Gongol.com Archives: 2012 Weekly Archives
Brian Gongol

Business and Finance Do we require too many licenses, and are they too hard to get?
A rather wide swath of jobs require some sort of professional licensure or certification from the government. Some of those are for good reason -- but others are nothing more than relics of a guild system. That is, sometimes people who are already in an occupation try to keep other people from joining that same occupation and do so by raising barriers like licensure requirements. ■ There can be legitimate arguments made for licensure -- especially where the health and safety of others are involved. But licensure isn't the only way to ensure the protection of others. The private sector does it: The Michelin guides are renowned for giving people insight about hotels and restaurants -- which can be invaluable information for someone from out of town. Consumer Reports is another prime example. ■ Insurance companies and banks also perform this role, though they do so without most consumers noticing. Insurance companies (if they're smart) invest in active risk management, seeking to limit their losses on policy claims. And banks that do their due diligence when lending money aren't going to hand over cash to borrowers if they expect those borrowers to run a shoddy operation. Nor will they usually lend money for real estate without requiring an inspection for health and safety. ■ When government intervention is required, it can often be done just as well through reactive enforcement as by imposing preemptive licensure requirements. Most Americans handle their taxes quite well on the honor system, knowing that the consequences of crossing the IRS are pretty grave. Besides, preemptive licensure can give people a false sense of security: Just because someone has been licensed to practice medicine is no guarantee that they're actually a good doctor. ■ Licenses, of course, can make sense. But it's important to weigh whether we require too many or whether their requirements are needlessly burdensome -- because a lot of jobs that could offer people a good opportunity to earn a living in a skilled occupation can also require burdensome costs and efforts to obtain licensure. That can artificially allow people already in the occupation to become rent seekers (in the economic sense), keeping potential competitors from gaining entry into a market where they could make money for themselves and provide a competitive price for consumers.

Computers and the Internet Your computer should know why you're smiling
The MIT Media Lab has been working on a project to make computers more responsive to the emotions of their users -- and one of the discoveries they've made is that 90% of people smile (briefly) when they're frustrated. But it's not the same smile as the one we give when watching a funny movie. So they're learning how to program the computers to know the difference, so that someday in the not-so-distant future, Siri won't think you're laughing along with her when in fact you're getting ready to chuck her against a wall. ■ But don't try using Siri if you're working at IBM, where management has decided that Siri and Apple's dictation features are to be turned off...because Apple isn't very clear about what it does with the information it captures from voice queries and transcriptions. IBM, being reasonably cautious, figures that it probably does't want people leaving a trail of IBM research and internal details on the servers of a potential rival.

News Illinois House of Representatives votes for $1-a-pack cigarette tax increase
The plan is to use the money to fund health-care expenses for the poor. The hazard is that such a large increase will give incentives to tobacco bootleggers.

Threats and Hazards Counterfeit parts found 1800 times in US military aircraft
And the total number of parts was over a million. 70% of the fakes came from China. The world has to start getting a grip on counterfeit products coming from China. The problem is huge and growing.

Business and Finance Worst headline of the day: "The week ahead: Should you be buying or selling?"
It's an example of a widespread but painful error in thinking within the financial universe. Nobody should be making decisions to buy or sell on a week-ot-week basis. There are really only two legitimate things to do in the market over time: Either just patiently invest on a dollar-cost-average basis using market index funds (and then withdraw those same funds slowly upon retirement), or invest very deliberately in a very concentrated way with a handful of companies which you take the time to understand well. If people think the stock market is to be "bought" and "sold" from week to week depending upon the sentiments of millions of other people, then they should really step away from the market altogether -- for their own safety.

Business and Finance Today's extremely low-return investing environment

Computers and the Internet Words that will get you flagged by the Department of Homeland Security

Health Shawn Johnson talks about having a healthy body image

Iowa This is what passes for crime news in Iowa
Why a man would have taken his zebra and macaw into a bar, nobody will likely ever know

Broadcasting Show notes from the WHO Radio Wise Guys - May 26, 2012

News It's not the OJ Simpson trial, that's for sure
Rajat Gupta is on trial to determine whether he cheated the stock market by using insider information. The judge in the case is worried that the lawyers on both sides are boring the jury to death, saying, "We need to find a way to sharpen the presentation on both sides and get it more focused." Unfortunately, this is why Warren Buffett noted in his year 2000 letter to shareholders that "More money, it has been noted, has been stolen with the point of a pen than at the point of a gun." People are neither well-versed in things financial, nor are most people easily excited about or interested in those things. In a very real way, theft by insider trading or accounting fraud is made easier by the fact that so many people find it just so infernally inscrutable. Because financial crimes don't involve gunfire or stabbings, they just don't seem as viscerally exciting as violent crimes. But they can be enormously harmful, and on a much larger scale than a single armed robbery.

Computers and the Internet Another view on the future of Facebook
The site simply won't last in predominance forever. It probably has about three really good years left. At some point or another, people will decide that too much sharing is just too much. And there's no shortage of potential rivals who have already arrived on the scene -- or that may appear later.

