“Goodness Gracious Me!” – A Classic from 1960

Millionairess PosterPeter Sellers has done some wonderful roles in his life time. In 1960 he starred in the movie “The Millionairess” with Sophia Loren. It is a hilarious comedy in which Peter Sellers is an Indian doctor living in London and Sophia Loren is his millionairess patient. She has fallen in love with him and feigns all kinds of illnesses to come and see him.

There is a great song from this movie called “Goodness Gracious Me!” which was a hit, particularly in India. It has hilarious lyrics, e.g.

Sellers loren millionairessFrom New Delhi to Darjeeling
I have done my share of healing,
And I’ve never yet been beaten or outboxed,
I remember that with one jab
Of my needle in the Punjab
How I cleared up beriberi
And the dreaded dysentery,
But your complaint has got me really foxed.

When I was a teenager in New Delhi this song used to play on the radio a lot and hearing it again it brought back big memories and I laughed hard once again as I did in those magnificent 1960’s and my college days. How fondly I remember them!

I’m appending a YouTube rendering of this song below. Please watch and you will love it. Also rent the movie, The Millionairess if you can find it. It’s a lot of fun.

Some things are evergreen!

Posted in Fun, Old Movies, Travel, Vacation | Tagged , | 6 Comments

The Cure for Deficits

Our Federal Deficit is in the headlines again. It’s a bi-i-i-g deal! (That’s why I’m capitalizing the F and the D). There’s talk everywhere of the fiscal cliff and debt ceilings and who should pay and what to cut … All the talk is, of course, dishonest and does not give any inkling to the average American about what the real picture is. The press simply jumps on the wagon of the politically self-serving parameters in this debate, reports “both sides” and basks in the improved ratings for the media garbage they generate. It is too lazy to learn the real perspective on our federal financial situation. So I am laying out a perspective here that, maybe, gives us a tool to repair this problem.

Everyone knows by now that our national debt stands at $16 trillion. There’s even a national debt clock that shows this every time some political hack wants to make an issue. But what does this number mean – that so far we have spent $16 T more than we collected in taxes at the federal level. To understand the debt and the annual deficit we must understand a key aspect of how the government does its accounting.

The government does its books on a Cash Basis i. e., all the federal accounting, budgeting and assessments are done based on annual cash inflows and cash outlays, something no 21st (or even late 20th) century financial entity would be allowed to do. Only the government among major economic bodies (Corporations, NGO’s, Partnerships etc) does business and reporting this way and it distorts the picture immeasurably. If we want to have any chance of understanding the public products, services and obligations and the time lag with which their costs and benefits kick in we have to unravel this cost basis accounting and see what’s lurking below.

Cost Basis does not recognize accrued costs and obligations. The federal government has many, many future obligations (that we can define and quantify to varying degrees right now) that it does not include in its deficit calculations. Our budget deficits are based solely on what the government pays  and receives in taxes every year, not the obligations we accrue.

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[ASIDE]
In this form of accounting, our deficits are not caused at all by the major entitlements so viciously under fire by Boehner, Paul Ryan and their ilk. Quite the contrary, the personal payroll taxes that are used to pay for these services have more than paid for their cost. On a cash basis Social Security and Medicare have a surplus of over 2.5 trillion dollars right now. So here’s how our debt clock looks if we break out these “Entitlements”:

Federal Debt (non Entitlements):         $18.5 Trillion
Surplus (Entitlements):                              $2.5   Trillion
Net Debt:                                                    $16 Trillion

It’s true that in 15 to 20 years this surplus will evaporate and Social Security and Medicare will go “bankrupt” if we do nothing. By “bankrupt” we mean that future obligations will require more taxes or deficit spending – just like we pay for most of the other government right now! But do understand that the current debt of $16 T is not a result of these Entitlements.

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If we are going to use an accrual standard to measure Entitlements and their impact on our debt then we have to use the same standard to measure other future obligations of the government and the hue and cry must be just as vicious about paying for those or going “bankrupt”.

Let’s look at three of the other (out of many) accrued deficits:

1. Infrastructure Repair and Upgrade Deficit. By some measures we are reaching dangerous levels here – budgets have been slashed for infrastructure since the 1980’s. The  Accrued Deficit: $5 Trillion (or so, give or take a trillion). See figure for 5-year shortfall in chart to right

2. Education and Training Deficit. Part of our chronic unemployment comes from a neglect of the training of our work force. We need an urgent Repurposing of our Labor pool if we are to compete in the 21st century. If we start now the results will still take many years to materialize so we can’t wait. Tom Friedman, Bill Gates and El Arien of Pimco, to name three prominent people have been screaming about this. Estimated Accrued Deficit: ?? Trillions.

3. Insurance Deficit. Our government has a large national  insurance function. For example. It insures nuclear plants, banks and savings deposits etc. It insures against natural disasters such as hurricanes, earthquakes etc., against major accidents, such as oil spills or coal mining accidents, against disease outbreaks, security breaches, such as terrorism, against unemployment and destitution. You name it. A whopping percentage of the government function is insurance – we need this public good, it seems for without it there can be no power plants, oil drilling, banking or the safety net. But unlike private sector Insurance companies the government does not have to set aside reserves to pay for its future obligations. When these obligations kick in, as during a severe recession (2008-2010), or a natural disaster, big deficits are generated. Net Insurance Deficit: 3-5 Trillions by some estimates – depends on assumptions about future economic conditions also.

