Category: Thoughts

Questions for ConSova CEO Michael Smith

Michael,

How does one decide to embark upon a career like yours, in which you run a company whose goal is to remove people from health insurance rolls? When you tell people what you do at parties, do they turn their backs on you, or do they pretend not to be horrified?

According to Inc. Magazine, you proposed this line of business to your prior employer, and they didn’t want to do it, so you struck out on your own. Did your prior employer think it would be an unprofitable line of business, or did they think it was repugnant?

You are surely aware that your business makes money because the American health system is so damaged – because American health insurance is expensive, hard to get, and often available only through large employers. To use a medical analogy, your business is the wound myiasis of health insurance. Do you know what that is? Are you bothered that the maggot infestation of festering wounds is a startlingly apt metaphor for your career?

Your business requires people to prove that they are eligible spouses and dependents to retain their insurance. One way you look for ineligible health plan members is checking for couples where the spouses have different last names. Do you know any feminists? Do they think you’re justified in demanding extra documentation from married couples when a woman hasn’t changed her name? What is a reasonable cost in time and money to charge someone for the documentation they need to prove their relationship?

Do people often quote the play “A Man For All Seasons” to you? You know the line: “It profits a man nothing to give his soul for the whole world … but for Wales?” Just guessing from your LinkedIn profile, it doesn’t look like this is making you rich. Or maybe you just didn’t feel like wearing a well-fitted suit or hiring a competent photographer for your corporate headshot. Fair enough. I don’t usually wear suits or hire photographers either.

Do you think that your organization is a net positive for America or the world? Where on the scale do you think you fall on the continuum between working pro bono publico and working entirely contra bonos mores?

Finally, how do you sleep at night? I hope it’s on a huge pile of money, because if you’re not getting filthy rich doing this, I don’t see the point.

Sincerely,
Aaron Weber

I may need to resume my angry real estate blogging

Because this horrible monstrosity is on the market in Boston, asking $4,775,000. How much does it cost to look that cheap? How much does it cost to get “hand-picked Statuario marble” countertops that ugly? I suppose the kitchen would be OK if you usually eat out or have staff cook for you, but look at the decorative moldings on the kitchen island’s faux buttresses. IT LOOKS CLASSICAL AND CURLY IT MUST BE SOPHISTICATED. I hate to imagine the person who eventually does buy this and enjoy it, or the person who buys it and then spends another million bucks ripping out all the tat and replacing it with something halfway tasteful.

It reminds me of nothing so much as the homeless man I saw this morning on the way to work, carrying most of his worldly belongings in a Nieman Marcus bag.

Krugman vs. Murdoch, again and again

Yesterday, Paul Krugman pointed out that core inflation has not been, and still isn’t, a big problem facing most Americans today. Oil and health care prices have been a squeeze, it is true. But with cost containment and subsidies for health care, and better fuel economy and easing oil prices, those are somewhat less pressing today.

So how does Rupert Murdoch’s Wall Street Journal respond? A giant headline above the fold in today’s paper blaring BASIC COSTS SQUEEZE FAMILIES.

Health-care spending by middle-income Americans rose 24% between 2007 and 2013… That hit has been accompanied by increases in spending on other necessities, including food eaten at home, rent and education, as well as the soaring cost of staying connected digitally via cellphones and home Internet service.

In other words: Health insurance costs went up. Cell phone costs went up. Education costs went up. “Food eaten at home” went up, although they don’t cover whether eating out went down or stagnated, indicating that people are switching to eating at home to save money. But core inflation, as much as they want it to be a problem, is not the problem.

Stagnant wages are the problem. Health and education and rent costs are the problem. Observers are accustomed to lamenting the Washington Post’s coverage of politics and the economy, and wondering when the decay of standards will finally lead to the ultimate collapse of the paper as an institution. Must we also concede that the Wall Street Journal is nothing but a hollow shell, awaiting its own downfall?

Notes on Parking

There’s an empty lot on a major road near my house, and developers are proposing to put in first-floor retail and three floors of apartments. Total of 5 units of housing. City zoning requires 1 parking space for each unit of housing, so they will devote about 50% of this centrally-located real estate to the construction of a surface-level parking lot.

This is dumb. It’s so obviously dumb that even Slate and Buzzfeed agree about it.

But cities move slowly to change dumb rules, and neighbors really do not like it when people bring cars into their neighborhoods and compete with them for street parking.

