Christopher Liljenstolpe (ir)Relevant musings on random topics,2011-06-11:/atom/ 2015-04-21T10:50:00Z acrylamid Private (non) investment in monopoly infrastructure,2015-04-21:/2015/private-non-investment-in-monopoly-infrastructure 2015-04-21T10:50:00Z Christopher Liljenstolpe <p>A few news items over the last week conspired to inspire me to vent.</p> <p>First of all, PG&amp;E has been fined for it's San Bruno pipeline explosion, and they just had another one near Fresno (however, that one may, or may not be a maintenance fault). An interesting side--note is that PG&amp;E was granted a rate hike last year by the California Public Utilities Commission to cover their costs in improving infrastructure safety.</p> <p>The other was an article in the Wall Street Journal this last week stating that a number of nuclear power station operators in the US are looking to charge their customers, through rate hikes, for either lifetime extension programs or decommissioning costs.</p> <p>In both these cases, the supplier is a regulated, formal or <em>de facto</em> monopoly. Also, they are generally private corporations that are beholden to shareholder/owners, many of which are very limited in their ownership goals (read, short to mid term share price growth).</p> <p>Another thing that is common, that in both cases, these are long--lived pieces of infrastructure, both pipelines and nuclear power stations have lifetimes measured in decades. It is also generally understood that long--lived infrastructure needs continue maintenance work, and that, at some point, it will need to be replaced and decommissioned. These costs should not come as a surprise to an entity that builds and operates such infrastructure, nor should it come as a surprise to the regulators that supervise them.</p> <p>In fact, they have, and do, recognize that. In all these cases, the operator has justified part of their rate requests to their regulators as the necessary costs of maintaining that infrastructure. In short, the rate payers have been paying for that maintenance and eventual replacement or decommissioning from the start, it's built into the rate. In fact, in the case of PG&amp;E, it's covered in the gas transmission rate.</p> <p>So, if we've paid for it, why are we being asked to pay for it again? In the case of PG&amp;E, the maintenance we've already paid for was obviously (and tragically) not sufficient, or the monies that were paid were re--directed elsewhere. In the case of future costs to extend or replace the nuclear plants, we're being asked to pay again because, hopefully, the operator has discovered that what we've paid wasn't enough. If that is the case, why? Were they just bad in their budgeting, or again, did the monies go to something else?</p> <p>Most companies would not have the cojones to ask for a customer to pay a second time for the company's mis--management. When Ford had the exploding Pinto problem, they didn't ask their customers to pay more for the cars going forward to cover the cost of necessary re--engineering. Why, because the customers would, rightfully, take their business elsewhere. So, why do these regulated industries think they can ask their customers to fund the company's mismanagement? One word --- monopoly. The customer <em>can't</em> take their business elsewhere, they are captive.</p> <p>The reason for this disparate behavior is simple. In a non--monopoly company the loss of a customer is a direct hit to the bottom line. It is much more expensive to acquire a new customer than to keep an existing one. If a company shed lots of customers because they asked those same customers to fund the management's failure, the shareholders would be the one that suffered and would probably loose more money than what they would loose if the company paid to fix their iatrongenic problem.</p> <p>On the other hand, since the customers of the monopoly company are captive, they can't be "lost." Therefore, the costs to the shareholders of asking those customers to fund the mismanagement, there is no cost, whereas the company just "manning up" and paying to fix its problem would have an impact to the bottom line, and therefore the shareholders. Actually, the situation is worse. Because there are no (or little) consequences to the company (and therefore the shareholders) for the mismanagement, there is even an incentive to mismanage that long--term maintenance investment, not grossly, but things like <em>delayed maintenance</em> or <em>value engineering</em> become, potentially, more prevalent.</p> <p>So, how do we fix this? It's not easy, or we already would have done so. But, in short, we should enforce rules for regulated monopolies that basically state that they carry the something approximating unlimited liability for a service if they use that service as a justification for a rate model. If it then becomes obvious that they are not, or have not, performed, the company should remedy the situation without recourse to the rate payers. If they are found to be incompetent in doing so, then the regulator should find a provider who can rectify the deficiency(s) with the cost being born by the company that collected the revenues to provide that service.