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Richard Moyer

Richard Moyer

Richard is an engineer by day, and a political activist by night, fighting would-be totalitarians and government busybodies everywhere.

With the news that Silk Road, the underground internet marketplace that accepts Bitcoins as currency, was shut down and the $28 million of Bitcoins belonging to the owner/operator Ross Ulbricht seized, it poses important questions to the cryptocurrency community.

 

How do you deal without outright theft by government?

Were the Bitcoins actually seized, or was the only the owner imprisoned? What then?

Without the key to the owners wallet, the $28 million in Bitcoins might be considered "seized", but only because the person in control of them is now physically controlled by the government employees that imprisoned him. With the key, government employees could presumably redeem the Bitcoins for US dollars and then spend them.

 b2ap3_thumbnail_bitcoin_goldv2.png

It is known by fellow Bitcoiners what enters and leaves Ross Ulbricht's wallet and when. So, the Bitcoin community has an option to either recognize the theft of these Bitcoins and redeem their value to the government employees that seized them, or they can do something that I feel is morally just: they can consider them dead bitcoins.

 

Ideally, once the ill-gotten Bitcoins are seized, the total population of existing bitcoins would be reduced. Then, however many Bitcoins were stolen would be created anew and set aside in another wallet for anyone that suffers the misfortune of being robbed by government employees (or anyone else for that matter). However, this model assumes some kind of central authority that can create and destroy Bitcoins at will, and this doesn't currently exist (and really shouldn't, since it defeats the advantage of the currency being decentralized).

 

Ultimately, the power to punish or reward theft comes down to the individuals in the exchanges and marketplaces that convert Bitcoins to products and currency. Since a stolen wallet is uniquely identified, vendors that accept Bitcoin have the ability to identify and "kill" stolen wallets. This would give rest of the community great incentive to check if a wallet is blackballed by the marketplaces and be careful not to accept transactions from frozen accounts. Accounts that accept stolen Bitcoins could have the choice to return them to the thief, turn them in to a wallet earmarked for the rightful owner, or be blackballed from the exchanges themselves. Until the stolen wallet is confirmed to be back under the control of the rightful owner again, it would remain on the blackballed list, and careful users would not accept the coins from the thief. A simple checker program could be issued and updated by the exchanges to help people avoid accepting "dirty" Bitcoins.

 

The gatekeepers that redeem Bitcoins into the real world are human, and unlike the transactions within the system that are fully computerized, it is their morality that controls how Bitcoins interact with the real world. Ultimately, it is the users of Bitcoin that can choose to accept or reject government theft, and their collective action will determine if  seizure is an effective means of controlling the currency or not. If the Bitcoin community recognizes government theft as legitimate, it is to the detriment of the Bitcoins that they hold. They would be well-advised to band together, and reject the theft of Ross Ulbricht's wallet.

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The goal, supposedly, of ObamaCare is to reduce the cost of medical care to Americans. It is true that Americans spend more on health care than any other country, but it is also true that Americans spend more on pretty much everything else, too.


So, what government program is ObamaCare modeled after, such that it will reduce costs to Americans?

 

Is it the public schools? The public school model is based on hiring employees, and then paying them with everyone's taxes. This accomplishes an apparent cost savings to the consumers of public education by spreading the cost around to everyone, whether they go to school or not. This is viewed by many as superior to private schooling because the poor wouldn't be able to afford private schooling, leading to a cycle of ignorance and poverty. However, ObamaCare can't be modeled after this, because everyone uses health care, and it's hardly cheap, since Chicago spends 5.6 billion annually to educate 400,000 students. That's $14,000 per student while only 6% of their students graduate from college by age 25. Since Obamacare doesn't hire any doctors, or have anyone left to pass the costs off to, Obamacare isn't using the public school model.

 

How about Social Security or Medicare, the two most popular government programs? Social Security and Medicare are based on taking money from someone and then giving it to someone else. They fail to reduce the "cost" of retirement or medicine, since it just grabs money from someone and gives it to someone else after paying the Social Security Administration's 65,000 employees' salaries. ObamaCare doesn't have much chance getting us a bargain with this model.

