Nothing Changes..... Except Maybe the Weather

"Global ________ presents humankind with the most important social, political, and adaptive challenge we have had to deal with for 110,000 years. Your stake in the decision we make concerning it is of ultimate importance: the survival of ourselves, our children, our species."

These words could have been but were not written by Al Gore.

These words could have been but were not written by a "scientific" member of the Intergovernmental Panel on Climate Change.

These words were in fact written by Lowell Ponte, an influential member of the International Research Technology Corporation. Mr. Ponte wrote these words in 1975, and the missing word from the above passage was not warming. The missing word was COOLING.

I have just finished the introduction to Ian Plimer's book Heaven and Earth: Global Warming the Missing Science, and I am hooked to say the least.

Here a few gems from the introduction:

"To reduce modern climate change to one variable (CO2) or, more correctly, a small proportion of one variable (i.e. human-produced CO2) is not science, especially as it requires abandoning all we know about planet Earth, the Sun, and the cosmos."

"Temperature measurements using ground-based thermometers, ballon-mounted radiosondes and satellite-mounted microwave sensing units all show that no warming has occurred since 1998. Once the urban heat island effect with ground thermometers and the 1998 El Nino are considered, there has been little warming since 1979."

"If we change the time scale and look at the last 6 million years, for 3 million years it was warmer than now. For the other 3 million years there was an increase in the magnitude of high-frequency warm and cold cycles. During the last three warm cycles, it was 5 degrees Celsius warmer than now. Past natural climate changes have been partly cyclical and partly unpredictable and have nothing to do with human additions of CO2 to the atmosphere."

Uh-Oh!

Fannie Mae's (FNM) new numbers are out, and as taxpayers, we should all be very frightened by what we are seeing. From the Seeking Alpah article on the report:

The report (second quarter report) describes FNM’s exposure to problematic classes of mortgages on their book. That total comes to a whopping 0.9 Trillion. The total book of business is $2.7 Trillion, fully 32% of their book is troubled.

The report muddles with the actual holdings, as there are overlaps in the descriptions. The actual numbers they provide include:

• Negative Amortization Loans: $15b
• Interest Only: $196B
• Low Fico: $328B
• LTV>90%: $265B
• Alt-A: $269B
• Sub Prime: $8B

Those numbers add up to $1.2 trillion. This means that 50% of the loans in the book are troubled for two reasons. For example, $25 billion are loans that have high LTV and a FICO score less than 620. (AKA a “stinker”)

Dare to Compete

My beautiful and brilliant wife was kind enough to write a guest post about Health Savings Account.

Far too often, people get caught up in the Republican vs. Democrat, Liberal vs. Conservative argument. Forget that flummery.

What we should be focusing on is Clear Thinking vs. Muddled Thinking, Facts vs. Emotions, Good Ideas vs. Bad Ideas, Freedom vs. Government Control. The guest post below is a perfect example of a clear and rational thought process:

Have you ever shopped for a car? Whether you intended to lease or purchase, buy new or used, your process probably looked something like this: conduct Internet research on the price, features, warranties, mileage, safety ratings, reliability ratings, etc.; visit car lots for test drives; weigh the costs and benefits of various trim packages; consider your financing or payment options, your budget, and how much you want to deposit or spend; negotiate with a salesman; and, finally, drive your car off the lot.

Why do we engage, time and again, in this intensive process? Every one of us wants to make sure we get a good deal, and because cars are expensive and important to our livelihoods, and there are so many options to choose from, we’re willing to roll up our sleeves and shop around.

Car companies are forced to respond to this price elasticity of demand by competing with one another on price and quality, and the end result benefits the consumer: better quality cars at lower prices!

Health Savings Accounts (HSAs) can make this benefit a reality in the healthcare industry.

An HSA is a tax-deductible savings account that can be used to cover medical expenses. In order to open an HSA, a consumer must have a high-deductible health plan (HDHP). HDHPs offer low monthly premiums because consumers pay out of pocket for routine medical care up to their deductible. Once the deductible is met, most HDHPs pay anywhere from 80–100 percent of covered expenses. Money contributed to HSAs is tax deferred, rolls over year after year, and can be withdrawn to cover medical expenses tax free. Best of all, your HSA contribution is an annual above-the-line deduction on your income taxes, and, like an IRA, it can be withdrawn for any reason penalty-free after you reach the age of 65.

