Prince William's Job

There are rumors going around that Britain’s Prince William may soon be out of a job. No not that job, the UK is not doing away with its monarchy and young William remains second in line for the throne, after his father and grandmother, the Queen. However, William’s present job as a pilot for the Royal Air Force’s search-and-rescue helicopter service is supposedly being farmed out to an American-based private company in an effort to save the government some money. I’m not sure I like the idea.

I’m not a die hard Anglophile and I don’t really care one way or another about the British Royal Family. Prince William seems to be a very nice young man, with a pretty wife and a child on the way. As far as employment opportunities, I think it’s safe to say that the Prince will have enough on his plate to keep him busy for the rest of his life. There is also little chance of his family going hungry any time soon. What bothers me is privatizing a service such as a helicopter search-and-rescue group. You see there really are jobs that are best performed by a government, where profitability is not the chief concern.

Suppose you are fortunate enough to be boating off the coast of England when a nasty storm comes up and capsizes your little craft. A private company is tasked with rescuing your incompetent (or just unlucky) butt from the frigid water, but determines that the storm is too dangerous to fly into because the corporate office has estimated that there is a significant enough probability that they might lose a multimillion-dollar aircraft. Your sorry ass just isn’t worth the risk. But suppose you then radio the rescue pilot and inform him that your sailing companion that day is none other than Donald Trump, who has guaranteed that he will cover any potential financial loss to the company. Is the rescue then attempted on that basis? Doesn’t really seem right does it?

“Privatization” is a popular buzzword these days and the concept is seen as a viable alternative to the ever-increasing size of government. There are many areas that the government could extract itself from and save the taxpayers some money, but there are other areas where it really isn’t a good idea. Imagine that you’ve taken a temporary assignment in a foreign country with a history of political unrest. One day a protest group devolves into a riotous mob and one of the targets of their hatred du jour is any American (including you). You flee as the angry mob approaches, running down an alley where you trip and fall, tearing your jeans and scraping your knees. Turning the corner, you sprint toward the safety of the American Embassy, which is just a block away. You are tattered and bloody, but safety is just steps away.

When you arrive at the gate, who is it that you want to be standing guard? I say please let me see a U.S. Marine, well-trained, well-equipped, and steeped in a tradition of duty and service to his country; a protector to whom the concept of being a fellow American really means something. What if instead you found a private security guard that had witnessed the approach of the dangerous looking mob behind you and decided that the corporation that he works for really didn’t pay him enough to take that risk, and locked you out? I don’t know about you, but I really don’t like the idea of trusting my life to a rent-a-cop.

Let’s say you don’t boat and don’t travel. You may think my examples are a bit too far-fetched to matter to a hard-working, self-reliant type like you. Well then how about if your granny (or any sweet little old lady that you know) lives in a city where much of its public services have been privatized and farmed out to for-profit companies. Now Granny gets a bit confused these days, and she forgets to pay the invoice for her monthly fire-protection plan that she received from Fire Protection Company, Inc. Of course, the worst thing happens and Granny’s scented candle burns down and catches the curtains on fire. In moments, the house is engulfed in a fiery conflagration, and dear sweet Granny is trapped inside. She is lucid enough to call for help (hopefully the 9-1-1 service wasn’t eliminated in the budget cuts), and the fire truck arrives in moments to rescue the poor thing. But wait, they receive a call from the home office. Seems the resident of that particular house isn’t paid up. Sorry lady, no rescue today. We gotta let it burn. Oh, by the way, we gotta let you burn, too. Think this an impossible example? It’s happened here in the good old U.S.A. (well, they haven’t let a granny burn to death…yet).

Governments have grown large and increasingly expensive, which is a problem. Yet there remain many areas that are better serviced by a tax-funded public organization than a privately-funded corporation. Being a “libertarian” doesn’t mean that you love freedom more than anyone else does, it just means that you’ve got some different ideas about how to run things that haven’t gained popularity, and perhaps shouldn’t. There are those people in our society, usually with wealth and power, who would have us believe that they have better solutions to the needs of our people than our more traditional ones. Personally, I’m all for new ideas or new technologies that can save us money. But let’s make sure that we think very carefully before we adopt any of those ideas. Oh by the way, our British cousins just may want to rethink getting rid of William’s current job, too. The RAF is probably better suited to saving lives than a company with a focus on the bottom line.

