Joel Kotkin on US cities

Joel Kotkin has posted an outstanding analysis of the condition of US cities on his site.

Mr. Kotkin has completed studies on the future of several major cities, including New York, St. Louis, Los Angeles, the San Fernando Valley and the Inland Empire region of Southern California. He is currently completing a study on the future of Phoenix and in association with the Planning Center, is currently working on a new project on the future of suburban development.

His personal knowledge of the subject matter is apparent, and most people will find his conclusions surprising.

Definitely worth a look; I'm adding his books to my "to-read" list.

Trump University is open for business

That's right, all you fans of The Apprentice can now learn how to drive companies into bankruptcy just like the master!

The online-only "university" offers a "100% satisfaction guarantee" - at least, for the first week of a course! After that, you are welcome to be as dissatisfied as you like, but it won't matter.

The time needed to devote to each course will vary depending on how much time a student has and his/her willingness to fully engage with every aspect of the course.

You can't earn credits or get a degree from Trump University, but maybe it will help students learn the arts of shameless self-promotion and enrichment at shareholders' expense.

At last Palestinians and Israelis find agreement...

At last Palestinians and Israels seem to have found something they agree about: none of them are fans of Laura Bush!

On her recent trip to the Middle East, Bush found protesters wherever she went. Israelis protested at the Western Wall. Palestinians protested at her visit to the Dome of the Rock.

Even Sesame Street characters got into the act!

Overcharging for overdrafts?

If you are one of the few Americans lucky enough to have not overdrawn your bank account in the last several years, you may be surprised by what I am about to say.

Overdraft fees are big business.

Even if you have overdrawn, and are aware of the fee (frequently ranging from $25 to $35 per item, plus a daily fee up to $10) you still may not have realized just how big an income stream they are for banks. Many banks earn fully half of their revenue from fee income, of which overdraft charges are the majority.

Predictably enough, as fees have risen, so have consumer complaints.

One of the stickiest complaints rises from banks paying items against overdrawn accounts. Many consumer groups have asserted that a payment against an overdrawn account is essentially a loan, and that in many cases the fee charged is an effective annual percentage rate (APR) in excess of 100%. Such groups want overdraft fees made subject to usury laws limiting the APR that can be charged, and in Indiana this is already occurring.

This is problematic both on concept and implementation. Because overdraft charges tend to be a flat fee regardless of the amount of the overdrawn item, it is somewhat fallacious to look at the effective APR. Customers are charged the same amount whether the item is $10 or $1000 and whether they are overdrawn by $5 or $500. Firms in many other industries also charge fees which might be considered ususious by this standard. Late fees are standard practice for utilities, landlords, and cell phone providers, just to name a few. In any of these cases, a late fee charged may amount to an effective APR in excess of usury limits.

If overdraft fees are subjected to usury laws, banks have a very simple solution. If the item is returned unpaid due to insufficient funds, no loan can be construed and usury limits can not be made to apply. Banks can continue to charge the same fees, but would deny any item that overdraws an account by any amount. For most consumers this would be much worse than the current practice, because they will pay the same fee to the bank, plus the payee may charge them returned item and late payment fees.

The Federal Reserve presented a reasonable alternative solution Thursday, improving fee disclosure requirements under the Truth In Savings Act. The new requirements, which take effect on July 1, 2006, will now require banks to specify when opening accounts the kinds of transactions for which they might impose overdraft fees. They also require banks that promote the payment of overdrafts in ads to disclose in periodic statements the total fees for paying overdrafts and for returning items unpaid. Ads must disclose the types of transactions covered, the time period consumers have to cover overdrafts, and the circumstances when overdrafts will not be paid, and cannot call an overdraft service a line of credit.

Consumer advocates want overdrafts regulated under the more stringent Truth in Lending Act, forcing banks to call paid overdrafts a loan - its "true nature," as the Fed put it. The Fed said it may revisit this issue.

When, not if

An panel of communicable disease experts convened by the World Health Organization (WHO) to consider the growing threat posed by avian flu H5N1 released its findings yesterday, and they should serve as a call to action for the pharmaceutical and health care industries. The panel suggested that an H5N1 pandemic could easily be as deadly as the worst flu virus yet: the pandemic flu of 1918 that killed 50 million people worldwide — half of them young, healthy adults.

Michael T. Osterholm, director of the Center for Infectious Disease Research at the University of Minnesota, described a likely scenario in the May 5 issue of The New England Journal of Medicine. "We would be facing a 1918-like scenario.... We would have no surge capacity for health care, food supplies, and many other products and services.... We have no detailed plans for staffing the temporary hospitals that would have to be set up in high-school gymnasiums and community centers — and that might need to remain in operation for one to two years.... We have no way of urgently increasing production of critical items such as antiviral drugs, masks for respiratory protection, or antibiotics for the treatment of secondary bacterial infections. ... Nor do we have detailed plans for handling the massive number of dead bodies that would soon exceed our ability to cope with them."

The WHO lists six stages from the detection of a new influenza virus in animals to a global human flu pandemic. Currently the H5N1 bird flu is at stage 4: small, highly localized clusters of human infections. At this stage, the virus cannot spread easily from person to person. New evidence suggests — but does not yet prove — that H5N1 may be moving to stage 5, meaning that the virus is becoming increasingly better at person-to-person spread. When stage 6 is reached, there will be rapid human-to-human flu spread and pandemic flu.