So, how exactly do HSAs give us better health coverage at a lower cost? Simple: by creating competition. HSAs make consumers “consume” healthcare intelligently. When you have to pay all medical expenses out of pocket until you meet your deductible, you become price sensitive. You start to pay attention to how much everything costs. You shop around for doctors, hospitals, and surgery centers. You become selective about which tests and procedures you really need.

And when you become selective with your dollar, healthcare companies—from pharmaceutical giants to hospitals to physicians—start to compete for that dollar. Just like automakers, healthcare providers are forced to respond to consumers’ elasticity of demand by offering better quality services at lower prices. And isn’t that exactly what we all want? If only every consumer would take charge of their healthcare consumption like they do their consumption of just about everything else.

It all comes down to the very basic, very simple principles of capitalism. Reduce government regulation, increase price transparency, and increase competition, and the consumer benefits.

It’s frightening that our country’s leaders seemed to have abandoned all principles of capitalism. I’m hanging onto my HSA for dear life.

Vanity of Human Wishes

One of my all-time heroes is the late and great Dr. Samuel Johnson. I will post more about Dr. Johnson on this blog, but for now, I want to leave you with the final stanza of his classic poem The Vanity of Human Wishes:

Where then shall Hope and Fear their Objects find?
Must dull Suspence corrupt the flagrant Mind?
Must helpless Man, in Ignorance sedate,
Swim darkling down the Current of his Fate?
Must no Dislike alarm, no Wishes rise,
No Cries attempt the Mercies of the Skies?
Enquirer, cease, Petitions yet remain,
Which Heav'n may hear, nor deem Religion vain.
Still raise for Good the supplicating Voice,
But leave to Heav'n the Measure and the Choice.
Safe in his Pow'r, whose Eyes discern afar
The secret Ambush of a specious Pray'r.
Implore his Aid, in his Decisions rest,
Secure whate'er he gives, he gives the best.
Yet with the sense of sacred Presence prest,
When strong Devotion fills thy glowing Breast,
Pour forth thy Fervours for a healthful Mind,
Obedient Passions, and a Will resign'd;
For Love, which scarce collective Man can fill;
For Patience sov'reign o'er transmuted Ill;
For Faith, that panting for a happier Seat,
Thinks Death kind Nature's Signal of Retreat:
These Goods for Man the Laws of Heav'n ordain,
These Goods he grants, who grants the Pow'r to gain;
With these celestial Wisdom calms the Mind,
And makes the Happiness she does not find.

Johnson has the very rare ability of capturing in this poem both hope and despair in a way that so resonates with the experience I believe we all have in being human. 

No Laffing Matter

Art Laffer, whose company is based right here in Nashville, nails it in today's WSJ:

The bottom line is that when the government spends money on health care, the patient does not. The patient is then separated from the transaction in the sense that costs are no longer his concern. And when the patient doesn’t care about costs, only those who want higher costs—like doctors and drug companies—care.

Thus, health-care reform should be based on policies that diminish the health-care wedge rather than increase it. Mr. Obama’s reform principles—a public health-insurance option, mandated minimum coverage, mandated coverage of pre-existing conditions, and required purchase of health insurance—only increase the size of the wedge and thus health-care costs.

......A patient-centered health-care reform begins with individual ownership of insurance policies and leverages Health Savings Accounts, a low-premium, high-deductible alternative to traditional insurance that includes a tax-advantaged savings account. It allows people to purchase insurance policies across state lines and reduces the number of mandated benefits insurers are required to cover. It reallocates the majority of Medicaid spending into a simple voucher for low-income individuals to purchase their own insurance. And it reduces the cost of medical procedures by reforming tort liability laws.

My wife and I have had an HSA plan for a little over two years now, and we absolutely swear by it.

My wife is an absolute genius when it comes to health care and specifically HSA's, so I may try and persuade her to write a guest post on HSA's for this blog.

Timeless Marketing & Sales Lesson #7

Marketing and branding expert John Moore has a great blog called Brand Autopsy that should be on your daily reading list.

John is currently running a series of posts entitled “Would you miss . . . ?” that I think gets to the core of what business and business communication are really all about.

