A Service Bottleneck

When I was looking at time series data from my previous post, I found an interesting issue. First, the above graph represents "connected time," i.e. time people are actually using the resource; else, the value at Zero would dwarf the entire graph. The Y-axis is the number of seconds served for the corresponding number of concurrent connections. This is actual data, and the describe is generic.

The coolest part is: IT'S A BELL CURVE. I've read about these in statistics, but this is the first time I've encountered one in the wild. I knew I had a problem when the bell curve did not flatten out on the right tail. The physical limit of the resource is 23 units. As concurrent connections approached 23 units, new connections were denied and subsequently retried. See the "hump" beginning at 18 units? That's the graphical representation of a bottleneck.

Now, how to fix this. . .it's not practical to fix this problem with a technological solution. 95% of connected time is served prior to the bottleneck at 18 units. Over 90% is served with the first 13 units, and the marginal return for each subsequent unit is less valuable.

The fix is with a business control. First we determined the build up occurred due to multiple long running connections, which did not act like the other connections. Many of these connections began at the same time and finished at the same time, and did not disconnect randomly. Therefore, we modified the behavior of the people using the long running connections.

Working with Continuous Time Data

Recently, I was asked to study some time series data. Each record contained a date range, bracketed by a DATE_TIME and an END_TIME field. The objective is to find number of concurrencies for all records’ date ranges. Each second in each date range must be compared against other fields, and calculate a total for the date range, i.e. 3 concurrent events at 8:30:31 AM on July 31^st.

First, I tried modeling this with Excel. With relatively few records, 600, this was extremely quick, immediate information. I listed the possible times in 1 minute increments. However, as the increment shortened, the possible times exponentially expanded. Excel lost steam as we approached 10000 times being checked.

Next, I tried a SQL query using an accompanying table with a datetime field. I used a scripting language to walk through each second of each record’s date range and create a record in the accompanying table. Then I could use the following SQL command to pull the data:

SELECT time, COUNT(time) FROM times GROUP BY time ORDER BY time;

This created two bottlenecks: 1) populating the accompanying table, and 2) retrieving the data. As the accompanying table expanded the GROUP BY statement became a burden.

Solution was to use a SQL aggregating table with a counter field. I ran a massive SQL creation of every possible time between the ranges we examined. Use a scripting language, I walked through every record, and ran the following SQL command:

UPDATE times SET counter = counter + 1 WHERE DATE_TIME >= record AND END_TIME <= record;

The final solution took a day to run for results from the previous month. It was faster than the two previous methods, and only created one bottleneck.

MLB Road Trip

I was looking for a site to quickly plan a MLB road trip, and many exist. However, most are not effective at consolidating information I need: dates, locations, and games available.

So I built one myself:

http://mlb-road-trip.winsletts.com/

Currently, I don't have minor league games, but that is around the corner. Please, send or leave a comment on the site.

Review: Bluehole OCA

Pros:

• Large planning hull is wide and stable
• Soft chines make side surfing easy

Cons:

• Weighs 80 lbs. – maybe more

Specs:

Length: 15’2”
Width: 36”
Rocker: 2”
Paddler Weight: 100 lbs to 1000 lbs

Summary:

Yesterday, I ran the Locust Fork as it fell from 4 to 3.5 in my grandfather’s Bluehole OCA. The boat was produced in 1975, has some Royalex damage on the underside of the hull, but still floats. It has an old Birmingham Canoe Club sticker on it. My grandfather was a member back in the 70’s when LRC was suicide, Bull Dog Bend was the place to go, and the Locust was for experienced paddlers. The last time I’d paddled this boat on the Locust was some of my first whitewater trips, so it was good to reconnect with the original.

The boat was outfitted with a 72” airbag in the front, and knee pads for comfort. I bought that airbag in ’01 from Grainger at Alabama Small Boats – I assume he’d had it on the rack for while.

I was surprised at the speed of the old boat. Turn it on a chine, give it a forward stroke and the boat takes off. Arriving at eddies was easy; catching the eddy was a different story. I’m used to harder edges on a canoe that whip into the eddy; however, the soft chines of the OCA plow straight through the slow water. To get the boat to whip around required a strong bow draw. Even then, you needed maneuvering room.

The large planning hull makes an awesome surfer. Side surfing at ender hole was a good 12-second ride. Since I didn’t have a rear air bag, the boat stern squirted and flushed me out. The recovery process took 3 other boaters, and about 5 minutes. All of whom I thank again. I surfed the boat on a couple of other front surfing waves. The downside to playing in the OCA is the exhaustion from muscling the boat around.

Other than the play, the boat ran the river flawlessly. It always took to my commands when moving down rapids. On Double Trouble, I moved from right-to-left behind the top hole, and into the eddy easily. Above the river right hole on Tilt-a-Whirl, I caught the eddy, ferried across, perused on down, and took on minimal water. On Powell Falls, I got a little ambitious and ran the right bump. Everything went as planned, until I flipped on landing—my fault.

Overall, the boat was fun to reconnect with. It was easier to paddle than I remembered, and made for a fun day. In the future, I’ll probably pull the OCA out a little more.

Renault-Volvo Strategic Alliance

Written with Mahendra Madhavan for a case study in our Global Financial Management course.

Thesis

Disproportional control of the resulting Renault-Volvo RVA by the French Government was not a merger; it was an acquisition. Volvo investors lost all control of their organization, while assuming the risk of Renault. Volvo’s Executive Chairman, Peter Gyllenhammar, attempted to perform a unilateral cram-down by requiring quick decisions and giving sparse information. After pulling the company from its core competencies, Gyllenhammar resigned. Volvo leadership leveraged those failures to return the company to its core strengths.

Why was the merger proposal rejected? The economic rationale for the merger seemed unassailable. What other considerations proved significant?

The reason investors reject the merger is inadequate information from Volvo management. When Volvo’s Executive Chairman, Peter Gyllenhammar, champions the merger, he gives an incoherent retort emphasizing a quick merger, and non-business arguments such as: “You cannot go back to something you have just mentally left” (7). Volvo’s senior management loses confidence and trust of the investors by requiring a short timeline, and excluding them in the latest development; exceptional information must be provided for corporate changing events, like mergers. Volvo management performs improperly--only sparse information is provided, which creates uncertainty among the investors.

In addition, merger terms are not fair for all of Volvo investors. The French government retains a powerful right, termed a Golden Share, which prevents an investor from acquiring or voting more than 17.85% of direct interest in the merged company Renault Volvo Alliance (RVA). In concessions, the French Prime Minister raises the figure to 35%, matching Volvo’s actual percentage of equity at closing. Control of the special voting rights gives Volvo little control in the strategic direction of RVA.

Volvo investors are concerned about protectionist actions of the French government in other industries. French government intervention in internal RVA affairs and the powerful Golden Share ensures the French government retains control over corporate decision making. When Gyllenhammar tries to reinsure Volvo investors about French control, he vaguely states an attempt to get “interpretation or assurances” (7). A yet undefined timeline on the privatization of Renault creates anxiety among Volvo’s investors. Among the concerns, France’s Minister of Economics, Edmond Alphandery, has stated full privatization would not occur.

