Saturday, July 31, 2021

The Reopening - The View from Hawaii



Earlier this month my family and I spent a week in Maui. In case you haven't heard, it is really, really beautiful--a great vacation spot. Hot take, I know. Here are some observations:

  • Two underappreciated qualities that give Hawaii its magical appeal are the remoteness in distance and time. You can go to lots of amazing islands in this world, but almost none are as physically remote as Hawaii. Related to this but not necessarily following except for the particular way our world is populated is the fact that it is very temporally remote. The rest of the world is asleep or done with their day when yours on the island is starting. This forces one to shrink their world down to a few mountains in the vast ocean abyss.
  • The reopening from the perspective of Hawaii is perhaps unsurprisingly behind what I've otherwise experienced. Anecdotally this was supported by other travelers who came from places more locked down than Oklahoma such as New York and California. They too were surprised by the policy phase Hawaii was still in.
  • Related to this was the part that both caused anxiety for me in preparing for the trip and frustration for me in navigating the travel. This is the Hawaiistan aspects whereby it was as if I were travelling to a third-world country. At the time when we were there (this policy was recently relaxed) the only vaccinations that were meaningful were those given on the island. The same shot from Pfizer, et al. given in another U.S. state gave no privilege--every entrant had to get the same COVID test done before arriving and not more than 72 hours before arrival. Testing in a pandemic is critical, but the various rules laid out for Hawaii, which I won't bother to fully go into here as others have covered this, and the way they were implemented had more to do with health theater and signaling than they did with science.
  • This should probably not be a surprise given that the Maui mayor thought it helpful/necessary to beg airlines to bring fewer tourists to the island. I guess that's how they solve for the equilibria in banana republics.
  • Speaking of banana republics and their policies, Hawaii generally and Maui specifically suffers from two self-imposed penalties--development restrictions and the Jones Act. 
    • On development - I understand that there is a bootleggers (resorts, others in the tourist industry, and current homeowners/developers) and Baptists (current residents who in many cases are self-described natives and who don't want things to change) story going on. I'm not sure everyone close to this issue does understand that. I am sensitive to the good, bad, and sometimes ugly history of how Hawaii is now a U.S. state. Blanket restrictions on and impediments to development imposed by government are not the solution. They are economically harmful making Hawaii poorer than it would otherwise be, which of course harms the poor the most. They are also culturally destructive creating a hostile environment of us versus them as opposed to a constructive environment of negotiated compromise and agreement. Finally they are morally repugnant when they allow the politically powerful to violate property rights.
    • On the Jones Act - this is "self-imposed" in that Hawaii is a U.S. state and this is a U.S. federal government policy. Hawaii itself is not responsible for it. However, why isn't the Hawaiian delegation to Washington and Hawaiians as a politically lobby effort not storming the Capitol on this one (figuratively speaking, of course)? 
  • Enough griping. Hawaii is awesome. The people I encountered (Hawaiians and tourists alike) were delightful. Aloha is not just a slogan. It is a warm and wonderful way of life that is embraced and practiced everywhere you go. I felt welcomed and appreciated in Hawaii by virtually every person I had the pleasure of engaging with.
A few recommendations:
  • Do some homework before travelling to decide how much of an activity vacation you want (there is plenty to do) and how much of a relaxation vacation you want (it is easy to not have enough as it takes time to drive, boat, walk to various destinations, everyone moves a bit slower than you might expect, and at every turn there is a siren call to spend more time).
  • Because of the odd time zone Hawaii has been placed in (it "should" be a hour or two earlier there when compared to most places) and because of the typical jetlag for U.S. travelers, Hawaii wakes up early and you will too. So it follows that it turns in for the evening before you probably expect. Just chalk it up to following Ben Franklin's advice and hope that it adds some wisdom to your life.
  • We stayed in Wailea on the southwestern shore. You can't probably go wrong between this area and the rival northwestern shore, but I do think it is easier to traverse from the SW part of the island. 
  • We stayed at The Fairmont, which is highly recommended provided you want a resort experience and a resort bill at the end.
  • The Road to Hana is highly demanding but can be highly rewarding. Planning here is key. There are good apps to guide your journey. You won't get it all in--the more you stop, the less distance you'll get. We actually went the entire loop around the "dangerous" undeveloped part of the island. It was truly treacherous at times but still doable for a minivan. Not sure if I'd recommend it as opposed to reversing course to head back home. But doing so wouldn't have saved us any time since I wanted to make it to the half-way point of The Pools at 'Ohe'o
  • From a prior trip, I can highly recommend biking down Haleakalā. 
  • Maui Pineapple Tour was very interesting and fun. I've never seen Dole's operation, but I image it to be on the other end of the production frontier--Maui Gold is charmingly but surprisingly a trip back to farming circa 1950.
  • Iao Needle state park is underappreciated. For the intrepid, consider disobeying the signs and hiking the prohibited trails. It is an awesome scenic adventure. 
  • Unfortunately I didn't get to try the many famous and/or recommended dining spots that are still on my Want To Go list. The two at the hotel,  and Nick's Fishmarket, were very good but . . . did I mention resort prices? The labor shortages were most acutely seen here as perhaps only 1/3rd of Ko was open and service in general throughout the island was poor.
  • For the price of airfare (explicit cost, time in the air, and jetlag effects) plan to stay in Hawaii for as long as possible--at least one week. There is always more to do including doing nothing.