 

Is it based on government power to negotiate prices? Given that the Feds just paid something like $300 million for the nonfunctional Healthcare.gov website, ObamaCare isn't apparently flexing much muscle in price negotiation. Among countless other examples of waste, government emplyoyees also pay for cargo planes they have no plans to ever use, so its unlikely that we'll see much penny-pinching in ObamaCare.

 

How about the military? The past 20 years of military action have been centered around the oil producing regions of the Middle East, which is strategically important for oil. Given that we've spent around $6 trillion dollars on these foreign adventures, and imported 15 billion barrels of oil from the Persian Gulf over that time, we paid roughly $400 a barrel for that oil above whatever we paid on the open market. It is unlikely that the military model is going to save us any money.

 

Ultimately, there are three basic ways to reduce the cost of a product, either reduce the labor required to deliver it, use cheaper labor to supply it, or negotiate a lower price. Given the dismal record of government to do any of these three things successfully, ObamaCare will have to get creative in finding ways to reduce costs to the public. Already, though, we see ObamaCare failing in these regards.

Reducing manpower needed to deliver medical care:

  • The IRS has already hired 16000 agents to enforce the new law. These guys aren't free.

Use cheaper labor to provide medical care:

  • Thousands of doctors are leaving the profession, which can only drive up the price of their labor.

Negotiate better prices:

  • ObamaCare has actually imposed taxes on medical device manufacturers, which will naturally be passed off to the consumer. Failed again.

 

And we haven't even gotten started yet!

Providing better care at lower prices requires innovation, not a new law. People can be forced to pay money for medical insurance, but ObamaCare cannot manifest into existence the thousands of additional doctors needed to provide medical care to millions of newly insured people. People may have "coverage", but if there is no doctor to see them, then they will not receive treatment. Furthermore, if doctors refuse to accept the coverage, thereby going "out of network", then government-mandated health insurance becomes entirely useless. People do not work for free, and qualified people cannot be made to exist by the passage of a law.

 

Obama's reference to "bending the cost curve" is something uniquely Washington. As if there were a physical cost curve to bend, he imagined that if enough government employees were brought to bear, and enough pages of legislation passed, the cost curve would creak under the weight and everyone's lives would be improved. But, outside of Washington fantasies, there ain't no such thing as a free lunch, and all the additional apparatchiks paid to enforce ObamaCare will come at a heavy price to everyone.

 

To answer the title question, there is no fabulously efficient program coming out of Washington, and the interjection of government force to the already over-regulated medical industry is certain to raise prices, reduce quality and limit choices.

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Chickasaw, Alabama is home to roughly 5500 people, and as of a few weeks ago, a 24-ton military-issue fighting vehicle.
 
Not to be outdone by Ohio State, and presumably dissatisfied with the tactical abilities of their two Humvees (one in police paint, the other up-armored) and SWAT van, they acquired a half-million dollar diesel-powered behemoth, known to the US military as the MRAP.
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'MURICA
 
The Mine Resistant, Ambush Protected vehicle, or MRAP, is designed to protect its occupants from multi-hundred pound roadside bombs of the variety used against American troops in Afghanistan and Iraq. There is no doubt that the MRAP can withstand any threat presented by Chickasaw's tiny criminal underbelly. Chicksaw averages between zero and one murders per year, and in 2011, fell victim to a staggering six robberies.
 
Unfortunately for the taxpayers of Chickasaw, and untold other cities gleefully snapping up military surplus gear, the maintenance of the half-million dollar monster parked in front of the police station could cost many tens of thousands of dollars per year. To wit, a Dodge Charger squad car will cost $10,000 per year to keep in fuel, oil and tires. If the Chickasaw PD chooses not to maintain the vehicle, then it will deteriorate quickly and become truly useless.
 
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As a method of law enforcement, the MRAP may be worse than useless. As opposed to an ugly hat, or a new baton color, the MRAP, if ever employed, will actually damage law enforcement efforts.

