Skipping Past the "Helicopter in Every Garage" Phase

Jay Fitzgerald of the Boston Herald reports on a long-shot but interesting economic development project for Rhode Island…

Woburn’s Terrafugia Inc. hopes its futuristic car-plane business takes off in Massachusetts.

The maker of the hybrid car-plane contraption - which theoretically will both drive on roads and soar through the sky - plans to meet with officials from Gov. Deval Patrick’s Massachusetts Office of Business Development next month to try to work out an economic-incentives package to keep the company in the state.

But Massachusetts may face stiff competition in its attempt to retain Terrafugia’s future production operations.

A number of states - eager to attract a cutting-edge manufacturer requiring potentially hundreds of highly skilled assembly and mechanical workers - are actively wooing the young aviation company, founded by an MIT grad and his colleagues.

"I’d rather stay right here in Massachusetts," said Carl Dietrich, co-founder and chief executive of Terrafugia, which hopes to start production of its two-seat car-planes sometime in 2009.
But "economics are economics," said Dietrich, who adds he’s listening closely to economic-incentives pitches being made by such states as Rhode Island and Maine.

The two states, both long known for their boat-making sectors, see aviation as a logical way to attract and keep highly trained mechanics jobs, he said.

The name of Terrafugia's intended first car-plane is the "Transition". According to Terrafugia's FAQ, car-plane means exactly what it sounds like, i.e. something that might exist in a Sean Connery era James Bond movie…

Q: Will the Transition fit in my garage?

A: The Transition was designed to fit into a standard household garage. At 6.75 ft (2.1 m) high, 6.5 ft (2.0 m) wide, and 18.75’ (5.7 m) long, the Transition will fit anywhere that you could park a larger SUV such as a Cadillac Escalade or Lincoln Navigator, and will fit inside a 7’ garage and a standard parking space.

Q: How fast will the Transition drive on the ground?

A: The Transition will be fully highway capable and able to easily reach the speed limit. A 100hp engine in a vehicle as light as the Transition will provide ample power on the ground.

Q: How fast will the Transition fly?

A: At 75% power, the anticipated cruising speed of the Transition is 100 kts (115 mph, 185 km/hr).

OK, well, maybe it's not exactly like a James Bond car-plane…

Q: Can I take off from the highway?

A: No. In addition to power lines, billboards, overpasses, and other obstructions that make this idea unsafe, the Transition will have to be parked with the engine off in order to deploy the wings and engage the propeller. It is also illegal in most states (emergency landings excluded).

I'm curious; does the possibility of luring this company to Rhode Island make any of the if- it's-not-being-taxed-right-now-then-it-needs-to-be crowd mellow their position on whether Rhode Island should help balance the state budget by ending its sales-tax exemption on aircraft?

The Con-Victim's Choice

Even conservatives may have difficulty finding fault with this

The Federal Reserve Board moved yesterday to place new regulations on the nation's credit card industry that would make it more difficult for lenders to raise interest rates and give consumers more time to pay their bills.

If enacted, the regulations would be the most sweeping change in decades, offering consumers more protection against late fees and stopping lenders from making credit offers that regulators deem to be deceptive.

"The proposed rules are intended to establish a new baseline for fairness in how credit card plans operate," said Federal Reserve Chairman Ben Bernanke. "Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs."

Representatives of the banking industry are, of course, making an argument that I'd likely make in other contexts (meaning other industries):

"The Federal Reserve's proposal is an unprecedented regulatory intrusion into marketplace pricing and product offerings," said Edward Yingling, president and chief executive of the American Banking Association. "We are deeply concerned that these rules will result in less competition, higher consumer prices, fewer consumer choices and reduced consumer access to credit cards. In short, everyday consumers will bear the real cost of these proposals."