The concept behind this series is very simple and very profound. Mr. Moore takes a different company in each post and asks the question “Would you miss [insert company name here]?”

For example, in one of his recent posts asks, John asks the question “Would you miss Costco?”

Would you miss Costco’s sample Sundays, wholesale prices, hotdogs, etc.? Would you miss Costco’s service and atmosphere? Would Costco employees miss working at Costco? Would you be sad to know that your children would never experience Costco?

Have you ever sat down with your employees or your customers and asked this question?

There is no escaping the fact that business and money have always been and will always be attached at the hip.

However, far too often we get so mired down in budgets, quotas, and quarterly reports that we forget that business is all about relationships. It’s about the relationships between employer and employee. It’s about the relationships between companies and their vendors. It’s about the relationships between companies and their customers. It’s the relationships that really create the value.

When you think about it, the “Would you miss . . . ?” question is what marketing, public relations, and advertising is all about.

Marketing, public relations, advertising, and every other form of business communication are ways for companies to remind their customers (and their own employees) of the value of their relationship.

Forget about awareness, interest, desire, and action. Instead, focus on reminding people why they would miss you if you ceased doing business tomorrow. Sell them on the value of their relationship with you.

Let’s not forget that we are all in the business of selling. If customers and client won’t miss what you are selling and how you do conduct your business, it won’t be long before they don’t miss you.

Timeless Lesson: If you are not missed, you will soon not be missed.

Viper Down the Shirt Front

This post isn't going to win me any friends among my fellow MBA's (about 3/4 of whom became consultants after graduation) but here goes nothing.

Former business consultant and author Matthew Stewart has written a new book entitled The Management Myth: Why the Experts Keep Getting it Wrong.

In yesterday's Wall Street Journal, Philip Delves Broughton reviews Stewart's book.

From Broughton's review:

Three years ago, Matthew Stewart published a provocative article in The Atlantic magazine blasting modern management theory and education. His advice to anyone considering an MBA was “don’t go to business school, study philosophy.”The secrets of business, he said, were to be found in history, literature and the classic ruminations on life and existence, not in the half-baked ramblings of business academics, consultants and “gurus.” In “The Management Myth,” he expands the Atlantic article into a devastating bombardment of managerial thinking and the profession of management consulting. As a former management consultant, Mr. Stewart lived long enough in the belly of the beast to know its nature.

Mr. Stewart quotes Bruce Henderson, the founder of the Boston Consulting Group, who describes consulting as “the most improbable business on earth” and who goes on to ask: “Can you think of anything less improbable [sic] than taking the world’s most successful firms, leaders in their businesses, and hiring people just fresh out of school and telling them how to run their businesses, and they are willing to pay millions of dollars for their advice?”

Reading the review of this book reminded me of one of my favorite Charlie Munger quotes: "I'd rather throw a viper down my shirt front than hire a compensation consultant."

I read this review while having breakfast with my father this morning. My father, the CEO of a public company, could barely contain his enthusiasm about buying us both a copy of this book.

For years now my father has been railing against management consultants, and I think this is going to be the book that he sends to his 100 closets business friends (some probably consultants).

Fair Share?

The newest data is out and those pesky rich folks appear to be paying far more than their fair share in income taxes.

From the Tax Foundation article:

.....the IRS data shows that in 2007—the most recent data available—the top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government. This is the highest percentage in modern history. By contrast, the top 1 percent paid 24.8 percent of the income tax burden in 1987, the year following the 1986 tax reform act.

Remarkably, the share of the tax burden borne by the top 1 percent now exceeds the share paid by the bottom 95 percent of taxpayers combined.

The above chart reminded me of something the great Austrian Economist Ludwid Von Mises once said:

Taxes are necessary. But the system of discriminatory taxation universally accepted under the misleading name of progressive taxation of income and inheritance is not a mode of taxation. It is rather a mode of disguised expropriation of the successful capitalists and entrepreneurs. Whatever the governments' satellites may advance in its favor, it is incompatible with the preservation of the market economy. It can at best be considered a means of bringing about socialism.

Just The Facts.....Just The Facts

From the Hoover Institution's Scott Atals. Scott W. Atlas is a senior fellow at the Hoover Institution and a professor of radiology and chief of neuroradiology at Stanford University Medical School.

