January 20, 2017

Inaugural Hopes, the Radio Show, Today

Today, inauguration day, it turns out that I’m on a radio show here in Vermont which happens to be at 11am ET right before the inauguration with my friend host Bill Sayre. We’ll be talking about my hopes for the new administration, some of which are in yesterday's post. You’re welcome to call in with your hopes and fears or comment here. It’s on WDEV in Vermont at 550 AM or 96.1, 96.5, or 101.9 FM and live streamed from www.wdevradio.com. Call-in numbers are 802 244 1777 and 877 291 8255.

January 19, 2017

Things to Hope for in the New Administration

Granted, there’s plenty to fear from the new administration, the temperament of the president-elect not the least. But I hope Trump will succeed; I also hoped Barack Obama would succeed.

The resentments that led to Trump’s narrow victory stem from these legitimate grievances: 1) the wealthfare state with its bank bailouts, corporate subsidies, and lobbyist-designed tax code; 2) a failed educational system mired in political correctness but failing to enable opportunity; and 3) America sputtering helplessly in a dangerous world and not even willing to name Islamic terrorism (I did not say all Moslems) as its enemy.

I’m an optimist. Here are the things I hope a change in leadership can make possible. They won’t all happen but they all require change – which we are getting like it or not –  to have a chance.

Education. Our educational system is in terrible shape. Obviously we have some great teachers. But, at this point, most of the teachers themselves are the product of a shoddy and undemanding education. Democrats are in thrall to the teacher unions which have fought reform to protect their workers. Now Republicans (with Democrat support I hope) can lead us to a system where incompetent teachers are fired, failed schools are closed, and education can be the road out of poverty it was for my grandparents.

Regulation. Our infrastructure is crumbling and deficient; we need the jobs that would come from rebuilding it. That doesn’t mean we need to pour additional trillions of government money into infrastructure as I hope the new president learns quickly. It takes more than 20 years to get through the regulatory process to build even a small road. A pipeline project at either the state or federal level can be held up long after approval and even after it is almost finished by legal challenges or illegal vandalism. We need a permitting process which gives a quick – and lasting - yay or nay to a proposed project after a single very thorough review. Any legal action after approval which seeks to delay a project should require the plaintiff to post a bond equal to the cost of delay, which is returned only if the appeal is upheld. Criminal obstruction of projects should result in criminal prosecution. If these actions are taken, we will have a wealth of new construction in both the public and private sector. Much less money will go to lawyers and the cost of delay and much more to the construction and jobs which are needed.

Local and regional banks need to be freed from the strictures of Dodd-Frank so that they can resume lending to the new and small businesses which actually create jobs. All bank investors need to be exposed to the risk of failure; that’s the most effective regulation. That means dismembering any institution so big that we would be forced to bail it out. It was the bank bailout (TARP) which first ignited the flame under the teak kettle.

Tax reform. An early test of whether the wealthfare state has been overturned will be whether the tax policy which allows venture capitalists and hedge fund managers to pay only capital gains tax on their income is repealed. More consequential to the economy is ending the tax policies which encourage corporations to move their earnings or even their operations abroad.

Health care. It’s still broken. Whether you call the needed fix a repair of Obamacare or a replacement is just political semantics. Yes, many people have been added to the ranks of the insured. However, the cost of doing that, as we’re seeing this year, is a cost shift: those who used to be able to afford health insurance are now seeing it take a hugely increasing share of their income, if they can afford it at all, while deductibles go through the roof. This will need a bipartisan fix. The problem would have had to be addressed no matter whom we elected.

An assertive America on the world stage. Cozying up to Putin is not the way to get there. There are no more reset buttons to be pushed. Where redlines must be drawn – North Korean nukes and Iranian cheating are two examples, we must never tolerate their being crossed. We must rebuild the military. If we free up oil and gas drilling (safely and responsibly, of course), build pipelines to our ports, and encourage exports, our adversaries including Russia, will lose the oil revenue they need to do a matching buildup as well as the ability to threaten our allies with embargoes.

The end of political correctness. College campuses should be cauldrons of controversy. Speech must never be criminalized. Dissent and debate are essential to democracy.

Good luck to us all.

Friday inauguration day it turns out that I’m on a radio show here in Vermont which happens to be at 11am ET right before the inauguration with my friend host Bill Sayre. We’ll be talking about my hopes for the administration. You’re welcome to call in with your hopes and fears or comment here. It’s on WDEV in Vermont at 550 AM or 96.1, 96.5, or 101.9 FM and live streamed from www.wdevradio.com. Call-in numbers are 802 244 1777 and 877 291 8255.

January 18, 2017

The World Economic Forum at Davos

The More Things Change...

You may have noticed that this week many news stories are being filed from Davos, Switzerland. That is because the World Economic Forum (WEF) is being held there this year – as it has been almost every year at this time – and reporters important enough to be invited can write about almost nothing else. I wrote the post below in 2006; but, since it sounds like the WEF has changed less than the world itself, I'm re-posting with only minor edits.

In 1999 (before the IPO of our dotcom era company) and in 2000 (just after our IPO), Mary and I were invited to the WEF. Our stock which had debuted at $12 was near its all time high of $120. The dotcom bust was still months away. In many ways, this trip was the apogee of our lives inside that fantastic bubble and Davos is the setting for a chapter of my book hackoff.com: an historic murder mystery set in the Internet bubble and rubble.

The World Economic Forum is an organization “committed to improving the state of the world”. It’s members are some 1,000 of the world’s largest corporations. They pay large dues, rumor says up to 300 thousand per year. And their executives are appropriately invited.

But many other people are invited as well. Political leaders are invited and come; for Davos 2000 they included Bill Clinton and Tony Blair, Israeli Prime Minister Ehud Barak and Palestinian leader Yasser Arafat, former Israeli Prime Minister Simon Peres and young King Abdu’llah of Jordan, and many, many more. There was an expectation that deals would be made; peace and commerce advanced.

The anointed thought leaders from the press were invited; Thomas Friedman, of course, but also David Kirkpatrick of Fortune and — much to the point that year — Tony Perkins of Red Herring and Upside fame. No one who hadn’t read both of these was anywhere near an IPO.

The corporate leaders for 2000 included Bill Gates of Microsoft and Scott McNeally of Sun (they had less use for each other than Barak and Arafat).  Jeff Bezos from Amazon was here as well as Michael Dell. Michael Bloomberg — who was not yet a mayor — attended as a business leader. [Bloomberg and I were on a committee together which was chaired by Carly Firiona. His open contempt for her inanities would have made you believe he never could have a political career.] There were Asian billionaires as well; Richard Li of Pacific Century Cyberworks and Masayoshi Son of Softbank were the most prominent. European business was represented mainly by the third to tenth generations of old companies with a sprinkling of telecom executives. South America and Africa were “underrepresented”.

To the discomfort of some the members, a smattering of Internet IPO CEOs had been invited as well. We were thought of as nouveau riche, which we were; some of us didn't stay riche very long. We were not asked to participate in the major panels but were on small panels. Some of us were invited in 1999 and 1998 before most of us were rich but when we were already hard at work changing the world. Most of us were not invited in 2001 or ever again.

The scene below is from the book I wrote about my strange time in the Internet bubble. I’m going to extract some of it in this post and some in a subsequent one. The fictional characters are Larry Lazard, CEO of hackoff.com, who, in this flashback, has not yet been found dead in his office; his wife Louise; and a Israeli friend Chaim Roslov, who Larry met while chairing a small session at the WEF. Simon Peres, of course, is an historic character and a meeting very much like the one I describe in the book actually did happen except for Larry and Chaim’s contribution which is fictional.

We join them just after a meeting which Larry chaired:

Chaim buttonholes Larry as they leave the luncheon: “You are going back to the Congress Center.”

“Uh … yeah, my wife and I are.”

“So we’ll share a taxi.”

“Yeah, sure,” says Larry, not sounding sure. “This is my wife, Louise.”

“Hello, Louise,” says the Israeli. His name is Chaim Roslov, pronounced with a guttural like Chanukah.

The driver of their cab doesn’t speak English but the multi-lingual Israeli establishes Spanish as a lingua franca and directs him to the Congress Center.

“You are Jewish,” says Chaim to Larry. It is not a question.

“Only half,” says Larry. “How do you know?”

“I know,” says Chaim. “Your mother was Jewish.” Apparently question marks are not in his English vocabulary.

“Right,” says Larry.

“Then you’re Jewish.”

“Right,” says Louise, amused.

“But I don’t practice,” Larry objects.

“I’m not asking you to synagogue,” says Chaim. “Practice does not matter. But you are a Jew.”

“I guess…”

“You are free for breakfast tomorrow,” Chaim asserts.

“I think so,” says Larry. “For what?”

