to be an independent, but where that seems to have a mostly negative connotation in the world at large, it was the the most common way of describing people there. Because of it, conversations were rich, varied, respectful of others and all about solutions.

I was also surprised to learn about how out of touch I, and probably a large part of the the US, are with where this generation stands on issues. Personal financial responsibility was voted their most important topic. The amazing people from Youth Build, who build homes and communities where things had not been going well like East Harlem, were a lot more interested in simple local solutions than government involvement. The winning proposal was one for philanthropy and wasn’t the only one. Financial literacy projects were probably the most proposed projects.

I was the old guy there. At first it seemed like people really wondered what the heck I was doing there at all, but by the end I was head first into conversations with pretty much everybody. Really a lot of fun, and I am still jacked up from it. I hope some of the people that asked for my card follow through and stay in touch.

I love my HSA

A long time ago, I had one of those mythical government health care policies. You know the kind, you show your card and everything is paid for. I loved it. At that time health care cost a much smaller portion of our GDP, and many people had better coverage than they do today. It’s been getting worse for a long time. Today though I have something I like even better, a Health Savings Account (HSA) and a high deductible insurance policy. Combined these have got to pretty much cover the most hated trend in insurance today, shifting costs to the insured. And I really am happy.

The health care debate is going on full steam right now and there starting to be enough cracks in the wall to think it could come tumbling down. How very sad for all of us. I have been following this debate for a long time. I was very interested in this in round one: the Hillary Plan. While I’m not sure that was the best plan, having enacted it, I doubt we’d be facing health care costs approaching 25% of our GDP in our near future. I am amazed that there are people arguing that our current broken system is actually better for us than a government run program might have been.

I am open to a government run plan to compete with the big insurance companies.  I’d want to be very careful to understand the costs, making every aspect available via so people can make real comparisons. I’d prefer not to see the government subsidize the program with taxes over and beyond premiums.  If government can’t get it done for reasonable all in costs, and we can really know that, I’m all for it. If private insurers can beat those costs, we should all go for that. If not, say because feeding profit expectations just costs us too much, then we have a real alternative. I honestly can’t say which one will win, but it will not be the same.

An HSA is the antithesis of of a government run plan. No bureaucrats, government or corporate, are involved in day to day health decisions. I decide what is covered or not, at least until my saved money is gone. What most people complain about is that up until the deductible is spent it all comes out of your own pocket. So if you have a $4000 deductible, you spend $4000 before you ever get a dime of coverage. At least with a conventional plan you get to argue with your insurer for awhile before they pay partial claims or just outright deny you. You don’t have to pony up real funds until the shouting is over.

The plan I have is different. My employer decided to take the difference between what a traditional plan cost and what a high deductible plan costs, and deposit the difference into our HSA. This way, there is always a balance available, at least that is until I spend the available deposits. It tends to work just the opposite of a traditional plan. With a traditional plan, you start paying co-pays or out of pocket until some magic number is reached, and then the full insurance kicks in. With an pre-funded HSA, you pay off your balance until it is run out, and only then do you pay out of pocket. Unless you are chronically ill, and assuming you spend wisely, you may never run out of funds. I haven’t in the three years I’ve been on this plan. But this isn’t even the best part.

I can use my HSA balance for a much larger range of expenses than what any insurance company would ever allow. Allowable expenses include over the counter drugs, chiropractors, physical therapy, dentists, eye wear and exams, equipment and many more things. I have complete control over who I see. The rules for my spending are set by the government, not a corporate bureaucrat, and their “stick” should you break the rules could be income tax penalties. But the rules are much more encompassing than anything any insurance plan would ever allow. It does put in in the seat to ask about how much things cost. I like that, I do it with everything else I buy.You do have to ask questions of your doctor, something most of us seemed trained not to do. This needs to be made easier, so you can compare costs of tests, of diagnostics, surgeries, or medicines and other routine expenses. There is a lot of room for improvement here.

A word of warning, these expenses may not count against your deductible, a risk should you get more seriously ill, and this is an area where reform would be really important. I’d also like to see some sort of loan garauntees and a line of credit for when your balance runs out but your deductible hasn’t been met.

Perhaps this new government option will both come to be, and will provide real competition to the broken current system. But I really hope the type of plan I have remains, and is considered in the mix of this whole debate.

Followup on my son’s voter issue

So after the initial rush of indignation and anger I have done quite a bit of research and got the message from my son that no voting official told him that he would get a provisional ballot. He registered at a campus event, and nobody there would have been able to do that anyway. What really happened was that after he registered, he found out about an issue that could still in fact keep him from voting.

The attempt to force database matches on demographic data is something our attorney general has been trying to get done. In fact he filed a law suit trying to force this to happen, which would have put most new registrations, and many registrations for people who have moved after previously voting, on the provisional list. For all the reasons I pointed out in my first post on this, this is a really silly idea. The likelyhood of false matches is so high that no respectable computer pro would ever recommend it.

However today, the law suit was thrown out.

My son is a disenfranchised voter

Somehow, I thought this could only happen to “other” people, people outside my family and friends, people who’s circumstances I don’t know well enough to get me as outraged as I am today. My son is 22, has previously voted without problem in our home town here in Wisconsin, in Duluth where he went to school and was planning to do so again in Milwaukee where he lives today. He hadn’t voted there before, so he went to register. What he was told seems to me to be totally out of line. I feel the need to let everybody I know what has happened.

For reasons I still need to understand, he was told he would only be able to place a provisional ballot, meaning the vote won’t count until an election official reviews the registration. Here is where it gets really interesting. It turns out that most provisional votes are thrown out.

This is quoted from a Rolling Stone article here:

“Under the Help America Vote Act, some states now reject first-time registrants whose data does not correspond to information in other government databases. Spurred by HAVA, almost every state must now attempt to make some kind of match — and four states, including the swing states of Iowa and Florida, require what is known as a “perfect match.” Under this rigid framework, new registrants can lose the right to vote if the information on their voter-registration forms — Social Security number, street address and precisely spelled name, right down to a hyphen — fails to exactly match data listed in other government records.”

Any programmer that has ever worked with demographic data from a variety of sources know that the chances of exact matches across a number of sources should be considered extremely rare. People, move, their names get misspelled by people doing data entry, handwriting is imperfect on paper forms, people use formal and informal versions of their names, and on and on and on.

My son is at that stage in his life where he moves around a lot. Because of this, he will sometimes use our home address on forms where the situation requires a more permanent location. Nevertheless, he has lived withing a few miles of his current address for more than a year. It would seem likely he would fall out of favor with the HAVA criterion. His situation is so common, I would think it would be a problem with a large portion of young voters.

My son is real. He has a drivers license and an up to date US passport. He is employed. He now lives in a predominantly poor and black district of Milwaukee. So why is he limited to a provisional ballot?

The plain and simple truth is this: my son is a legitimate voter. I am mad.

and then this

As if to add an exclamation point to the point made in my last post,
Randy Cunningham,
Republican representive from San Diego and perhaps most importantly
chairman of the House Intelligence subcommittee on terrorism and human
intelligence, pleaded guilty to what we have feared for some time from
those in power now, accepting cash and gifts for influence by no less
than defense contractors. Stinky.