Foremost, using a tank on civilians is really bad press. One can imagine the helicopter footage of that massive sand-colored elephant of an MRAP pulling up on high-top sneaker-wearing soccer moms' PTA protests: iconic, tyrranical, Tiananmen.

At a comical 3 miles per gallon, the cost to fuel the MRAP is exorbitant, robbing other more essential police functions of funds.
 
Furthermore, the roaring noise of the massive Caterpillar diesel engine, and laughable top speed of 65 miles per hour means everyone has the drop on ol' MRAP, and any car built after 1950 can disappear into the distance while MRAP chugs along uselessly in all of its inane abundance.
 
b2ap3_thumbnail_MRAPSWAT.png
 
At over 25 feet long, the MRAP has the turning radius of a derelict coal barge, and probably couldn't execute a U-turn over four lanes of traffic. If big, bad MRAP is ever employed to chase a bicyclist or even someone on foot, changing direction would foil MRAP's best efforts.
 
Even quelling a full-scale riot wouldn't likely be made easier by an MRAP: the rubber-tired monster truck with exposed fuel tanks is vulnerable to any would-be arsonist, and its impossibly poor visibility makes a narrow city street all the more hazardous. Despite its muscular appearance, the MRAP doesn't actually have any weapons. It is, in all its lavish massiveness, a big metal box on wheels unsuited for practically every application.
b2ap3_thumbnail_Chickasaw-humvee.png
Necessary? Oorah!
 
The MRAP is specialized for resistance to roadside bombs, and essentially every other function you might expect from a real vehicle has been sacrificed to gain this remarkable ability that was only valuable in the narrow circumstances it was designed for. It is so otherwise useless, in fact, that the US military is giving lightly-used, and even brand-new models away for nothing. This should be an indication to any would-be owner that this massive new cost liability is the equivalent of a fantasy sword collection.
 
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In my tenure as an industrial project engineer, which has only spanned a few years, I've been witness to a shift in the model of equipment production, which is suffering from two highly-poisonous ideas. The first being focus on shareholder value, the second being a single-minded focus on core-competency.

Reflexively, when these two ideas become a chief focus, a manufacturer is motivated to seek competitive bids on every piece of equipment and find the lowest-cost producer for everything. Often this is cost-effective relative to producing parts in house. However, accountability and quality control become literally impossible. The massive conglomerates that provided the equipment for a greenfield steel mill I helped construct were German, but hardly a single piece of their equipment was made in Germany, and when we asked the manufacturers, they were actually hard-pressed to say exactly where their equipment came from. This is the essence of the job-shop model.


Instead of following the Henry Ford model of vertical integration, the job-shop model is as follows. The principal company, like General Electric or Siemens, goes to major industrial fabricators in China, like China First Heavy Industries, to bid on producing assemblies. CFHI then turns around and asks smaller fabricators to bid on the castings and components. The small fabricators then go to job shops to make individual parts, which can be small dirt-floor buildings in northern China staffed by barefoot 12-year-olds. This is not an exaggeration.

The supply chain can get even longer than two or three companies, and by the time small parts are actually machined, the principal company has no idea who is bidding on the work or where the parts are being made. When there is inevitably a problem with the equipment cobbled together from the work of barefoot 12-year-olds, discovering the source of the error is almost impossible and no one business can be properly held accountable or effectively barred from future bidding.

Because of the job-shop model, quality control is impossible, and therefore quality has suffered enormously in even the six years that I've been buying and installing industrial equipment. But why?

When vertically integrated companies wish to change a single component to improve quality, say by using better steel, or machining the part more precisely, their overall profit is affected very little, while the end product is improved noticeably.