It's only a matter of time, according to virologist Klaus Stöhr, project leader for the WHO Global Influenza Program. "We are in a situation where we simply have to deal with uncertainties on when this will happen — not whether this will happen or not," Stöhr said yesterday in a news conference. "We believe a pandemic will happen, but we don't know when and also [we don't know] the severity of the event."

"In the last 18 months, we have seen an incremental increase in our concern," Stöhr said. "We do not know if a pandemic can occur next week or next year." Only one thing is sure: H5N1 is coming.

Zero plus zero equals....

Yesterday US Airways and America West Airlines announced their intent to merge, forming the nation's fifth largest passenger airline. How well will these two firms integrate?

According to the US Department of Transportation these two airlines ranked 17th and 18th out of 19 airlines in complaints per 100,000 passengers for the first three months of this year. "We've corrected problems before; we can correct them again," according to America West spokesman Carlo Bertolini said. According to US Airways spokeswoman Amy Kudwa, "We've had a renewed focus on on-time performance."

US Airways has filed for bankruptcy twice in the last three years, and both companies continue to struggle financially, with junk bond debt ratings. Moody's Investors Service said that even after a merger, the two companies would continue to face a difficult operating environment.

It sounds like these two companies are on the same page - unfortunately for them it's not the right one!

Health care profits

On A Political Question, a comment was recently made about the current medical establishment being driven to revenue maximization. It was asked what the medical community could do to refute or change this?

I believe that most health care providers (doctors, nurses, etc.) genuinely have a patient's best interests at heart. The problem is the "health care industry" - the area where health care ceases to be about helping people and becomes about making a profit for stockholders. Obviously socialized health care has the opportunity to fix this by reducing the influence of or removing the profit motive from health care. Setting that aside for the moment and working within the USA's current private systemt, the first question that must be asked is why there is a conflict between revenue maximization and patient care.

A major contributing factor to this is that most health care is transactional. We pay per service regardless of the result. As a result, health care companies do not have an incentive for cost-effective treatment but for cost-ineffective treatment! If I have an illness and it could probably be fixed with a month of generic drugs, or it could be fixed with an expensive operation, the health care company would rather I opt for the operation because it is more profitable. This is an oversimplification, of course, but it does go to the root of the problem, the way we pay for health care.

What if the health care company was paid the same amount based on the illness remedied rather than the way in which it is remedied? This would equate revenue with recovery. Health care companies would then have two goals: increase revenue through helping more patients, or cutting costs by providing more efficient remedies. Obviously it would also be critical that treatments be successful because pay would be contingent upon recovery.

Any major change in the health care payment system must take insurers into account, and would be well served by beginning with them. Such a large percentage of health care payments pass through insurers that probably only they would have the ability to effect a fundamental change like this. As I understand, there are currently discussions underway about shifting Medicare and Medicaid in this direction. We just have to be careful that cost-effective doesn't turn into simple cost-control; health care must be centered around patient care!

The Donald says "rebuild!"

In his typically over-the-top style, Donald Trump is jumping into the World Trade Center site planning and adding fuel to the fire.

In a press conference at Trump Tower yesterday, the developer said that the proposed Freedom Tower design “is the worst pile of crap architecture I've ever seen in my life.” The Freedom Tower design by Daniel Liebeskind recently hit a major snag when the NYPD expressed concern about vulnerability to a terrorist attack. Trump refered to Liebeskind's design as "a monstrous skeleton," saying that if it's built, "the terrorists win."

Trump threw his support behind a plan to use the original WTC footprints for the memorial, and rebuild the towers elsewhere on the site. The new towers would be substantially similar in appearance to the old WTC, but would be at least one story higher, making the north tower (aka Tower 1) the world's tallest building.

Governor George Pataki and Mayor Michael Bloomberg have already agreed to construct the Freedom Tower, and Bloomberg reaffirmed his support for that design, saying "...We are not going to rebuild the two World Trade Center towers." Despite this, Trump said he will continue to promote the plan, including use of the model on his television show, The Apprentice.

Checking out

Although the general concepts are the same, the functionality of self-checkout lanes seems to vary widely from chain to chain; at one large grocery chain where they have been in use for eight or nine years they seem to generally work well and the stores frequently have just one employee for eight (frequently in use) lanes. Many people seem to prefer these to a cashier. At another, smaller grocery chain the self-checkout lanes are virtually unusable and demand employee support after almost every item, resulting in no advantage for the store and frustrated customers. In this case people wait in line for several minutes for a cashier even when a self-scan lane is open.

What is the difference between sucessful and unsucessful self-scan lanes? I think it comes down to an interaction between two factors: the useability of the techonology and people's willingness to give up the human interaction of a cashier.

Some people are eager to give up dealing with a cashier. They find the interaction time-consuming and irritating, and would rather just get out of the store. Others (myself included) prefer that human interaction. The former group will tend to self-scan even when the technology is slightly flawed, and even when self-scanning slows them down because of bagging, while the latter will self-scan only if the technology is good and they percieve another advantage, such as speed for a small purchase.