Aloha!


Saturday, July 10, 2021

What Does NIL Imply for Parity in College Football?

The evil empire known as the NCAA has now finally relaxed its rules on amateurism allowing college athletes to earn compensation off of their name, image, and likeness rights (henceforth, NIL). How sweet of them. It only took a rare 9-0 shutout loss at the Supreme Court to get them to change their ways. 

Cue the pearl clutching as the latest moral fear becomes a moral panic--God forbid someone in America would make money off of their talent.

Yes, times they are a changin', and for the better. There will be losers, though. Eventually, it is likely the ones losing advantage will be all of those who have been profiting off of players not being compensated. This list somewhat in order includes: coaches, administrators, athletes in all sports other than football and men's basketball (mixed bag here as there will be lots of NIL opportunities for many of them), fans, and the universities in general.

For this post I'd like to briefly discuss how this might affect competitive balance (aka, "parity") in college football and men's basketball. 

If by parity we mean anybody can beat anybody (i.e., "any given Sunday"), then the initial and perhaps enduring apparent result will be increased parity.*

If by parity we mean league continuity, then the apparent result will be decreased parity.

Let me explain. Allowing NIL compensation adds a dimension along which teams can compete. A classic analogy is when the CAB under the Carter administration ended price controls allowing airlines to compete on price. This was very good for consumers in the long run and very disruptive to airlines in the short run. 

In this same way NIL comp will add a competitive dimension to the competition for college athletes and thereby increase variance in those athletes' sports. An increase in variance means instability. That instability will have two features:
  1. It will give new and added opportunities for lesser, secondary teams to challenge incumbent blue bloods. Potentially Oklahoma State now has more opportunity to challenge Oklahoma in football.
  2. It will open up more risk of failure especially for lesser, secondary teams. This failure can be in the more obvious form of shutdown but also in the harder-to-perceive version of loss of status. Hypothetically the difference is Temple dropping football altogether or going down to a lower, true-amateur level versus Penn State falling from prominence. 
The first case will look like more parity. The second case will look like less to the causal observer. This is why I referred above to these being the "apparent result". I would guess that the second will come to dominate the narrative as many will long for the good old days when anybody could compete in college football and men's basketball. You know, back when Alabama always played Clemson for the national title . . .



*If you think complete parity is in any way desirable in sports, you don't understand sports in the least. Nobody gathers around to watch guys flip coins.