</p> <p>This would more closely align the shareholder with the customer, and enforce the drive for competent management of these critical and capital intensive infrastructures. Remember, this is really only relevant for monopoly services. if the customer can <em>realistically</em> obtain the service from other providers, then this may not be necessary, as commercial pressure should force the company to perform.</p> Tipping,2014-06-17:/2014/tipping 2014-06-17T10:05:00Z Christopher Liljenstolpe <p>I was struck by commentary around the discussion about a potential increase in the minimum wage for <a href="">San Francisco</a> to $15 USD per hour, which is very similar to what <a href="">Seattle</a> has already <a href="">done</a>. It seems as if the restaurant owners' associations in each city are looking for a carve-out for <em>tipped</em> workers in both the <a href="">Seattle</a> and <a href="">San Francisco</a> cases, and threaten <strong>very</strong> expensive meals if they don't get it. If you look at this argument rationally, those restaurant owners are basically saying that the only way they can provide an affordable service is for their customers to directly subsidize the salary of their work force. In the United States, we call that subsidy a <em>tip</em>.</p> <p>Let's look at this argument. Normally, when I engage a vendor to provide a service, such as repair my car, fix a chipped tooth, <em>etc</em>. I don't expect to be told that the service was <em>X</em> dollars, but I need to pay the actual employee who performed the service their wage on top of the bill I received for the service. I expect that the total cost of providing that service is built into price I paid, <em>including</em> the cost of labor. Why is this different in the restaurant business?</p> <p>If I didn't know better, I would think that the restaurant business is using this technique to obscure the actual cost of the product they are trying to sell, but no industry would ever <a href="">try</a> <a href="">and</a> <a href="">do</a> <a href="">this</a> to their <em>valued</em> customers. I believe there is even a government <a href="">agency</a> in the US that will step in if an industry actually were to attempt such a nefarious practice.</p> <p>Now, the US is fairly unique in the world in that tipping is expected, and the reason given is that the person who receives the tip is not fairly compensated for their work without the tip. Most of the rest of the world views a tip as it was originally intended, a <em>gratuity</em> that rewards exemplary service. I travel all over the world, and only in the US do I feel obliged to tip. That removes the reward component, and makes it a service fee or tax. It no longer represents the <em>thank you</em> that it was originally intended to provide.</p> <p>The rest of the world pays it's service workforce a living wage, or at least one that isn't predicated on tip income. I don't see the cost of services in those other parts of the world out-of-line with what I pay in the US. Are we saying that the rest of the world is just better, smarter, or more efficient in delivering those same services, such that they can pay better wages and still hit the same price points without relying on the customer to pay a hidden additional salary subsidy to the employee? Say it isn't so...</p> Unauthorized Disclosures in the Networked Age,2013-06-16:/2013/unauthorized-disclosures-in-the-networked-age 2013-06-16T00:00:00Z Christopher Liljenstolpe <p>Over the last few weeks, I've been reflecting on the latest round of scandals emanating from Washington D.C. For those of you who have been living under a rock on the dark side of the moon, here's a synopsis:</p> <ul> <li>The IRS has been <a href="">targeting</a> organizations that have specific political orientations.</li> <li>The NSA was caught with it's hands in multiple cookie jars, multiple times<ul> <li><a href="">Intercepting</a> <em>metadata</em> on communications in the United States <em>without</em> legal oversight.</li> <li><a href="">Collecting</a> data from individuals Internet activities with the assistance of major Internet infrastructure and content providers.</li> <li>Potentially <a href="">Listening</a> in to domestic phone calls without warrants (although the congress-critter who leaked that little gem is now <a href="">back-peddling</a> on the allegation. However, the NUCLEON project that is mentioned in the <a href="">CNet</a> link is almost as <em>interesting</em>.