OK, I don’t need to name all deficits not explicitly included in the debt of $16 Trillion.

Good News
This is HORRIBLE, you say. Is there any good news that points the other way? Yes, there is. And this is where some of the solutions may lie.

When you account on a Cost Basis you do not distinguish between Expenditures and Capital Investments. Both are treated as an outflow of cash. However, capital investments are not cash merely consumed. They produce future cash flows and other benefits. These future benefits are also not included in a Cash Basis Debt number. So when proper Capital Expenditures are accrued properly the real deficit does not grow as fast as the Cash Basis deficit and the future cash flows produced are unaccounted deficit reducers. Good news, huh?

This fact can be used to mitigate our employment problem and reduce the debt at the same time!

Here’s an example:
Say you want to produce 3 million  jobs per year (as Romney said he would magically do by cutting marginal tax rates). The Government can borrow and spend about $100 billion (per year for as long as it takes – probably one presidential term) rebuilding our infrastructure. Each $billion produces 14,000 direct jobs and about the same number indirect ones. (See my blog here for details). So $100 billion will produce about 3 million jobs. On a cash basis you have just increased the debt by $100 billion/year. But since you have reduced the infrastructure debt by the same $100 billion the net deficit (on a rational accrual basis of accounting) is unchanged. The cost of borrowing: Less than 1%/year for a five year period. Add in gains from: not having to pay unemployment benefits and increases in income tax revenues and this is a hugely beneficial way to reduce the deficit while seeming to increase it.

We need this kind of bold analysis to create policies that have a chance to get us out of our mess.

The second part of the solution can be from technical innovation, productivity increases and a faster growing economy. During the last century the US grew at a compounded rate of 3% for generations because the US developed every new technology worth inventing – airplane, nuclear tech, integrated circuit, internet, satellites and GPS, biotech … you name it.

I saw an interview with Professor Sadoway from MIT working on materials technology (on Steven Colbert’s TV program) who is close to making a battery that can store 100 times the power than today for the same amount of weight. If perfected this technology alone could bring down the price of oil to $20 per barrel (he said) by boosting alternative energy production.

As for our Medicare costs and medical costs in general we are projecting to spend $30 Trillion in the next decade as a nation on healthcare. These could come down substantially in the coming years due to converging technologies that will produce zero-cost diagnostics and personalized cost-effective wellness solutions. See my blog on this here.

This kind of solution has to be adopted by our nation as a matter of policy. If deficit spending is required to increase the chances of such technologies coming to fruition then let’s do it, despite the howling Republican luddites. (OK, they’re not all Republican and that was a cheap dig).

Anyway the point is that the CBO can project burgeoning deficits all they want – they have no way to assess the power of exponentially growing innovation and technologies. If we are unable to continue innovating then, yes indeed, our deficits will be untenable and we will inevitably see a horrible decline in our standard of living.

But what if are able to embrace the vision in Peter Diamandis’ book, Abundance, throw the anti-science medievalists out of our leadership and decide as a country to forge ahead on the vision….. the deficits will vanish.

My fingers are crossed.

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Posted in Current Events, Education, Healthcare, Innovation, Investing, Medicine, Money, Politics, Science, Uncategorized | Leave a comment

The Witches’ Brew – A Halloween Incantation

It’s Halloween night! In the gathering gloom the streets of our little town are filling up with trick-or-treaters. Cute youngsters dressed up as ghouls and monsters and gnarly witches are spooking up the neighborhood and the houses are draped with spiders’ webs and howling sounds of evil spirits and the ominous shrieking of ravens or flying raptors.

I completed the New York Times crossword puzzle today where the theme was taken from the Witches’ Brew scene in the play, Macbeth, the great Shakespearean tragedy classic. The scene is a dark cave with a cauldron boiling in the middle to the sound of howling winds and thunder. Four shriveled hags are tending to the witches’ brew in the cauldron and throwing in ingredients as they shriek their evil portents and incantations. Four of the answers in the puzzle were Ingredients in the witches’ brew:

    • tooth of wolf
    • blind worm’s sting, and
    • lizard’s legs
    • slips of yew

A delightful puzzle indeed for Halloween night. Setting the right mood for the morbid delights of this holiday that seemingly celebrates evil and brings us in a benign way with the objects of our fear and the dark side of the world.

Shakespeare’s lines for the witches are beautiful – in rhyme and meter suitable for incantation and the ingredients are all the scary images of the Elizabethan mind. Here’s an excerpt:

WITCH #1.  Thrice the brinded cat hath mew’d.
WITCH #2.  Thrice and once, the hedge-pig whin’d.
WITCH #3.  Harpier cries:—’tis time! ’tis time!
ALL.  Double, double toil and trouble;
Fire burn, and caldron bubble.
WITCH #2.  Fillet of a fenny snake,
In the caldron boil and bake;
Eye of newt, and toe of frog,
Wool of bat, and tongue of dog,
Adder’s fork, and blind-worm’s sting,
Lizard’s leg, and owlet’s wing,—
For a charm of powerful trouble,
Like a hell-broth boil and bubble.
ALL.  Double, double toil and trouble;
Fire burn, and caldron bubble.
WITCH #3.  Scale of dragon; tooth of wolf;
Witches’ mummy; maw and gulf
Of the ravin’d salt-sea shark;
Root of hemlock digg’d i the dark;
Liver of blaspheming Jew;
Gall of goat, and slips of yew
Sliver’d in the moon’s eclipse;
Nose of Turk, and Tartar’s lips.
………..