“There is an important meeting. Simon Peres is coordinating this. We must do something to create opportunity for Palestinians. There must be hope for them or there will be no peace. We have a plan; we want your help.”

“I don’t even know any Palestinians,” says Larry. “I don’t think I can help.”

“You can help,” says Chaim. “You must come to the meeting.”

“We will come,” says Louise.

“Only your husband may come.”

“Why?” asks Louise. “Are you orthodox? Are you afraid of women? I’m Jewish — all Jewish.”

“Your husband is the principal. It is he who must come. If you are the principal, you would come. It must be that way.”

“Why must it be that way?” asks Louise.

“It must,” says Chaim flatly.


The breakfast meeting is in another hotel in a medium-sized conference room. The chairs have been arranged in an oval, and Simon Peres sits in the middle of one of the long sides of the oval. Larry takes an empty chair near one of the ends. Chaim is towards the other end but there is no seat open near him.

A young, black-haired functionary from the WEF speaks first. “The World Economic Forum has a proud history of being the venue for progress on otherwise intractable issues. Much of the discussion that led to the Oslo Accords began here in this neutral territory where direct communication is possible. In the midst of unparalleled global prosperity and relative peace, we must do what we can to solve the world’s most intractable problems. We may not succeed, but we have no excuse not to try. Prime Minister Peres has been kind enough to host this breakfast so we may discuss part of what we can do. Before we start, I’d like to go around the room and ask each of you to identify yourself, your country, your company, and state briefly why you are here.”

When the introductions reach Larry, he says: “I’m Larry Lazard; I’m an American. My company is hackoff.com; we do security for e-commerce. I don’t know why I’m here. Chaim asked me to come.”

Peres turns his large gray face to Larry: “We’re glad you’re here, Larry Lazard,” he says. “You’re here because you can help.”

After the introductions, Peres himself speaks: “We are here because there are problems which must be solved,” he says. “The greatest obstacle to peace in the Middle East is the lack of hope among young Palestinians. We are doing something about that. The danger is that, in the Middle East, hope is its own worst enemy. There is a story about an asp and a camel who meet on the banks of the Suez Canal. ‘Take me across on your back,” said the asp to the camel.’

“‘I can’t do that,’ said the camel to the asp. ‘You will sting me.’

“‘I won’t sting you,’  said the asp.  ‘If I sting you, you will die and I will drown.’

“‘Okay,’ the camel said and the asp got on his hump. Halfway across the canal, the asp stung the camel.

“‘Why did you do that?’ asked the dying camel.

“‘Because this is the Middle East,’ said the asp before he drowned.

“We cannot allow ourselves to be drowned — to remain trapped in this cycle of despair and violence,” continues Peres. “We must create hope where there is no hope. We must give young Palestinians an alternative to violent death. That alternative comes from jobs. We must export some of the potential of the Israeli economy and the world economy to the Palestinian territories.

“We are doing that. We are establishing businesses and factories there.  We are creating jobs and we are creating hope. But there is great resistance to this when it is perceived to come from Israel. There is a brave Palestinian woman who has risen to be the plant manager of one of the enterprises we created. She has risen above the squalor and despair she was raised in. But her own father has called for her death; a local imam has declared a fatwah against her. She may not live long although this brave woman does live today.

“So we need you who are not Israelis to create jobs in Palestinian territory, in the West Bank and in Gaza. We need you to create hope.  We need you to create an alternative to violence and death. We will help you; we will put you in touch with the right people; some of them are here at the conference. But we must be invisible and you must be visible. Otherwise this remains the Middle East. The asp will bite the camel. And both will die. Will you do this?”

Many say they will. Names are taken; appointments are made.

“Will you help, Larry Lazard?” asks Chaim, who is now somehow seated next to Larry.

“I would like to,” says Larry. “I mean this sounds like a very good thing, but I’m not sure how I…”

“My friend Larry Lazard and I will help,” says Chaim. The great head turns toward them. “We will work to create jobs in the territories. We will outsource there. We will create well-paying programming jobs there and we will save money for our companies doing this. It is what our friends the Americans call a win-win.”

“So,” Larry explains to Louise later, “I’m going to be put in touch with a Palestinian who’ll be our contact for contracting some of our programming to a group in Jenin. They’re supposed to be good; they can do it cheaper than we can get it done in the US. And we save them from being suicide bombers.”

“Was Barak at the meeting?” asks Louise.[She meant Israeli President Barak, of course. She wouldn't have heard of the Illinois state senator with the funny name yet.]

“No, why?”

“Isn’t that strange?”

“The whole thing is strange,” says Larry. “Davos is strange. Being a billionaire is strange. I don’t know.”

“We’re there any Palestinians at the meeting?” asks Louise.


“Does that tell you anything?”

“No. I told you; I’m going to meet a Palestinian. This is a good thing.”

“We’ll see,” says Louise.

“Why are you so negative?” asks Larry. “You’re the JAP. You’re the 100 percent pure Jew. You had a Bat Mitzvah, for Christ’s sake.”

“I don’t know,” says Louise. “I don’t know. We’ll see. I am glad you’re trying. I’m glad that chauvinist pig Chaim recruited you.”

“So that’s it; you’re still pissed off that you weren’t invited to the meeting.”

“No, that’s not it,” says Louise, then: “Yes, it is. I AM pissed off. But that’s not what’s bothering me. I don’t know. Try. It’s the right thing to do.  Meet the Palestinian. And remember the camel.”

January 17, 2017

Dodd-Frank and Me

The Magically Receding Bank Loan

Software companies usually don’t borrow money; I blogged long ago about the loan my old company couldn’t get to buy a switchboard. But in 2011 Mary and I started a new company, NG Advantage LLC, to truck compressed natural gas. Our idea was to bring the economic and environmental benefits of natural gas to companies located beyond the reach of pipelines. We were the first to do this in the US and there is a lot of demand.

But my inexperience with borrowing and then Dodd-Frank almost did us in.

One of the new technologies which make trucking natural gas viable is carbon fiber trailers. A trailer with carbon fiber tubes can haul twice as much gas per trip as the old trailers you may have seen with steel tanks that look like something a giant would use for SCUBA. These carbon fiber trailers, at the time, cost $500,000 each. Since customers use the gas directly from the trailer, there are usually two of these sitting at each customer location (active and standby) and then there are some more trailers being filled or going to and from customers. There is also very expensive equipment at each customer site and then a station full of compressors built on a pipeline to put the gas into the trailers. In other words, you need a lot of stuff to be in this business. I knew that; I’d made a spreadsheet.

My assumption was that, since I had successfully built businesses before, once I had customer contracts, I’d be able to borrow enough using the equipment as collateral to get the business started.

“No,” said the bankers. “We can’t do that. Your company has no track record; your industry doesn’t even exist!”

“But I’ll have contracts to prove that there’s a need and the equipment will be collateral. Isn’t this just like a car loan only a little bigger?” I argued.

“Now you’re talking,” they said. “If you want to personally guarantee the loans and put an amount on deposit with us to cover them in case of default, we can probably do something.”

It didn’t seem like a very good idea to lend them our money (even if we had enough) at 1% so they could lend it back to us at 7%. “How much of a track record do we need before you can finance us without a personal guarantee?” I asked.

“One year of EBITDA-positive operation,” they said without even having to think about it. [If you’re not familiar with the concept of EBITDA they meant they wanted to see us generating cash from operations.]

“OK,” I said.

We raised money from angel investors; we got an economic development loan (which we did have to personally guarantee); we got seller financing on the land we needed for the compressor station; and we got some very, very expensive loans from non-banks which, at first, we had to personally guarantee.

We built the compressor site; we bought the trucks; we signed contracts and delivered gas. We had a backlog of customers signed up. And we had been EBITDA-positive for a year. Deploying new customers meant we needed more trucks and everything else. Back to the bank I went.

“No,” they said. I reminded them of what they had said last time.

“That was then and this is now. Under Dodd-Frank, we can’t make risky loans to new companies. We need you to be EBITDA-positive for two years.” We got more very high interest loans and raised more from investors.

Dodd-Frank is a law which was passed after we bailed the banks out under TARP (see We’ve Been T*ARPED). The premise was that, if we’re going to bail out banks, we have to regulate them to make sure they won’t need more bailouts. Actually, I agree; that’s one of the reasons we shouldn’t have bailed them out. And, although only the money center banks got bailed out, even local banks, who had been more likely to lend on reputation, came under the same strictures.

After two years a very senior banker assured me we had a loan. “Just have to go to committee,” he said. “Just a formality.” He was crestfallen when he told me he’d been turned down in committee; hadn’t happened to him in fifteen years. “It’s Dodd-Frank,” he said.

The story ended well for us. Banks do now lend to us and we borrowed money at reasonable rates to repay the money on which we had to pay outrageous interest. We paid back the economic development loans. But we were only able to succeed because we’d been lucky enough to succeed before and had the ability to guarantee some loans and to raise capital from people who’d made money by funding us before.