Saturday, June 12, 2021

The Reopening - The View from Las Vegas


As a reward to myself for blogging every day in May, I travelled to the place that is at the same time the most and the least American city, Las Vegas. It had been over two years since my last trip there, Super Bowl 2019. Some observations:
  • It is largely unchanged at first appearance. The casinos are packed. Restaurants are hard to get into. Crowds are abundant.
  • A studious observer will notice that even though casino open tables are full with high minimums, there are numerous ones, banks in fact, that are unopened. My guess as to the primary cause for this would be the labor shortage with depressed actual or forecasted demand as a secondary contributor. 
  • Speaking of the labor shortage, the struggle is real. I can support Scott Sumner's prediction and observation that labor supply is low and as a result service is poor. Let's be clear, everyone I encountered from a service perspective (waitstaff, front desk, concierge, retail clerks, etc.) did a great, friendly job. But service is SLOW. Restaurant wait times are crazy (more on this in the business thought below) and reservations are required--we almost had to slum it one night at Shake Shack but fortunately got into Din Tai Fung (more on where I ate far below). There are empty tables at "full" restaurants--not a strategically spaced COVID thing. Some have yet to open. Calls to concierge and guest services had very long waits on hold. And note this: those enormous signs out front on the strip, very valuable advertising real estate, had in their rotation help wanted ads among show previews, featured restaurants, and "...the loosest slots on the strip...". 
  • One of the reasons I went and took the whole family (more on this in the culture thought below) was to see the shows. Sadly, I was a bit early in my winter planning for this trip as the primary show draw for us, Cirque du Soleil, is not ready to open yet. This makes sense as it takes time to get the band back together so to speak. 
  • Masks were sparsely seen among the patrons. Probably 10% wearing them at most. Various staff is more like 75%. This was different at the poker tables as only about 20% of dealers wore them, but also about 20% of players. For the players I think this was a combination of a desire to use masks strategically as well as California CDS (just anecdotal but supported by several examples--young poker players from California and elsewhere were masking even though they admitted they were vaccinated). 
Feel free to file several of the above under either or both 'lockdowns have long-term consequences' or 'pandemics have long-term consequences'.

Two more thoughts: one on culture and one on business.
  1. People have always asked me when I tell them I'm taking my kids to Vegas "What is there for kids?". The answer is lots, but it is deeper than that for me. The world is for all of us. I don't subscribe to the idea that we should shelter kids in incubation chambers until they are ready for the real world. The real world gets them ready for the real world. Yes there are obvious limits. Yet this isn't simply a disagreement about a matter of degree. I think there are hard and soft lines between what a kid should and shouldn't be exposed to. People including if not especially kids are antifragile. We walked in the heat (108) as well as in the air conditioned resorts. We saw the beautiful people among the beautiful gardens of Bellagio as well as the desperately troubled on the decidedly rough sidewalks. Of course we did not attend a strip club. At the same time I did not hide their eyes at the scantily clad girls (and guys) selling groupie photo ops. Piff the Magic Dragon's show was excellent with the adult language that is not generally my 9-year-old daughter's vocabulary. I think my kids saw repeated great examples from me and my group and many others we encountered that a Las Vegas experience can be great fun while still being responsibly and reasonably behaved and coexisting with bad, excessive, undesired behavior all with the attendant consequences.
  2. As mentioned above, there were long wait times for restaurants among other things. Some of this is a temporary phenomenon that will abate as the reopening completes. Yet some of it is an enduring problem. First some history: In the mid 1970s William Bennett and William Pennington began transforming Las Vegas by developing a more family-friendly environment and a more expanded idea on what the Vegas bundle should include. Add to this the innovations Steve Wynn developed. Gradually the idea that Vegas should be stingy rooms, cheap food, limited shows, and free drinks all with the desire to get gamblers gambling gave way to the idea that these other areas could be profit centers themselves and of greatly higher quality and variety. Then came the metric revolution advanced greatly by Harrah's so that the casinos could understand their customers better tailoring the experience more individually (profit maximizing price discrimination). For a long time I yearned for the casinos to recognize and reward me for not just my gaming but also for all the other revenue I was bringing with me (hotel room, restaurant spending, show attendance, etc.). Slowly this has finally been happening to where on this past trip almost all my high-end food spending is credited to my value as a customer. But there are still unclaimed chips laying on the casino floor. The OG business model dies hard. Our room at Aria was very nice, but still lacked some basic desires. I would have liked and used a minifridge that was not stocked with high-priced items with a hair-trigger system ready to charge me for an inadvertent nudging. Keep that there, but give me another one that is empty--maybe at an upcharge. How about a coffee maker or Nespresso in the room? Presumably the casino is thinking they want me out of that room on the casino floor or at the pool ordering drinks or in a restaurant. However, keep in mind they definitely do offer room service. More to the point think about the tradeoff. Instead of popping a K-cup right out of bed, I went downstairs to Starbucks in the Promenade waiting over 30 minutes in line. The wait outside the popular Salt & Ivy for brunch was >1 hour. This is not productive time for the hotel/casino. People who were not waiting right outside the restaurant looking at their phones instead were walking away to find another place probably in another property. Waiting on queue is a dead-weight loss in need of a creative, profitable solution.
Finally, here are the places where we ate with all being recommendable:

Wednesday, June 9, 2021

The Rules of Investing Club


  1. Stay invested - Don’t time the market. Timing the market is not just impossible. It is multiplicatively destructive in two ways: bad decisions compound mathematically and the likelihood of mistake compounds with attempts.
    • Sub-rule - Know what this means. It applies when the market is “down” and when it is “up”. What makes you think you can define these? What makes you think you’ll both get it right on the exit/entry (at least twice) and have the nerve to make the proper moves at that time. Also, wouldn’t timing imply buying low? So why are you bailing after a crash?... oh, because even though you didn’t see the downturn coming up until this point, you now can see definitively that a further decline lies ahead.
  2. Keep a cash reserve equal to X months expenses - X is up to you. A typical rule is 6 months, but mileage will vary. Be sure to include access to credit as a buffer as long as you also take into account that the event that causes you to tap into this safety reserve might also be damaging your credit access. Notice how this rule helps with adhering to the first rule.
  3. Diversify - The only "free lunch" in investing as it allows for (some) risk reduction without return reduction (up to a point) when done properly.
  4. Outsource - SPIVA. You ain’t special and just about no one else is either. Therefore, use well-run, low-cost, TRUE index funds. (Besides Vanguard, Fidelity and Schwab are also typically good providers.)
  5. Do what it takes to stay on plan - Employ dollar-cost averaging (DCA) or enroll in forced (passive) contribution increases or use a professional as a commitment partner.
    • Sub-rule - Make sure the pro has incentives that are congruent with your own, has the right credentials (CFA and CFP being the gold standards but experience matters a lot too), and is cost competitive. 

Monday, May 31, 2021

I've Got Bad News For You

Your house is going to catch fire and burn down completely in about 10 years from today give or take a month. The good news is that no one will be injured in this accident and nothing substantially bad will happen to your house between now and then. No fire, no flood, no tornado, no termites. 

The further bad news is that you are now positively uninsurable. The further good news is you no longer need insurance. Insurance is about transferring risk; not transferring expense. What you now need is a redirection of resources to prudently prepare for the coming loss. 

Similarly, worries about a collapse in health insurance markets because of genetic information breakthroughs are firstly fairly unrealistic in their assumption of complete elimination of uncertainty and secondly seriously misguided because of our misguided understanding of the purpose of insurance. 

We are confusing the mechanical result of insurance being used (compensation goes to harmed parties from unharmed parties via an insurer middleman) and the conceptual purpose for insurance existence (the transfer of a risk from those sensitive to it those better equipped to handle it including across time). 

Suppose we were in a world where health risks were as predictable as fire "risk" was in the analogy. Would this mean those with pre-existing conditions would be left to suffer? Of course not. As John Cochrane has been saying for a long time, this problem is solved by health-status insurance. 

Basically, give those with known high risks money equal to the expected value (cost) of future expenses. If the future costs are a sum certain, then there is no role for insurance (a known liability implies buying a bond). A strict parallel between the house fire and pre-existing conditions would mean no doubt about the cost ("...nothing substantially bad will happen to your house between now and then."). That is not realistic even if we have near perfect information about what pre-existing conditions foretold. 

The world we will live in even if we get really, really good at matching pre-existing conditions to future health problems will be one with some variance and uncertainty. There will still be a risk of accidental death before the predicted health problems develop along with hopefully great medical and economic advances that make treatments better and less expensive.

If we feel we should help the future victim of house fire (pre-existing conditions), we through government and private charity can give them funds to compensate for the loss. We cannot give them insurance unless and only to the degree there is uncertainty.

P.S. Perhaps doctors and patients should just secede from the broken insurance market? Count me in.

P.P.S. If you want to test your understanding, think about how a typical pregnancy is not a good candidate for insurance while a rattlesnake bite is.

P.P.P.S. I just renewed my personal homeowners policies on Casa Shazam, which gave me reason to post this thought experiment.



Sunday, May 30, 2021

WWCF: First Contact

Which will come first?