A Sea King helicopter

(Prince William's current ride)

        

     

If You Build It, They Will Come...Or Will They?

My last post concerned the reuse of an old factory facility in my hometown of North Canton, Ohio, the Hoover Company, and how the developers were taking advantage of historic tax credits to make a good deal even more lucrative for them. Some of the comments I received on Facebook suggested that I was against the entire concept of the reuse project. I’m not against it at all; I favor doing creative things with old buildings. I am against our government handing out free money to millionaires while ignoring those Americans who work hard and ask little from their state.

There’s another creative reuse plan for an old factory in the news now. It’s the former Hercules Engine factory, located just south of Downtown Canton. A group of developers that includes a member of the Timken family have purchased the property and want to remake the complex into a mixed-use facility. According to their website, the “…mixed use project will include residential rental apartments, class A office space, retail and restaurant space and a new Convention and Event Center. This brand new state of the art Convention and Event Center will, among other things, serve as the new home for the three primary events of the Pro Football Hall of Fame Festival (the enshrinement dinner, the gameday luncheon and the fashion show).” You may think I’m some sort of anti-progress Luddite, but I’m not a big fan of this project. Read on and I’ll tell you why.

The project is in the news because the Canton City Council voted to provide a $3 million loan for the first phase of the project, which will turn 125,000 square feet of former factory space into 95 market rate residential apartments. There was one council member voting “no” on the loan. After looking over the plans, she asked the question that no one wanted to hear: “Who would want to live there?” Such honesty in a politician should be recognized and rewarded. Oh, by the way, the project will qualify for millions of dollars in historic tax credits from both state and federal government, just like the Hoover Company project.

Getting people with money and good jobs to move back into the urban core is the Holy Grail for many cities, and Canton has been trying to do this for decades. Suburbanization has decimated cities. Most of them look like ghost towns on the weekends when the lawyers, bankers and government workers head home to the suburbs. Back in the mid-1980’s, I had an office job in Downtown Canton as a commercial real estate appraiser. I enjoyed working downtown; we wore suits and neckties to work, had lunch at Bender’s, the Mergus Restaurant or the Mayfair Tavern, and took a walk around town after lunch when weather permitted. We were located downtown because it was close to the county office buildings that included the real estate property records (land and building information, sales information, tax maps, transfer records, etc.) that were essential to our operation. The county government itself was an important client that needed appraisals for things like sewer easements and tax complaints. A few of us would come in to work Saturday mornings, when we wouldn’t be interrupted by telephones and clients, and could crank out some reports.

Coming to work on a Saturday was an almost surreal experience. Unlike weekdays, there was hardly any traffic, restaurants were closed for lunch, and parking was plentiful. I parked in one of the city’s newest parking decks that was located a block away from my office and connected to a new hotel and adjacent office building by enclosed skywalks. If it was raining, I could walk across the street in the protection of the skywalks, through the hotel and into the office tower, then exit the building and quickly cross the street to my office building, avoiding most of the rain. But it was much easier and quicker just to go outside and take the sidewalks. One Saturday, as I walked down the steps in the parking garage (there was no need to take the elevator since I was so close to street level because the deck was almost empty) I encountered a homeless man sleeping across the bottom of one of the steps. I carefully and quietly stepped over him and continued on my way. I did stop at the parking attendant’s booth and informed the woman working there of the unusual situation. She was flabbergasted and asked me what she should do. I pointed through the parking deck toward City Hall, adjacent to the west and said, “The police station is right there. I’d call them.” Then I crossed the street to my office and got some work done.

We didn’t stay downtown much longer, but it wasn’t really because of homeless people bothering us on weekends. Some of the data we needed was made available on computer disks, and the rest could be retrieved by one worker that we sent after it as required. Later, all of the data was available online, and continuously updated. Having a suburban office was closer to home, had an attached parking lot, and was more convenient to everything we needed, so we moved. Likewise, many banking operations were moved to suburban locations. Even law firms moved out of the city because they could be closer to their clients as well as a greater variety of restaurants and services. The lawyers could drive in to their infrequent trips to the courthouse when necessary. The process of suburbanization was started by the automobile, aided by the computer, and completed by the vast amount of information available on the Internet.