So this is what you put in a witches’ brew: Eye of newt, toe of frog, wool of bat and tongue of dog.   Adders’s fork and blind-worm’s sting, Lizards’s leg and owlet’s wing….

Even some politically incorrect stuff: Liver of a blaspheming Jew??

I love it. How delicious! Only Shakespeare can invoke such dark imagery.

In this spirit I thought it might be fun to come up with my own incantation on what terrifies me on this Halloween night. Shakespeare I’m not, but here goes (and certainly I’m not hiding my lack of political correctness):

ALL: Double, double toil and trouble;
Fire burn, and caldron bubble.
WITCH #1: In three debates all slick and shrewd
A grim charade have we viewed
WITCH #2: Thrust and parry, lie, intrude
Play with facts, be loud and rude
WITCH #3: And now election doth come nigh
Whose snake oil will the nation buy?

ALL: Double, double toil and trouble;
Fire burn, and caldron bubble.

WITCH #1: A carrion-rippin’ raptor’s beak
Vacuous, sneering Palin-speak
Infrastructures’ slimy rust
Workers’ savings going bust
Wiggling vermin in your creel
Healthcare Law –  loud repeal
Spend and borrow, beg or steal
Private capital, vulture deal!
Mafia bosses in the pews
Blatant theft of Union Dues
False debates and jaundiced views
Outright lies on Fox News

WITCH #2: Workers’ burden – broken backs
Minimum wage, social cracks
Greedy poor – lazy blacks
Quick, pledge the rich – no new tax!
No science, please they’re flat earthers
Paranoid – blatant birthers!
They Sing “America” full of smiles
And stash the loot in Cayman Isles!

OK. You get the drift. Write your own Halloween scary verse. Post it here and let everyone get a good scare!

Posted in Current Events, Education, Evolution, Halloweeen, Healthcare, Innovation, Money, Politics, Vacation | 8 Comments

The 13-Link Chain Puzzle and Other Fun Posers

Last Friday at the Mathematical Sciences Research Institute (MSRI) I met Gary Antonick, who writes a numbers blog for the New York Times, a fun blog that you must check out. I gave him a puzzle and he loved it so much he thought it was going to be one of the best he has posted on his blog.

We had gathered together at the Berkeley site of MSRI for an annual celebration to honor Martin Gardner, the famous gamer, puzzler and magician who wrote the column Mathematical Games for The Scientific American for 25 years. Many of us grew up loving his column and spent endless hours solving his posers and reveling in his tricks.

Elwyn Berlekamp, the well known author of several books on Nim-like games was there, playing Dots and Boxes with kids and other visitors. He runs a nifty outfit called Gathering for Gardner, whose website is here. Their logo reproduced below is really cool as it reads exactly the same when you turn it upside down – this is the sort of thing Martin Gardner loved.

In the spirit of Martin Gardner many math puzzles were presented to the attendees.

The 13-LInk Chain

I discussed the following 13-link chain puzzle with Gary – a puzzle that I have known since my grandfather posed it to me many, many years ago and one I had immensely enjoyed. Gary loved the puzzle and has posted it on the New York Times blog today. So check it out, see if you can solve it and send me the solution, or your comments or questions. I’m reproducing the puzzle below as well:

The 13-Link Chain Puzzle
You have a balance scale and a single chain with thirteen links. Each link of the chain weighs one ounce. How many links of the chain do you need to break in order to be able to weigh items from 1 to 13 ounces in 1-ounce increments?

As with all puzzles that have Martin Gardner’s elegance and spirit, this puzzle is very pleasing at many levels and encompasses some more general math patterns that are endlessly extended by people who then  pose ever-more evolutionary puzzles based on this.

For those of you who want more of these fun puzzles try out the ten off-the-shelf classical (and simple) Martin Gardner puzzles here. (From Elwyn’s Gathering for Gardner site)

Happy Solving!

Posted in Education, Innovation, Puzzles, Science | 17 Comments

“I Think We Found It”

Smashing Discovery – The “God” Particle

On July 4 of this year an historic announcement was made to the world: “I think we have it!”

The “it” was the elusive Higgs boson, something for which the physics community has been searching for decades to complete the so-called  Standard Model which describes the fundamental building blocks of our universe.  In December I wrote about the Higgs and the building excitement as physicists began to see signs of its existence. See my blog about the Higgs and the Standard Model here. Sometimes called the “God” particle the Higgs is a theoretically postulated particle that endows mass to matter.

Without the Higgs field nothing can have mass and the world as we know it cannot exist. If the Higgs were found not to exist we would need to revise all of physics and come up with new theories regarding the fundamental building blocks of nature.

The announcement that the Higgs was  almost definitely spotted was made at CERN, home of the Large Hadron Collider (LHC), where protons are smashed together at almost the speed of light at energies never duplicated at any other facility.  As they collide the energy of the protons is converted to other fundamental particles, including the very, very short lived Higgs that decay rapidly, but into predicted decay products that are analyzed in massive detectors. See a wonderful video explaining the whole process and capturing the jubilation at CERN at the announcement, below.

Peter Higgs (on the left) and Prof. Tejinder Virdee at the CMS detector. Photo source is CERN.