Since the passage of Dodd-Frank, the big banks which caused the crisis have gotten bigger; the big four in the US now control 45% of total bank assets.  Dodd-Frank took away the flexibility which made local and regional banks competitive. A first step in putting capital back in the hands of job-creators should be to exempt all but the biggest banks from this law and allow more money to flow to Main Street. Second step should be to make sure that any of the huge banks which is too big to fail are also too big to continue. If a bank is a systemic risk, it should be broken up. Once it is clear that we can’t be blackmailed into bailing out banks again, the rest of Dodd-Frank can be dismantled. Then capital-intensive startups can borrow to grow after they’ve proved themselves by being EBITDA-positive for just one year. And we will have new jobs and rising wages.

More on the harm Dodd-Frank has done at How the Fed and Dodd-Frank Killed Jobs and more on how much I had to learn about capital-intensive businesses at The Difference Between Venture Capital and Private Equity. See  It Was TARP that Boiled the Tea for some of the 2010 anti-establishment fires which are clearly still burning.

January 15, 2017

Tweets Are DIY Headlines for Politicians

Tweets notoriously have room for only 140 characters so how can they possibly be used to convey a serious position? Well, headlines only have about 60 characters. Sound bites are not much longer. Many of us absorb most of our non-Internet news in headlines and sound bites. The advantage of tweets from politicians’ PoV is that they get to write the tweets themselves.

Way back in 1980 I was running (unsuccessfully, obviously) for the US Senate. After much research I produced a position paper and held a press conference to deal with the fact that the social security trust fund was headed for bankruptcy. My proposal was to raise the retirement age to 67 for those currently under 40 (which included me). The headlines and sound bites were “Evslin Proposes Raising Social Security Retirement Age”. At least half the newspaper articles included somewhere, usually way down in the story, whom would actually be affected; the TV coverage only had the sound bite of my calling for increasing the retirement age and neither the explanation of why or the protection for those 25 years or less from retirement.

Poor Mary was campaigning at the VFW that night. She was accosted by furious veterans near retirement who believed I’d proposed that all their plans be upset and they be forced to work two more years with almost no notice. (BTW, my plan became law without me.)

My tweet obviously would’ve been “Evslin Proposes Plan to Protect Social Security Benefits”. I hope there still would’ve been a position paper behind it; but, frankly, it’s the headline (or tweet) that makes most of the difference. All of us who have run for office wish we could’ve written the headlines. Now we can.

The Internet is a force for disintermediation. We don’t need phone companies to make “phone calls”. Anyone can blog. We can borrow without a bank and crowdsource our funding. Now any prominent politician can write his or her own headlines. This is forcing media to redefine its role which is not a bad thing.

Most national politicians probably have staff that does their tweeting. The President Elect apparently does not. I wish there were links from his tweets to full explanations of his positions; I disagree with some of his tweets and find some of them offensive; but actually I’m glad to know directly what he’s thinking rather than have it filtered through staff or a headline writer.

January 12, 2017

The Difference Between Venture Capital and Private Equity

A Whole New Ballgame

Once NG Advantage LLC, our compressed natural gas trucking business, started to grow, we needed a lot more capital. Moving into a new region requires at least a $5 million investment to build a station to compress gas from a pipeline into the trailers which deliver it to customers. Adding even one new customer can require a million dollars or more in new trailers and equipment. Even though we were EBITA-positive, we were still new so banks still couldn’t lend to us because of Dodd-Frank (thank you, Senators Dodd and Frank). We could now borrow from non-banks (at high rates) but we still needed cash for down payments on all this equipment.

So we had to sell some equity. “Been there, done that,” I thought. Knew we were too small to go public but didn’t know what I didn’t know. Last time I ran a pre-IPO startup we raised money from venture capitalists (VCs). I quickly learned that VCs don’t do investments as big as we needed, in fact don’t do capital intensive businesses at all. It’s private equity firms, which tend to have much bigger pools of money than VCs, who provide early stage financing for businesses like ours. Just like VCs, I thought, but more zeroes on the check.

Because I didn’t know any private equity firms, we hired an investment banker to manage the process. Together we did a five-year plan (as if anyone knows what’s going to happen in five years). We put together the “book” which described our successes, our market, our competitors, and our plan. Anyone could plainly see they’d make a lot of money by investing in us.

The investment bankers shopped a teaser to private equity firms and lined up thirty of them for us to present to in New York City during a three-day period. It was intense although not as intense as the IPO road show I’d done fifteen years before. At least I didn’t have to travel somewhere new every night although we did walk around midtown New York. I got sick of the sound of my voice making the same pitch ten times a day but answering questions was fun. The bankers were gentle when they pointed out after the first presentation one morning that I was somehow wearing one brown shoe and one black one.

About ten firms had enough interest to come up to Vermont to see our first compressor station and meet the team. One snowy day, a delegation’s return flight was delayed for a few hours so we took them to dinner near the airport.

“What’s the downside risk?” one of the partners from the investment firm asked me.

“What do you mean?” I asked, surprised by the question.

“I mean, in the worst case, what would happen to our investment?” he asked surprised that I was surprised by the question.

“Well, we’re a startup. You could lose all of your investment,” I said. trying not to sound like I thought I was talking to an idiot. The conversation abruptly switched to sports.

“Why did he ask me that question?” I asked our investment bankers once the private equity guys were gone.

“He wanted to know the answer.”

“No venture capitalist ever asked me that and I’ve talked to hundreds of them. They understand that most startups fail. That’s obvious.”

“You don’t understand the difference between venture capital and private equity,” the banker said.

“That’s obvious, too,” I said. “Please tell me.”

“Venture capitalists do well if they have a batter’s average; private equity needs a fielder’s average.” [note to anyone who didn’t grow up with baseball statistics: players do well when they get a hit more than 30% of the time they bat (.300 average in baseball talk); in the field they are playing poorly if they make an error more than 5% of the time they are involved in a play (.950 average).]

Venture capitalists make a large number of small bets relative to the size of the fund they are investing. If five of them are complete losses, four of them return the investment money, one returns 5 times the investment money, and one returns twenty times or more, the fund is a success from investors’ PoV. This, of course, is what I was used to. It’s why VCs don’t look at investments that don’t have huge potential returns. They only need a few winners but they need them to be big. They swing for the fences, to go back to baseball talk.

Private equity firms make relatively few investments from each fund but each investment is big. If one of them goes down the tubes, ALL of the rest have to do very well in order for the fund to perform reasonably. The capital-intensive companies which private equity firms invest in don’t have products that “go viral” like software or social media. If they grow (like NG Advantage) they require even more capital. When they go public, it is not an astronomical multiple of the early investment. If they fail to make it big, the hope is that they can sell assets or themselves and that the investors will break even or avoid losses.

Lesson learned. We did raise the capital we needed but that’s another story for another day.

For much more on the difference between venture capital and private equity firms, see What VC Can Learn From Private Equity by my friend and super-VC Fred Wilson (aka @AVC). If you are a CEO or CFO talking to both types of firm, you really want to read Fred's post.

January 10, 2017

Why Vaccinations Need to be Mandatory

There are multiple news reports (see here and here, for example) that Robert Kennedy Jr. says that Donald Trump appointed him to head a presidential panel to review vaccine safety and science. As of this moment, there’s no direct confirmation from the Trump team and no explanation of how the findings of this commission are supposed to be used. I’m hoping the story is as inaccurate as the testimony I heard Kennedy give here in Vermont against mandatory vaccination. But it’s a good time to review why many vaccinations (which are obviously intrusive) still MUST to be mandatory.

We used to have periodic epidemics of polio, smallpox, rubella and other diseases. Huge numbers of people were either killed outright or left badly damaged. When I went to grammar school a long time ago, there was almost always at least one classmate in permanent braces as a result of polio. Not true anymore. Because of vaccines, smallpox has been eradicated and we no longer have to vaccinate against it and polio is almost there.

So why can’t people just decide for themselves whether their children should be vaccinated? Two obvious reasons are that parents don’t have an inherent right to risk the life and health of their children and that, especially in a society where many health costs are socialized, everyone else will have to pay for the disease that could have been prevented. But let’s put those two arguments aside.

There are always some people who cannot be given a particular vaccine either because of a general medical condition or because they’re allergic to the ingredients of the vaccine. So long as everyone who can get vaccinated does, the risks to those who can’t get vaccinated is very low

According to Vaccination greatly reduces disease, disability, death and inequity worldwide from the World Health Organization (which is also the well-documented source for other assertions in this post):

“’Herd protection’ of the unvaccinated occurs when a sufficient proportion of the group is immune. The decline of disease incidence is greater than the proportion of individuals immunized because vaccination reduces the spread of an infectious agent by reducing the amount and/or duration of pathogen shedding by vaccinees, retarding transmission.” [footnotes deleted but available via the link]

Those who can’t be vaccinated need herd protection. Those who diminish the herd effect by refusing vaccination for themselves and their children are putting those who can’t be vaccinated at deadly risk.