</li> </ul> </li> </ul> <p>However, when we look further back, we have lots of things that were meant to be buried and never noticed:</p> <ul> <li>A certain big agriculture <a href="">company</a> received a bit of a <a href="">gift</a> from friendly senators and congress-critters.</li> <li>We surrendered (or had surrendered on our behalf) a <a href="">few</a> of our Constitutional guarantees in the name of <em>security</em>.</li> <li>The movie industry has <a href="">tried</a>, <a href="">again</a>, and <a href="">again</a> to try and put the <em>Internet</em> djinn back in the bottle rather than actually adapt to it and move on (maybe they should read <a href="">this</a>).</li> <li>A US soldier <a href="">leaked</a> a <em>few</em> cables to <a href="">Wikileaks</a>.</li> </ul> <p>The list is actually quite long and getting longer. And, obviously, it is not just a US phenomena. As many have said, it is becoming harder to keep secrets. On balance, this <strong>may</strong> be a good thing. Large projects (either corporate or public sector) involve lots of people. And today, more so than in the past, many of those individuals are not directly employed by the entities trying to keep a lid on things. The NSA leaks of last week were exposed by civilian contractor with a beltway <a href="">bandit</a>. His personal beliefs (we still allow those, by the way, at least for now, we do) were of the libertarian bent. The various bills noted above (some passed, unfortunately, others were stopped) were noticed by an activist and interested community, that is enabled by rapid dissemination of information, targeted at those who may find it interesting.</p> <p>Unlike past times, an <em>interesting</em> nugget of data doesn't need to pass a high <em>interest threshold</em> (news editor, <em>etc.</em>) to become public knowledge. Anyone can make information public to interested groups. Once it's out there, a much larger community can easily look at it, evaluate it, and discuss it. Furthermore, it can act on that information (swamp the switchboard and e-mail servers of the US Congress, for example).</p> <p>No longer is there an easy choke point for the government, or corporations to choke the flow of embarrassing information. This is a good thing. There is no way, yet, to sue (or arrest) <a href=""><strong>The Internet</strong></a>. Individuals who expose the information may face repercussions, but if they are motivated by their ideology (which has always been a driver for secrecy violations, by the way), they may be willing to take the personal <em>hit</em> for the <em>greater good</em>.</p> <p>The flip side of this is that there is no way to stop information that is actually harmful (<em>e.g.</em> some of the information in the diplomatic cables leaks noted above <em>may</em> have been hazardous to some of the sources mentioned). This is certainly a concern, and something that needs to be addressed. However, existing tools to control and limit this kind of risk are <strong>very</strong> open to abuse by those who would be <em>embarrassed</em> by a disclosure that actually carries no substantial risk of injury or damage.</p> <p>We, globally, and certainly in the US, have become too comfortable with secrecy, decisions that are made on our behalf in the name of security that, in fact, reduce our real security as human beings (natural rights). What's more, in the name of secrecy, we haven't even been involved in the debate leading to these decisions. They are made <em>in our best interests</em>, without consultation.</p> <p>The events of this last week, and more broadly, over the last number of years should put the keepers of the secrets on notice that their job will be <strong>much</strong> harder than before. All it takes is one person to crack the door, and it's gone.</p> <p>Maybe this realization will force a re-think about how we deal with these issues. What <em>must</em> be considered secret? Why <em>must</em> it be considered secret? If it is really for the common good, then there won't be much motivation to disclose. However, if you would be embarrassed, castigated, or indicted, to be associated with a secret, maybe you shouldn't be doing it in the first place? If you are going to restrict people's liberties, maybe you need to consult with them first, informed consent is a wonderful thing.</p> <p>What am I saying, that is too radical a thought, no one would ever actually make that determination on their own.</p> <p>Two parting thoughts, both from men I respect (emphasis is mine):</p> <blockquote> <p>let us save what remains: not by vaults and locks which fence them from the public eye and use in consigning them to the waste of time, but by such a multiplication of copies, as shall place them beyond the reach of <em>accident</em>. --- <em>Thomas Jefferson</em></p> <p>The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well meaning but without understanding. --- <em>Louis D. Brandeis</em></p> </blockquote>