Frankly, "reduced consumer access to credit cards" would probably be a good thing. It would, of course, be preferable for credit card users to be adequately versed in their usage and, even better, habituated to live within their means. That being quixotic, however, boundary-type regulation seems more conducive to free-market activity than would be barrier-to-entry-raising regulations such as requiring extensive paperwork and education initiatives of credit-granting institutions.

The Cost of War

I know there's no direct connection, but I couldn't help but think of those complaints about the cost of the Iraq war to the state when I read this bit of rare positive news:

A California aerospace company is scouting locations in Rhode Island in order to open a facility to build armored boats by the end of the year.

Kelly Space & Technology is looking for a 20,000- to 30,000-square-foot building to accommodate manufacturing operations and engineering offices, according to chief executive officer Michael J. Gallo. The company has opened an office in Warwick near T.F. Green Airport and has one employee evaluating potential sites, Gallo said. ...

... Gallo, a native of Fitchburg, Mass., also was drawn by Rhode Island's expertise in the boat-building industry and the defense contractors in the state and nearby.

The company also was attracted by assistance from the state's Business Innovation Factory, a nonprofit company that includes government officials and that seeks to support experimentation and innovation.

Wanted: Everything You Aren't, for Nothing You Understand

Just to see what's going on out there, I ran a Monster.com job search for the first time in years. I had forgotten how completely unqualified the ads can make you feel. That seems to be the result when corporate HR departments are given more twenty words to describe a job opening. A made-up example:

You are: a self-starting, autonomous copy-editing genius with fifty years of experience and the ability to follow instructions carefully. Passion for semiconductor technology a must. Fluency in more than half of the world's spoken languages a plus.

Your responsibilities are: to conduct broad-based research for the creation of high-impact marketing, advertising, instructional, psychosomatic media and corporate packages (print and Web), translated into three programming languages and Pig Latin in a fast-paced environment emphasizing attention to detail.

We are: a completely unknown company, but the only organization hiring people with your skill set, just now.

Benefits revealed upon hire; salary commensurate with experience.

We've Gotta Talk

Mark Patinkin makes a reasonable point — one that is often leveled in an accusatory tone at conservatives:

Stanley O'Neal, the ex-head of Merrill Lynch, was booted for losing billions betting on the garbage now known as sub-prime loans. His punishment? An estimated $161-million sendoff package. The issue isn't even that he didn't deserve it, it's that Wall Street rewards CEOs who mess up not just their own house, but the economy, which is why they don't care if they do it.

Shouldn't we demand accountability at that level of wealth and power? We on the right are properly hesitant to interfere with the operation of business, but the same argument whereby I would justify, in economic terms, government support for roadways and other infrastructure could be relevant to situations in which an upper-crust business elite rewards its own even when they play a role in disastrous business ventures that gash the global economy. If the consequence for risks gone bad is a mere $161 million severance package, then there's hardly incentive to fully vet strategies that look attractive in the short term. And as executives and board members become involved in such arrangements, the likelihood of a correction decreases.

I can hear the ghost of Milton Friedman arguing that the problem is self-correcting. The plight of Merrill Lynch will generate adjusted behavior, and future CEOs will think twice before dashing after the next subprime mortgage–type opportunity. I usually find that argument persuasive.

Maybe, amid my populist impulses, I just need reaffirmation of my faith, but I wonder. The solutions of those on the left are no solutions at all; indeed, they are apt to make the problem worse, but what would be the solutions of those on the right? If we were to decide that a problem exists, that is.

Is There More to this Providence Fruit Building Thing?

As an admitted antiquarian, I've never met an old building I didn't think should be preserved and re-used. But that's just me and I recognize that--beauty being in the eye of beholder--not everyone thinks that the Providence Fruit and Produce Company Warehouse (more here) was worth preserving, restoring or reconfiguring. OK, fine. But what troubled me about the events leading up to the demolition of the building was the manifest failure of the government--state and City of Providence--to get their acts together. In particular, how the state's incompetence ended up in lost revenue:

The state bought the building from Amtrak for $14.1 million and evicted the remaining businesses. It held the property for six years while it debated what to do with it — either knock it down or sell it — and the property deteriorated, becoming a haven for the homeless and a draw for graffiti artists.