The detection of the Higgs is an amazing feat, something that shows what we can accomplish if we set our minds to it and work with each other. The Large Hadron Collider is a great collaboration – funded by dozens of  countries and involves tens of thousands of physicists from some 40 different countries around the world. Some of the awe inspiring statistics are:

  • The world’s largest superconducting magnets cooled by the world’s largest refrigeration system.   These are used to accelerate protons in the underground tunnel loops to 99.99999999% the speed of light!
  • The highest energy particle beams (4 TeV in 2012) and collisions ever achieved.
  • The most sophisticated detectors ever conceived are deployed. The ATLAS (stands for A Toroidal LHC Apparatus) detector, for example, is located at the point where the proton beams intersect and tracks, identifies and measures the myriads of particles produced. This detector alone weights about 7000 tons (as much as the Eiffel Tower) and has a dedicated team of 3000 physicists from 174 universities in 38 countries studying its output.
  • The other general purpose detector is called the CMS (Compact Muon Solenoid) – pictured above – with silicon pixels and silicon strip detectors to capture the tracks of charged particles and a muon detector. CMS too has an independent team of physicists studying its huge data output – 3000 physicists from 183 institutes and 38 countries. One such country is India which has an important node in the data processing worldwide collaboration at TIFR (Tata Institute of Fundamental Research) and through a 1 gigabyte-per-second direct link to the data via Fermilab. TIFR then distributes the data to other universities and labs around India for independent evaluations and analysis.
  • Out of, oh about, 10,000,000,000,000,000,000,000,000,000,000,000 or so proton-to proton fly-by’s (so far) the total number of excess decay particles with the specifics we seek to confirm the existence and mass of the Higgs is only about 200 particles! It’s looking for the ultimate needle in the haystack. Amazing what signal to noise ratios our modern experiments and computing can achieve.

I am making a trip to India next month where I am planning to meet with several of the physics groups working on the Higgs data and learn first hand about the epochal discovery and the exciting work that remains to pin down many of the still unanswered questions regarding the Higgs. I hope to visit TIFR as well as other auxiliary centers doing some world class physics. See a great presentation (dated August 29, 2012) posted by Professor Kajari Mazumdar of TIFR about India’s role in the discovery of the Higgs.

The LHC takes us back to a time one-trillionth of a second after the Big Bang

With the LHC we have essentially built a time machine that takes us to within a trillionth of a second after the Big Bang when the temperatures had cooled enough (to about 10,000,000,000,000,000 degrees C) for the Higgs to form and endow everything with mass. It’s amazing that we can conceive and experimentally do such things!

Posted in Cosmology, Evolution, Innovation, Money, Politics, Science | 8 Comments

The Job Creators?

The Mathematical Sciences Research Institute (MSRI) is a wonderful Berkeley organization dedicated to the advancement and celebration of Mathematics and its beauty and its application in every day affairs. For example on October 26th (two weeks from today) they are convening Celebrating the Mind to honor the life and works of Martin Gardner who has delighted so many of us with his math puzzles and games.

I have been a sponsor of MSRI in past years and am very grateful to my friend, Elwyn Berlekamp, for getting me involved. Elwyn has written some great books on mathematical games that I have loved reading. At a gathering of MSRI not long ago I had a great time meeting some wonderful math enthusiasts – many teachers, researchers, entrepreneurs and authors with delicious insights into all aspects of pure and applied math – like chaos theory, logic games, nonlinear algebra and information encoding.

I also met a gentleman who had used his considerable math prowess to built some pretty effective quant (or quantitative) models to simulate the financial markets and exploit minute inefficiencies in high frequency trading for impressive profits. He told me about his Hedge Fund which he runs from the Bay Area and which has a direct computer line to the financial markets in New York and other locations. He had encoded his quant model into computer software that trades without active human intervention automatically, swiftly and emotionlessly using the direct access to the Exchange computers. From what he told me I was able to piece together some of the salient features of Hedge Funds that use this method of trading and their characteristics.

I am providing below a narrative of a hypothetical fund, a composite similar to the one run by this gentleman in some aspects. The names and figures have been changed and many aspects such as taxes have been generalized from what I was told.

John Q. runs a limited partnership Hedge Fund for which he has formed an entity, Quant Investments, (QI) to act as a General Partner. The Hedge Fund has 25 limited partners who have contributed $900 million for the Fund. These limited partners are high net worth individuals as well as other pools of money, such as Pension Funds or Managed Wealth portfolios. The Fund does high frequency trading using a proprietary mathematical or quant model. It turns over its portfolio several times in a month, sometimes in days, exploiting inefficiencies. This year the fund is up 40% or by a whopping $360 million. John Q.’s compensation consists of a 1.5% management fee plus 20% of the profits above a threshold. This amounts to about $65,000,000 in the year after all his expenses!

John Q., if he treated the entire compensation of $65 million as ordinary income would have to pay 35% in Federal Taxes. It turns out that most Hedge Funds’ General Partners (GP) can treat their compensation – the part that is 20% of the profits – as Capital Gains. This brings the federal tax rate down to only 15% if the gains were fund on assets held for more than a year. How this direct income from investing by the fund manager can be capital gains boggles the mind. Also utilizing the margin rules of the exchanges he can borrow against his equity, increase his bets and make even a larger profit – all Capital Gains!

But John Q. does not want to pay any taxes that he can legitimately avoid. (it’s his responsibility and duty as a businessman, as Mitt Romney said). So he sets up a Cayman Island shell company that he owns indirectly. Let’s call this company Quant Investments, CI Ltd. (QIC). This company buys (from QI) the quant software, as Intellectual Property, for $65 million, say. (Paid using the $65 mill first year’s profit, which John Q. defers to himself, thus incurring no personal taxes). This creates a one-time long term gain for QI and John Q. taxed at a rate of 15%. Every year thereafter QI pays royalties to QIC roughly equal to John Q’s compensation and so has no net profit and no net taxes from American operations. QIC, of course has obscene income from its Intellectual Property holding but that is not subject to taxes, Cayman Islands being a tax haven.