As a public company, Volvo’s market value is explicit. Yet, as a private company, Renault’s enterprise valuation contains assumptions on discounted cash flows, projections, and market multipliers. Since a privately held organization does not file financial statements to financial regulators, investors rely on biased information provided by merger proponents. Such valuations are subjective judgments of the valuation analysts. Resulting losses by Renault during the valuation and the proprietary details of the valuation analysis cause considerable concern among investors. Given this situation, investors question the fairness of 65% weight for Renault ownership in RVA.

Who figured prominently in the rejection? Did the opponents have one common objection, or did groups of them oppose different aspects? Either way, was Gyllenhammar’s approach appropriate?

Several groups oppose the merger. Volvo’s institutional investors leveraged the media for opposition. The Swedish news papers Expressen, Dagens Industri, and Svenska Dagbladet, all opposed the merger. Volvo senior and middle managers wrote letters to Soren Gyll, CEO, indicating disapproval of Gyllenhammar’s merger proposal. Merger opponents commonly object the lack of clarity and the uncertainties over the values implied in the merger agreement. Comments provided by the institutional investors in Exhibit 5 state such shortcomings. From Volvo’s Annual Report for 1993, Gyll wrote in an annual letter to the shareholders:

It is important to convey knowledge and understanding of the company’s current orientation and status to all interested parties. Candidness and clarity must characterize our operations. . .

Gyll understands the importance of shareholder information, and the lack of which caused the RVA debacle.

Gyllenhammar, the Volvo’s chief architect of the Renault-Volvo merger, began with intentions to make RVA a leading global auto manufacturing company. Three arguments for the merger are (1) competitive efficiencies, (2) operating efficiencies and (3) financial strength. Proponents envision this in phases: the 1991 strategic alliance leads to combined company in 1994. Through the process, Gyllenhammar invested personal amount of time and energy to create the alliance. However, he deviated from fundamental steps required for the complex merger of public and private entities. 164,000 institutional and private investors own Volvo, and the majority is required to approve the merger. Stakeholder buy-in requires earning the trust and confidence of most parties. Gyllenhammar releases three documents a span of two months; the first two contained soft information with no financial forecast. Since synergy is cited as the primary advantage, a lack of financial support for synergy eroded investor confidence. When disclosed, details of the Golden Share surprise Volvo’s board of directors. The details of which are hashed together only two days before the announcement. Such actions constitute calculating intentions or brash foolishness by Gyllenhammar. Although the board iterated support several times, investors felt the Gyllenhammar’s submission to the French government gives Volvo away cheaply. Criticism of Gyll by Gyllenhammar for his half-hearted leadership of his management team indicates the merger proposal is an ego clash.

Volvo’s latest financial reports show a surge in profits (SKr 1.03 billion) for trucks and cars for the first nine months of the year contrasting a loss (SKr 707 million) in the corresponding period the previous year. This begins the company’s emergence to profitable, and Renault reports losses tied to the recession in the European automotive industry. Analysts questioned if Volvo needed Renault. Gyllenhammar should use the latest financial results to renegotiate ownership balance in RVA and possible removal of Golden share arrangement.

In his three page resignation document, Gyllenhammar lists the efforts undertaken by Volvo under his leadership for merger with Renault. He criticized the shareholders for rejecting the merger proposal; yet, not a single sentence spoke regards the Golden Share agreement, which was concern for all Volvo investors. Initial intentions of a merger were geared to make RVA dominant in the 21st century auto industry. Gyllenhammar created a divisive situation and failed to act in the best interests of the Volvo’s share holders.

What was the “process” by which the proposal failed? Since no vote was taken, had the proposal really failed?

Once the proposal shows cracks, the growing opposition from media, investors and employees overwhelms any progress. For Gyllenhammar, the process failed. For Volvo, the process is an inactionable proposal. Gyllenhammar communicates poorly and lacks sufficient information to make the proposal actionable. He admits lack of clarity: “If we can address these other concerns – give more clarification, perhaps get positive news on privatization – then we think the chance is very good.” To win the process, he should provide infinite documents creating an overload of transparency.

Once concerns fuel nationalistic, conservative editorials, Swedish Small Shareholders Association announces the evaluation is impossible on the basis of meager information. This was in response to an eight-page brochure summarizing the terms and rationale for the merger. The document stated synergies would save up to Fr 30 billion (both Volvo and Renault) by the end of 2000; however, no financial forecasts validated the estimate. Volvo published a 2nd document at the request of shareholders; again it contained no financial forecast and little detail. This document only expanded on allocation of the synergies: 60% from car and 40% in truck and bus operations. Finally, Volvo released a third document containing supplemental information, a valuation discussion and fairness opinion from Credit Suisse First Boston, and copies of letters from the French government. The letters contained assurances regarding use of the golden share and privatization. This document addressed the concern of an institutional investor questioning fair value of Renault’s shares. By this time institutional investors had decided not to support the merger proposal. Volvo employees with 5000 white-collar workers announced its members would vote their shares against the merger proposal. Volvo dealers in North America expressed strong concerns that the merger would dilute Volvo’s strong brand franchise because Volvo was viewed comparatively poor there. Lastly, 900 company civil engineers called for postponement. Push against the merger rises quickly after one dissenter.

The proposal failed when Volvo’s board decided to withdraw in December 1993 based on the recommendation by Soren Gyll. He based the recommendation on a special meeting with Volvo’s senior divisional managers, and a letter from 25 senior managers expressing disapproval. Under the alliance, control of joint activities had been 50/50. With the merger, managers believed that control would tilt 65/35 to Renault and Volvo.

What were the implications of this episode for analysts and executives in strategic alliances?

Executives pursing a strategic alliance should allay stakeholder questions by providing timely, accurate, grounded, and factual information. An emphasis on trust and confidence creates a buy-in atmosphere for all parties; strong-arm tactics and limited timelines create questions and divisions. Executives involved in strategic alliances should frequently seek third party analysis looking at the rational for the agreement. Gain pre-approval from employees, senior, and middle management prior to corporate changing actions. As basic business practices, executives must communicate benefits from corporate decisions to internal and external stakeholders.

Strategic alliances looking toward an eventual merger require continuous monitoring to ensure the decision is the company’s best interest. Environmental and economic factors change and strategic alliance should be analyzed within that context. Communication between companies should remain open, and any attempts to renegotiate must be viewed amicably. Executives should never view the merger as a foregone conclusion of a strategic alliance.

Paradox of Tax

Currently, the United States government, states, and cities derive tax revenue from income, property, gambling, sales, and sin taxes. These tax revenues have been used to build public services: roads, police & fire forces, healthcare, and parks. Rarely are the taxes people pay directly attributed to the benefits received. For instance, income taxes build roads, and higher income individuals build more roads than lower income individuals. However, lower income individuals pay less per mile than higher income individuals who drive less. The paradox of our tax system and usage of tax dollars forces people to act unnaturally.

A person acts unnaturally when he cannot assess the full cost of performing an action. Collectively, the problem multiplies. I’ll discuss roads because everyone is familiar with driving. However, it should be replicated across as many services as possible.

Governments should remove the portion of income, property, gambling, sales, and sin taxes spent on building and maintaining roads. Then, instate that tax on gasoline sales. Net effect on the average citizen who makes the average income and uses average gasoline will be zero. Net effect on high-income individuals who use less than average volumes of gasoline will be positive. Net effect on low-income individuals who use above-average volumes of gasoline will be negative. Therefore, people will directly associate actions with costs.

