My Father's Paper

After my last post, I was curious: was there any trace of my father's illustrious career in all of the world wide web? I took some serious googling but I finally found this:

Abstract : Wind-tunnel tests have been performed to investigate the effect of surface heating on boundary-layer transition on a flat plate. The tests were performed at a nominal Mach number of 2.40 and a free-stream temperature of 205 deg F, and the data were obtained at nominal plate temperature levels of 60 deg (adiabatic recovery temperature), 100 deg, 140 deg, 180 deg, and 260 deg F over a length Reynolds number range from 0.475 x 10(exp 6) to 3.93 x 10(exp 6). The identification of the onset and end of transition was made by inspection of the curves of surface-tube Mach number reading as a function of length Reynolds number obtained through the transition region. Boundary-layer-velocity profiles were obtained at points corresponding to the onset and end of transition to enable the computation of critical Reynolds numbers based on boundary-layer dimensions.

The best thing is, I can actually download the pdf! It is amazing to read something my father labored on more than 50 years ago. I was printed out on an old typewriter (with special scientific notation keys). I just wished I had thought of looking for this while he was still alive. What a kick he would have gotten out of seeing this again.

Death of the Greatest Person I'll Ever Know

It happens to nearly everyone at some point in their lives: the death of the greatest person that you will ever know. Of course, most of you will not know it at the time. The loss will only really hit you years later when you think "I knew that person - too bad I didn't spend more time with him when I had the chance."

Yesterday, my father passed away at age 84. He lived a most remarkable life. I hinted at that in this post from two years ago:

My father certainly qualifies as a great American. He fought with distinction during WWII. He did cutting-edge scientific research on boundary layer behavior and heat ablation for the infant space program. He created numerous inventions for the various companies and organizations that employed him. And when he came home from a long day’s work, we worked several more hours at home creating gadgets for improving our quality of life. He invented one of the very first automatic sprinkler systems more than fifty years ago. He never profited from it, he made it just for our home.

However that post really did not do justice to the man. He was awesome. For example, during WWII, he helped capture more that 50 enemy soldiers in an amusing but very brave operation. And he really did a lot in the early days of the space program.

What really struck me today was that not only is the body gone - and it was mostly worn out after 84 years - and the mind gone - again mostly worn out - but the stories were gone. The stories were gone forever. He could talk for hours about his childhood of poverty in Montana in the Depression, his college years, his military service in Italy during WWII, and his excellent career as a mechanical engineer. I remember those stories. I was occasionally really bored by those stories - he never learn the art of making a long story short although that was one of his favorite expressions which he would insert at about hour 1 or 2 into the story. But usually I was captivated - he really could put you right there where and when the action occurred.

And now all that is gone - forever.

All that is left of this great man is the memories of his life imprinted in the minds of those who knew him and loved him. I need to remember. My son spent too little time with him and I need to share all that my father had to offer with him. I need to remember every detail that I can - because that is all that is left.

Tax Cuts, Minimum Wage Hikes, and Perpetual Money Machines

The Democrats have come to power and straight away they are going to make a priority of raising the national minimum wage (which has not be raised in many many years). I was wondering why this would be a priority. Usually labor unions support minimum wage hikes because it is the ultimate in collective bargaining (we all stand together and insist on higher wages) plus it prevents firms from switching to cheaper labor. But labor union membership and power have waned in the US and they have very little political strength – so why would politicians care?

Then it occurred to me that the minimum wage to the Democrats is what the tax cut is to Republicans: they are both the financial equivalent of a sort of perpetual motion machine (you could call it a perpetual money machine if you like). The idea is simple: politicians love to give free money to people. But where does one get free money? It is never free- is it? Well it might seem free if you manage to get it without raising taxes or reducing spending. Both a tax cut and a minimum wage hike seem to fit the bill.

For the moment, let us ignore any pro and con arguments for either tax-cuts or minimum wage hikes. Politicians will not be persuaded or dissuaded by any such logic. All they care is: “Will it help me get elected?” And perpetual money machines do work for politicians: there will always be five to ten percent of the electorate that will believe anything – and five to ten percent will swing any election. So politicians would be fools not to try to get the votes of these silly people.

But here is the major problem: politicians creating “perpetual money machines” are politicians not doing their primary job. They should be doing the hard work of both finding legitimate public goods that are worthwhile taxing the common man to pay for and/or finding illegitimate public spending that should be axed from the budget. But this requires courage: some people will be harmed and they will be angry. You cut farm subsidies and the farmers won’t vote for you. You fund a new project and your opponent will call you a “tax and spend liberal”.

Politicians looking to make something worthwhile out of thin air by some alchemy will inevitably succeed in creating nothing out of something instead. I wish more people would send them the message: “Stop this foolishness and get back to work!”