So cities must come up with creative ideas to get people to come back downtown. There are cities such as New York, Boston, Chicago and others that don’t have this problem, although they do face problems. People are willing to live downtown because they usually work there, plus there is a wide range of services readily available and there are things to do at night like professional sports teams, art galleries, theaters, restaurants and night clubs. Small cities like Canton haven’t really had such a complete array of choices for decades.

I heard a story once, I don’t know if it’s accurate and have since forgotten most of the details, but it sounds right so I’ll tell it here. Back in the ‘80’s Canton managed to get a minor league baseball team to locate here. They just had to build a ballpark. The man hired to aid economic development for the city proposed that the city acquire and assemble a group of unused or barely used properties near the city’s core and raze them in order to build the facility. It would bring people downtown for night games, allowing for development of restaurants and bars to service the fans before and after the games. This would hopefully build upon itself. More nightlife would lead to more interest in living downtown leading to additional support facilities and additional attractions: an upward spiral. I think it was a great idea.

Instead, the city chose to build at the south edge of town, in a flood plain at the end of a grungy industrial street. The facility would have decent access to the nearby interstate highway as well as on-site parking, but wouldn’t be within walking distance of downtown or any pre- or post-game eating or drinking establishments. It worked well for a short time, but the novelty soon wore off, and the finances of the team suffered. The city’s economic development director realized that the city government didn’t have a clue how to help themselves and soon departed for better opportunities. Eventually, Canton lost the franchise to nearby Akron. Guess what they did. They razed a group of properties and built a ballpark close to the city core. Bars and restaurants located nearby to serve the sports fans. It seems to be working pretty well for them.

Canton has been trying to lure people back downtown for years. An energetic young developer bought and renovated several old office/retail buildings near the square and managed to find some tenants to fill them. Happy with his initial success, he took over a project to renovate the historic Hotel Onesto into market rate apartments. The building is an architectural gem and retained much of its interior beauty, plus had a newer parking deck attached. The city’s mayor, a one-time high school cheerleader turned politician, gushed about how wonderful the project would be and said that she was ready to move-in as soon as they were ready to have her. The project still languishes unfinished long after completion was scheduled and no one lives there yet.

Several new restaurants have been opened nearby, and an “arts district” was created. Most of the restaurants received good reviews and were popular, at least for a little while. Some have closed, others reopened under new owners, but for the most part, none of them have had real long-term success. Lack of convenient nearby parking has been a problem. Our weather isn’t that great most of the time, and most diners would prefer to park in an adjacent well-lit parking lot than hope to find a convenient spot on the street. As yet there are no nearby residents who could both walk to the restaurant and afford to eat there when they arrived. Urban blight and its associated problems remain a significant problem that most cities cannot overcome.

Which brings us back to the Hercules project, and the perceptive question posed by the skeptical councilwoman: just who would want to live there? Of course the developers have market studies to assure any skeptic that market demand exists for the project and folks will be lining up to rent the cool urban loft-style apartments as soon as they are available. During my career in real estate, I’ve read dozens of such reports. Most of them are not worth the paper they are printed on except to the author who gets to charge dearly for this collection of “insightful analysis”. Figures lie and liars figure. Almost any MBA student could assemble data that seems to support the desired conclusion. I’m pretty sure I could still do it myself, but since I don’t like to mislead people, I don’t think I would. The problem is that market rate apartments must effectively compete with other apartments in the market.

Young professionals, the most desirable group of tenants, seek someplace to live that is convenient to work as well as amenities such as restaurants, dry cleaners, supermarkets, nightclubs and restaurants. In fact, these things are desired by almost all potential renter groups except older empty nesters (another important demographic), who might be less concerned about an exciting nightlife but more interested in other cultural amenities. There are also far fewer employment opportunities in downtown areas these days, so most potential tenants are already working in the suburbs. This project is located far enough away from all existing amenities that most would prefer the safety of driving to the prospect of a long walk through what still is considered to be a “bad” end of town. That negates the one thing that makes downtown living more desirable than suburban living: the prospect of a safe and easy walk to your destination. The most desirable alternative for most renters are nice suburban apartments, which continue to be constructed without fanfare or any government assistance (other than our current tax laws, which are a major help to all apartment developers). The financing for the Hercules project is falling into place. They probably will build it, but will anybody care?