When people directly associate a cost with an action, they minimize that action. Revenues for road maintenance and building will crumble in the short-run. The US observed this with demand destruction at $4.50 / gallon. However, people make decisions that lower the cost of road maintenance and building: driving lighter cars that consume less gas, move closer to required amenities, or walking versus driving. Individuals are given the option to choose their tax rates (but actually a 'service fee').

Taxes and government policies produce unnatural incentives. Income taxes versus actual cost taxes subsidize actions of lower income residents no matter the cost to society. Abnormally low-cost mortgage arrangements encourage people to purchase houses, instead of renting. Disproportional transportation costs people to make decisions contrary to collective best interests.

I’m not against the “American Way of Life:” traveling to work in the city from a big house a away in a suburb. I am for government not creating false incentives for people to act unnaturally. As much as possible, consumers of public services should recognize the costs associated with their actions. The paradox of tax is: no matter the intent, it makes people act unnaturally.

Why Sustainable?

Most often we here “sustainable” in the term “sustainable development.” To answer the question why sustainable, let’s answer the question: “What is development?” Development is creating something new. The purpose of creating something new is to gain an advantage.

Development is using resources to create something that provides an advantage. Past examples of macro development has been power grids, interstate road systems, and government. These systems provide advantages for everyone who participates in the system. Micro development extends into industries, businesses, and people’s lives: i.e. people purchase cell phones to give them an advantage.

Development requires initial investments: the creation of the object. The interstate system in 1956 was the largest project ever undertaken: costing $114 billion dollars (not adjusted for inflation).

The interstate system provided an advantage. Transportation times were shortened substantially. Large trucks are now the backbone of our economy. The advantage the United States received from the interstate system was much larger than the $114 billion dollars invested.

In 2009, the interstate system is a foundation for our efficiency. Original creation of the system was a cost and a benefit for our system. Maintenance of the interestate is a cost, but not a benefit. The entire system does not perform better because a bridge is repaired or replaced. Maintenance does not benefit anyone, except the person receiving payment for maintenance. That’s the paradox of maintenance: it provides no benefit, but it is required to maintain current efficiencies.

With that preface, why sustainable development? The answer: because maintenance provides no benefit. In the United States, we are no longer a blank slate. We have a choice between maintenance and re-creation. Our administration is verbally pushing re-creation with a twist, “sustainable re-creation.”

Schumpeter’s term “creative destruction” applies to wiping out technologies due to advances. American’s would rather create than maintain; we’d rather buy a new car than repair a broken axel. That’s why the administrations fight for sustainable development is so important. New creation and development is easier to sell to American’s than “maintenance.”

However, don’t expect the massive maintenance bill, aka “Stimulus Bill,” to change the marginal productivity of labor. It’s providing much needed maintenance for the current infrastructure; it’s not creating something new, and no advantages will be had.

My Experience with a House Auction in Birmingham

Today, I participated in a house auction in Vestavia, Alabama. We discovered the auction three days ago. We had the house inspected yesterday. From the time we viewed the house, we began due diligence for the auction.

We found a green ranch style house built in 1960 with good bones, but necessary repairs. It sat on a half-acre lot in an excellent neighborhood. Prior to auction, the house was listed for $139,000—cheap enough to assume financing, and payment. First, we decided whether we wanted the house. My wife had an emphatic “YES!” Actually, she designed the color patterns, and chose appliances from Craigslist. I was more apprehensive.

Next, we began due diligence, which consisted of three steps: an inspection, speaking with the mortgage underwriter, and financial analysis. The inspector told us to plan for a new air conditioning and heating service ($2,000 - $5,000) immediately, and a new roof ($5,000) within a year. The mortgage guy helped us minimize our initial capital outlay. Interestingly, a 5.75% interest rate was more desirable than a 4.75% requiring a MIPS payment of $3,000, an origination fee of $1,500, and a monthly PMI of $100. With the 5.75% mortgage and required payments at closing, and immediate repairs, we found a maximum on the house to be $112,000.

The house had a 5% “service fee” tacked onto the maximum mid. Therefore, our maximum bid was $107,000 (actually $106,667).

With our inspection, mortgage information, and financial analysis, I headed to the auction. I told our real estate agent to kick me if I bid above my maximum price. Five houses were auctioned off, and ours was last. Experience of seeing four auctions prior to “game time” soothed my nerves.

Once ours was announced, I listened keenly. The disclaimer was the same as the four previous, and bidding began similar to the others. Bids quickly ramped up from $10,000 to $40,000, $60,000, $80,000, $90,000. Then silence. Someone was holding the highest bid at $90,000, and the auctioneer asked for $95,000; he got it. Quickly someone else bid $100,000. Pace slowed, and everyone looked around for the next bidder. When he asked for $105,000, I flashed my card. $106,000; someone else. $107,000; I was quicker to bid this time. The pace slowed again. From $10,000 to $107,000, only 45 seconds passed. I remember my analysis—I was at my maximum.

Next a lady raised the bid to $108,000. I waited to give her thinking time. I waited to give me thinking time. I remember my analysis--$108,000 to $109,000 was marginal. The difference between the two was slim. I flashed my card. I had the high bid: $109,000.

Do I want this house? Are there costs associated with the house I don’t know about? Will this wipe-out my savings? Pausing, she bid $110,000. I don’t know how long I had the high bid—4 seconds, maybe. It felt like a minute, and everything became clear.

At $110,000, she and I were the last bidders. My decision prior to the auction determined it was too high for me. I feared buyer’s regret. At $107,000 I was certain. At $110,000, I feared a bidding war that left me standing, and owning uncertainty.

Pressure came, and everyone was looking at me. Auctioneer asked if I would go $111,000? How about $110,500? I shook my head, and the event was over. She won the house for $110,000 (plus a 5% “service fee,” or 115,500).

As I walked away, I tried to answer the question, “Would I have paid $110,000?” All I could think was, “absolutely.”

Relationship of Past to Future and Thought Models

Future events are more predictable than the past. Taleb stated this in Black Swan and provided good support. Essentially, this point in time could be created by infinite possible historical events. Some historical possibilities are quixotic: the world was created yesterday, and everything is the way it is. Others more rational: over 4.6 billion years the earth created life from a melting pot (which is the debate between creationists and everyone else). Even the recent past, i.e. yesterday, creates infinite nodes on a decision tree, and multiple nodes lead to the current point. Anyone could have done infinite events yesterday, not restricted by resources, time, other people, or environment, and be where they are now.

However, resources, time, other people, and environment bind the future. A person can only get so far today based on resources (i.e. money), time (only 24 hours better get going), other people (“liquidity for one, insolvency for all”), and environment (200 years ago you had a small possibility spectrum). Side note: I’m an optimist, and I believe in stringing together victories for change—not fell swoop, lottery changes to the future.

Past future decisions had more possibilities than current future decisions. Creation of predictive models attempts to tame the future based on collective handling of the future in the past. Past future decisions were based on resources, time, other people, and environment at that point in history.

Failures of models attempt to define collective output of all decisions with a limited number of inputs. Deviation from the future and predictive models occurs due to a change in inputs. Models disregard the current binding input in favor of past correlative inputs.

Bubbles happen when most inputs are found from past data, and perpetual future assumptions are made on this limited set of inputs. Crises happen when a new binding input is collectively found.