Idea Contests

In my previous post, I mentioned as an afterthought an idea for giving partial protection for creating entirely new types of products that cannot be completely protected by a patent. I gave the pumpkin carving kit as an example, but there might be better examples. Think of the automatic toilet cleaner. People have been waiting for some time for this and it hasn’t come. I don’t expect it to come soon. I’m sure that someone can invent one but what then? You do a lot of hard market research for the guy who will swoop down and steal your business.

Here is a good example: Lotus developed the first really good spreadsheet: Lotus 123. A few years later Microsoft came out with a knock-off: Excel. Excel was a bit better – but they had second-mover advantage (and deep pockets). They took over and made the lion’s share. I’m not against competition but I recognize that Excel would not exist without Lotus 123 and Lotus 123 would not have happened if the developers could have known that they would lose out in the end to Microsoft. New products may never see the light of day without some partial protection.

Sunil asked a reasonable question: “[D]on't you think something like that would be hard to enforce? How does the company prove it was first, and not the knock-off?.” It is an important point – there will always be disagreements about who is deserving and who is not.

My proposal is to conduct a contest for the best such invention that solves a well-defined problem. The winner gets a five-year monopoly. No one is harmed here: there aren’t likely to be automatic toilet cleaners in the next five years anyway so what is the harm in granting a monopoly to something that otherwise would never exist?

In practice, entrepreneurs who already have a prototype that they want to protect will suggest most of these contests. But there will be enough time for someone else to finish their model and submit it as well.

The monopoly gives the entrepreneur the ability to do the vital market research necessary to determine if the market is really there for this product. People need to be educated about a new product that no one knows anything about – like a personal computer. And the firm needs to learn how much people are willing to pay for an entirely new product.

The competition will soon have their chance. Five years passes quickly. But a five year running start gives the first-mover a real chance to make a quality product that can take on the competition. Everyone thought Barnes and Noble would crush Amazon dot com but they moved too slow and Amazon grew into the behemoth we see today. It just shows what a difference a few years might make.

Pumpkin Carving Kit Part II

A year ago, I wrote this nice piece about my son’s Halloween pumpkin and the nice pumpkin carving kit (Pumpkin Masters) he used to carve it. In that piece, I wrote of the reasons why an entrepreneur might have a great idea (like the idea to create a pumpkin carving kit) but still be reluctant to turn it into a business. I wrote:

It seems easy to believe that this was an obvious winner now but there are always a lot of questions to answer before a person with an idea becomes an entrepreneur:

1. Is there a market here? In this case the market is extremely seasonal – this makes it risky.


2. Do I have the lowest cost technology? If a competitor can make hand jigsaws for one-half the cost your supplier charges, you will be out of business quickly.
   


3. Do I know how to market this product? Will supermarkets stock this item? You might produce a quality product that languishes in obscure shops for years until some bright fellow sees it, sees no patent, and makes a knock-off that he successfully markets in every supermarket.
   

Well, just this week I had to buy another pumpkin carving kit (we lost last year’s). I went to store to store looking for this nice kit we had last year. All I could find was a cheap knock-off. It cost only $5 instead of $10 but it wasn’t as good. Some of the patterns were of very poor quality and would have been impossible to create: the pumpkin would have collapsed. The carving saw was not the same quality as last year’s saw. It was just a cheap knock-off that was successfully marketed by CVS (the big drug store chain) and perhaps some other big chains to take over this market.

Next year I will plan ahead and get the real kit if I can find it. But it may be that Pumpkin Masters will be out of business by then. They did the hard work of showing that there was a market for pumpkin carving kits only to find that it will be the knock-offs that will get the market.

I feel that there might be an intellectual property right that is missing here. A firm that creates an entirely new good (not a minor improvement in an existing good) that nevertheless is not completely patentable should be given a short period – maybe five years – to market test their product before the knock-offs sweep in and enjoy the fruits of that hard work. This would give the creators of entirely new markets a brief moment of protection before the competition gobbles them up. Otherwise new markets never get created.

I wrote that there were never pumpkin carving kits when I was a kid. Now I know why. It is only just dumb luck that they exist for my son.

Worst Jobs In History

From the always excellent India Uncut is this link to a BBC TV show about the worst jobs in history. Here is an example:

As a fuller, you are expected to walk up and down all day in huge vats of stinking stale urine. The ammonia produced by the rotten wee may make your eyes water, but it creates the softest cloth by drawing out the grease (lanolin) from the wool. If you can dance up to your knees in urine for around two hours per length of cloth, you'll succeed in closing the fibres of the wool and interlocking them to produce cloth that is kind to the skin. You will be doing your part, along with the weavers, dyers and merchants, in making it a world-beating export.

You may stink and regularly have to fight back the urge to throw up, but you are guaranteed very clean toenails.

This one was far from the worst. It makes you appreciate the quality of life we enjoy today.

Free Parking and Waiting Costs

I haven't been blogging regularly for some time and have considered stopping blogging altogether. I will delay that decision for a little while. In the meantime, I have one more post that I would like to make.