At one point of time in its history, the Hercules factory provided 5,800 good-paying industrial jobs right in the heart of Canton. If renovation plans proposed by the developers succeed fully, there will be 95 families (of one or two each) living on the site, plus an additional group of low-paying support jobs for the convention center, hotel, and restaurant. There are also plans for more “Class A Office Space” at the site that would provide more jobs, but the demand for downtown office space has been falling for years, and the current state of technology offers little hope for near-term improvement in this area. Thanks to computers, even the federal government now allows some people to work from home, mirroring trends in the private sector.

So is there something better that could be done with an old industrial facility like the Hercules plant? Here’s an interesting idea: the best use for an old industrial plant is for an alternative industrial use. Space could be made available for start-up companies at little or no expense in hopes that some of them will succeed and bring jobs back to the city. If they needed to grow, a contract would require the city to help them find or build larger space within the city limits. How about if we paid unemployed industrial workers three years of unemployment benefits upfront under the condition that they use the money to form manufacturing cooperatives that would occupy space and bring jobs back to the city? With new jobs comes increased income tax revenue for the city. This money must be used to address the problems of urban decay.

More people would be willing to live in the city if there were more employment opportunities and they weren’t worried about crime. There would be less crime if there were more jobs. The workforce would be improved if there were improvements in education, and there would also be less crime committed by better-educated young people facing more opportunities. The problem is that all of these solutions require money, and that money comes from our taxes. Right now, we are using tax dollars to pay millionaire real estate developers to renovate facilities that either don’t require additional economic incentive (the Hoover Company project) or to provide benefits for projects with dubious outcomes (the Hercules project). I think that these tax dollars should be used in other ways to solve the underlying core problems that are at the heart of our cities’ problems, and provide for economic growth that will benefit everyone. Right now, we are using the tax dollars for the benefit of the real estate developers in hopes of some of it trickling down to the rest of us. So far, that hasn’t worked out very well at all.

View of former Hercules Engine factory, Canton, Ohio

 
 

Significant Architecture...or Making a Good Deal Better?

Yet another news item from my local paper caught my attention yesterday, and this one is literally right up the street. The former world headquarters of the Hoover Company, located right on the square in North Canton, Ohio, has petitioned to be listed on the National Register of Historic Places. The former factory has been shut down for several years, and all of the manufacturing that once took place there now happens in places like Mexico and China. Only the buildings remains, and they were purchased by a group of investors who wish to transform the complex into a multiple use facility. Now you may think that I would be all for this sort of creative reuse thing, and generally speaking I usually do favor such projects. But this time, I’ve got some problems with it.

If you don’t know, The Hoover Company once made leather harnesses at its factory in the center of the little village of New Berlin, just up the road from Canton. In the early years of the 20th century, as the automobile began to replace the horse, “Boss” Hoover bought the patent for a suction sweeper device that had been invented and produced by a local custodial worker. New Berlin changed its name to North Canton during World War I, and Hoover abandoned the harness industry in favor of vacuum cleaners, and built a highly successful business around it. For years the business flourished and the Hoover family became benefactors to the surrounding city. Eventually the business was sold to outside interests, and finally, like many American manufacturers, the jobs were sent overseas where wages are lower and environmental concerns more lax.

Now when I think of buildings listed on the National Register, I think of places steeped in history, like Independence Hall in Philadelphia, or architectural gems like the Chrysler Building in New York City, both of which are buildings worthy of preservation. The Hoover Company buildings are a group of structures of various styles, none of which are particularly attractive or even interesting. The part of the buildings that face the town square are very basic mill type factory construction, and were abandoned for production purposes by the Hoover Company long before they stopped making vacuums at the plant because the space was old and obsolete. The developer has shown sketches that show the front façade being transformed into an almost unrecognizable group of shops, restaurants and apartments. The rear of the building, once very good quality manufacturing space, has already been converted to office and classroom space. The former world headquarters office building sits mostly unused, because it cannot easily be converted to office space that would be desired by the market. So much for saving the buildings for the sake of historic preservation.

In truth, the buildings don’t even really belong in the center of the city. Ask any urban planner and they would tell you that factories should be located well away from residential areas and retail centers. But the city grew around the factory, and they both benefited, so there they sit. If the site were a vacant piece of land, it would be desirable for many uses, but not a factory. In fact, if the site were vacant land, it would be worth far more than what the current owners paid for it in 2008 (with all of the buildings on it). You may think that I’m crazy for saying such a thing. It does seem to defy rationality, but trust me; in this case I know what I’m talking about. I’ll get back to that issue in a minute.