In 2007, what was the binding input: confidence, incoming or outgoing money? Economists are largely okay with cramming 2007 into current models, calling it largely accurate, and going forward. Economist’s antithesis wants them hung for not predicting the future.

Economists have shown they are excellent builders of models that match the events. However, they are lousy at determining the actual inputs.

Everyone poorly defines current restrictions on the future. For example, ask someone “What do you want to do?” Then ask them “Why aren’t you doing it?” That person will give a list of artificial restrictions.

Buy or Rent: an NPV of the Birmingham Housing Market

My wife and I sold our house in May 2008. With our equity, we could afford to set the price aggressively to sell. It was better to sell our house for less, than it was to hold on for a mythical price.

After we sold our house, we moved into an apartment. When selling, the buyer’s agent asked, “Why are you selling?” And my reply was, “I don’t want to be in a house right now.” I can’t say that I foresaw the economic meltdown last fall; my projections were 10% interest rates as the supply money for mortgages decreased. Either way, it was a good move.

Trade-Offs: Apartment v. House

Apartments are cramped, and most “features” of a house are indirect to the features of an apartment. For instance, in an apartment you don’t have yard work, in a house you have to do yard work; the trade-off is a yard where you can play. Other trade-offs include maintenance, cost of utilities, trash, taxes, etc. The costs of a house are explicit, but most benefits are implicit.

Like most personal finance decisions, we have decided we want to live in a house for non-financial reasons. We made the decision based on non-financial metrics, but financial metrics determine our price range and feasibility of living in a house.

Assumptions & Data

As, we are not speculators; therefore, we are not betting on aggressive increases housing price. Remember this when I am talking about owning a house, and appreciation.

We will start with our known information and assumptions:

Principal on House	$120,000.00
Rent	$830.00
Interest Rate	4.85%
Mortgage Months	360
Tax Rate	12.00%
PMI Rate	1.00%
Pay PMI Until	20%
Variable Utilities (House / Rent)	50.00%
Property Taxes	1.00%
Repairs (Mortgage Payment)	50.00%
Rent Increase	2.15%
Corporate Bond Yield	6%
Growth of House Value	1%
Closing Costs	3%

Currently, our rent is $830, marginal tax rate is 12%, monthly variable utilities average $215, and fixed utilities average $100. I’m using the corporate bond yield of 6% to discount the costs. Marginal tax rate is included because of the beneficial treatment of mortgage interest by the IRS. I'm using 6% discount rate because I can receive that on a relatively safe bond.

One bit of contention is the 2% growth of house value; it is the long-term growth of housing values—-I read that recently somewhere. Include anticipated repairs and upfront repairs that must be made prior to move-in. Monthly repairs of "50%" assumes costs are half the mortgage payment, which is a best guess. Owning would significantly outweigh renting if no repairs were needed.

Findings

First, buying a house with a 30-year mortgage is not a positive NPV project.

Given the assumptions above, the following NPV’s exists for renting and owning after the following durations:

	Buying	Renting
1 years	($19,315.04)	($13,381.76)
5 years	($73,679.56)	($61,384.46)
10 years	($126,077.78)	($110,696.20)
20 years	($191,423.27)	($182,415.45)
30 years	($231,285.04)	($229,245.59)

Throughout the duration of the project, renting always has a higher NPV than buying. From year 1 through year 20, renting actually has gains on buying. Only from year 20 through year 30 when principal has been reduced, does buying gain on renting.

I've heard people claim, "At least with owning a house, you receive a check when you leave." If he rented and saved the rest, he would have more money than the closing check. Seeing that most people are moving houses less than every 10 years, most are making poor financial decisions.

Outcome

In order to maintain our current economic position on housing, we cannot buy a $120,000 house. Also, the value of housing is a function of time, and the indeterminate market value of the house. As people have recently found, the owner receives the benefit/detriment of changes in house prices.

We continue to look for houses, but I don't expect to make any money in the process.

Got a Team

When my uncle played ball as an eleven year old, my grandfather took the role of coaching. He didn’t participate in the original draft; due to each team having too many players, the league created a team, and he was given players from other teams. Since he didn’t choose the players, he received the worst players from every team. Each of them could have easily played right field for any other team—in little league, right field was the position for people who were rotated in to play the minimum number of innings.

To make it fair, the other coaches had given him first pick on equipment. “To choose a wooden bat, you don’t just go up and grab it. You hold the fat end of the bat, and tap the handle on the ground.” When he told this story, it was always the occasion we had a wooden bat, or an object equitable to a bat—a stairway baluster. He would demonstrate with the bat how to tap lightly, “you should that ‘ping.’ That’s when you know a bat has pop.” He could always find a solid piece of material to have that right high-pitched sound.

After they chose the equipment, he would begin with the story of crafting a team. “They were ragtags. Half of them hadn’t played baseball before. The first thing I'd do is make them hit baseballs out of the bushes.” He showed me how to hit in bushes—ruined some good azaleas. “I would put a baseball on a limb, and they would hit it. We did that for house a day.”

When I was twelve, we had a Cinderella season, and ended up in the championship series. He took me to the azaleas out front, and I hit baseballs the week before the series. I had a hit every at bat that series, except one: it was a liner to the second baseman.

“Why didn’t you hit off tees?”

“There was an endless supply of bushes—we’d tear up too many tees. When someone struck out, I’d send them to hit off the bushes. We’d practice from three o’clock in the afternoon to dark every day. Next, I needed a pitcher. There was one kid with two left feet—he had two left feet. He could hum that ball.” He’d make a pitching motion with his arm—you’d see his longer finger nails wrapped around the imaginary ball.

Preaching Circuit

Mitchell’s head was hard as steel.  Legend has it; he killed the mountain goat in his office by ramming it. An asset that rivaled his will was his ability to place events in chronological, cause-effect relationships.  As an ardent dissident of every official of the United Methodist Church (UMC), everyone who would listen heard him call it a “Preacher’s Union.”  UMC brought changes to the local church, and he decided long ago those changes were lacking.

“You know why we have a fifth Sunday night singing?”  Standing outside the church after we’d sung hymns from the red book, Mitchell asked a rhetorical question and didn’t expect anyone to answer.

“Before this church was United Methodist, we had a preacher that would travel on a circuit of four churches.  We couldn’t afford a full time pastor, so we split one.  On Sunday morning he would have services from nine in the morning to one in the afternoon.  Sunday nights, he would rotate between churches.  First Sunday night he would be at Iron City; second Sunday night he would be over the mountain; third Sunday night he’d be here.  When the fifth Sunday night rolled around he would be off, and the churches would join together to sing.” 

The Swimming Hole

I’d grown up going to my great-grandmothers house; the same one where my papa grew up. We called the area “Rawhide,” but we were the only ones I’d heard call it “rawhide.” My papa told me stories about living over there, and I’d just imagined the woods. My mind transposed him into some woods I’d been in.

One day, we were heading up to my uncle’s on a winding road. Rawhide sat on top of one major hill and two minor hills which abutted each other. The three peaks of the hills were arranged in a triangle, and the winding road weaved through the bottom center of the triangle, and back up to the top of the hills. As we reached the low spot, my grandfather pulled over.

“Come on.”

“Where are we going?”

“Gonna show you were we played. It’s right down here.” He pointed as we walked off the road, through a thicket. Thirty five yards off the road, it opens up.

“This is where we’d swim.” Didn’t look much like a swimming hole, just wet leaves.