So I had an idea: How do we get people to stop bringing more cars into the city, without angering current residents who are worried about being able to find an on-street parking space?

We could charge more for a first-time parking permit. Renewals would remain the same, but bringing a new car into the city would cost extra. In particular, it would dissuade students from bringing their cars from home when they come to the city for a year or four. Several people at a recent community development meeting complained that suburban students come to Cambridge, park their suburb-sized SUVs, and then never use them. This seems like an ideal place to nudge people with a small price increase. If it’s an extra $50 to bring the truck, they might not do it at all.

The beauty of this is that it unites two key stakeholders on the issue. The new urbanists are in favor because it reduces average car ownership and car usage. Current residents don’t care about that, but they would love to have it be easier to find parking. And they get that, because OTHER people don’t bring cars to the neighborhood.

Similarly, we could increase cost of getting a second street-parking permit for any given home. So your first car costs $50 a year, your second costs $100, and so on. Sure, roommates would have to figure out who gets Permit 1 and who gets Permit 2, but I imagine there’s some math that could make that work out.

Missed connection

“Urticaria” has been floating around in my head recently. I have no idea. I had to look it up. For some reason I thought it was a variety of nettle, but it’s the medical term for hives.

In this week’s New Yorker Oxycontin is described as an “iatrogenic disaster” which is an apt description if I’ve ever seen one. Lovely phrasing for a scourge.

A friend recently went to the ER for a minor injury and wound up getting hives from the detergent used in the hospital gowns. Iatrogenic urticaria.

Maybe that’s the connection.

Education debt and policy

This started as a comment on a Demos article about education debt and bloomed into… well, something.

I have said this before in many places, but I’ll add it here as well: This is a very complicated issue and deserves careful thought about the entire system of education.

Higher education benefits society as a whole. We as a society ought to encourage it in various ways. But the primary beneficiaries of higher ed are those who actually go to college. That’s why it makes sense for most students to pay a significant portion of the cost of their schooling. Because education is strongly correlated with higher earnings, it makes sense to finance the cost of education and pay it back when you’re educated and have more earning power.

That’s why student loans exist: They’re a useful tool, and in moderation, generally a relatively fair way to allocate the cost of education.

Of course, lending money to young people with little earning power and no income is risky, so that’s why the government has stepped in with subsidies (the Direct Loan program) and regs (making the loans harder to discharge in bankruptcy).

Per McArdle, “a little student debt” is often good – but the key is the “little” part. Everyone can agree that “a little” student debt is OK but “too much” is bad. The hard part is defining “too much” and “a little.” I’ve seen people with six-figure debts pay them off handily after landing six-figure salaries (mostly law and medicine grads). I’ve seen people default on loans of less than a thousand dollars (often beauty-school dropouts).

Given that education and education finance is a complicated system, serving humans with huge varieties of need and circumstances, run by humans and enacted by politicians, it’s imperfect.

Obviously we need better mechanisms for helping people avoid predatory loans and predatory schools, as well as mechanisms that can more cleanly offer forgiveness for people whose educational achievements are not matched with financial ones. And it needs to be without regard for the type of degree. A CS major may fail to become a successful programmer as much as an arts major may fail to become a successful commercial artist as much as a gas-fitting and plumbing certificate holder may fail to build up a customer-base of delighted residential and commercial plumbing customers. None of those people will be well-served by adding permanent indebtedness to their professional setbacks.

So very little of the debate I’ve seen anywhere has addressed the entire issue. It’s always a single corner. We can talk about debt. We can talk about tuition. We can talk about tenure, and administrators, and campus amenities, and online education, and the merits and failures of the for-profit model, and go on to argue “What is a university anyway” and then disappear up our own navels.

Blue sky: What would a good, fair, functional post-secondary education system look like?

And what would it take to get there from here?

Channel Cannibalization

I get that channel strategy is difficult for businesses. If you sell only wholesale, like the ethical-and-stylish shoe company Novacas, you lose out on a direct relationship with your customers. Still, it’s a popular strategy especially for smaller companies that need the publicity and marketing stockists can do, and/or don’t have the size to run its own retail operation.

If you sell only direct, you’re doing all the work of both building your product, and also running the retail business. American Apparel, for example, used to sell only wholesale, but eventually opened its own retail line as well. But they now have to deal with running an entire retail operation, with all that real estate, all those leases, all that payroll, all the liability that comes with running a high-turnover, image-focused company.