So John Q., who makes 8-figure incomes, pays virtually no taxes! He is classified as a “Small Business” and a job creator in the Romney/Ryan lingo. Maybe this is one of the loopholes they will close that will make their tax cuts revenue neutral. Don’t count on it – there are donor lobbies here pulling the strings.

I asked the Hedge Fund guy I met how many people he employed and he said, “Six”.

That’s it. 6 people and a small offshore group of programmers to provide updates and maintenance to his software. Some Jobs Creator for a small business with revenues of hundreds of millions, wouldn’t you say!

Truth is that many small businesses that earn more than, say, 1 million are hedge fund types. They play zero-sum games with our financial system where they have a special advantage through special access or fancy quant models. They move large sums of money from A to B and keep a cut, producing no new product or service. Since the game is zero-sum you wonder who the counter parties are that are taking the losses. They also employ very,very few people.

For last year (2011) here are the statistics:

  • The top 25 hedge fund managers took home an average of $576 million each.
  • And that was a down year.
  • Last year’s total compensation for the top 25 hedge fund managers dropped 35% … to $22 billion.

These guys feel entitled to their riches. They feel they are smart. After all they can build sophisticated data-mining models of the complex economy and financial markets that no one else can. They see themselves as hard working geniuses, deserving, self-made millionaires. And they whine like hell when they have to pay anything in taxes. They scream of Socialism, Class Warfare and job-killing government interventions!

I asked the fund manager I met what real product his small business produced for America. His answer was typical: By filling inefficiencies in the market we are creating a more rational marketplace. Further we are creating liquidity by increasing the volume of trades. And finally, we are providing for the hedging of risk – our counter parties are using us to reduce their risks.

What malarkey!

Errant Trades by Knight Capital Cost it $440,000,000

The feeding frenzy on Wall Street today is so fast and intense that few appreciate it – until something goes wrong and we hear about it. A couple of months ago a high frequency institutional trader called Knight Capital had a glitch in its automated trading software.

It started making erratic trades.

Immediately the market plunged about 10% (in a matter of minutes). This created inefficiencies that other computer trading software spotted and they had a buying spree. The loss to Knight Capital was estimated at around half a billion! The market went back up, but Knight almost went bankrupt and had to get an infusion of money from (presumably) a white knight. Also if you were a small investor with a stop loss order at, say, 10% below the day’s market price, you got stopped out and did not participate in the correction. You were scissored by a shark infested feeding frenzy! Welcome to the furious and fraudulent poker game we call Wall Street!

The truth is that, despite all the wailing by the special interests, the current administration has done nothing to regulate Wall Street. The pathologies that gave us the $30 Trillion dollar mugging of 2008 continue. The collective howling about “too much government” etc. has had its desired effect.

Obama has been cowed (if he ever intended otherwise) to make only cosmetic changes to a very dangerous crooked game being played with naked greed on Wall Street. A simple fix, which would not even require any complex legislation, would be to limit all stock transactions to be cleared at the closing price of each day – a Dutch auction, such as is held for the direct sale of U. S. Treasuries.

Meanwhile our dishonest debates go on. The real issues are not even on the table.

(Note: All images in this article are from public internet sites.)
Posted in Current Events, Education, Innovation, Investing, Money, Politics, Science | Tagged | 7 Comments

Message to Fellow 1 Percenters

Wanna scare your Tea Party friends? Just yell “Big Government!“ The effect will be like throwing a slab of pork in a Taliban gathering. Or mailing a Dutch cartoon to an Egyptian lynch mob.

Is the government too big? Are taxes too high? Has Obama increased taxes? Are we headed to confiscatory taxation? Are we preventing a prosperous, free market system from producing wealth for all by trying to redistribute the goodies?

We have to answer these questions honestly if we are to do the right thing and have the economic stability we seek.

First, let’s be clear. We need taxes for a functioning society and a healthy free market economy. As Supreme Court Justice Oliver Wendell Holmes said,

Taxes are what we pay for a civilized society.

All rich countries have high taxes because wealthy societies have high demand for public goods. In countries where we do not have a real tax system such as Afghanistan or Pakistan or even India there is no widespread wealth.

Prosperous societies are built on collectively created infrastructure, mass education, public health, a safety net and sophisticated social obligations and luxuries. Luxuries, such as support of the Arts, National Parks, Space Programs, Research & Development, Clean Air and Water etc.

Also a superpower such as the U. S. has defense obligations as well as security needs.

We need libraries, firefighters, police, coastal protection, disease abatement, satellites for communication, Internet safety and reliability, a reliable Power Grid,  the FAA for safe air traffic and many other institutions that we have carefully built over the years that enable us to do commerce, enforce contracts, adjudicate disputes, facilitate interstate business and allocate our natural resources.

We have a world class University system, research labs, DARPA (for defense related research needs), National Science Foundation, National Institutes of Health and many, many other excellent government funded, efficient prosperity producing institutions. (All ripe for defunding by the ideologues of the right who want right back in to run the country). These institutions have given us the Internet, our satellites and the GPS system, and virtually all the technologies that made us rich in the last century.