Iowa Iowa's supreme court isn't "radical", and political candidates have an obligation to be honest
A state senate candidate in central Iowa is accusing the Iowa State Bar Association of creating a "radical" supreme court for the state. He's referring to the court's decision in Varnum v. Brien, which was the correct decision -- even if he doesn't like it. The decision -- which had the effect of making gay marriage a legal right in Iowa -- was not "radical". It was, in fact, a fair decision under the state's constitution, which is all we can ask of our courts to deliver.

America's labor force participation rate

Business and Finance Fewer people are doing all the work
That's America's labor-force participation rate, measured from quarter to quarter. It measures the number of people who are working out of the total adult population (ages 16 and up). The number hasn't been this low since the early 1980s (when the trend was on the way up, thanks to Baby Boomers still joining the workforce). This graph undoubtedly shows the start of the retirement wave and just how quickly things are already changing. So...for those people still working, if you feel like there's nobody left around the office or the shop, it's not just in your head. And, by the way, it's happening much faster than the forecasts predicted. Just a decade or so ago, government forecasters expected the rate to remain above 63% until at least 2025. We could very easily drop below that number this year.

The United States of America Fisher House: A great charity for the week of Memorial Day
The Fisher House Foundation ensures that military families have someplace to stay when their loved ones in the armed services are hospitalized. Given the solemnity of Memorial Day, it's a highly worthwhile charity. Also worth considering for your charitable dollars: The USO, which provides entertainment and other relief services to active-duty members of the military. Both are outstanding charities.

Humor and Good News "What would George do?"

Personal savings rate

Business and Finance Are you on track to save at least $1,289 this year?
If so, then you're doing better than the average American. The personal savings rate in April was 3.4%, or about $1,288 per person per year. The problem? That number just isn't going to cut it. And worse yet, it's clearly trending downwards -- towards the dismal 2% rate that prevailed in 2006 and 2007. ■ Personal savings forms the basis for a number of very useful things. First, it gives people at least some cushion against bad times...the classic "saving for a rainy day" that everyone should do. Companies have to do this by depreciating their assets, knowing that things wear out over time. Households need to do the same thing, since cars break down and furnaces give out and kids get sick. ■ By further extension, we need savings so that people can have something to live on when they retire. Americans, generally speaking, probably need about $1 million in savings and net assets of some sort or another at age 65 in order to afford a comfortable retirement without a lot of worry. Social Security is not a retirement plan. It's just not. It's a backup insurance policy against being destitute in old age. And there's no way that saving $1,288 a year is enough to get to $1 million. ■ The third leg of this stool is that personal savings equals wealth. You can't have wealth if you don't ensure that you consume less than you produce. A personal savings rate this low -- and 3.4% is far too low -- means that we're essentially eating our seed corn. Read Warren Buffett's 2003 essay on the US trade deficit: All told, we've sold off more than $2 trillion in American assets to the rest of the world to pay for our consumption of more than we produce. That's $2,470,989,000,000 at last count -- or about $8,000 for every man, woman, and child in this country. Many Americans don't even have $8,000 in their own net assets -- much less realize that the rest of the world owns that much more of our country, per person, than we own of anything anywhere else. If there's one iron rule of capitalism, it's that the one who owns the capital is the one who actually gains the wealth. And there are really only two kinds of capital: The things that are counted in that negative $2.5 trillion balance we have with the rest of the world...and human capital. And, while we're still pretty good at what we do here, our human capital is basically the output of what we put into our educational system. So unless we decide to make our schools phenomenally better and/or start investing more and consuming less, we're in deep trouble in the long term. ■ Bottom line: It's possible to become a nation of over-savers. Japan once had a personal savings rate of 15% -- which may be saving too much and spending (and enjoying life) too little. But a good rule of thumb has always been to target a savings rate of about 10%. Some of that will be lost to inflation over time, but as long as its invested with some shred of wisdom, that 10% amount generally produces enough for a comfortable household nest egg. 3.4% just isn't enough. Not nearly enough. ■ (As an aside...households that are putting money into education and training that actually stand a good prospect of earning a higher return in the future should consider their tuition spending to be the same thing as "savings", even if it technically doesn't look like that. If you're going to earn a meaningfully higher level of income as a result of that education, then it's a lot like putting money into savings -- as long as you follow the rule of saving a high percentage of your future [higher] earnings later on. But if you're burning those tuition dollars on a low-return degree program, then it's really just consumption, because it feels good but doesn't really make you wealthier in the future.)

News Where do these awful people come from?
Iowa's supreme court has ruled that it's a man's right to sue for fraud and be paid back for damages if a woman falsely claims a child is his. This begs two questions: How in the world was this not the law before? And, where do these awful people come from, who would knowingly lie about the paternity of a child, just to extract money out of someone who wasn't the child's father? In related awful-person news, a man is accused of killing his pregnant wife because he wanted to continue having an affair.

Iowa Sioux Center manufacturing plant will close
They make furnishings for the medical industry, and the company's owners say they just don't know how medical-care reform will affect the industry with enough certainty to keep the plant open.