Where Efficiency Goes to Die

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"Baumol's disease" provides an interesting explanation for why service businesses like health care can only be so efficient. Can they be more efficient than they currently are? Absolutely, but any improvements made will not bring delivery costs down to the levels found on the product side of our economy. From Steven Pearlstein's column in the Washington Post:

No matter how innovative people were in coming up with new technology and new ways of organizing their work, Baumol and Bowen reasoned, it would still take a pianist the same 23 minutes to play a Mozart sonata, a barber 20 minutes to cut the hair of the average customer and a first-grade teacher 12 minutes to read her class “Green Eggs and Ham.” Based on this observation, the duo predicted that the cost of education and health care would inevitably outstrip the price of almost everything else.

Now, 50 years later, Baumol has updated and expanded his observation with a new book,“The Cost Disease,” which sheds some useful light on our current economic debate.

The basic facts are well-known to most Americans: Over the past 30 years, overall prices have risen 110 percent, median income has risen 150 percent, medical costs have risen 250 percent and college tuitions have risen 440 percent.

To hear the politicians talk, you’d think the rise in tuitions and medical costs was an American phenomenon. But as Baumol points out, the growth rates are pretty consistent across all developed countries.

The whole column is an interesting read, and I would be remiss if I didn't point out that Pearlstein's the Robinson Professor of Political and International affairs at my alma mater, George Mason University. 

The Glaze

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This quote from Mark Bowden's book Worm: The First Digital World War – a book I haven't read but  sounds very interesting so I'm going to get myself a copy – comes via Rex Hammock's blog:

Mark Bowden describes a phenomenon called “The Glaze” that “every geek has experienced” when talking about technology with a lay person: The unmistakable look of profound confusion and uninterest that descends whenever a conversation turns to the inner workings of a computer.

If you change the end of the sentence from "a computer" to "my job" that sentence perfectly describes the look on my family members' and friends' faces whenever I talk about work. There's a reason I've earned the title "King of BS (Boring S***).

Teachers Paying Teachers

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Contained in a blog post about the publishing industry is this eye-opening paragraph about what seems to be a possible paradigm shift in the textbook industry (one can only hope):

So lets take a deep breath and go back a step. The article on earning a million was sent to me by my daughter as a follow-up to both of us quoting the performance of the web service  www.teacherspayteachers.com. Here US teachers deposit their learning plans and receive royalties on their re-use. Deanna Jump, a kindergarten teacher from Georgia, has become the first teacher to earn a million dollars in royalties. The site has had 50 million page views in the last 30 days and teachers post over 800 resources a day. The site has a rival (not mentioned in the article) in the shape of the UK periodical Times Educational Supplement, which has adopted this business model and teamed up with the leading US teachers union in a jv, while exploiting a global market from London. As advertising retreats the TES has executed a wonderful transition: not migrating so much as re-inventing itself in close alignment to what its readers needed to be better teachers. Indeed, in some ways this is re-inventing the textbook as much as the magazine, but whatever it is the outcome is the same: understanding how users work and supplying (in this case user-generated) content in the right context and with the right interface is the new publishing.

Check out the "About" page for TeachersPayingTeachers and behold some pretty incredible numbers:

TpT by the Numbers

40,000+ Free Resources
250,000+ Products
1,100,000+ Registered Users
50,000,000+ Page Views/Month
$10,000,000+ Teacher Earnings

This kind of thing has been a long time coming. It's been baffling how the textbook companies have been able to keep a stranglehold on the school systems even as technology has reduced the cost of self-publishing and enabled peer-to-peer sharing. It will be interesting to see how this service plays out politically – it's hard to imagine school systems allowing teachers to take wholesale control of their curricula, or the textbook industry to go down without a huge fight – but in these days of austerity there might be a chance for some cost saving innovations like this to take hold.

Again, we can only hope.

Visiting Ten Thousand Cities

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Pat Conroy wrote the following parapraph in a Letter to the Editor of The Charleston (WV) Gazette in reaction to learning that two of his books had been banned by the local school board:

The world of literature has everything in it, and it refuses to leave anything out. I have read like a man on fire my whole life because the genius of English teachers touched me with the dazzling beauty of language. Because of them I rode with Don Quixote and danced with Anna Karenina at a ball in St. Petersburg and lassoed a steer inLonesome Dove and had nightmares about slavery in Beloved and walked the streets of Dublin in Ulysses and made up a hundred stories in The Arabian Nights and saw my mother killed by a baseball in A Prayer for Owen Meany. I've been in ten thousand cities and have introduced myself to a hundred thousand strangers in my exuberant reading career, all because I listened to my fabulous English teachers and soaked up every single thing those magnificent men and women had to give. I cherish and praise them and thank them for finding me when I was a boy and presenting me with the precious gift of the English language.

This is why reading is more than fundamental.

Drunken Gas

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Has anyone else seen all those social media posts blaming the high price of gas on President Obama? Experts have pointed out that the causes for the rise and fall of gas prices are complex and have little to do with the President, but that doesn't seem to deter people from believing what they want to believe. Here's an interesting story that might help persuade some folks that the President, or anyone else for that matter, is really in control of the oil industry:

On June 30, 2009, oil mysteriously jumped by more than $1.50 a barrel during the night, to reach its highest price in eight months, the kind of swing that is caused by a major geopolitical event…

Although not authorized to invest company cash in trades, Steve Perkins, a long standing, senior broker at PVM Oil Futures, had managed to spend $520 million on oil futures contracts throughout the night, the FSA said.