Most vaccines are not 100% effective, even if they are always administered properly which, of course, can’t be the case. However, so long as there is sufficient herd protection, there is very little risk for those few whose shots didn’t take for one reason or another. However, if there are a large enough group who just don’t get vaccinated, then those individuals for who the vaccine didn’t work are at great risk.

California used to have very liberal laws on refusing vaccination. NOT vaccinating became a fad among the nominally well-educated health-food-eating citizens in affluent Marin County. In 2015, only 84% of that County’s students entering kindergarten were fully vaccinated according to the San Francisco Chronicle in a story about the ensuing measles outbreak. “Last year there were 61 measles cases in California — the highest since the disease was declared eliminated in the United States in 2000. The state beat that number in the first month of this year.” California, seeing that there could easily be epidemics of more deadly diseases, has sensibly made it more difficult to avoid vaccination except for those who have a specific medical condition which would make a particular vaccination unsafe.

Part of the anti-vaccination hysteria come from a study claiming a link between autism and measles vaccine originally published in the Lancet; it was reasonable to take that seriously. However, this study was not only wrong; it was fraudulent (see story here). The principal author was funded by lawyers representing parents in suits against vaccine companies. The article was retracted by Lancet and the falsification of data revealed. Because of the scare the article engendered, huge followup studies were done. That was easy because there is lots of vaccination. Absolutely no statistical or causal link has been found between any vaccination and autism. None the less, the myth lives on and both Trump and especially Kennedy have cited this non-existent link (see news stories linked to in the first paragraph). That’s scary.

The truth is that every vaccination does have some small risk. If it’s by injection, there’s a tiny chance of infection. There’s a very small chance that the vaccine, like anything else, can be contaminated. There’s an equally tiny risk that the recipient will have an undiagnosed allergy to the infection. Obviously new vaccines like the one for Zika have to be thoroughly tested and procedures can always be improved. We always have to be aware of the possibility that new data can surface.

Ironically, as long as almost everyone else gets vaccinated, those who opt their families out of the very small risk of a tested vaccine get to free ride on the very herd protection they are compromising. Society can’t afford to let that happen. We can’t leave those who can’t get vaccinated or whose vaccine doesn’t work at risk. We can’t give preventable epidemics room to blossom. Some vaccinations must be mandatory. This is an example of a case where the needs of the society come before the needs of the individual and state compulsion is justified.

Trump and Clinton Call Sanders’ Election “Illegitimate”

Former Candidates say They Got Berned by Putin and WikiLeaks

President Elect Bernie Sanders today addressed criticism that his surprise Presidency will be “illegitimate” because it was due to leaks of email stolen from the Democratic National Committee. National security officials say the emails were obtained by Russian hackers acting under instructions from Vladimir Putin. “This is the bitterness of billionaires,” the President Elect said. “They were sure that their 1% cronies would be nominated by both major parties and, no matter who won, they would be able to continue exploiting the middle class and ignoring the needs of the less fortunate. The people have spoken.”

Critics from both the Clinton and Trump camps say that release of these documents during the end game of the primary season led to Sanders’ narrow surprise win at the Democratic Convention on the third ballot when super-delegates abandoned the former Secretary of State in favor of the junior Senator from Vermont. This upset Trump’s game plane for a campaign against Clinton. “I could’ve beaten crooked Hillary,” tweeted real estate mogul Donald Trump. “Unfair media helped rapist Assange steal the election for Sanders.” Experts are unanimous in saying that Trump could not have beaten Clinton under any conceivable circumstance.

Senior Clinton campaign aides say that President Obama should have done more to discourage and punish Russian hacking. The President responded to that accusation today. “I’m proud that my coalition was essential to electing Bernie Sanders President so he can continue my Progressive policies. This is an endorsement of my legacy. In the interest of transparency, I could not interfere with the free flow of information to the American people during a campaign.”

Vice President Elect Elizabeth Warren reacted angrily when asked if her election is legitimate. “The American people heard the truth about Hillary Clinton and the Democratic establishment and they acted on that truth. Would less truth make us more free?”

Sanders had no direct comment on rumors that Vladimir Putin is urging him to appoint Edward Snowden to an intelligence post.

“Russia had universal healthcare long before we did,” said Sanders. “There are things we can learn from them. I will make every effort to work with President Putin to solve the problems of the world. Anybody who doesn’t think that’s a good idea is stupid.”

Donald Trump says he will run again in 2020.


Notes: This, of course, all happened in a parallel universe. In our reality, WikiLeaks didn’t leak the DNC material until the week before the Democratic Convention when HRC had already sewn up the nomination and none of the people said or tweeted any of the things I have attributed to them.

The idea for the great firewall came from this tweet by @razhael.

January 09, 2017

Alexa – Cover Your Ears

AlexaOn the left is an Echo, a wonderful appliance from Amazon whose name is Alexa. She is a wonderful listener - perhaps too good. Yesterday I read two stories which suggest you may want to cover Alexa’s long ears if she is a listener in your house.

First the primmer:

When the Echo is on, by default she is listening. If you say “Alexa”, then her rim turns blue (not shown) and she starts listening carefully. Whatever you say next goes into the cloud where it gets interpreted. You might be asking for a song to be played, for something to be added to your shopping list, asking a question to resolve a bet, ordering something from Amazon or others, or invoking one of the many other services available through Alexa. Point here is that you know that your actual request to “Alexa” is permanently in the Amazon cloud unless you explicitly delete it – which you can do.

Story #1, more amusing than scary, comes from Twitter friend @DonutShorts.  A San Diego news station was showing a piece on a little girl in Texas who ordered a bunch of stuff from Alexa and her parents only finding out about this when the packages started to arrive. One of the on-air people said: "I love the little girl, saying 'Alexa ordered me a dollhouse'." Many of the Echoes, owned by listeners heard their name called and did what they were told: they ordered dollhouses, too, which started to arrive all over San Diego. Turns out that by default ordering without verification is turned on. However, you can either turn it off or require a verification PIN in the Alexa app.

If you use Alexa to control things like calling 911 or disabling your home security system, you want to be very sure that the command you give Alexa for this is too unique to be said coincidentally on the air or by a visitor after the word “Alexa”. You can also change the wakeup word from “Alexa” to something much less common (since “Alexa” has now become common) and not likely to be used accidentally.

Story #2, courtesy of old friend Edie, is from the LA Times:

“When Bentonville police found the body of Victor Collins inside James Andrew Bates’ home in November, they also discovered a house outfitted with a number of Internet of Things devices, including an Amazon Echo. The gadget is constantly listening for spoken commands, but according to the company only records and stores snippets of conversation following a ‘wake word’ — in the Echo’s case, ‘Alexa.’ Bentonville police say there’s ‘reason to believe that Amazon.com is in possession of records related to [their] investigation.’”

So far, according to the story, Amazon has refused to release whatever the police asked for. But we should assume that, if Amazon has what’s being asked for and there’s a valid warrant, they’ll have to release it. To me that’s no big deal if Echo is indeed only recording what comes after the wake word. The film clip with the story says that Amazon says that this is the case and that Echo does NOT record except after the wake word – presumably during the period when her rim is blue indicating that she is in full listen and record mode.

I believe that Amazon believes what they told the newspaper, although this is not specific in their user agreement for Echo. But it’s also clear that Echo is listening when she is on or she wouldn’t be able hear her name and go into full listen mode. So what if Echo is hacked so she transmits whatever she hears? Scary thought.

Which brings me to why my Echo in the picture with this post has a red ring (it’s really red; it’s just my droid that makes it look almost white). If you push the microphone button on top, the Echo is put into “no listen” mode. Now a cynic might ask why that mode can’t be hacked as well; and perhaps it can. But the hardware engineering could be such (and I hope it is), that pushing this button physically disables the microphone in a way that software can’t switch back on. Mary and I are now in the habit of using the button to tell Alexa to cover her ears when we’re not talking to her.

January 07, 2017

Defeating Putin is the Best Revenge

No matter whether Russian hacking was one of the decisive factors in the endgame of a close election, the best thing to do about Vladimir Putin is to defeat him. He has been successful in what I suspect was his original aim when everyone “knew” HRC was going to win: he has damaged faith in our electoral process. He is also providing an excuse to ignore what is wrong in America for those who don’t like the election results and don’t want to look at why the election was so close in the first place or why Trump was nominated or why Bernie Sanders almost was.

