Observe Business

Big moth and little moth

The microprocessor industry spent the 80’s and 90’s expanding the size and power of their products. Everyone was braying about higher CPU cycles and all that stuff techies get breathless about.

But now the pendulum has swung the other way. Intel’s latest product is called the ‘Atom‘ and it claims to be its ’smallest chip’ ever.

This is a trend that I see going on for a few years, where we try to mop up the excesses of the PC era. We will see computer makers try to cut down on size, on power utility, on  pollution, etc. Then we will all get tired of downsizing, and the race will start in earnest again. Plus ca change, plus ca meme.

Kid and Grandpa Silly Faces

In several management books, I have read that when you go in for an interview, you should think of it as two way interview. Not only is the company interviewing you, you should be interviewing the company and your future boss.

The people who read the Harvard Business Review-which has cover charge of $15 and contains no comics or pictures of naked ladies-must be smart people. Then how come so many of them are posting on an article that talks about ‘11 Habits of the Worst Boss I Ever had’ on Harvard Business Review?

The Internet is getting increasingly polluted with sleazy marketing. Between sites that contain prepackaged articles, sites that claim to be independent review sites but are really just lead-gen (lead generation) sites, a consumer has to be wary of what is out there.

I heard a lot about another weight-loss gimmick called ‘FatLoss4Idiots’. So I went to Google ‘fatloss4idiots scam’ and found the following page:

'Fatloss4idiots scam' Google Results

EVERY SINGLE site listed above is an affiliate site that says good things about the product, and then tries to get you to buy it. I found out that this is a deliberate marketing tactic. The guys who run ‘FatLoss4Idiots’ tell prospective affiliates to use tag lines like ‘FatLoss4Idiots is a scam’ on their websites so that consumers who are doing research will click through from search engine results. In the top 5 search results pages that I viewed a few weeks ago, every single link was from a spammy affiliate site.

Man kills with car, gets off scot free

Vehicular homicide has a trivial punishment in some states, in this case, Kansas. In addition to the societal problems, this causes car insurance rates to rise.

In this case, the defendant ran a red light and killed someone. Unless this reckless driver is taken off the road permanently, by a permanent revocation of his license, he has just raised the danger level for everyone, and insurance rates will go up accordingly. The many have to pay for the actions of a few.

The solution, just from a car insurance level, is that committing certain crimes means a permanent loss of license, across the country. That would prevent a bad driver in Florida from getting a license in Georgia.

USA Today has been publishing for over twenty years but has never become an ‘indispensable’ newspaper. If it vanished tomorrow, would anyone care?

This article talks about how the end of cheap credit is a ‘catastrophe’ for dealers, because ‘many’ of them will go out of business. But if you read the article, it says only 10% of them will go out of business.

So, here we have the article saying 10%, and then saying ‘many’. Since when is 10% considered ‘many’?

Bad, sloppy, writing.

Oops...Tesla ends up with nothing.

I have written previously about how Tesla got a sweetheart deal from starry-eyed, naive San Jose CA politicians, and how a Chinese car company is coming to the USA with a cheap hybrid. I wrote about how their business model had some major flaws.

And now I have been vindicated. Tesla is doing a bunch of things to conserve cash, and generally do all sorts of things to stay alive. Frankly, Tesla is circling the drain, it is a corporate train wreck. A few quarters from now, the best asset they will have is their domain name, which they will end up selling to a Chinese company for a few bags of rice.

California high speed train proposal a train wreck

California…the land that cars built. And now it wants to build a high speed train system, that runs at 220 MPH. There is a proposition on the Nov 2008 ballot to make the taxpayers pay for this white elephant on wheels. (Update: Here is a writeup in LA Times Editorial by a pro and a con)

That would mean a high speed train like  the shinkansen in Japan or the TGV in Western Europe.

The backers want to float a bond that will cost us 647 million a year for 30 years, plus one billion a year for operating costs. Of course, the bond is guaranteed by the taxpayers.

So, this enterprise will cost us Californians 1.647 billion dollars a year.

Let’s do a little financial analysis to find out just how the numbers work out.

We will have to sell almost that much in tickets to make it back. We can get a few dollars from concessions.

The train is supposed to service the northern California cities of Sacramento, San Francisco, Oakland, San Jose and the southern California cities of Los Angeles and San Diego.

Today, you can fly between any of the northern and southern California cities for, let’s say $100 one way.

1.647 billion dollars annually means we have to sell 16,470,000 tickets at $100 each to break even.

That is 45,100 one-way tickets per day.

That would be the equivalent of 322 flights per day, assuming 140 seats per flight on a Boeing 737. Airlines fly 80% full if they are doing well, so that would be the equivalent of 402 flights per day.

One train can transport about 425 passengers, so we will need to have about 100 trains running at 100% capacity every single day.