The government also acts as the insurer of last resort. It allows us to take risks that no private entity is big enough to take. For example the government insures nuclear plants, takes on the disposal of nuclear waste, has a Federal Emergency Management obligation (through FEMA), insures bank deposits, insures ordinary people against temporary unemployment, disability etc. Our Social Security and Medicare/Medicaid programs are examples of social contracts that we set up with the government for our collective Safety Net. These are not welfare, but are based on insurance premiums (Payroll Taxes) that are paid into the system for the benefits. And, yes, we do also have Welfare – we are a civilized bunch.

Federal Taxes by Source (Total GDP: $15 Trillion)

How much do we pay in taxes for all this? In 2010 we paid 24.8% of GDP. This includes ALL taxes: Federal Income Tax, State Income Tax, Payroll Taxes, Property Taxes, Sales Taxes, Excises, Duties etc.

Federal Taxes amounted to 15% of GDP and Federal Income Taxes were just 6% of GDP! See Chart on Right.

This is the lowest ratio of any rich country in the world except Mexico and Chile. In most European countries the taxes paid are much higher, ranging from 40-50% of GDP and these countries are prosperous, have free markets and better standards of public welfare than we do. By contrast India is at 17%, Pakistan at 10%, Afghanistan at 7%. and have proportionately low prosperity.

Taxes Over Time (As Percent of Total Federal Tax)

Since 1970 we have continuously lowered taxes in America, particularly on the rich. Income Taxes are the lowest ever. Corporate taxes are minuscule. The only tax that has gone up in the past few decades is Payroll tax. See chart on left. Income tax and Corporate tax together are about half of the total federal tax collected. (Down from 70% in the last decades).

We have a near flat tax system now (although you wouldn’t know this if you heard Mitt Romney’s tirade about the 47% paying no taxes.) See chart below, taken from Wikipedia, which shows that if you include all taxes, not just Federal Income Tax, we have a nearly flat tax rate across income levels now. Many other sources I have looked at confirm this.

Our Non Progressive Tax System

It’s hard to imagine a flatter income tax distribution. The chart shows that the top 1% of income earners, who make about $1,370,000 a year per family, and represent collectively 21% of all money earned, pay about 21.6% of the total taxes. People in the middle class or those making in the range of $50,000 – $200,000 earn about 70% of the total income and pay about 72-75% of total taxes. The bottom 40% earn about 10.4% of the income and pay approximately 7.4% of the taxes. Income here includes all sources, such as, welfare, social security, veteran’s benefits, food stamps, earned income credits etc. – all the programs of dependency built into Obama’s socialist setup. If you don’t include government assistance the bottom 47% (the Romney 47, if you will) earn about 9% of total income, pay 7% in taxes and have a median income of about $20,000 per year per household. Many are retired or war veterans or students or unemployed.

With all our requirements for public goods our taxes are abysmally low and it shows.

We alone in the civilized world can’t provide universal health care. We have 50 million uninsured and 20,000 avoidable health related deaths a year. Medical bankruptcies are on a steep rise. Our education system is going down in tandem with our reduction in top tax rates – we rank very low among the rich countries. Our students can’t afford college – the typical debt load of a graduate is $40,000 to $100,000. It takes a lifetime to pay off and the poor are increasingly being shut out.

Our infrastructure, once the envy of the world is breaking down – we need $2-3 trillion just to repair it and trillions more to modernize it. We are cutting down on Space and Science. We run a deficit of billions even when borrowing from the Social Security Trust Fund, which has had a surplus for two decades, and we now claim we cannot afford the safety net and must renege on the social contract.
We will not even pay for the wars we have waged and the modernization of our defense and intelligence services. We minimize government expenditures for green energy or carbon reduction and follow rather than lead versus countries like Germany.

We have  a national debt of $16 trillion and rising. But we do asinine things like taking a no-new-taxes pledge. No, we go beyond no-new-taxes in our astonishing stupidity – we want to lower taxes further, ballon our deficit even more and make the tax system redistributive from the poor to the rich!

What’s wrong with us?

The income tax in the U.S. was started to pay for World War I. Young men were being conscripted and it was said that patriotism demanded the dollars and cents of people with the ability to pay. The tax was imposed only on the rich.

Today the children of mostly poor to middle class families are helping fight our wars – they are taking the deaths, the disabilities, the PTSD’s, the burden of higher suicide rates and the underfunding of veterans by our society. For the rich this is a costless war – they feel none of the pain and none of the cost. No higher taxes, no loss of privileges for their children and a tremendous flow of wealth from the poor to them. To rephrase Paul Ryan, who says that our welfare state runs on Other Peoples’ Money (OPM) – our wars run on OPM and OPC (Other Peoples’ Children)

There has been an unprecedented redistribution of our nation’s wealth from the middle class to the rich. This is not a matter of class envy. It is a matter of fairness and true patriotism.

As a member of the upper 1% in income and wealth I say to all 1 per centers: Let’s show our true patriotism – a much larger love for our country than singing America The Beautiful while berating our working class as lazy and dependent. Let’s pledge a “I’ll Support America with my Dollars” movement and fight for fair and sensible tax levels for all of us who have benefitted so much from the prosperity of this nation built upon the sacrifices of those at the bottom and middle. What’s wrong with the tax levels we had in the 1990’s – the economy produced 22 million new jobs and we actually had a surplus at the end? It’s not Soak the Rich – It’s not Class Warfare. It’s just fair. And, believe me, there’s no fiscal cliff in a reversion of marginal rates for those at the top of the pyramid – only shared prosperity.