On the morning of the 30th, an admin clerk called Perkins to ask why he had bought 7 million barrels of crude during the night. Perkins had no recollection of the transactions, and it turned out that he had made the trades during a “drunken blackout," according to the FSA.

By the time PVM realized the transactions had not been authorized by a client, they had incurred losses of $9,763,252.

Between the hours of 1:22 a.m. and 3:41 a.m., Perkins gradually bought 69 percent of the global market, while driving prices up from $71.40 to $73.05, by bidding higher each time.

Here's the crazy thing: the authorities only suspended this guy's trading license for five years and said they might give it back if he can prove he's conquered his drinking problem. If this is how the world works how can any one leader be held responsible for the outcome? The inmates are truly running the asylum.

Dilbert on the Debate

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Some gems from Scott Adams' review of the first 2012 Presidential debate:

I think Romney has a hypnotist for an advisor, or at least someone skilled in the dark arts of psychology and influence. I just watched him repeatedly lie to me and came away thinking he'd be a good choice for managing the economy. I'm not saying he actually would be a good choice, but he did something impressive: He made me think he wouldn't cut taxes at the same time he told his base he would. As a trained hypnotist myself, I rank his debate performance as breathtakingly brilliant. (Seriously.)

Meanwhile, President Obama was learning the hard way that the worst time to have anniversary sex is right before a debate. He looked a bit too relaxed. I think he should have lit a cigarette, taken a long puff, exhaled, and told the crowd that Romney would do for the country what the President just did for the First Lady. That would be totally bad ass. Then he could toss in a zinger about how awesome the sex was right after killing Bin Laden. I think we all know that evening was ear muff time for the Secret Service.

Jim Lehrer, who apparently died several months ago, moderated the debate. The pundits have been harsh on him today. But who else do you hire for the first debate? Do you hire someone who works for a Republican news network or someone from a Democrat news networks? Apparently the debate producers scoured the United States and decided that the only non-partisan left was a cadaver.

So glad I didn't watch.

An Ink-Stained Wretch Laments

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The Carrboro Citizen is shutting down its presses and its publisher, Robert Dickson, wonders aloud what the future holds for newspapers:

The problem is that professional journalism costs money, and that we have all gotten way too comfortable with getting our news for free. Journalists don’t make much money (just ask the Citizen staff), but they’ve still got to eat.

Newspapers have done this to themselves though, and pulling back from the brink is proving to be painful. The siren song of Internet advertising cash has not made up for the lost revenue from print editions. So, what do you know, newspapers across the land are deciding to charge for their online content. Gee, what a concept…

I’ve heard a neighbor tell me how easy it is to defeat the pay wall at The New York Times. The best $3.75 I spend every week is on that newspaper, and I can’t imagine a day without it. What’s our world going to be like when the Grey Lady goes down because readers won’t pay for content? Or The Wall Street Journal or The Washington Post or The News & Observer?

The republic will be on the rocks, that’s what will happen. We can have all the instant information we want, but we have to be able to trust it to make reasonable decisions…

So what does this have to do with the demise of The Carrboro Citizen? My pondering has led me to the belief that one future of hyperlocal news outlets, at least in the style of The Citizen, is as nonprofit entities.

It’s likely too much to ask of small local businesses to provide sufficient advertising revenue to sustain the necessary news coverage for a community like ours. A locally owned and operated nonprofit, however, could supplement ad sales with reader support and maybe a few grants, and come up with a sustainable model for local long-form journalism.

Who knows how we'll get our news in the future? Last night the country suffered through the first of three Presidential debates scheduled for this election season, and many of us tracked it by monitoring Twitter or Facebook. Who could have predicted even fifteen years ago that we'd be getting real-time "news" in 140 characters or less on a smart phone?

But that's news in the most shallow of senses, and does not answer the question of how/where we'll get the lcoal in-depth stories that have traditionally been the province of newspapers. Quite frankly the issue isn't the delivery system – paper vs. digital – but the ability for the people producing the stories to make a living doing it. 

The idea of creating a non-profit to house a local news operation is a good one, and for at least one more reason than Mr. Dickson mentioned: a non-profit is not owned by any one person and answers to a board of directors. Unlike a publicly owned company it isn't driven by the need to meet quarterly profit projections, and unlike a privately owned company it doesn't have to meet an owner's financial expectations or needs. Sure there will be people who exert more control on the organization than others, but there are mechanisms built into a non-profit corporation's structure that help prevent it going off the rails and losing focus on its mission. In fact, maybe its most important aspect is that its core mission moves from creating profit for its owners to serving its community's information needs. 

A non-profit structure wouldn't be a panacea, but if the objective is to create an institution that serves a community's information needs then it's probably a better fit than just about any other at this point in time. There's nothing wrong with for-profit newspapers, but as Mr. Dickson points out their days may be numbered.

Foreclosure Blossom

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Check out this interesting animated map showing how foreclosures exploded in the United States on a county-by-county basis. Interesting, but not surprising to folks in the Piedmont Triad, is the fact that the number of foreclosures in the area was already depressingly high in January '07, before the housing crisis hit most of the rest of the country. For instance in Forsyth County 1 in 837 homes was in foreclosure in January '07, and 1 in 549 in July '12. As you'll see when you look at the map, many other regions started out in better shape than the Triad, but quickly caught up as the economy tanked.