After lobbying by local preservationists, the state decided to put the building up for sale in the spring of 2004, with the condition that the original structure be incorporated into any new design.

The state’s request for proposals included a draft preservation easement that prevents the developer from knocking the building down for any reason — even in an emergency situation, only localized repairs are allowed without permission from state historic preservation officials.

But that preservation easement was never included in either the purchase agreement or the final property transfer last February....

Carpionato responded to the request with a $4.5-million bid, and on July 8, 2004, proposed a Quincy Market-style development featuring dozens of small shops. The state agreed in principle to the design, and consented to sell the building to Carpionato for $10 million less than the $14.1-million price it had paid to Amtrak seven years before. The reason, state officials said, was that half of the property had been sliced off to allow for the offramp construction. The other reason was that forcing the buyer to re-use the old building clearly reduced the value of the property....

So the state wanted to preserve the building, but did nothing to ensure compliance. Well, almost nothing:

A section of the deal requires the developer to set aside $250,000 to be paid if Carpionato breaches the agreement, Moses wrote. But that is the extent of Carpionato’s liability, he argued, and beyond that, the state does not have legal recourse; nothing prevents Carpionato from destroying the building if the situation changes for regulatory reasons — like issuance of a demolition permit.

I'm unsure if the $250,000 will be paid--but it's a small price to pay, anyway.

I'm not particularly impressed with the way that Carpianato has gone about this and my impression is that this was their gameplan (h/t) all along. But the whole way this went down has me wondering if this isn't a case of the State being incompetent....maybe someone on the State side of things had a reason to leave out the previously agreed upon guarantees and conditions in the final purchase agreement. I don't know. But the mystery of why they were left out remains.

So, to summarize, I'm not debating the aesthetics of whether to demolish or save. I am questioning the flow of events that led to the outcome. The property was sold under a certain set of pretenses that supposedly guaranteed preservation of the original structure in some form. As a result of these assumptions, the property was sold for cheaper than market value because preservation is more expensive than ripping it down. In other words, the property could have probably fetched more money if these supposed qualifications weren't in place to begin with. That would have meant more money to the State (ie; taxpayers), including no historic tax credit, incidentally. The end result is that the developer got the best of both world; a cheaper, "preservation price" for the property and then the eventual go-ahead to demolish and develop at a more "economical" price.

So, I wonder if a game was being played from the start to keep the price down based on a pretense of preservation that would ultimately prove unenforceable because the legal language guaranteeing preservation was mysteriously left out of the final deal.

What a Career Ought to Be

"A hobby that got out of hand."

That's what Ron Voake, of Norwich, a Vermonter of the old sort, says regarding his booming business as a wooden toy maker:

Mr. Voake, the owner of Vermont Wooden Toys, has been deluged with orders from customers leery of buying toys made in China after millions of toys manufactured there were recalled this year because they have lead paint.

"Every time there was a story about a toy recall, I got flooded with orders," Mr. Voake said. "This year stacks up as preposterous. I've never had a year like this, and I hope I don't have another one."

Wooden Toy Maker is certainly an option on the table for when I can't do the construction thing anymore. The question is: Do I have to move to Vermont?

The Dream Interferes with the Life

On Dan Yorke a few minutes ago, Trisha Smith — the controversial owner of the Post & Naughty store in Portsmouth, whose landlord is threatening to cancel her lease if she doesn't stop courting customers outside her store, as it were — mentioned that she has lost her day job. (The company owner, as it happens, lives in Portsmouth.)

One could make hay about her being a never-married mother of two, but it seems to me that there's got to be a compromise that won't drive her family into poverty. She made a good point to Yorke: She's trying not to be one of those welfare moms we've been talking about. That said, she's been all over the news posing as a fighter of the prudes; perhaps she could cede a little ground and tone down the sidewalk marketing outfits. The store's name sort of makes the point without illustration, I'd say.