These are not the worst of Putin’s sins by far. There is the annexation of Crimea, the unspeakable horror of Syria to which he is a major contributor, the murder of political opponents at home and abroad, and kleptocracy on an unimaginable scale – and that’s just the stuff we know about. Like a tornado sucking in dirt, his strength is sucking in support from sizable minorities (I hope) in allied countries. Wavering leaders, scared by American weakness, are flocking to placate him. A recent poll even showed that support for Putin among American Republicans has increased.

Trump’s twitter assertion that we’ll solve the world’s problems together is absurd. It’s as dumb as Obama and Clinton’s reset button, George Bush seeing something good in Putin’s eyes, or hapless John Kerry “negotiating” a series of truces in Syria, which lasted exactly as long as Russia wanted them to tactically.

So how do we beat Putin? Hint: it’s not by threatening him with “consequences”; it’s not be telling him to “cut it out”; President Obama tried these already. Even sanctions, some of which have teeth, have not been effective. Putin respects nothing but strength; Putin won’t respond to anything but force. Strength now, literally, can avoid war later.

We need to crash the Russian economy. That’s what happened with Reagan’s then unpopular deployment of missiles to Europe. Russia and its unhappy satellites couldn’t afford the ensuing arms race. The satellites broke free; the wall came down; and there was glasnost, for a while, in mother Russia.

Fortunately, we have an easy and peaceful way to defang Putin: flood the world with American oil and natural gas. At above $50/barrel for oil Russia can probably squeak by; that’s why they agreed to a production cut with OPEC. If we step into that breech by quickly permitting LNG and oil export terminals, allowing pipelines to be built from our incredibly productive oil and gas fields to the sea, and getting rid of the ridiculous restrictions on exports designed to subsidize domestic refiners, there is no way that Russia will be able to earn enough oil revenue to keep its economy afloat.

I’m not suggesting we put public money into pipelines and export terminals; if we just issue permits expeditiously and do not allow vandals to interfere with construction, private funding for these infrastructure projects is a much better bet than getting Mexico to pay for a wall. The drillers are already starting to take their rigs out of mothballs even with the incentive of $50 oil and despite inadequate takeaway capacity.

Yes, there’ll be collateral damage: Saudi Arabia, what’s left of the tyrannical regime in Venezuela, and the market for ISIS-controlled oil. But our allies’ backbones will be strengthened knowing there is cheap American gas and oil available to protect them from Russian energy blackmail via Gazprom. Arab oil embargos are already a non-weapon because it’s so clear that American energy can flow into the breach.

The second part of the anti-Putin campaign is a quick buildup of American military strength. We need to deploy well-armed troops to the Baltics and along the Russian frontier. We should be willing to arm those who, like the Ukrainians, are willing to fight against Russia. This will NOT lead to an arm’s race as long as we deploy the energy-supply weapon at the same time. Russia won’t be able to pay for it.

A collapsing Russian economy and clear military inferiority will affect Russian “elections”, and hopefully will lead to regime change. Putin, if still alive after a change of power, can blame the US.

If we unleash our energy weapon and rebuild our military as only we can, it won’t matter whether the President calls Putin a thug or a genius; he’ll be washed up. May be better to let him save as much face as possible, as long as we’re winning.

The good news is that Trump is for both increasing our energy production and military strength. Will those who are decrying Russian attempts to influence our election support taking effective steps against Putin? Will Trump be able to channel their anti-Putin outrage to gain their support for a strong counter-attack? Does he want to? It’s a stretch on both sides of the cultural gulf.

January 06, 2017

PayPal Phone Phish – Be Careful

The caller ID said “PayPal” so I picked up the phone. A dulcet woman’s voice said: “Hello, this is PayPal automated phone confirmation system. Please enter your PayPal confirmation pin.” I hung up so fast that I dropped the phone.

This wasn’t especially tempting because I knew I hadn’t paid for anything recently on PayPal and didn’t think Mary did. But whoever is doing this is making thousands and thousands of robot call and so, statistically, they will catch some people who have just ordered on PayPal and will assume the call is legit. If I had just used PayPal, I might’ve been tempted; my broker calls to confirm wire transfers, for example.

Important points:

  • Caller ID and calling telephone number can be spoofed as easily as the sender’s email address on a phishing email. You cannot assume you know who is calling you.
  • Don’t be fooled by the fact that the call comes just after you’ve used a service. That is an amazing coincidence for you, but it’s also a statistical certainty that it will happen to someone if enough robo-calls are placed.
  • The only way you know whom you are talking to is if you place a call to a known number. If you get a call like this and think it might be legit, LOOK UP the number of the supposed caller and call back; it’s not safe to use a callback number in a voice mail.
  • Always insist that the person asking you for a confirmation give you the specifics of the transaction they’re confirming even if you called them. The call I got was from a robot so I couldn’t have gotten any information even if I hadn’t hung up
  • Don’t give information to robots that call you.

For information on phishing attacks by email, see Don't be Phished by Russians - or Anyone Else

January 05, 2017

Natural Gas and “Fugitive Emissions”

Why are people who are passionate about saving us from the perils of global warming often found in opposition to natural gas drilling and pipelines?

If you’re worried about global warming and think we need to do something quickly, you should love natural gas. It emits 50% less CO2 per BTU of energy created than coal, 26% less than oil. An economically-driven switch from coal to natural gas for electricity generation made the US in 2012 the only nation in the world to meet the emission reduction targets set for it in the Kyoto Protocol even though the Protocol was never ratified here. Moreover, natural gas is a necessary complement to renewable sources since it can be switched on quickly when the sun doesn’t shine and/or the wind doesn’t blow. Natural gas burning doesn’t release harmful SO2 and virtually eliminates ash and other particulates.

At the opposite extreme, if your concerns are mainly economic, Americans have saved a fortune by substituting natural gas for coal and oil in transportation, industry, and power generation. Cheap energy is leading to a comeback in American manufacturing.

There are three “environmental” arguments against use of natural gas.

  1. It’s a fossil fuel and it does emit CO2. Both parts of that statement are true. However, most of those coal plants would still be running and emitting twice as much CO2 per megawatt if it weren’t for natural gas (not to mention that electricity users are actually saving money from this switch). Making the perfect the enemy of the good never makes much sense.
  2. Fracking poses grave dangers to ground water. “Fracking” is a terrible name from a marketing PoV; it’s an unfortunate shorthand probably chosen by an engineer for hydraulic fracturing, which, together with the twin technology of horizontal drilling, has led to a cheap and abundant supply of natural gas in the US. However, this argument is largely a slander. I wrote a post about that here and will update it.
  3. Methane (the active ingredient of natural gas) is a much more potent greenhouse gas than CO2 and huge dangerous quantities are released as consequence of natural gas use. The first part of this statement is true but the second isn’t. That’s what today’s post is about.


The Union of Concerned Scientists says that, if 9% of natural gas extracted escaped into the atmosphere, the net greenhouse effect of using natural gas would be the same as coal. They cite a range of estimates for natural gas leakage between 1% and 9%; so at the high end of the range, there'd be no CO2 emission decrease. However, even in their citations, I can’t find any support for the 9% number. Argonne National Laboratory gives a range of current estimates between 1.13 and 1.55%.

Union of Concerned Scientists also says:

“The good news is that proven, cost-effective technologies are available to significantly reduce fugitive methane emissions.

“Aging, leaky pipelines can be upgraded or replaced. Drilling site emissions can be better monitored, and effective use of available technologies can minimize the amount of fugitive methane that escapes.”

The Environmental Defense Fund agrees: “Oil and gas methane pollution is an urgent problem with a clear, low-cost fix.”

But how “urgent” is the problem? How much harm are fugitive emissions doing? Could much more natural gas be escaping as a byproduct of natural gas drilling and distribution than is commonly believed?

Here’s data from the United Nations sponsored IPCC report on the dangers of global warming. The chart below is from Chapter 6. It shows annual increases and decreases in the atmospheric concentration of methane.


Note that since wide-spread fracking for natural gas in the US began in 2008 and through the period of increased natural gas use worldwide after that, the rate of increase in atmospheric methane has actually declined. This isn’t what you’d expect if gas drilling and use were releasing significant new amounts of methane.

One reason there isn’t any correlation between natural gas drilling and use and atmospheric methane is that fossil fuel use as a whole (including methane emissions from oil drilling, pipeline leaks, etc.) is that, again according to the IPCC, fossil fuel use accounts for less than one-sixth of methane emissions, much less than the roughly one-third which comes from agriculture and half that comes from natural sources like swamps.

Again according to the study: “The growth rate of CH4 [methane] has declined since the mid-1980s, and a near zero growth rate (quasi-stable concentrations) was observed during 1999-2006, suggesting an approach to steady state where the sum of emissions are [sic] in balance with the sum of sinks…”.