“It was 10 feet deep, and about 15 yards long. Leave’s must have filled it in.” He pushed some leaves out of the water, and clear water sprang up to replace the leaves. A spring gushed in the middle of the hills.

Location of the Spring

Old 78

“When we were younger, we lived on 78.” Ned pointed the direction of the highway, going left out the church doors a quarter mile down the road. “We owned a convenience store.  78 was gravel then, and people would travel between Birmingham and Atlanta.  I remember when Bama played Georgia Tech, good number of folks traveled to see them.”

Going away from Birmingham on 78, you’d run up a hill just past Anniston.  “As far as we were from the hill, people were getting on it going toward Birmingham.”

I’d seen a stone building on 78 near the location he’d pointed earlier.  I’m not sure if that building was the store, but I assumed it was.  The buildings sandstone façade looked old enough.

“One day, young man came down the hill; he was hauling.  78 was gravel, and he lost control.  We were playing outside when he ran off the road.  Across from the store, there were some low-lands that held water.  He ran off into the water; we ran down to him.  I held his head out of the water.  He was bleeding, and we drug him up to the road.”

“You know he just laid there and died.  We tried to make it comfortable for him.”

Location of the Store

The Bridge

“We were getting close to a mine,” being a kid, I had no idea what that meant. “The ship rolled on waves whose peaks put the mine at deck level. “

“What’s a mine?”

He pressed his thumb to his forefinger, measuring off three and a half inches as he did when we were fishing, “It was a ball of steel with spikes sticking out. When those spikes hit something it blew up. It was too close on us for big guns, and everyone was getting tense.”

“Winslett! Get your gun and get up on the bridge! I ran up there, as the mine slid closer to the hull. I aimed at the spikes,” he held his finger up again. His long nails gave his finger an extra inch.

“I got my 30-06; ran up to the top. Aimed down at the mine with my iron sights. The target was bouncing on the ocean. I missed it the first shot, reloaded and WHOOOM! Ocean water shot all over the deck.”

The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit

The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit by Thomas J. Sugrue. Princeton University Press, New Jersey (c. 2005).

World War II gave American race relations an opportunity to choose a new path.  During the war, Detroit powered the American army, and stood atop the nation as the symbol of industrial ability.  Land, labor, capital, and entrepreneurship primed the pump that fueled Detroit.  Every player in the economic boom pursued his maximization of utility.  Status quo of the city provided this maximization of utility at the expense of African Americans.  Thomas Sugrue, in The Origins of the Urban Crisis, highlighted the city’s massive expansion, thirst for resources, and policies that fed its fall.  Detroit’s maintenance of the malfunctioning standard, instead of pursuing sustained innovation, led to the collapse of the city.

During the creation of Detroit’s industries and, more acutely, during World War II production, labor shortages brought higher wages for the city’s manufacturing jobs.  Well paid workers, in order to control wages, created an artificial labor shortage with discrimination and segregation.  Managers provided excuses for the segregation, saying they “feared that white workers would strike or lose morale if the color line were breached” (93).  Union leaders stated support for integration, but acted oppositely. At union shops, “disproportionately few blacks held union posts” (101), while “on the national level, the UAW was on the cutting edge of civil rights” (100).  In 1955, Michigan passed the Fair Employment Practices Law.  Employers exchanged explicit discrimination for disparate impact: “prospective workers found their way to the union through references from friends and relatives.  Here, housing segregation reinforced hiring discrimination” (107).  White control over wages was founded on control of labor supply. Once employees asserted groups of individuals were inferior, the labor supply was halved and wages forced upwards.  The system rewarded every white person with greater opportunities than half the population. Marginalizing African American maximized these rewards for white workers, and “patterns of discrimination fluctuated depending on the relative supply of black and white labor” (122).  As workers maintained artificially high wages, Detroit’s industrial costs soared and “employers left industrial centers with high labor costs for regions where they could exploit cheap, nonunion labor” (138).

Discrimination of African Americans in the workplace diffused into society.  Even segregating neighborhoods created shortages for white and black living spaces. Vultures of society maintained status quo because segregation provided a benefit.  For real estate agents, threat of integration created artificial turnover:

"Blockbusting" real estate brokers, as they came to be called, offered real opportunities for blacks, while sowing panic among whites.  Working both sides of the embattled racial frontier made a lot of real estate brokers rich. (195)

Real estate agents received higher compensation from protectionist neighborhoods assaulted by rumors of integration.  Shrewd landlords extorted black tenants living in dilapidated neighborhoods with excessive rent and destitute conditions.  Individuals maintained the dual systems because they maximized utility.  Two artificial markets, employment and housing, allowed deficient individuals to assert superiority over half the population with an easily distinguishable feature: skin color.  Using segregation, individuals scrambled for larger pieces of the flagging industrial complex, and, doing so, thwarted an innovative, entrepreneurial future.

Sugrue argues that Detroit’s economic foundation of and federal funding of segregation premised a collapse.  Companies received greater gain when they deserted the artificial markets of Detroit. The tone of Origins of the Urban Crisis exposed the author’s passion for examining urban blight.  Comprehensive sources included community council memorandums, FDR speeches, US social-political dissertations, newspapers, and time period surveys.  Surgue constructed the sources into a profound statement: Detroit’s fall was evitable.  Government, society, businesses, unions, and education failed to provide positive direction to establish the city as a reigning industrial powerhouse.  Each player acted as if the outcome was a zero-sum game.

After writing my review, I read about the Nash Equilibrium.  Asymmetrical information and violent defense of the status quo in the public sector created a stalemate for Detroit.  No group gave ground for the fear of being trampled.  These groups eventually made it inhospitable for business in the city.  In the end, the entire city was trampled.

Citibank Indonesia

Written with Mahendra Madhavan for a case study in our Global Financial Management course.

Thesis

Citibank must answer questions regarding its purpose within Indonesia. Bank headquarters has requested higher net incomes, augmenting a currently aggressive budget. Citibank’s quest for higher profits could negatively affect the bank’s long-term leadership in Southeast Asia.

Overview

Citibank expanded into Indonesia in 1968. By 1983, the local Citibank official in Indonesia, Mr. Mistri, maintained a profitable division which tracks the growth of the country. Attaining the profit growth correlation with the Indonesian economy was an original reason for expansion into Indonesia. The government of Indonesia had requested international banks to make the foreign direct investment to increase human and financial capital. In 1983, Citibank corporate managers increased the Indonesia’s after-tax profit goal by $500,000 to $1,000,000. In pursuit of these goals, the local Indonesia Bank officials based decisions on diverse risks, regulatory restrictions, local growth and competition, and personal compensation.

Investment Risk

Due to corporate business controls, local bank officials are allowed maximum exposure to a country, but may exercise an ability to stay lower than maximum. These controls are set by collaboration between corporate and local bank officials. While the acceptable sovereign risk derived with the budgets, the risk limits are available prior to the budget process. By fixing acceptable sovereign risk prior the budgets, the probably income can be setup dependant on risk, and risk independent of desired income. However, if the risk review was not complete prior to the budget, the company risked an adjustment game of tweaking budget and risk levels instead of making solid analysis.

In 1983, when corporate bank officials pushed down an increase in net income, they did not provide any guidance for increasing risk, nor make adjustments to the weighted average cost of capital. A CAP model states an increase of reward is accompanied by an increase in risk. When corporate officials increased budgeted income arbitrarily without respect to risk, they degraded the previously accepted budgeting process. Citibank corporate officials should provide a dialog for corporate and local officials with regards to the desired risk and return characteristics from the region.