And if you sell wholesale and direct to customers, you compete with your stockists. This was a major concern for Novell when I worked there: Many of their customers bought direct from Novell. Others bought from independent systems vendors or consulting companies. Novell was in the awkward position of trying to balance running a consulting team that sold its software to customers, a sales team that sold its software to customers, and then partnership teams that competed with those two teams to sell the consulting and software indirectly to similar customers. Lots of companies, especially big companies, wind up in that situation, for very good reasons. Most of your customers will fit clearly into one of the appropriate channels… but there are cases where the channels compete with each other instead of with your actual rival companies.

And then there’s Nike, which seems to have dozens of overlapping but incomplete channels for everything, so that no one place has access to their entire product line, not even their official direct stores. You can buy Nikes at any online or offline athletic goods store, or any shoe-selling website, or Nike.com or their official Niketown retail locations.

But you can’t get all the shoes at any of those places. Zappos sells more than 500 different Nike shoes, but that’s far fewer than the number of models Nike makes. If you want the unusual exclusive ones, you have to go to an unusual exclusive store, like BDGA in Boston. Not too surprising.

What’s somewhat more surprising is that even Nike.com carries a pretty limited selection of Nike shoes! Click “Sports” at the top of that page: There are 10 sports they offer gear for, including the very general “Training.” Everyone knows Nike makes shoes for more than 10 sports.

If you want, say, the Romaelos 2 weightlifting shoe, which is a pretty specialized shoe but not THAT weird, you’d have to go to their retail channels – the specialized powerlifting shops like Eastbay and Again Faster, or the more general shops like regular old FootLocker.

I assume there’s a very specific set of reasons that they use to determine which channels will get a given product. Obviously, the Kanye West collab will be limited release, because the whole point is that it’s hard to get. Obviously, a plain Nike Free running shoe will be wide release, because it’s for everyone who puts one foot in front of another. But what’s the justification for not selling all your specialized-sport shoes on your official website?

Signs I am Pushing 40

  • Have incurred a genuine dumbass weekend-warrior sports injury (Rhomboid strain. Class of injury: Not painful so much as really, really annoying)
  • Excited about having new gutters.
  • Big plans this weekend include “go shopping for shrubs.”
  • Planning on purchasing some house numbers so that my address is more legible on the outside of my house. In case someone has to find it in an emergency.
  • Read entire brochure about life insurance.

You know what surprises me about San Francisco?

There are so many problems that can be solved by money, and so much money, and yet the problems have not been solved.

I got to thinking about this after yet another MBTA breakdown last night, waiting on a freezing outdoor platform for an hour while two different trains forgot how to operate, and trolling the knee-jerk “screw transit” crowd on Twitter. Like you do. I warned people that the T was underfunded, and like clockwork someone came out and announced that no, it was just unions and waste. There’s plenty of money in the budget! They’re just paying pensions and stuff.

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But here’s the thing: The pension mistakes of the 1970s cannot now be clawed back. What are you going to do to make sure that the trains themselves, now decades past their expected lifespan, are capable of running at all, much less running on time? Have you considered just spending a billion dollars on a new set of trains? I mean, it’s a ton of money, but it’s just money. It exists if the willpower exists. Yeah, sure, it would mean a gas tax increase. You know what’s expensive for drivers? Being stuck in traffic. You know what cuts down on that? Reliable transit. It’s politically difficult because people don’t believe it helps them. But there’s a ton of money out there that can be allocated to solving problems that can be solved by money.

And in San Francisco, the great big pool of money is even bigger and the problems are even more money-related. People are fighting about the bus Google runs for its employees. For crying out loud, Google could buy some goodwill here and just run a free or low-cost bus service for the general public. Or help establish a consortium that companies pay into and which then allows any employee to ride for free? (You could charge $5 or $10 to the general public to make it more palatable). The Route 128 business group does that in Boston and it’s totally uncontroversial. Just a series of shuttles from transit stops to office parks that are not otherwise served. If you call it the Bay Area Commuter Network and abbreviate it BACN you’d even have all the hipsters and knee-jerk ironists on board.

Or Google could buy a few county commissioners – I’m sure they’re available for SOME kind of price – and start persuading everyone to upzone everything from San Jose to Marin. It’d go a long way to alleviating the housing crunch and take the pressure off the roads and pressure for the bus system and so on. It’s an eminently solvable problem. All you need to do, frankly, is throw some damn money at it.