The most important point in all this is that, unlike CO2, the amount of methane in the atmosphere isn’t going up. Also, unlike CO2, methane naturally decomposes over time. We don’t have a methane problem.

Bottom line: the environmental as well as economic benefits of using America’s abundant supply of natural gas have been and continue to be much, much greater than any harm from fugitive emissions.  The industry has been, can, and should be reducing fugitive emissions. No excuse for not doing that. Building new pipelines is critical both to expanding the availability of natural gas and eliminating leakage from old pipes. More drilling for natural gas (responsibly, of course) is a pathway both to a better environment and a better economy.

Please note that I am not disinterested when it comes to natural gas. I founded a company which trucks natural gas to large users beyond the reach of pipelines and still have a financial interest in its success. I’m proud that it has both saved businesses by reducing their energy costs and vastly reduced emissions. Still, you have to watch my objectivity on this. The business is helped by low natural gas prices, hurt by low oil prices, would be helped by a tax on carbon dioxide (which I’m not advocating), and is not needed where pipelines do get built.

Other posts in the climate change series:

“Dissent is not a crime” – Except to the New York Times

Believers and Deniers Combating Climate Change (the nuclear option)

Past Climate Change - The Pictures

Natural Gas vs, Climate Change

Solar and Wind Need Natural Gas

January 04, 2017

Trump Draws Red Line in North Korea


President-elect Trump just drew his first foreign policy red line with his tweet promising that development of a North Korean nuclear weapon capable of reaching the US “won’t happen!”. It is likely this line will be tested. How he responds will set the tone for his presidency, just as the firing of striking air traffic controllers did for Ronald Reagan. In fact the risks are much higher than they were for Reagan; the air traffic controllers were not armed with nukes.

Unlike many of Trump’s tweets, this one actually is in line with existing US policy. Despite this policy our actions towards North Korea were a bipartisan fiasco of appeasement and bribes during both the Clinton and Bush administration. President Obama has avoided getting caught in window-dressing negotiation with North Korea but he certainly hasn’t slowed their progress on development of either nuclear weapons or the means to deliver them. US red lines don’t have much credibility since Assad went unpunished for using chemical weapons on his own people (and everything he’s done since). According to the administration itself, Russia didn’t stop hacking after Obama told them to “cut it out” and that there would be “consequences”. It’s likely that Putin was more confident that he could get away with annexing Crimea than if he hadn’t had a chance to see us retreat from Obama’s red line in Syria.

It is obviously much, much better never to draw a red line than to draw it and then retreat from it. Obama didn’t have to say what he did about Syria. Trump didn’t have to tweet what he tweeted about North Korea. On the other hand, although we could stand aside in Syria, we really can’t let the mad man Kim Jung-un do what he threatens: “…tip new-type intercontinental ballistic rockets with more powerful nuclear warheads and keep any cesspool of evils in the Earth, including the U.S. mainland, within our striking range.” We will need to deal with this threat sooner rather than later; Trump would have been tested whether he tweeted or not.

Setting the red line and then enforcing it will give Trump credibility he can later use to stop other bad actors, perhaps just with words. What Trump does about North Korea will have much more effect on Putin’s behavior than whether he calls him a thug or a genius. Perhaps the most important audience for this red line exercise is Iran; will we or won't we hold them to the letter and spirit of the deal Obama made with them? Of course demonstrating that our word is reliable will also be a great relief to our allies.

But I don’t think words will stop Kim Jung-un and I hope Donald Trump doesn’t either.

January 03, 2017

How the Fed and Dodd-Frank Killed Jobs

Every economist worth her or his salt has a theory about why the great recession was followed by a nearly jobless recovery. Historically, lots of jobs are created in a surge when the economy is recovering; didn’t happen this time; many people left the work force and never came back.

I’m not an economist but I like mysteries and I think I know who done it: it was a toxic combination of unintended consequences of the Federal Reserve’s low interest rate program, which is still going on, and the Dodd-Frank bank regulation bill, which may be targeted for elimination or serious modification by the new gang coming to town.

What the Fed Did

It is normal Federal Reserve behavior to shovel out cheap money when times are tough in order to jumpstart the economy. The idea is that the availability of capital will lead to business expansion and a rising tide will lift all ships. The Fed shoveled out the money; the stock market recovered (aka the rich got richer); various interesting bubbles have developed; but the job market didn’t recover as measured either by percentage of the labor force employed or rising wages. Oh, BTW, some people seem to be rather pissed off about this; but let’s stay away from politics. Point is that the economy strengthened but didn’t create the usual surge in demand for workers. We might well have lost jobs overall if the invention of horizontal drilling and hydraulic fracturing hadn’t led to a boom and only partial bust in energy and associated industries. That’s why we’re better off than Europe, IMO.

What happened? Where are the jobs?

Well, suppose you run a factory and you see the economy getting better and the demand for your widgets growing. You want to increase production. You have a choice to make: hire an additional shift or buy a new machine. Ordinarily, in the cautious beginning of a recovery, you might go with the people; you can always lay them off if things change and you’re going to be stuck with the payments on the machine. But these aren’t ordinary times; interest rates are near zero; the payments on the machine won’t be that bad. Energy costs to run the machine are going down, not up. And there are some really nifty new smart machines out there. In fact, as you shop around, you realize that if you replace some of your existing equipment as well, maybe you can actually reduce staff and still increase production (you’re a hard-headed, hard-hearted business person). Your banker really wants to “give” you the cheap money the Fed crammed into the bank’s vault. You go with the machine; GNP and your profits go up; employment and wages aren’t helped.

Classic economists will object that, even if you buy the machine, someone has to make it and that’s jobs. But these aren’t classic times. New “machines” have a large software component. It takes programmers to write the software. But it takes the same number of programmers to create the program whether you sell one copy or a million (I used to be in that business). Moreover, for the hardware, maybe the machine maker also just orders a new machine rather than increasing staff.

What Dodd-Frank Did

But new businesses always create new jobs. That’s still true. The availability of cheap capital should have led to new businesses and new jobs. That’s where the unindicted co-conspirator Dodd-Frank comes in. The bill actually had a reasonable premise: if the public is going to bail banks out (as we unwisely did), then we have not only a right but a responsibility to regulate them so they don’t need bailouts. Trouble is that the new rules effectively said that banks could only lend the flood of cheap money they were being force-fed by the Fed to very, very well established businesses; that doesn’t include startups even if the founders have great records and the collateral is rock solid.

This was a double whammy if you’re a startup (I was one but am not bitter; we got funded but not by a bank). The old established guys that you could easily knock off by being more innovative and aggressive get free money and you don’t get any at all. Access to capital, as all us capitalists know, is essential to business growth and formation.

So, to sum it all up: the Fed, through the banks, makes almost free money available to old established businesses who use it to increase production without hiring more people. When this doesn’t create jobs, the Fed makes even more cheap money available. Profits go up (it’s nice to have free money), but wages and employment don’t. Dodd-Frank assures that even less money at even higher rates than normal is available to the small businesses and startups which have always accounted for the bulk of new jobs (and keep the profits of the old guys under control).

That’s how we got an almost jobless recovery. It’s almost enough to make you want to occupy Washington, DC. Or maybe that’s what’s about to happen.

More including how to undo Dodd-Frank and bank bailouts at Dodd-Frank and Me.

January 02, 2017

Solar and Wind Need Natural Gas

The current build-out of solar and wind worldwide is enabled by a parallel buildout of natural gas fired power plants. This from a recent article in The Washington Post:

“We’re at a time of deeply ambitious plans for clean energy growth…

“Only, there’s a problem: Because of the particular nature of clean energy sources like solar and wind, you can’t simply add them to the grid in large volumes and think that’s the end of the story. Rather, because these sources of electricity generation are “intermittent” — solar fluctuates with weather and the daily cycle, wind fluctuates with the wind — there has to be some means of continuing to provide electricity even when they go dark. And the more renewables you have, the bigger this problem can be.

“Now, a new study suggests that at least so far, solving that problem has ironically involved more fossil fuels — and more particularly, installing a large number of fast-ramping natural gas plants, which can fill in quickly whenever renewable generation slips.”

The abstract of the study (all that’s available free), which was published as a working paper by the National Bureau for economic research, says: “All other things equal, a 1% percent increase in the share of fast reacting fossil technologies is associated with a 0.88% percent increase in renewable generation capacity in the long term.”

Nuclear and coal plants are very slow to start and stop; they provide baseline power but can’t be used to top off the grid. Oil plants are possible as peakers but can’t spool up as fast as gas turbines and are both dirty and expensive to run even at the current cost of oil. Hydro can be turned on and off if there is the right amount of water behind the dam; but hydro is not available everywhere. Hauling electricity long distances (for example from where the wind is blowing to where it’s not) involves transmission loss and requires grid infrastructure which may or may not be where it needs to be. Large scale battery technology is still in the grant-sucking phase and involves huge amount of toxic waste from used batteries. That leaves natural gas to take up the slack. It’s the “fast reacting fossil fuel” the study is talking about.