1. Americans have better survival rates than Europeans for common cancers. Breast cancer mortality is 52 percent higher in Germany than in the United States and 88 percent higher in the United Kingdom. Prostate cancer mortality is 604 percent higher in the United Kingdom and 457 percent higher in Norway. The mortality rate for colorectal cancer among British men and women is about 40 percent higher.

2. Americans have lower cancer mortality rates than Canadians. Breast cancer mortality in Canada is 9 percent higher than in the United States, prostate cancer is 184 percent higher, and colon cancer among men is about 10 percent higher.

3. Americans have better access to treatment for chronic diseases than patients in other developed countries. Some 56 percent of Americans who could benefit from statin drugs, which reduce cholesterol and protect against heart disease, are taking them. By comparison, of those patients who could benefit from these drugs, only 36 percent of the Dutch, 29 percent of the Swiss, 26 percent of Germans, 23 percent of Britons, and 17 percent of Italians receive them.

4. Americans have better access to preventive cancer screening than Canadians. Take the proportion of the appropriate-age population groups who have received recommended tests for breast, cervical, prostate, and colon cancer:

• Nine out of ten middle-aged American women (89 percent) have had a mammogram, compared to fewer than three-fourths of Canadians (72 percent).


• Nearly all American women (96 percent) have had a Pap smear, compared to fewer than 90 percent of Canadians.


• More than half of American men (54 percent) have had a prostatespecific antigen (PSA) test, compared to fewer than one in six Canadians (16 percent).


• Nearly one-third of Americans (30 percent) have had a colonoscopy, compared with fewer than one in twenty Canadians (5 percent).

5. Lower-income Americans are in better health than comparable Canadians. Twice as many American seniors with below-median incomes self-report “excellent” health (11.7 percent) compared to Canadian seniors (5.8 percent). Conversely, white, young Canadian adults with below-median incomes are 20 percent more likely than lower-income Americans to describe their health as “fair or poor.”

6. Americans spend less time waiting for care than patients in Canada and the United Kingdom. Canadian and British patients wait about twice as long—sometimes more than a year—to see a specialist, have elective surgery such as hip replacements, or get radiation treatment for cancer. All told, 827,429 people are waiting for some type of procedure in Canada. In Britain, nearly 1.8 million people are waiting for a hospital admission or outpatient treatment.

7. People in countries with more government control of health care are highly dissatisfied and believe reform is needed. More than 70 percent of German, Canadian, Australian, New Zealand, and British adults say their health system needs either “fundamental change” or “complete rebuilding.”

8. Americans are more satisfied with the care they receive than Canadians. When asked about their own health care instead of the “health care system,” more than half of Americans (51.3 percent) are very satisfied with their health care services, compared with only 41.5 percent of Canadians; a lower proportion of Americans are dissatisfied (6.8 percent) than Canadians (8.5 percent).

9. Americans have better access to important new technologies such as medical imaging than do patients in Canada or Britain. An overwhelming majority of leading American physicians identify computerized tomography (CT) and magnetic resonance imaging (MRI) as the most important medical innovations for improving patient care during the previous decade—even as economists and policy makers unfamiliar with actual medical practice decry these techniques as wasteful. The United States has thirty-four CT scanners per million Americans, compared to twelve in Canada and eight in Britain. The United States has almost twenty-seven MRI machines per million people compared to about six per million in Canada and Britain.

10. Americans are responsible for the vast majority of all health care innovations. The top five U.S. hospitals conduct more clinical trials than all the hospitals in any other developed country. Since the mid- 1970s, the Nobel Prize in medicine or physiology has gone to U.S. residents more often than recipients from all other countries combined. In only five of the past thirty-four years did a scientist living in the United States not win or share in the prize. Most important recent medical innovations were developed in the United States.

Leasing 101 - Part 9

9) TI: Not a kind of calculator

• TI = Tenant Improvements , i.e.Paint, Carpet, erecting walls, taking out walls, etc.
• What sort of TI Allowance is the Landlord offering?
• If TI is not being offered, is Landlord willing to discount rate or offer free rent for any work needing to be done to the space?
• What interest rate does Landlord amortize TI costs in excess of the allowance?