Of course, as a conservative New Englander, I'm very empathetic when outside activities affect a last-cubicle-on-the-left job such as the technical writer position that Ms. Smith just lost. It also occurs to me that I haven't figured out what to get the missus for Christmas, this year, and I hear that not everything in the store is apt to make a Catholic-convert ex-bad-boy blush. And if I'm of a mind to stop by and help the business out, Monday on my way home from work, the folks giving her trouble ought to be on alert that they're in very sparse company.

ADDENDUM:

Make that Tuesday on my way home from work. Mr. Yorke is apparently disrupting her business and dragging her into the studio on Monday. (Why not bring the studio to her, Dan?)

ADDENDUM II:

According to Marc (in the comments), I missed some key information when I hopped out of the van for a moment last night: Apparently the store isn't open on Mondays anyway, and Dan may be on site on Tuesday. Doesn't take long to miss much, I guess.

To Build Hi-Tech Businesses, You Need a Middle Class

Natalie Myers has an interesting article in this week's Providence Business News about some local business leaders hoping that hi-tech modeling and simulation becomes a boom industry in Rhode Island…

Steve Swenson stands next to a plasma screen showing an unmanned air vehicle landing on an unmanned boat while skimming the ocean’s surface. The images are crisp and textured, reminiscent of a video game. He explains that this is one of OceanState Technology Corp.’s first jobs for a commercial client.

Like so many modeling and simulation companies, OceanState gets most of its contracts from the U.S. Department of Defense. But Swenson said he’s trying to change that, because he sees the opportunity to leverage DOD investment on the commercial sector....

The medical industry has huge growth potential as a market for modeling and simulation, as do insurance, finance, pharmaceutical, transportation, aerospace, homeland security and cognitive science, he said.

As a result, Swenson led efforts to incorporate the region’s first trade association for the modeling and simulation industry in June last year. It’s called the New England Modeling and Simulation Consortium, and its goal is to draw attention to the region’s capabilities in that field to attract more funding from federal and commercial entities.

The question begged by the article is why Rhode Island should be better for the modeling and simulation business than any other place? You need two essentials to run a successful simulation business…

• Fast computers with lots of memory
• A smart, educated workforce to develop and run the modeling software on the fast computers

These days, no region of the U.S. has an advantage over any other in obtaining hardware and software, so if there is going to be something special about Rhode Island in this economic sector, it is going to have to be related to the people. Rhode Island’s advantage here supposedly lies in its proximity to a large number of universities that can provide the necessary workforce…

One of New England’s great attributes is its high density of universities, Swenson said. “That’s why one of the NEMSC’s agenda items is working with local universities to try to introduce programs and curriculum that would help employers in this industry get the people that they need out of college,” he said.

Here’s the problem. RI won’t be able to attract and retain the educated workforce that the modeling and simulation industry needs, if overall livability in RI stinks for the middle class. Those educated people who can run the modeling software are going to want their kids to be well-educated too. They won’t settle long-term in communities unable to combine affordable housing with good school systems.

This means that a place like Rhode Island, which heavily taxes middle class paychecks, but provides little in return to middle class citizens (like good schools), is facing a permanent disadvantage in developing a hi-tech business base.

To Build Hi-Tech Businesses, You Need a Middle Class

Natalie Myers has an interesting article in this week's Providence Business News about some local business leaders hoping that hi-tech modeling and simulation becomes a boom industry in Rhode Island…

Steve Swenson stands next to a plasma screen showing an unmanned air vehicle landing on an unmanned boat while skimming the ocean’s surface. The images are crisp and textured, reminiscent of a video game. He explains that this is one of OceanState Technology Corp.’s first jobs for a commercial client.

Like so many modeling and simulation companies, OceanState gets most of its contracts from the U.S. Department of Defense. But Swenson said he’s trying to change that, because he sees the opportunity to leverage DOD investment on the commercial sector....