However, in a job-shop model, if a company is supplying bushings to GM, all of their profit is derived from the difference between cost of production for the bushings and the price paid by GM. This means that the company is highly motivated to reduce the cost of production as much as possible, since their bid price is fixed. Reducing the cost of the bushings by three or four percent means potentially doubling profits, even if it means producing vastly inferior bushings that still pass specifications. Essentially, every part is necessarily reduced to the absolute minimum level of quality dictated by the principal, and as we have seen with poisonous baby food, sometimes the quality level goes well below the minimum.

Amongst every other product suffering from the job-shop model, cast iron parts may be the worst off. Because all the manufacturer's profit is derived from the castings, rather than the final product, the job-shop foundries are motivated to reduce the quality of cast iron used and the quantity used to the breaking point. Voids in castings, thin castings, and using the cheapest available cast iron serves to boost profits only by a few cents a pound, but when profit margins are so thin, these few cents make a huge difference to the manufacturer.

The end result of this extreme pressure is that I have received valves with cast iron handles that literally crumbled in my hands. A vertically integrated company would be foolish make valve handles so poorly because it would harm their reputation far more than the half-a-cent of profit benefits them. However, the job shop lives and dies by these few cents, and has almost no choice but to find profit any way it can. By focusing on core-competencies, and producing as little in-house as possible, and by focusing on shareholders at the expense of the customer, manufacturing is incentivized to produce the worst products that it can get away with, and sometimes not even that.


If focusing on core-competency, often a CEO's excuse for selling company assets for short-term benefit, costs the company its reputation, is it worth it? If focusing on shareholders causes a company to lose its customers, is it worth it? There is such thing as a bad profit; it is a profit extracted from customers who are so disappointed they do not return. Many of the profits extracted with disappointing quality have me looking elsewhere when I source equipment.

As a chief decisionmaker in the purchase of equipment, I have started to look to smaller fabricators in the United States who do all their work in-house and are ultimately responsible for quality. Instead of sourcing manufactured equipment assembled from parts all made by the lowest bidder, I can frequently ask a fabricator to make a product for me, from raw materials, for much less money. If the big manufacturers cannot control quality, customers ultimately can by going outside the paradigm and designing their own equipment. Large manufacturers are leaving themselves wide open to smaller competitors who can easily meet or exceed the large manufacturer's poor quality standards. The egregious quality of large manufacturer's equipment often negates any benefit of good design, and homemade solutions often have impressive lifespans by comparison.

The job shop model, with its total lack of accountability and inherent incentive towards low-quality, deserves a place on the scrap-heap of history.

 

 

 

 

 



 

 

 

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Have you heard people talk about a maximum wage? Not a minimum, but a maximum?

Many like-minded people believe they see a solution for the giants among us; cut off their legs. They propose a maximum wage, capping people's earnings, as the "cure" for this "ailment" that isn't an ailment at all. With a childish view of economics, it might seem that when a person gains a dollar to become richer, someone loses a dollar and becomes poorer.

This is, not for lack of an academic term, total bullshit. I agree that many of the richest people in the world are as rich as they are because of purchased political favor, fraud and intimidation. However, many people become exceedingly wealthy by creating something of great value to society in exchange for their riches. Henry Ford. Thomas Edison. John Fogerty.

Imagine if tomorrow, the maximum wage were set at $150,000 a year in the United States.

The first order of business would be for every very wealthy person to renounce their US citizenship and leave the country. For someone making a billion dollars a year, it would cost around $30 a second to stay in the USThe super rich would waste no time leaving, unless state employees confiscated their belongings straight away or closed the borders.

Next, athletes, entertainers and other second-tier ultra-wealthy people would look for work outside the country. Following them to the border would be doctors, scientific and artistic geniuses and other highly-skilled people that can make a better buck elsewhere. That is, unless state employees closed the borders, imprisoning the population in their new Utoptia.

There is no more certain way to stifle entrepreneurship, drain the country of its talented people and ensure that no talented people immigrate than to cap wages at some arbitrary level. Not all wealthy people are helpful to society, but most of them are, and their contribution to society can be measured with some level of accuracy by their wealth.

Theft by government is not the road to riches, it is a well worn path to poverty, visited by many countries in the past with the same dire result.

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