The mayor sent a letter of support along with the application. He justified his support of the site’s historical status by citing the iconic smokestack and how the building is North Canton’s most recognizable landmark. Of course, it’s the biggest building in the city, and does sit right in the middle, making it rather difficult to overlook. He also included little tidbits of information like the fact that in England vacuuming the carpet is referred to “hoovering” the carpet, which lends further support to the company’s historical significance. Here in North Canton, former home of the Hoover Company, we refer to vacuuming the carpet as “vacuuming the carpet.” Guess we’re not as clever as those Brits.

So why are these real estate developers really so keen on getting this complex on the National Register? Have you guessed yet? Let’s see, what is the one thing that motivates real estate developers above all else? If you said “creating a lasting legacy through construction of architecturally significant structures” then you’re a bit more idealistic than is safe in today’s society. The answer is simple: money. Being on the register doesn’t prevent them from changing the looks of the building, but it does allow them to qualify for a tax credit equal to 20% of the rehabilitation costs. There’s also a state tax credit available. Now rehabilitation costs are already an allowable tax deduction. They are a normal cost of doing business. But tax credits are applied to all income tax owed. They come right off of the bottom line and are way better than simple tax deductions.

So what we are doing here is allowing millionaire real estate developers to pay less taxes, right after we increased taxes on wealthier Americans. This was done because we needed more revenue to cover our nation’s growing expenses. It was a smart thing to do, and we have witnessed improving economic conditions since the new tax rates took effect. Giving this group of people lower taxes also decreases their cost of doing business and gives them an unfair advantage in the market for commercial space. Other millionaire real estate developers that don’t have this advantage have to charge more for people to rent space from them. Doesn’t really seem fair to me.

Let’s get back to the question of the underlying land. Right up Main Street from the Hoover Company, there used to be a delightful little root beer stand. It was painted bright orange and had cute carhops that delivered delicious food and sweet root beer floats to diners in their cars. It was a much more pleasing slice of Americana than the ugly factory down the street. But several years ago, when drug stores were transforming the way that they do business, one of them decided that the corner where the root beer stand sat would make a great location for their drug store. They bought the site, tore down the root beer stand, and then built a drug store that looked just like a hundred other similar ones. The site was worth more as vacant land than it was as a root beer stand. In a side note, a little while later the drug store chain realized that they had over-expanded their operations, and filed for bankruptcy. The drug store was abandoned, then was sublet for use as a dollar store, which pays much lower rent.

So if the land is worth more without the factory buildings, why don’t they just tear them down and start over, like they did with the root beer stand? For one thing, it is very expensive to tear down old factories. They’re full of things like asbestos, which must be disposed of properly (and expensively). Also, when you tear down a factory building, environmental tests must be performed on the site, and any problems must be remedied before anything can be built on the site. So any problems caused by things that had seeped into the ground (tanning solutions, PCBs, oil, grease, solvents, etc.) over the many decades that the site had been used for industrial purposes would have to dug out, properly disposed of, and replaced. That’s really expensive. So instead we “creatively reuse” the site, and keep its secrets buried in place. We creatively reward the entrepreneurs that undertake the task by allowing them to buy the property for very little money, then give them tax money in forms of grants, low interest loans, and other incentives, and finish it all off with huge tax credits. Is this any way to do business, or run a government for that matter?

At this point you’re probably guessing that I’m some kind of Marxist pinko, out to destroy big business and the American way. I’m not. The fact is we need real estate developers because we all need someplace to live and shop. Houses and apartments are better places than caves, and it’s much easier to gather food at the supermarket than get your buddies together and hunt down a buffalo. I’ve known the local partner in the Hoover deal most of my life. He’s not a bad man. I’ve had dinner with him and I stopped to talk with him only a few weeks ago. He thinks of developing real estate as something fun to do, and it’s important to him that he’s still having fun. I’ve also spoken with the California partner in the deal and he seemed very personable as well. Someone has to take the risk, and these guys are willing to do it. Risk must also be rewarded. But we don’t need to overcompensate. A nice piece of pie is just fine; we don’t need to cover it with ice cream, add a dollop of whipped cream, and then plop a big juicy cherry on top.