The abstract of the study doesn’t mention it but the fact that small natural gas generating plants can be built economically means that these plants can be located near the renewable sources so that new grid capacity doesn’t have to be built to get the backup power to where it’s needed. Moreover, a distributed grid with power usually generated and consumed in the same locations is much more resistant to either natural catastrophes or sabotage including hacker attacks (subject for a future post).

So the economics of renewables depends heavily on the price and availability of natural gas. See Natural Gas vs. Climate Change for steps I think we should be taking now to assure we have natural gas when and where we need it at a good price as well as for the objections to use of natural gas and my conflict of interest in recommending it.

If you believe that we are on the cusp of a climate meltdown, you should support abundant natural gas both because it emits 50% less CO2 per kilowatt of electricity generated than coal AND because it is an essential part of reliable electricity in a grid which also uses renewable sources. Even if you are just interested in cheap and reliable electricity, the combination of well-sited renewables and cheap, clean natural gas makes sense.

Other posts in the climate change series:

“Dissent is not a crime” – Except to the New York Times

Believers and Deniers

Combating Climate Change (the nuclear option)

Natural Gas vs Climate Change

Past Climate Change – The Pictures

Natural Gas and Fugitive Emissions

January 01, 2017

Administration Leaks Inaccurate Report of US Electric Grid Hack

Friday night The Washington Post (WaPo) ran a front page story saying that, “according to officials who spoke on condition of anonymity”, Russian hackers had penetrated the US electrical grid at a then unnamed utility in Vermont. Other major news organizations, to their credit, did NOT pick up this story. Turns out that WaPo made a very bad choice in running it.

If you now look at the story, there’s a banner above it saying:

Editor’s Note: An earlier version of this story incorrectly said that Russian hackers had penetrated the U.S. electric grid. Authorities say there is no indication of that so far. The computer at Burlington Electric that was hacked was not attached to the grid.”

But there’s no front page story in today’s WaPo explaining how administration sources used the paper to spread inaccurate, scary information – quite possibly as part of the unseemly tit-for-tat between Trump and Obama over Putin (which Putin is winning so far).

Here’s part of the statement from the utility, which turns out to be Burlington Electric and which appears to have acted quickly, effectively, and responsibly:

“There is no indication that either our electric grid or customer information has been compromised. Media reports stating that Burlington Electric was hacked or that the electric grid was breached are false…

“Federal officials have indicated that this specific type of Internet traffic also has been observed elsewhere in the country and is not unique to Burlington Electric. It’s unfortunate that an official or officials improperly shared inaccurate information with one media outlet, leading to multiple inaccurate reports around the country.”

What did happen is that malware called Grizzly Steppe was found by the utility on a worker’s laptop which was NOT connected to either the electric grid control computers or customer information. This is serious but nothing like penetrating the grid. American businesses routinely find malware and viruses on their computers and detect phishing attacks.

[Update 1/5/2017 The story gets stranger and stranger. WaPo has now walked back from even the claims that Grizzly Steppe was found on the computer or that there was necessarily any Russian involvement. According to a story in VTDigger "The Post said it received bad information from anonymous authorities who leaked to them 'without having all the facts and before law enforcement officials were able to investigate further.'" Essentially the sources used WaPo to yell "fire" in a crowded theater.]

Here are some questions which WaPo and other media ought to be asking:

  1. Why did the administration leak inaccurate information?
  2. If there is a real threat which the nation needs to know about, what’s the correct way to make that information public? (hint: the answer is not an anonymous leak)
  3. Since the FBI and DHS knew about Grizzly Steppe ever since they investigated the hack of the Democratic National Committee way back when, why did they wait to alert Burlington Electric and other utilities until last Thursday? (technical note: each piece of malware effectively has a digital signature – the code itself. Virus scanning programs look for this pattern on computers to detect the virus.)
  4. Why didn’t law enforcement make the digital signature of Grizzly Steppe available to the commercial antivirus firms? If they had, almost very business computer in the country if not the world would have been cleansed. Have they done that now?
  5. Why do we want to let the hackers know where they have been effective? There is a cyberwar and this is battlefield intelligence.

I have no fondness for Putin, no illusions about his intentions. I’m among those who think Russia should have been sanctioned sooner rather than later and that President Obama should’ve done more than say “cut it out” and threaten his usual “consequences”. I’m very nervous about Trump’s seeming fondness for the Russian leader.

But acts speak much louder than words. This leak by the administration was petty and probably partisan. It damages rather than helps our side. WaPo should not have been complicit in this; should’ve insisted on attribution or fact checking. The New York Times was wise not to pick up the unsourced story.

But now the questions above need to be answered.

December 30, 2016

Don't be Phished by Russians - or Anyone Else

The Washington Post has a front page story headlined "Russian hackers penetrated U.S. electricity grid through a utility in Vermont, officials say". The story, which is attributed to anonymous administration sources, says: "According to the report by the FBI and DHS, the hackers involved in the Russian operation used fraudulent emails that tricked their recipients into revealing passwords." It's been widely reported that the same technique was used to get into the email account of Clinton Campaign Chair John Podesta.

[Update: later versions of the story say that the evidence of hacker intrusion was found by the utility on a laptop which was NOT  connected to the grid.]

Most of us aren't targeted by foreign spy agencies, but all of us who go online are targeted by those who want our passwords for plain old theft and fraud. The Russian hackers are probably very clever; but phishing is an old (and unfortunately very easy to implement) way to get passwords. Fortunately it's easy to avoid being phished. I wrote the post below more than ten years ago. Phishing hasn't changed much since then ; so, if you're not up-to-date on how to avoid being caught on a phishhook, please read on.


Phishing is a nasty way of stealing your account IDs and passwords. This post is about how NOT to be a phish and contains some secrets about how you can be fooled on the Internet. The email below is an actual illustration of phishing email Mary received.


Note that the email claims to have com from PayPal and shows a return address of service@paypay.com. Secret #1: Anyone can put any return address he wants on email. Return address is absolutely NOT an indication of where email came from. This one DIDN’T come from PayPal.

Note the link that says Click here to verify your account and the other link which says https://www.paypal.com/us. If you clicked on either one of those, they would take you to a site which pretends to be PayPal. It ISN’T. “But surely,” you say, “I can see where the second link is taking me. It does go to PayPal.” Secret #2: What is visible in a link and where it actually goes DO NOT have to have any relationship to each other. In fact, in the actual email (but not in this post) both of these links would take you to a bogus site whose address is I haven’t gone there. I suggest you not go there either.

This site will look like PayPay. It will ask for your ID and Password. It may even ask for some other personal information. Now someone else knows how to get into your PayPal account. You’re a phish.

Just to show you how easy this scam is, if you click on https://www.paypal.com/us or the other link in this post, they will take you to site of my book hackoff.com, not PayPal. But I don’t think I’ll resort to phishing for readers.

Once you know these two secrets, it’s easy not to get caught on a phish hook.

You already know that you can’t trust either the from address or any link to be what they appear to be. You can see what a link actually goes in Outlook email by hovering your mouse over it without clicking it but that’s not the way to handle security. The simple rule is this: Never, Never click on a link in an email to go to any site where you will be asked for your name and password. Never. Don’t do it.

So suppose you get a letter like this and think it may be real, what do you do? First of all, be skeptical. Organizations like PayPal know about phishing so they don’t ask people to click on a link to get to the signin page. But some other vendor might be really dumb.

If you think the email may be real and you do want to get to your account, simply type the login URL – in this case “www.paypal.com” – into the address bar of your browser. Then you know you are going where you think you’re going. DO NOT click on a link in email to get to a signin page. DO NOT copy the link from the email and paste it into your browser; even if it appears to read right, it may have a tiny difference that gets you where you don’t want to go. Type the URL into your browser or use favorites that you have set up in your browser to get there.

That’s all you need to do to safe from phishing.

One note: suppose a friend sends you an email with a link to an interesting website. Should you go there? Well, you won’t get phished if you don’t supply any account number or password. But you also can’t be sure the email is really from your friend unless there is a personal note with content no one else would write. And some websites can be dangerous even if they don’t have phish hooks. Be careful following links.

Salt of the Earth

Pure impurities

Apparently the "purest salt in the world" is distinguished by its "varying" impurities.

December 29, 2016

Past Climate Change – the Pictures

In order to understand the significance (or lack thereof) of the effect we are having on the climate, it is helpful to look at pictures of climate past. Not surprisingly perspective makes a big difference in the story the pictures tell. And past performance is no guarantee of future results. I don’t think that the pictures below prove either way the effect of anthropogenic activity on climate; but they’ve all been entered as evidence into the debate. And there is a debate whether people on either side of the argument find that comfortable or not.