Aliens Contact Us

or

We Contact Aliens


How quickly you dismiss this question on its very premises is interesting in itself. Let's start with the basic assumption that there have been, are, or will be aliens (intelligent life with origins beyond Earth). Now that we have that out of the way . . .

Where are you on the Fermi Paradox and The Great Filter? For this question to have meaning we have to additionally assume it is actionable because there will be a determination of contact made. So . . . 

Here are the terms:

Aliens contacting us would include the obvious spaceship lands on the White House lawn, but also signals deliberately sent that we detect/decipher even if they are not aimed directly for us. Add to this discoveries of artifacts here on Earth of past alien civilizations if those were exploratory or communicative in nature. So a deliberate message sent by aliens and received by us through passive discovery or active looking by us is the first condition met.

The second condition, that we make first contact, seemingly has a lot of hurdle to it. We have to discover aliens keeping to themselves to the extent they don't find us and make contact or we see one of their signals sent out prospectively, and then we make the first engaging move. Yet there is another way. If our signals we have been sending out unintentionally/sloppily since the time we have been aware that we've been transmitting to the cosmos or sending out deliberately to "is there anybody out there?" are received by aliens, then we have made first contact. Another feather in the cap of us first is what qualifies as "intelligent" life. While I am open to revision, right now I would allow anything at or above the minimum threshold of animal cognition. So Martian mice count, but Martian bacteria do not. As impressive as space monkeys would be, there is no chance they contact us first.

Robin Hanson has already been putting in the heavy lifting on this one. And don't tell me that it is already settled--dis ain't ova

My prediction: Perhaps I allow the Fermi Paradox to overly influence me or perhaps I'm too optimistic in regards to The Great Filter. Nevertheless, I come down on the side of the second case, we contact aliens first. To this I will assign a respectable but still negotiable 65% probability.



Saturday, May 29, 2021

Trust Is a Fragile Fabric

https://en.wikipedia.org/wiki/Bayeux_Tapestry


Of the many, many lessons to be learned from the COVID-19 Pandemic, one that stands out to me is how important honest communication is. Honesty is a bedrock of trust. Trust is an essential quality for a thriving society.

While fear can enable a society to survive, it takes trust to allow it to flourish. Largely we are only surviving the most recent pandemic. There are many reasons for this from poor understanding and application of science to isolationist responses regarding testing and vaccination driven by nationalist pride (distrust!) to blatant failure to test to failure to properly quarantine to failure to experiment and on and on. Granted that many of these failures came about because we were starting from a poor state of trust, we did not do much to improve the arrangement. In fact we set it back meaningfully along the way.

Suppose we get another pandemic (we will, just wait). Suppose further that it is similar to COVID in terms of virulence and contagion. Perhaps it is dissimilar enough that we have a caught-off-guard type of reaction thus making it even more similar to COVID. But we do remember COVID, so we actually do have some improvements in societal and government response. For example, some communities, large business firms, perhaps the federal government wants to conduct wipe-spread, rapid testing. What might stand in the way of that policy being well received and complied with?

The people that would need to be getting tested would need strong assurance that a positive test would be met with reasonable consequences. What about our response to COVID would give them that assurance? Although people would definitely want to know if they were infected all else equal, pushing back against this desire would be multiple, reasonable concerns. Namely, that they would be subject to harsh treatment if positive (social stigma, rough or indefinite or otherwise undesirable detention, etc.) and perhaps more reasonably that they would be subject to involuntary quarantine, lockdown, social stigma, etc. even if they tested negative. 

Compounding this would be a distrust that they were getting the full story. Vaccination acceptance still suffers from the horrible Tuskegee Study crime. To a lesser degree dismissive elite responses to those with concerns about vaccination, as unfounded as those may be, also deters people from trusting authorities on vaccines. Being told masks are worthless and then that masks were essential sent a clear message--don't trust the authorities. This was one of many noble lies, a short-sighted concept that completely fails to ask the essential question: And then what?

The Chinese government lied to the world at the early stages of the pandemic. They have characteristically been very deceptive as the pandemic has unfolded including apparently not cooperating with the investigation of a lab leak cause. We should expect and demand better from our authorities. In the long run people respect the concept of 'we don't know' especially when coupled with transparent, honest, and updating 'here is what we are thinking'. The 'And then what?' from this approach is productive responsibility and fruitful experimentation.