Southwest currently flies 376 flights per day within California.  It claims a good load factor at 80%, meaning it flies 80% full on the average.

Here is the distribution of flights in California for Southwest. Yes, I really did goto the SWA website and go through every single combination to do this. I really am that dedicated.

Southwest schedule in California

Therefore, Southwest sells 44,518 seats per day for travel within California.

Problems:

The train system would have to sell 45,100 tickets per day just to BREAK EVEN. SWA makes a profit at that number. Southwest is the dominant provider in the California market, and it is a very nimble competitor. I doubt that this train system will make as much money as SWA can.

The environmental benefit is miniscule, because the plants that generate the electricity will have to be fossil fuel. Alternative energies just don’t have the capacity to provide the massive amounts of voltage required to push train at 200 MPH.

The design of this proposed high speed rail system is all wrong and the benefits from this design are dubious. Northern and southern California are very spread out areas, and SWA flies point to point between many of these cities, making for quick and easy travel. I don’t think it is going to be feasible for the high speed rail system to be built in such a way that it would connect the population centers the way the airports do right now. A train will not be able to travel point to point, like Southwest can. A journey between ONT and SFO, for example, would probably take four hours or so, if you were to include stop and travel time from ONT to the high speed rail line station.

The train system currently does not require security checks, but I think a high speed rail system would, just like an airport. That would add security fees and check-in time. This would reduce its attractiveness to the traveling public.

The proposed budget does not include cost overruns. Government project routinely run over their cost(see here), sometimes by as much as 300%.

A government run railway would have a salary structure higher than what the private sector would provide, and it would of course not be as efficient.

Solution:

The California state government is right in wanting a railway. But, they should work on fixing the existing railway system, which can be done at a fraction of the 50 billion of a high speed rail system. If they can just speed up the existing trains to an average of 80 or 90 mph, a speed that trains used to run at back in the 1930’s, then that would go a long way towards making rail transportation more viable.

But, if they truly want a high speed rail system, that can also be done by the private sector. All that the government has to do is guarantee the right-of-way that is needed for a private company to build railroad tracks, and make sure that all legal issues for this right of way are addressed. There are sure to be many companies that will try to build this railroad. After all, the American West was settled by the use of private railroad companies. It would cost the government no more than a billion dollars to buy the land needed for the tracks and the stations, and they can then sell that land to any company that promises to build the railroad.

Chinese electric car MilesEV Sedan

In previous posts I had written about how the electric car company Tesla’s choice to manufacture its own cars in San Jose, CA was a huge mistake. I had also written about how the decision by the City of San Jose to give Tesla all sorts of freebies was a dumb idea.

Today I see an article that should send Tesla’s backers scurrying for the hills, and should prompt the mayor of San Jose to pull the plug on the giveaway. The long-promised for Chinese electric car is here, it’s called Miles Electric Vehicles, and it looks pretty viable to me. For $35K (or $55K, not sure yet) you get a sedan that goes 120 miles for $3 worth of electricity. It’s called the Miles XS500 and you can read about it at forbes.com or at autobloggreen.com

General Motors stock is in a pickle. Everyone has documented how low it has fallen. On Oct 9, 2008, the stock closed at $4.76. All the newspapers are saying how this is the lowest share price for GM since 1950.

What NONE of them mention is what the inflation-adjusted equivalent is. Five bucks in 1950 was worth a lot more than it is now.

According to the Inflation Rate Calculator at InflationData.com, there has been almost 800% inflation between 1950 and 2008. So five dollars in 1950 would buy what takes forty dollars to buy today.

Inflation calculation from 1950 to 2008

Conversely, five dollars today buys what 62 cents bought in 1950.

Therefore, a five dollar close in 1950 is equivalent to a forty dollar close today, and a five dollar close in 2008 is equivalent to a 62 cent close in 1950.

So the stock close today is actually far worse that it was back in 1950. Toyota as a car company didn’t exist. GM was on top of the world. And people actually wanted to buy GM cars. GM’s car launches were greeted with exhilaration, and front pages news.

Of all the things America has given the world, few are so life-changing as Cheerleaders. Football and Basketball have cheerleaders, but it is really Baseball that should have cheerleaders. People think Cheerleaders are an American invention, however, cheerleaders have a long history, because it seems that every culture around the world has had maidens in a state of undress perform during ceremonies.

I like to go to newspapers from other English-speaking countries to get a different perspective on what is going on, to escape the rah-rah myopic view of the USA mainstream press. So I went to the AOL Australia website, which aggregates Australian news, and what do I see?

PHL cheerleader pic on AOL Australia

I then happen by the NBC11 website , a TV station in the San Francisco area and see the same thing:

Cheerleader pic on NBC11 website San Francisco

The same pic showing up all over the world. We can thank the wire services for this.