The graphs below are from the latest UN-sponsored IPCC study. The one immediately below clearly shows temperatures rising since 1850. There’s some debate about the methodology but the shape of this graph is generally accepted. Since the temperature increase dates from the beginning of the industrial age and the warming apparently accelerates as greenhouse gasses accumulate in the atmosphere (picture below this), it is used as strong evidence of cause and effect and projected into the future (which I’ll write about later).



For the next graph we widen our perspective to warming and cooling over the last two thousand years. Here we see that global temperature seems to oscillate and that it was really cold about 1700 and very warm around 900. We are now recovering from what is called the “Little Ice Age”. The green line, about which there is some debate, does show a noticeable spike now above any previous peak. This spike is often cited as evidence of anthropogenic warming.


But when scientists look at data they also look at the likely accuracy of the measurement. The graph below shows the same data as the graph above but shaded to show what range of possible actual temperatures the graphed line represents. All measurements are subject to some error and estimates from before anyone was directly measuring temperature even more so. It is highly likely that the pre-measurement data obscures any short-term peaks (but that doesn’t prove there were any). The graph below shows that, within the range of likely error, the current peak – even the disputed peak at the end – may not be a onetime event.


Now let’s look back 4500 years. It was much warmer than now about 100BC. There were certainly humans then and they had fire but they weren’t making any significant change to the atmosphere. The scientists who made this chart say: “We, Cliff Harris and Randy Mann, believe that the warming and even the cooling of global temperatures are the result of long-term climatic cycles, solar activity, sea-surface temperature patterns and more. However, Mankind’s activities of the burning of fossil fuels, massive deforestations, the replacing of grassy surfaces with asphalt and concrete, the ‘Urban Heat Island Effect,’ are making conditions worse and this will ultimately enhance the Earth’s warming process down the meteorological roadway in the next several decades.” After that they predict natural causes will take over again.


Finally if we look back to before there was life on earth, we see that temperature oscillations are the norm. The huge drop in CO2 (purple line) at the beginning is because of the emergence of photosynthesizing plants. In the couple of million years since our ancestors evolved from the primate pool, temperatures have been relatively stable at the low end of the historic range. But “relative” covers a lot of ground. 20,000 years ago Vermont was covered by a mile of ice and migration to North America was by land across the Bering Strait. Lots of warming and lots of rising seas since then.


So what should we make of all this “evidence”?

  • We urgently need to better understand the causes of past climate change. No reason to think those same causes aren’t still at work. Could show, for example, that we’re in for extreme warming even with drastic reduction in the emission of greenhouse gasses. I hope government-funded research in the new administration will be on natural as well as anthropogenic causes. I don’t hope the research will stop; we do need to understand this.
  • Looking at the last 160 years by itself can be misleading (doesn’t mean it leads to the wrong conclusion, though).
  • Climate change is apparently chaotic; its graph a fractal. Small inputs can have huge effects and vice versa. Remember the butterfly wing in China that can cause a hurricane in the Florida. From a mathematical point of view, this means the linear extrapolations of the effects of increasing concentrations of greenhouse gasses in the UN report are suspect (but more on that later).

Other posts in the climate change series:

“Dissent is not a crime” – Except to the New York Times

Believers and Deniers

Combating Climate Change (the nuclear option)

Natural Gas vs Climate Change

Solar and Wind Need Natural Gas

Natural Gas and Fugitive Emissions

December 27, 2016

Natural Gas vs. Climate Change

The Kyoto Protocol was adopted by most of the nations in the world in 1997. Although Al Gore signed it, the US Senate never ratified it so it doesn’t bind us. However, the US is the only industrial nation to achieve the quotas established for it in the treaty. Between 1997 and 2012, the US reduced CO2 emissions by 5.2% according to the Energy Information Agency (EIA). The EIA says that CO2 emissions between 2005 and 2012 fell by 12%.

Why? Was this because of regulation in the spirit of the unratifed Kyoto, massive conservation, a buildout of wind and solar? Here’s what the EIA says:

“Energy-related CO2 emissions can be reduced by consuming less petroleum, coal, and natural gas, or by switching from more carbon-intensive fuels to less carbon-intensive fuels. Many of the changes in energy-related CO2 emissions in recent history have occurred in the electric power sector because of the decreased use of coal and the increased use of natural gas [emphasis mine] for electricity generation….

“Adjusted for inflation, the economy in 2015 was 15% larger than it was in 2005, but the U.S. energy intensities and carbon intensities have both declined. On a per-dollar of gross domestic product (GDP) basis, in 2015, the United States used 15% less energy per unit of GDP and produced 23% fewer energy-related CO2 emissions per unit of GDP, compared with the energy and emissions per dollar of GDP in 2005.”

In simple English, there was a huge switch from coal to natural gas because natural gas is now cheaper than coal. Burning natural gas gives off 50% less CO2 per BTU of energy generated than coal. There has also been a switch, although less dramatic from oil-based products to natural gas. CO2 reduced by 26% per BTU when switching from oil-based products to natural gas.

And why the substantial switch from coal and oil to natural gas? Almost all of it was without subsidy or mandate of any kind. It happened for the simplest of reasons: once the disruptive technologies of horizontal drilling and hydraulic fracturing (fracking) came into widespread use, the US suddenly had vast supplies of natural gas which could cheaply and safely be recovered. Down came prices. Up went usage. The capital needed to finance the change from burning coal or oil was readily available because of the money which would quickly be saved. This switch has been “sustainable” because it depends on economics rather than incentives which politicians can change every year. The rate of conversion fluctuates with the prices of coal, oil (which has also gotten cheaper) and natural gas; but the conversion continues and US emissions continue down while GDP is up.

Departing from environmental considerations for a minute, natural gas used in North America is sourced in North America; supply disruptions are unlikely; we don’t enrich our enemies by using it; in fact, the money stays in our economy. But I digress.

Still almost 33% of US electricity is generated from coal. Oil still powers many factories. Many homes are heated by oil and propane rather than clean natural gas. There is huge potential to lower emissions further by displacing this coal and oil with natural gas. The obstacles are that 1) pipeline don’t reach everywhere and 2) with the increase in natural gas usage, some pipelines are put of capacity seasonally – for example, those that serve New England.

So obviously if we fear climate change (or simply want lower energy costs) we ought to:

  1. Build new pipelines to reach more users;
  2. Encourage drilling for natural gas on public lands to keep the price low and displacement happening;
  3. Assure that regulation of the new technologies which created the abundance of natural gas is both effective and reasonable – and is not used to protect other industries which are challenged by the low cost of natural gas like coal, railroads which haul coal, nuclear, oil, and renewables.

We don’t have to wait for certainty on how significant the anthropogenic effect on climate change is to take these steps since they result in lower energy costs, don’t need public subsidy, and reduce a whole array of pollutants.

Unfortunately, it is now nearly impossible to build a new pipeline, especially in the Northeast because of “environmental” opposition. Frankly this is absurd, especially if you are concerned about atmospheric levels of CO2; The opposition makes perfect sense if you are in a competing industry, however.

There is an artificial hysteria about fracking meant, I think, to slow the growth of natural gas use. Those who believe there is a conspiracy against rational energy policy ought to follow the money (hint: purveyors of “renewable energy” are no purer in their motives nor more objective than those of us who sell other products). I wrote Good and Bad News about the Safety of Natural Gas Fracking a long time ago and will update it soon.

It is a legitimate concern that methane, the main ingredient of natural gas, is itself a much more potent greenhouse gas than CO2; If more use of natural gas meant massive releases into the atmosphere. Its use would be counterproductive from a climate change avoidance point of view. I promise to write more about “fugitive emissions”; but for now we can take solace both in the facts that the gas industry has decreased gas loss while vastly increasing gas production and that Chapter 6 of the IPCC report on climate change finds atmospheric methane content nearly stable with annual variations it attributes to the effect of temperature changes on natural sources like swamps.

In the interest of both the economy and the environment (the two are not enemies) we ought to be increasing the substitution of natural gas for its far dirtier fossil fuel cousins.

Please note that I am not disinterested when it comes to natural gas. I founded a company which trucks natural gas to large users beyond the reach of pipelines and still have a financial interest in its success. I’m proud that it has both saved businesses by reducing their energy costs and vastly reduced emissions. Still, you have to watch my objectivity on this. The business is helped by low natural gas prices, hurt by low oil prices, would be helped by a tax on carbon dioxide (which I’m not advocating), and is not needed where pipelines do get built.

Other posts in the climate change series:

“Dissent is not a crime” – Except to the New York Times

Believers and Deniers

Combating Climate Change (the nuclear option)

Past Climate Change - The Pictures

Solar and Wind Need Natural Gas

Natural Gas and Fugitive Emissions

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