So did anything historically significant really happen at the Hoover Company site that warrants its inclusion on the National Register of Historic Places? The vacuum cleaner wasn’t invented there. It was just another factory. True, they did produce desirable, good-quality products, some of which continue to function as they were designed to more than fifty years after they were made. That would be newsworthy these days, but the history of our country is full of companies that did the same thing. But this really doesn’t have anything to do with history, unless you mean the history of greedy people taking advantage of a system that they designed so they could have a bigger piece of the pie than anyone else gets, all while claiming to be protectors of our great heritage. And that’s not really newsworthy because greed happens all of the time and we are being lied to every day. There are far better things that we could be doing with our tax dollars than using them to put a cherry on the top of an already lucrative real estate deal.      

   The former Hoover Company plant, located on the square in North Canton, Ohio

Good Economic News and Reading the Fine Print

Good news! A report in the paper a few days ago said that all of the wealth that was lost when the financial markets collapsed during the Great Recession a few years back has now been recovered. This occurred thanks to a large increase in the stock market, and to a lesser extent by a more modest increase in housing prices. Before you go hog wild and start investing in the market, or even engaging in a bit more consumer spending, please read the fine print. Most of the gain has come from rising stock prices. The wealthiest 10% of American households own approximately 80% of all stock. The rich are again getting richer. Yes, the wealth has “returned,” unfortunately, it went to fewer people than it came from. Increased wealth from the slight rise in housing prices (far more Americans have their primary wealth tied up in their homes) was much less, but still positive.

Here’s what will happen (if I had some extra money, I’d wager it all on this). The increase in stock market values will lure some of the marginal investors, the little guys, back into the stock market in order to share in the gains. It would be foolish to miss out on this rising tide of wealth after all. When enough of them have invested, the more savvy investors will start selling short, in essence betting that the market will go down. Then it will go down. They’re called “market corrections” but they really just divert money into the “correct” pockets (hint: it’s not your pocket). Those who have sold short will again see their wealth increase, while the little guys will again lose wealth. But the wealth didn’t really disappear; it just relocated to the bank accounts of those people who are wealthy enough to know how to game the system.

I first stated learning about our nation’s stock market at an early age, when I was taught that it was a mechanism that allows a large group of small investors to own shares of large corporations. We choose to invest in companies that have a bright future, so that our wealth can increase as the company profits from its good business practices and decisions. It sounded like a fine idea to me. I owned stock in a local manufacturer long before I was licensed to drive a car. Its stock price (mostly) rose steadily, and they sent me a little dividend check every three months.

It’s odd how as we get older, we begin to get a fuller picture of how things really work. When I was in graduate school, I was actively engaged in the full-time study of financial markets in pursuit of an advanced degree. In order to keep current on financial affairs I subscribed to The Wall Street Journal and looked it over daily for new nuggets of information that would further my education. One day I was reading the story of a man who had attempted to “corner the market” in potato futures. His plot was discovered and he was banned for life from trading in the commodities market. When asked for his reaction, it was reported that he shrugged it off, responding, “It doesn’t matter. We’re all just gamblers. I’ll find somewhere else to gamble.” He wasn’t an investor in his nation’s future but instead just played his hunches for profit, even if it required breaking the law.

That was an eye opening moment for me, but it didn’t quite open them wide enough. After I graduated, I wanted to get a job in the financial industry, so I applied at one of the largest and most prestigious brokerage houses. I was interviewed and tested. Turns out that while I was technically well versed in the subject, I wasn’t considered to be a top-notch salesman, which is the primary requirement of the job. I’m way too honest with people to be an effective salesman. A friend of a friend that I knew from college did get a job with the same firm. He had graduated with mediocre grades studying marketing, which is considered the lowest academic group on the business school totem pole. I was in the top ten-percent of my class studying finance (a more challenging discipline). I heard that he did very well in his career because he could sell.

I had an earlier experience in college that also proved eye opening. The first history class I took included the happenings in the Roman Empire under the first emperors. The information on debauchery and excessive over-indulgence was far more than I had ever been taught by our sanitized textbooks and old movies. I love history, especially when you can explore it in more depth and get to the root of issues. I was at my local library the other day and saw a book entitled Smuggler Nation that was written by a history professor at Brown University, so I took a chance and picked it up. It has been an eye opening experience as well.