I, for one, think I will become even more prosperous if our capitalist system is built on a solid foundation of prosperity for all. Just as it takes two legs to walk it takes both public and private enterprise to built a successful, free market society. Obama was right – You alone did not build it, you had the whole of the 99% helping you!

Posted in Current Events, Education, Healthcare, Innovation, Money, Politics, Science | 17 Comments

Are You Better Off … ?

Gabrielle “Gabby” Giffords

Remember Gabrielle Giffords, a.k.a “Gabby” Giffords? The highly personable, intelligent and likable  “Blue Dog Democrat” and a U.S. congresswoman from Arizona? She was, of course, the victim of a January 2011 shooting – an assassination attempt that critically wounded her and left her in a near vegetative state. Since then she has undergone rehabilitative surgery and has regained some of her ability to walk, speak, read and write. She still needs assistance though for even the basic day-to-day activities and has resigned her seat in the U.S. House of Representatives.

It was a high moment when she made a brief appearance at the Democratic National Convention last month, walking by herself with a little assistance by her good friend Amy Wasserman. The TV was on and I was watching, paying half attention, as I was simultaneously trying to finish “Atlas Shrugged” by Ayn Rand. The droning of the Convention must have caused me to doze off – after all we’d just had another staged week from the Republican side with fake, affected energy and scripted homilies.

The flickering TV switched to Fox News channel and there in my reverie I saw Shaun Hannity. And – wait a minute! Surprise! He had the former Congresswoman “Gabby” Giffords on for an interview.

Shaun Hannity: Welcome Congresswoman Giffords. Welcome to Fox News, we are pleased to have you. All part of our untiring effort at being “Fair and Balanced.”

Gabby Giffords: Glad to be here.

Shaun Hannity: Now, look Congresswoman, let me ask you this: Are you better off today than 4 years ago?

Gabby Giffords: Well, obviously not Shaun. I was almost fatally shot in the head 18 months ago and am in the process of recovery.

Shaun Hannity: Isn’t it true that instead of being a healthy, athletic skier and a tennis player that you were 4 years ago you now need assistance in walking and have neurological impairments that keep you from concentrating, reading or writing for long? Are you satisfied with your state?

Gabby Giffords: Mr. Hannity, you are ignoring the fact that I was critically shot in this period. I am much better off than the horrible day on which I was wounded.

Shaun Hannity: Mrs. Giffords, that was more than a year ago. Isn’t it time to stop blaming the gunman? Eighteen months of so called rehabilitation and you are still far from a complete recovery. Let’s call it straight – you have been failed by Obama’s socialized agenda.

Gabby Giffords (a little taken aback): Er..what socialized agenda?

Shaun Hannity: Socialized medicine, Collectivism, Suppression of Individual Freedoms, to name a few. Why, Mrs. Giffords, you have had Government healthcare haven’t you since your ..er .. injury? How do you like the Government bureaucrats between you and your doctor?

Gabby Giffords: I am very happy with my doctor and the care I have received. I am recovering slowly but surely.

Shaun Hannity:  Be honest now. You are still broken, like Obama’s Economy. Without a job too. On permanent dependency of the Government like most of the supporters of your party.

Gabby Giffords: I was almost fatally shot, Shaun.

Gabby Giffords on Fox News

Shaun Hannity: You still keep blaming the gunman. Just like Obama who still keeps blaming the economy he inherited for his failed  governance and a lousy recovery.

Gabby Giffords: He inherited an economy that had undergone a $30 trillion mugging. Financial institutions were in collapse. Many companies like GM were close to bankruptcy. Credit had dried up and jobs were being lost at a rate of almost 1 million per month. The GDP was contracting at 9% per annum. Pension funds, endowments and personal savings were decimated and we were on the verge of a Depression not seen since the 1930’s. The Stock Market plunged losing more than half its market value. I’d say it was comparable to the shock I received from the gunman.

Shaun Hannity: Mrs. Giffords. You liberals must understand that our country was not built on whining and blaming others. You must own up to your own responsibilities. And, next time, carry a concealed gun. No kook would dare shoot you if you were armed and remembered your responsibility for self reliance. Mrs. Giffords, have you read Ayn Rand???

I woke up with a start from my bad dream – or was it just another day at the office for Fox News?

Posted in Current Events, Healthcare, Money, Politics | 6 Comments

The Scenic Durango & Silverton Narrow Gauge Train

I love trains. When I was 10 years old we lived near a railroad yard in Saharanpur, India. In the evenings, along with my siblings, I would walk along the yard tracks and watch the mighty steam engines as they shunted to and fro, taking on coal and being serviced in the yard.

Last month I took a road trip to the scenic Rockies town of Durango, Colorado. Founded in 1880 by the Denver and Rio Grande Railroad, historic Durango is perched at 6512 feet above sea level and is the terminus for a beautiful narrow gauge railroad that snakes up the mountains to the old mining town of Silverton (9318 feet above sea level) in the grand Colorado heights.

We took lots of pictures along the scenic route taken by this steam train, which is reminiscent of the legendary Darjeeling express in India as well as other mountain trains I remember from my youth – the train to Simla from Kalka in Himachal Pradesh and the one to Ooty from Wellington in Mysore.

Here’s a short video to give you a flavor of the lovely mountain towns of Durango and Silverton and also how the train traverses the scenic vistas along the beautiful, 45 mile route from Durango to Silverton. The train makes a picture book journey along the spectacular Animas River and boasts some of Colorado’s most striking canyon scenery. (Some stills were taken by my colleague, Larry Porter).