Economic Risk

Citibank had achieved one of its major goals in Indonesia of sharing in the growth of the Indonesian economy. Between 1968 and 1983, nominal GDP averaged 27% growth. However, real GDP growth only achieved 7%. If purchasing power parity held with respect to translation rates, Citibank should have achieved 7% over the same period. Assuming the original, aggressive budget was in line with expected real GDP growth, any addition to the net income would defer from original business strategy in Indonesia.

Due to Indonesia’s natural resources, expectations were negative because of short-term, falling oil prices. The GDP of the country for the coming year was uncertain. An increase in sovereign exposure during uncertainty gives Citibank less certain outcomes, but could mean exceptional growth if the country does perform well. If Citibank presses increased profits from Indonesia, it will increase its risk in relation to the local economy, and may not achieve profits.

Competition & Conflict of Interests

Citibank has provided increased training for human capital within the banking sector. An increase in capabilities has increased the knowledge of the entire sector, and increased competition. Higher degree of banking sector knowledge and skill calls for higher compensation packages which decrease profits. Competition for staff with local banks also pushes up compensation. Furthermore, a cultural flight from being trained at Citibank to employment at a local bank creates a political dilemma for the transnational bank. The increased competition pushes costs higher, and revenues lower. All the while, the Indonesian government has very defined roles for the foreign bank.

Bank compensation and bonuses are derived from budget versus performance measures. Since local bank officials wish to maintain bonus levels and the future is uncertain, there is a propensity to set the budget bar low. Mr. Mistri set a slight increase in revenue and a drop in profits. He considered this budget “aggressive,” but other facts from the case would call his budget “soft.” Competition could cause higher costs and lower revenues, but not to an extent to lower profits. Citibank’s Indonesian income, which correlates with the GDP, should not be negative unless real GDP is negative. Mr. Mistri appears to have set a low watermark that is easy to achieve, and will maximize his bonus.

Regulatory Restrictions

Since Citibank is a foreign bank, it lacks ability lobby the government. Furthermore, since Indonesian banking is still developing, the government imposed strong restrictions on foreign banks to prevent them from creating a tilted balance of payments. These regulatory restrictions and expectations of foreign banks limits Citibank’s expansion. It must conform to the government’s expectation, and remain within the confines of Jakarta.

Options

Reduce / Eliminate Prime Government & Corporate Loans Mr. Mistri could accept the budget changes and make changes to the investment allocation. By removing portions of the prime government and corporate loan portfolio, the bank could make riskier loans which should increase profits. Any move to reduce this portfolio would be outside the expectations of the Indonesian government, and could cause political backlash.

Increase Principal Invested / Value-at-risk in prime loans Citibank could increase the principal investments of prime loans and increase notional interest earned. Internal controls support this action because the bank currently invests less than the acceptable sovereign risk in Indonesia. These actions would lower target return on assets and return on equity for Citibank within the country, because prime loans would achieve less than 1.25% and 20% respectively. Political risks also accompany this decision: an increase of capital inflow would negatively affect the balance of payments, which Indonesian government had been working hard to stabilize.

Search for New Sources of Revenue Citibank could search for new sources of income. Developing a new market for current products would increase sovereign risk. Finding new ventures and establishing relationships would increase costs, and could provide limited results. Regulation has limited Citibank’s expansion possibilities, and any expansion would be limited to Jakarta proper. Since the bank has operated in Jakarta, it would have to take riskier loans to provide sources of revenue.

Change Nothing Mr. Mistri could make no changes to operating procedures. Such action would increase risk to Mr. Mistri within Citibank. By accepting changes to the budget, yet not making changes to the operating plan, his employment is tied to a recovery of the Indonesian economy.

Resist Changes to Budget Lastly, Mr. Mistri could resist changes to the budget. During his tenure at Citibank, he has established sweat equity and gained promotions. He has established himself as a leader, and has been rewarded for it. He could resist changes to the budget, and provide an insightful rebuttal outlining the flaws of the increased budget requirement: any increase in the net income expectations should be accompanied with a dialogue regarding expected risk.

Follies of the AIG Tax

H.R. 1598: The AIG Key Executives Bonus Accountability and Capture (TAKE BACK) Act

To amend the Internal Revenue Code of 1986 to impose a higher rate of tax on bonuses paid by businesses receiving TARP funds.

Today, the House passed the bill enacting a 90% tax on all income from bonuses greater than $250,000 from a company that received greater than $5 billion in TARP funds. Such action assumes every person who received a bonus at AIG did not deserve the compensation.

A government should never have the ability to decide an individual is “unacceptable” for high compensation. If passed by the senate, I believe this tax will be tested in the court system and overruled. It’s a tax with punitive and vindictive motives, and targets a specified group of individuals. I consider a person’s right to earn a market wage is as strong as his right to speech.

Euro Disney or Euro Disaster

Written with Mahendra Madhavan for a case study in our Global Financial Management course.

Thesis

For Walt Disney Company, Tokyo Disneyland failed. The arrangement for the Tokyo theme park capped profits for the Walt Disney Company. Blinded by the success of its first international theme park and failure of the profit, Walt Disney Company was focused more on declaring a profitable arrangement, than asking the marketing and financial questions that would lead to success.

Why Euro Disney did not succeed in Europe?

Euro Disney failed on many fronts. Walt Disney Company lacked understanding of the culture in Europe. Europeans, with 4-5 weeks of vacation, took destination trips, usually by airplane, on their work vacations. This cultural norm contrasted the easily accessible location Disney chose. Europeans did not consider Euro Disney a vacation spot; only, a place to spend a day. Location failure reduced the revenue generation inside the park, and the destination appeal of the park.

Modern imperialism consists of export the culture. American culture replaced prime French farm land with Euro Disney. French intellectuals considered the park a threat to future generations, who would lose their cultural identity and start speaking in English. Sensationalizing the cultural failure, some called it a “Cultural Chernobyl”.

Europe’s most severe recession since World War II, lead to an inopportune opening for Euro Disney. Furthermore, the strength of the French currency deterred Europeans from converting to the franc. The combination of the recession and currency exchange curbed spending by international travelers. During the 90s, currency situations in Europe created complexity for Disney. Either the park would manage desired exchange rates or settle on one currency.
Euro Disney and Walt Disney Company capital structure guaranteed profit for the Walt Disney Company, and drained the cash flow from Euro Disney. Walt Disney Company’s 49% equity stake, favorable royalty and management fees with scheduled increases was advantageous even if Euro Disney did not turn a profit.

Enormous interest charges on US$ 3.56 billion in debt arose from the highly leveraged capital structure with various creditors, including: syndicate of 60 international banks and, the French government. Adding to the weight of debt, construction was over budget by 30%. In the end, Euro Disney reported a $900 million loss in the first operating year. Debt restructuring two years after completion of Euro Disney, lead executives to admit original business plans have “weaknesses”. The royalty and management fees and debt service sapped the life out of Euro Disney.

Why Tokyo Disneyland succeeded?

Tokyo Disneyland was the first international theme park by Walt Disney Company outside of the United States. Built on a reclamated land east of Tokyo Bay, unlike Euro Disney, it was a phenomenal success.