I’ll probably be writing more about this book later, but for now I can say that illegal smuggling is heavily intertwined with our nation’s history. The Boston Tea Party is considered a primary seed of our nation’s quest for independence. But it had more to do with the population’s preference for lower cost tea smuggled into the country through the Dutch than for a desire for self-determination. The American Revolution was financed from profits made by smugglers. John Hancock is known for his prominent first signature on the Declaration of Independence, but the Hancock family fortune was derived in a large part from the profits made by smuggling. Another signer of the Declaration was Robert Morris, known to history as the “Financier of the Revolution.” Care to guess where his fortune originated? If you guessed “smuggling” then you’re catching on. In later years, Morris was financially wiped out by unwise land speculation and spent some time in debtor’s prison. Sometimes you’re lucky, other times, not so much.

During the War of 1812 (which has its primary roots in illegal trade) it might have been possible for the U.S. to conquer all of Canada because the defending British troops there were cut off from supplies and on the brink of starvation. They were saved by profit-mined Yankee farmers (who were also smugglers) when they drove herds of cattle north across the Canadian border and received three times the price that they could have gotten locally. It always pays to read the fine print, especially history’s fine print.

In other news, the number of Americans seeking unemployment aid fell again, driving the four-week average down to its lowest level in five years. We now have a rising stock market and increasing job growth. This follows closely on the heels of a tax increase on our nation’s highest wage earners. This is exactly opposite of the prediction made during the most recent election by those who pushed for a tax cut for wealthy “job creators.” Wouldn’t it be nice if voters could possibly retain this information for at least four years?

However, I don’t really see that much improvement in our local economy, especially among lower wage earners. This group of people also had a “tax increase” which was actually a result of a temporary cut in social security taxes that was allowed to expire at he beginning of the year. The result was that the group of people who could least afford to pay more taxes saw their take-home pay decline. Retailers that depend on this group of consumers, such as Wal-Mart and Family Dollar Stores, forecast that their sales would suffer. Despite this prediction, Wal-Mart stock has increased since the beginning of the year, while Family Dollar’s stock has actually fallen slightly.

Another recent story in the financial news details the return of American manufacturing jobs. Companies including General Electric, Hewlett-Packard, and Apple are relocating some of their overseas manufacturing back to the U.S. because of huge savings in transportation and logistics costs, combined with high productivity of American workers. But exploring the fine print tells us that the items being manufactured cater to the high end of the market. Of course, that’s where all of the money is. Our products designed to sell to our nation’s poorer workers are still manufactured overseas by even poorer workers.

Do yourself a favor and don’t stop learning. Dig deeper into the roots of stories. Explore historical contexts and above all, read the fine print.

Robert Morris, known as the "Financier of the Revolution,"

wealthy smuggler and unwise land speculator

 




 
         

Multitasking, Smart Phones...and Dumber People

My car magazine arrived in my mailbox yesterday. It was late (usually it shows up at the end of the month) and I was beginning to worry that it wouldn’t come at all. Magazines and newspapers seem to be on the verge of extinction, another victim of our instantaneous world of high technology. A glossy car magazine can’t embed a video of a new automobile racing around the track or carving up curves on a scenic mountain road like their online versions do now. We seem to demand that level of technology these days. We don’t need to read a book if we can see the movie. We can watch news on TV and get any relevant information in a matter of seconds instead of having to read about what someone else observed and get a more complete back story. We don’t need imagination to play games because today’s video game systems render action in real time, full color, high definition, and 3-D action. Watching a car go fast down the road has to be superior to just reading about it, right?

I don’t think it is right at all. If an article is well written, I actually get to experience more of the feeling that driving the car imparts than I would just watching it drive by in a video. An insightful journalist has skills that a mere reporter of an event lacks. It is an important distinction that we are all too willing to toss aside as we rush to implement new features available on our smart phones and electronic tablets. It is also subtracting an important element from the equation: our ability to think and reason, and to exercise our imagination. There is also a simpler reason that I like a nice lightweight glossy magazine over a laptop computer, smart phone, or an electronic tablet: it’s much easier to take with you into the bathroom to read while attending to other business. I think of it as the original version of multitasking, and perhaps the only one worth attempting.