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The Durango train station was built in 1840. Here are some photos:

A solo engine steams into the station.

Engine at Durango Station

We visited the Service Yard in Durango at night. Some pics:

Engines at Service Yard at Night

Engine Being Serviced

and

Engine on Turntable at Durango Service Yard. Pic by colleague, Larry Porter.

The town of Silverton has a picturesque setting in the high Rockies. Here is a video of a double engine train chugging into Silverton:

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All in all a very beautiful setting for a train lover!

Posted in Education, Photography, Science, Travel, Vacation | Tagged , , | 4 Comments

The GRIN Revolution – Cheap, Personalized Healthcare for the Billions

Some people don’t like Science. They think it dehumanizes us, mechanizes us and devalues our spirit, our aesthetics and our passions. It is heading our planet in the direction of ecological disaster, devastating wars, nuclear catastrophes, urban decay and continued extinction of most species, if not life itself. It’s a “Blade Runner” type of view, a kind of techno-apocalypse, made very popular by most of our “Science” fiction, cinema and art.

And then there are the “cornucopists” – a growing group of scientists and futurists who see a vision of plenty, sustainability, connectedness and unprecedented good health and prosperity through exponentially growing technology, outstripping our arithmetically growing challenges. The Singularity University (SU) in Mountain View was founded by a pair of such dizzyingly optimistic futurists: Ray Kurzweill and Peter Diamandis. I have had occasion to talk about Peter Diamandis’ book, Abundance: The Future is Better Than You Think in a previous blog and I strongly urge you to read it if you haven’t done so.


Last week at the invitation of my friend, Vivek Wadhwa, who is VP of Academics and Innovation at SU, I attended a seminar there, a part of their special Executive Program. As you can see from their website blurb on the right, this program is designed to acquaint key decision makers with the latest exponentially growing technologies. The technologies are presented at SU by scientists and entrepreneurs who are already developing tomorrow’s products and changing the landscape of possibilities for the U.S and the world.

The seminar was on the future of Health and Medicine, and was conducted by Dr. Daniel Kraft, Chair of the Medical Track at SU, and a Stanford and Harvard trained physician, scientist, entrepreneur and innovator.

Dr. Kraft presented a dazzling vision of a coming revolution in medicine driven by exponential growth in the so called GRIN technologies: Genomics, Robotics, Information technology and Nanotechnology. What is promised is a stunning new age in healthcare of low cost, personalized modern treatments and access for billions within a decade! This imminent revolution includes:

iPhone product by Netra for eye testing.

  • Mobile phone as a personal medical lab,
  • ubiquitous imbedded medical intelligence
  • zero-cost diagnostics,
  • mobile devices that can diagnose a patient better than a group of board certified doctors (I believe an X-prize of $10,000,000 is being offered for this goal).
  • an “OnStar” system for the body for remote medical monitoring
  • Surgical Robotics
  • Regenerative Medicine including custom manufactured body parts built using molecular technology or stem cell technologies

His vision is presented in this TED video.

These ideas are not some future pipe dream – they are being developed and implemented right now. In five to ten years the landscape of healthcare and medicine will be completely changed to a new paradigm dubbed Healthcare 2.0.

Here’s a brief taste of devices and technologies already built:

Mobile Phone as a Personal Medical Lab

Already there are 20,000 Apps for medicine on the iPhone and Android phones! Tests and diagnostics that you can do today:

iphone controlled blood pressure monitor

iPhone Glucometer for measuring blood sugar

  • Monitoring Blood Pressure
  • Blood Glucose Measurement/Diabetes Management
  • Realtime EKG
  • Sleep Monitoring
  • Ultrasound
  • Eye Testing
  • Skincare, ADHD testing, Ear and Hearing related, Renal Symptoms and many others.

The results of these tests can be continuously generated and stored for real time, preventive or post disease monitoring.

Other Zero Cost Diagnostics

To name a few:

  • Portable X-ray machines the size of an iPhone ($1 per X-Ray) using luminescent scotch tape!
  • Lab-on-a-Chip, such as Gene-RADAR, developed by Dr. Anita Goel, Nanobiosym, that can detect the RNA/DNA signature of any pathogen in your system, named and reported to a central computer. Virtually costless.
  • Genetic analysis and Genome mapping to facilitate personalized treatments. The cost (companies like 23andme) has come down to a mere $100 for a complete genome mapping soon to be under $1.
  • Smart Toilets – stool and urine daily testing and data storage. Get your poo log (actual name of product) data analyzed.

Ubiquitous Medical Intelligence

  • Detailed User’s Manual and treatment plans personalized for your body on the web.
  • Predictive Health for you with prevention strategies
  • Augmented reality for the body
  • “OnStar” remote help
  • Routine surgeries via remote robotics. Already 80,000 cases per year!

Regenerative Medicine

3-D Organ "Printer"

  • 3-D printing of organs
  • Regenerative cell therapies
  • Stem cells – bone marrow mining and baskets of bio-manufactured human parts!

You get the idea. It’s huge, what’s going on. We have the potential to use exponentially growing, convergent technologies to provide universal healthcare of unprecedented quality and individualization at very low cost. We can overcome a shortage of doctors and specialists and create a world where humans are connected with one another and contribute to the general wellness of billions!

Posted in Current Events, Healthcare, Innovation, Investing, Medicine, Money, Science | 5 Comments