Opening of the park coincided with the introduction of five-day work week in Japan and a strong, growing economy. Culturally, the Japanese were spending more time on leisure activities. Tokyo Disneyland became the symbol of a new a Japanese lifestyle – enjoying free time with friends and family rather than constantly working.

Disney cartoons and films were extremely popular in Japan and 200,000 Japanese visited Disneyland each year. Tokyo Disneyland made it possible for Japanese to visit the park without traveling to California. In addition, the fortunate location was accessible for 35 million Japanese within 90 minutes of driving distance. Contrary to Europeans, Japanese vacations were short, which made Tokyo Disneyland a successful tourist destination.

Tokyo Disneyland was designed for adults, particularly young couples. Prices were steep ($40 for adults), but the families sacrificed other activities. Enormous revenue generation paid off the debt in three years. Through the first ten years of operation, Tokyo Disneyland’s sales and attendance figures rose steadily.

What can be done to make Euro Disney a more profitable park?

Sales and Marketing. A growth strategy for the park would only be successful if it provides substantial increases in revenue. Pro forma statements from 1995 to 1999 (see attached) show the park must double revenue to approach profitability.

To do this, Euro Disney should modify the sales strategy to suit Europeans. At the time, individuals relied on travel agents and tour operators, which Disney had largely neglected. The company must actively cultivate relationships with tour operators to increase sales. In addition, marketing strategies must encourage tourists from neighboring countries to visit Euro Disney. Recent surveys indicate the German market accounts for 8% of visitors, 40% from France, 18% from Benelux (Belgium, Netherlands, and Luxembourg) countries and 15% from Britain (Ref. 1). The increase in visitors does not translate into profits; however, more foreign visitors will lengthen the average stay. Increasing length of on-site stay does translate into more auxiliary revenue: meals, rooms and Mickey Mouse ears. Profit doesn't come from the theme parks but from high-margin businesses such as hotels, restaurants and shops.

Increasing marketing and sales is a highly risky strategy. Recent gross margin is about 30% (see Normalized Income Statement), and the most recent figures show the net loss to be greater than the total revenue. Any impact on the top line carries greater costs in sales, general, and administrative, and will reduce gross margin.

Capital infusion / Walk away. Walt Disney could provide a capital infusion for Euro Disney. This action will not find approval from the shareholders of the Walt Disney Company; which essentially would prop up a separate legal entity, Euro Disney. Walt Disney Company’s cultural norm is a shareholder approach, but Euro Disney exists in a stakeholder environment. The French government, a syndicate of European banks, the French economy, and among others are stakeholders. This stakeholder approach eliminates Walt Disney’s ability to allow the park to go into receivership.

Coasting. A third alternative is allowing the park to generate a breakeven revenue. We termed this approach “coasting.” It saves face for the Walt Disney Company; hence, preventing the image of “Walt Disney” from being hurt internationally. To default on the park or continued failed expansions will damage the reliability of the company, and prevent future international endeavors in the BRIC (Brazil, India China) economies.


References:

1. http://www.time.com/time/magazine/article/0,9171,901020325-218398,00.html

Arc of Justice

Arc of Justice: A Saga of Race, Civil Rights, and Murder in the Jazz Age by Kevin Boyle. Kevin Boyle (c. 2004).

Racial storylines cut through time and geography of American history. Kevin Boyle’s Arc of Justice traced segregation from the destination to the source. The author’s construction of characters and segregation defined a solitary outcome that ensued in the streets, and then in the courtroom.

Boyle structured the narrative of the 1925 fight against real estate segregation as a culmination of events. The narrative centered on a house with African American owner-occupiers in a white neighborhood of Detroit. A mob, which contained experienced segregationists, surrounded and assaulted the house. The mob hurled rocks at windows and bricks at the walls. To halt the mob, African American tenants fired shots and struck two white men, killing one. After loading the house’s occupants into a police vehicle, the author filled in the back story.

First, Boyle described Ossian Sweet. He was an African American doctor, who purchased and began to move into the house on Detroit’s Gardland Avenue. Armed with the arsenal of men and weapons, Sweet prepared to be assaulted. Sweet’s preparation derived from his childhood experiences, college doctrine, and events of the previous summer. Sweet’s grandparents lived through the bonds of slavery and the hope of reconstruction. His parents battled with the constitution of segregation. Sweet’s own life challenged the opaque ceiling of segregation. As a child in South Florida, he witnessed barbarous acts against his race. At college and medical school, W.E.B. Dubois encouraged African Americans to violently fight for their place. After graduation from Howard University medical school, he setup a profitable practice, and traveled the world. By the summer of 1925, Sweet established himself as an elite member in Detroit society. The same summer saw violent ejections of African Americans from their homes in whit
e neighborhoods. When Sweet moved to a white neighborhood, he prepared to defend his house. However, Sweet’s goal was not to shoulder the race; to him, “it was partly the way that discrimination struck at the professional pride that he was so eagerly embracing” (93). Antecedents built his stoic character with a yearning to be admired.

As a character is introduced, the author told the background of the individual. Lawyers, NAACP leaders, blue-collar workers, and police officers became caricatures of the author. Each had abnormal traits expanded to the point of predictability. As a rhetorical, flirtatious lawyer, Clarence Darrow wound his six hour closing argument, and discovering his wife was not in the audience, moved closer to his newest mistress. Working class Caucasians were stereotyped as a powerful mob composed of weak units. The white mayor and judge were characterized as politically savvy, yet gutless. Each man skirted the edge of defending Sweet. No matter the outcome of the trial, the positions taken by the mayor and judge allowed them to side with the victor.

Arc of Justice’s greatest strengths were the stories behind the creation, maintenance, and vulnerabilities of segregation. After of the Civil War, Reconstruction took on a feverish quest for reconciliation. Commercial interests of the Republican Party encouraged justice to unfold for African Americans. Freed slaves benefitted from actions of “political opportunists more interested in bringing northern business interests to Florida—and fattening their wallets” (53). From the south, hot on the tails of African American migration, segregation spread northward. Powerful individuals ensured their commercial and power structure through segregation. Real estate agents, blue-collar workers, and politicians created dual marketplaces to maximize their commercial gain. Everyone who profited from segregation “knew how to be cruel. But they had to create a social system premised on cruelty” (55). Ossian Sweet journeyed the path prescribed by the African Methodist Episcopal Church: “by their accomplishments, they would force whites to acknowledge their equality” (51). Sweet challenged the institution as an honest man clearing more hurtles and achieving more than the violent offenders sustaining segregation. His achievement was his brick to the window of segregation.

Boyle’s writing had a varied pace, and indulged in speculation. When writing of assaults, concise phrases conveyed quickness. When writing the history of Darrow, longer sentences slowed the message. To move quickly, he cited headlines, and memoirs to move slowly. In order to delight the story, narrative license seeped into the authors writing. To discuss tactics the legal defense may use, Boyle riddled a paragraph with no citations and the indefinite terms “could” and “might.” Speculation confused the history, but excited the story.

Hierarchy of Gym Bags

People with the urge for upward mobility need to examine all aspects of the complete individual. As offensive as eating lunch in the break room, executives shun an individual who drags workout clothes around in rudimentary material. Obvious containers of clothes that do not fly are Wal-Mart sacks, and the not so obvious are mesh bags.