There were several things I noticed as I glanced through this month’s magazine. First of all, it seemed pretty slim. Advertising revenues are what make magazines profitable, and this one has far fewer ads for cars than it used to. In fact, I found something amazing as I leafed through this issue: there were no ads from American (Ford, GM, or Chrysler) car companies. This is a magazine with headquarters near Detroit, Michigan. In fairness, there was an ad from Honda, which despite being a Japanese-owned company, manufactures most of the cars that they sell in the U.S. here in Ohio. I also found out that two popular small cars sold by Ford and Chrysler's Fiat brand are actually assembled in Mexico. So much for “Buy American.”

The second thing in my magazine that interested me was an article about the new LED headlamps that will be used on the next generation S-Class Mercedes-Benz. These headlamps are a technological tour de force, incorporating daytime driving lights, turn indicators, fog lights, high and low beam lights, and cornering illumination in one unit, all while using much less energy than other types of lighting through the exclusive use of light emitting diodes. They also include movable masks, that are computer controlled to avoid blinding the drivers of oncoming vehicles, as well as vehicles being overtaken on the road. The article concluded by saying that vehicles bound for the U.S. market will not have the full range of features because our regulations will not permit them.

For many years, from the 1940’s through the 1980’s, cars on American roads were required by law to use seven inch round sealed beam headlamps. In other parts of the world, lighting was much more varied, and better. In Europe a Mercedes roadster like the one my brother drove was equipped with a stylish unit that incorporated all lighting needs in a single unit on each side of the car. In America, these cars had separated round sealed beam headlights for high and low beams, as well as separate fog lights. I had a Mercedes sedan from 1975 through 1983, and it used four round headlamps that were inserted into rectangular spaces on the front of the car. It also had two rectangular fog lights that hung under the front bumper, and were constantly being damaged by parking lot blocks and other road hazards. In Europe, the rectangular spaces on the front of a similar model car held all lighting, including high and low beams, and fog lights. It was a much more stylish, as well as a much safer solution. In Europe, studies said that their new lighting technology was safer, while studies in this country said that sealed beam headlights were safer, although the truth is probably between these extremes. Likely it depends on who funded the studies in the first place. In any event, U.S. laws have since been amended to permit greater flexibility in lighting design, but we still lag behind the learning curve by not permitting the newest designs, such as Mercedes’ new masked LED lights.

There are many people that decry our country’s extensive and sometimes inane system of over-regulation, claiming that if we could eliminate most of them, our economy would flourish. The free market would be used to determine what is best for everybody. The problem is that the free market wouldn’t stop someone from dumping poison into the air or water because it’s much less expensive than following EPA regulations. The free market allows far too much unscrupulous behavior before it theoretically adjusts to prevent unwanted behavior.

Where does the answer lie? It would be helpful to streamline our regulatory system and eliminate rules that don’t provide benefits, especially in terms of health and safety. But it isn’t really over-regulation by our government that results in economic inefficiency. It is time to use our imagination and our powers of reasoning. Start by enriching yourself by reading some books, then let’s use our empowered brains to elect representatives that will truly represent our interests, not the interests of their sponsoring corporations and special interest groups. In terms that free-market proponents will understand, we need to eliminate the economic incentive that causes our law makers to vote for those things that enrich the small portion of our wealthiest citizens while ignoring benefits for the entire population. Our politicians tell us that they must be masters of multi-tasking, and consider what is best for everyone, but these days it seems that all of their efforts go to protect whatever lobbying group is providing them with the most resources. We need some serious changes to laws regarding campaign financing and lobbying.

Recent behavioral studies have reported several interesting findings. Multitasking really means that you are doing two things at once and both of them poorly. Our smart phones are hindering us from making relevant observations about what is really happening in the world around us. In other words, smart phones are making us dumber. Exercising your brain is the best thing you can do for your health. Let’s all start trying to really think again. We can all imagine a better world than we live in now.

New Mercedes-Benz headlamp

Question: If a person from 1950 were to suddenly appear before you today, what would be the most difficult aspect of modern life to explain?

Answer: I carry in my pocket a device which allows me to instantaneously communicate anywhere in the world, and also offers access to the totality of mankind's knowledge. I use it to view pictures of cute kittens and puppies, and to get into arguments with strangers.