Where I live in Northern Virginia near Tysons Corner, parking is always scarce. When there are more cars than spots, cars cruise around like vultures waiting for something to eat. There might be available parking further away, but one would have to walk a ways and time is precious and exercise is unpleasant so people cruise - perhaps for 30 minutes or more - waiting for that open space.

Today I observed this behavior at a place where my son was having a summer camp. There were spaces further away but people insisted on cruising for that premium spot near the entrance. The weather was perfect - avoiding the elements was not a factor. There was plentiful parking on the street about 1000 feet away from the entrance to the building. So one would have to assume that people were trying to save time (which is doubtful because cruising consumes time) or they just didn't like to exercise.

Except the summer camp was at a health club. These people had paid money to exercise. One can only conclude that exercise outside the health club is somehow a different commodity than exercise in a health club. Does this make sense?

Should We Tax Transactions Between Family Members?

There is an interesting post on Half Sigma about why we should keep estate tax:

The general rule is that whenever money is transferred from one party to another, there's a tax. If a hard working middle class person has a problem with his pipes, and he pays money to a hard working plumber to fix the pipes, the plumber has to pay income tax on the money he receives. So if a child of a rich person receives millions of dollars for doing absolutely nothing, why should he pay less tax than the plumber who actually did something useful?

Actually, there is no such general rule in America or elsewhere. The general rule is that transactions are only taxed if they are between a retailer and a retail customers. Transactions between corporations are not taxed and there are important economic reasons why they aren't. Also transactions between family members are not taxed except for large gifts and estate taxes. This might be one reason why some people would like these taxes removed.

I think it is fairly obvious that we should not tax transactions between a parent and his or her underage child. Obviously children are in no position to earn income for themselves and parents have an obligation to support them. Taxing these expenses twice would be double taxation and extremely distortionary.

However, it isn't so clear to me that taxing transfers between adult members of the same family is wrong. If a working wife decides to quit working so she can stay home and be a homemaker, not only does the GNP shrink but so does the tax base. That decision tends to weaken country - we can no longer afford as much national defense. It might be reasonable to treat "homemaker services" as taxable income. But it also seems quite likely that this is a really bad idea as well. It is one of those areas that requires more thought and perhaps experimentation.

Likewise, I can see that in general that it might be reasonable to tax transfers between parents and their adult children. If the parent has died then the inheritance might seem exactly like "winning the lottery" as Half Sigma suggested. It does seem like money that is easy to tax with really causing any distortion, (if the person decides not to die because of the high estate taxes then that would seem to be a good thing).

But I can see the potential for distortion. If you pay taxes on inheritance but not on gifts then parents will be obliged to give before they die. Maybe the government doesn't really want to interfere in family matters. It is an interesting question but not so clear.

A Gaur

Here is a picture of a Gaur:














It is a very large relative of the domestic cow - it is not so closely related to buffalos and such.

OPEC Loses Control Again

Last August I wrote:

OPEC, the oil cartel, has temporarily lost control of world oil production. I say temporarily because I have no doubt that OPEC could quickly increase production by simply drilling more oil wells and sucking the oil out more rapidly.

But this raises a question: “If OPEC is making more money with the higher price, why would they want to increase production and reduce the price?” The answer is that letting the price of oil rise is like taking a submarine down to see how far it will go before the water pressure crushes it. It is a highly dangerous game. I think that OPEC must be very concerned that they might just spawn a monster of an alternative fuel technology.

If you control the world oil production and you want to maximize the present value of your total net revenue stream, then how do you set your price? The answer is that you would want to set the price just below the price where it becomes profitable for others to invest in alternative energy sources. If you set the price too high for too long, you run the risk that some exciting new energy alterative will come along and then you would be force to sell your oil at a discount later.

I went on to predict that the price of oil would soon be under $60 a barrel.

Well, at first, it seemed like I was right. The price of oil fell and gasoline prices came way down. It seemed like the spike in price was just an aberration and OPEC still controlled the price.

But the price of oil has headed steadily upwards lately. Today I read this.

I wonder if perhaps the assumption that OPEC still has 10 to 15 years of reserves is correct. Perhaps they have less. This might be like the slog overs of a cricket match: dwindling resources leads to a “go for broke” attitude. If you have only 5 years of oil left then why not get as much out of that as you can? By the time some exciting technology comes in and takes over, you made your money.

Another possibility is that it might be worthwhile to purposefully let the price spike and fall many times. During the spikes, you make large profits. During the falls, you put any competing technology out of business. Investors prefer to invest in venture with more certain returns. Creating uncertainty helps scare off investments in alternative energy.

I’m not convinced about this argument. I think that the longer the price stays above $60 a barrel the bigger the risk that oil will be replaced by something. But I cannot deny the possibility that the price of oil might spike at over $100 a barrel. But I still think that OPEC will bring the price back down under $60 soon. But it will be interesting to see what happens in the next two months.