The perfect pitch is a hearty leather, rectangularish bag, which looks like it was made in the 13th century. Any bag less than 20 years old lacks pedigree. Having pedigree are men nearing retirement age, and they hold the keys to your progression. Recently, older gentlemen at the Y have passed down their gym bags. Recipients gain favorable locker locations, new squash partners, and secret meeting times.

Here is the deal. You need something leather, something old, and something rectangularish. The rectangularish must be petite, about eight inches tall, and twenty inches long, and have good structure; sides must be stiff enough to stand up on their own. A petite bag is not a Honda Accord; it’s a 3 series BMW: sleek, functional, and distinguished. The structure is the most necessary feature. The sides have to be rigid, which is a feat with older leather. Care must be taken when cramming items in the lockers: don’t collapse your bag; it could be catastrophic for your career.

Lastly, the condition of the leather is paramount. Get some nice leather conditioner to ensure that old, new look. You need some creases in your bag to show that you go to the gym on the required Mondays and Thursdays: Wednesdays are optional, and Fridays are out, that’s when real top notch workers cut out at lunch.

On Luggage.com the perfect example of a gym bag states: “The classic design and high quality leather of this Leather Gym bag will make going to the gym a pleasure.”

The Cholera Years

The Cholera Years. Rosenberg, Charles E. The University of Chicago, 1962.

Human nature, without probing, settles into the path of least resistance. In Rosenberg’s The Cholera Years, cholera probes individuals to make abnormal decisions with abnormal information. Each person develops his limited choices based on trust, knowledge, experience, and personal resources. Collective choices expose the backbone of the evolving American culture of the 19th century.

Cholera afflicted the United States in 1832, 1849, and 1866. The second incident of 1849 duplicates the failures of the first. Each epidemic begins with headline deaths in Europe; strangled with complacency, the American public failed to implement a cohesive defense. Quarantines, religious gestures, archaic medicine, and ineffective government actions plagued the first two epidemics.

Lacking notable results, government, science, and religion institute ineffective, half-hearted efforts to prevent the spread of cholera. Government, being politically motivated, sways its allegiance between science and religion, depending on the leader and constituency. Headline text and public panics of impending epidemics sparked dormant municipal boards of health to become active. These boards were politically appointees, mostly laymen (20), whose defense “consisted almost entirely of enforcing quarantine” (19) and city-wide cleaning. When initializing the city-wide clean up, efforts that “represented the best medical opinion at the time” (23), boards lose fortitude quickly. Eventually, only the least despicable areas are treated with more than a layer of quicklime. Due to the political nature of these boards, “premature diagnosis of an epidemic disease would mean severe loss the city’s business” (19). Government entities are ineffective in pursuing actions if they provide marginal results.

Medical practitioners dismantle their respective status in society from 1832 to 1849. Ironically, “few physicians were able to admit . . . that they could do nothing for a well developed case of cholera” (67). Physicians apply poisons as treatment, and apply them liberally: “calomel, a chalky mercury compound” is applied until gums become suppurated (66). Slaves and those in poverty severely distrust medicine; “one such practitioner, hearing that cholera impaired ‘nervous sensibility,’ poured boiling water on the legs of a Negro man” (60). Government deregulation of the medical practice allow many without practical knowledge to become licensed physicians (155), and many citizens resort to “do it yourself medicine” (71).

Christianity fills governmental and medical voids of knowledge and action. Evangelicals, seeking to commandeer public action, request government to impose “fast days” (47). Fanatic Christians see cholera as the gardener that separates the weeds from the wheat. Cholera demonstrates “to man the power of the Lord” (43). Religion fills the void of scientific knowledge and government action because it has a cause and a cure: the Lord. Formalized Christianity loses significance as the 19th century progresses, but harsh rhetoric continues. In the end, survivorship bias shapes each person’s reason he lives.

The vicious seemed merely to have been hardened in their depravity, though the spiritually minded Christian was confirmed in his faith (39).

In 1866, government equips its actions with science and the two provide results. “Physicians had tried to cure cholera; 1866 had shown them their duty was to prevent it” (212). A quick sanitization of an infected person’s excrements halts the spread. New York City’s Board of Health mobilizes teams with a cause and preventative measure. Due to this containment, cholera, which was “a rod in the hand of God” (43), is now an explainable, preventable disease.

Rosenberg exposes many of the cultural norms prevalent in modern America: quarantining of classes, distrust of cities, political and commercial motivations of government, individualism, and “not in my back yard” protectionism (NIMBY). American cities have places for everyone, and each person is supposed to stay in his respective space. In 19th century New York, the poor had Five Points; when the wealthy with resources left the city, the poor remained on Orange Street. American cities are quarantined by economic status, cultural origins, skin color, and religion. Christianity grounds the distrust of cities. A city is a breeding ground for sin, each a modern Sodom. To purge the earth, God’s new sulfur is cholera. Individualistic outlooks and a strong internal locus of control stagnate community effort in helping victims. Cause for cholera is attributed to the victim, “as a very general rule, when a man gets sick it is his own fault” (150). Therefore, to contract cholera is considered a learning and growth experience. Lastly, a NIMBY mentality pushes 19th century communities to perform irrational acts of protectionism. When cholera hospitals were erected, “neighbors resorted to everything from humble petitions to arson in their efforts to have them removed” (94).

Rosenberg’s loudest statement in The Cholera Years is against the current treatment of poverty. Euphemistically chiding religion and government over the cholera outbreak serves as an indictment of the modern treatment of poverty: “the vice, filth, and ignorance that bred poverty nurtured cholera as well” (133). The author’s indictment is not of the 19th century conditions, but of current conditions. “Millions for defense was a national boast. Yet, charged a committee of the New York State Legislature, Americans ‘grudge the cost of protection against a destroyer more fearful than any mortal foe’” (145). Christianity has had two millennia to stop poverty, and failed. The United States will only overcome poverty with science and prevention.

Rosenberg’s writing is redundant, with slicing antecedents of sarcasm and the macabre. A sarcastic tone reflects the absurd thoughts of the day: “by mid-October, the medically sophisticated had already begun to notice forerunners of cholera in the atmosphere” (102). Macabre scenes depict the dehumanization of the dead: “Three bodies, one male, two female, lay on the floor, a few rags separating them from the decaying earthen floor” (106). Before the revelation of the cause, Rosenberg’s writing feels redundant, almost ten times over. This redundancy enhances the reader's cathartic experience as the author reveals the method of prevention.

A Formula for Writing: Verbs Control the Stage

• Choose to use verbs with impact, description, and consolidation. Apply forceful verbs to forceful events, flaky verbs to flaky events. Connotations, the verbs side kick, provide more description than the simple action. Each action contains one verb that could stand by itself to describe the event: find it.
• When singling out the verbs in a paragraph the idea should be understood (just not who).
• Emphasize verbs: these hinges of the sentence determine more than the actino of the sentence. Each sets a tone and rythm for the reader.

Examples

Original Sentence: "In 1866, government action was equipped with scientific knowledge that provided results."

Analysis: "was equipped" is a passive phrase, which forgets to tell the reader "who" did the equipping. Instead of making a statement, the phrase states a rhetorical question.

Refined Sentence: "In 1866, government equips its actions with science and the two provide results."

Outcome: The sentence no longer leaves questions open regarding how events happened. The refined sentence removes "Government action," and now we know "government equips the actions"