The medical industry has huge growth potential as a market for modeling and simulation, as do insurance, finance, pharmaceutical, transportation, aerospace, homeland security and cognitive science, he said.

As a result, Swenson led efforts to incorporate the region’s first trade association for the modeling and simulation industry in June last year. It’s called the New England Modeling and Simulation Consortium, and its goal is to draw attention to the region’s capabilities in that field to attract more funding from federal and commercial entities.

The question begged by the article is why Rhode Island should be better for the modeling and simulation business than any other place? You need two essentials to run a successful simulation business…

• Fast computers with lots of memory
• A smart, educated workforce to develop and run the modeling software on the fast computers

These days, no region of the U.S. has an advantage over any other in obtaining hardware and software, so if there is going to be something special about Rhode Island in this economic sector, it is going to have to be related to the people. Rhode Island’s advantage here supposedly lies in its proximity to a large number of universities that can provide the necessary workforce…

One of New England’s great attributes is its high density of universities, Swenson said. “That’s why one of the NEMSC’s agenda items is working with local universities to try to introduce programs and curriculum that would help employers in this industry get the people that they need out of college,” he said.

Here’s the problem. RI won’t be able to attract and retain the educated workforce that the modeling and simulation industry needs, if overall livability in RI stinks for the middle class. Those educated people who can run the modeling software are going to want their kids to be well-educated too. They won’t settle long-term in communities unable to combine affordable housing with good school systems.

This means that a place like Rhode Island, which heavily taxes middle class paychecks, but provides little in return to middle class citizens (like good schools), is facing a permanent disadvantage in developing a hi-tech business base.

Rhode Islander Nails Popular Science Award

Heather M. Lightner in the Jamestown Press:

Every year the editors of Popular Science review thousands of new products and technologies in order to find 100 breakthroughs in 10 different categories: automotive, computing, gadgets, home entertainment, personal health, aviation and space, engineering, home, recreation, and general innovation. This year, in addition to the "Best of What's New" award, the magazine also honored one product as the overall outstanding "Innovation of the Year" award - an award that belongs to Jamestown resident Ed Sutt and his innovative HurriQuake nail.

Sutt, who is the engineering manager of fastener technology at Bostitch in East Greenwich, has been studying the relationship between wind velocity and the failure of wood frame houses since his time at Clemson University, where he earned a PhD in civil engineering. Six years at Bostitch and hundreds of prototypes later, Sutt, also known as Dr. Nail, developed the Hurri- Quake nail, a nail that holds promise of reducing damage to buildings in the event of a hurricane or an earthquake.

Compared to standard sheathing nails, the HurriQuake nail offers up to twice the resistance to high-wind conditions, also referred to as uplift capacity. Two independent laboratory tests found that the HurriQuake nail can withstand uplift forces of up to 271 pounds per square foot. With its 25 percent larger nail head and unique geometric ring designed shank, the high-tech nails can withstand wind conditions and gusts of up to 170 miles per hour.

(OK, thanks for letting me scratch my engineering itch).

Some Pre-Turkey Day Blog Stuffing : Football Econ 101

Heck, it's late on getaway-day, so why not a bit of fluff before you hit the stuff...ing. In a rather un-PC titled article, "Patriots vs. Redskins", Kevin Hassett of the new American.com On-line Magazine writes about how the Patriots are the NFL's business model franchise. Hasset explains why economic theory supports that "the [NFL] draft is the only place to build a winning team" and that "economics would predict that teams would uniformly put an enormous effort into perfecting their drafts, and avoid sinking excessive dollars into costly free agents." So who does this the best?

In fact, this model predicts very well the behavior of one team, the New England Patriots. Their head coach, Bill Belichick, who received his undergraduate degree in economics from Wesleyan University in Connecticut, has been an artist at squeezing value-added out of his draft picks, and has won three of the last five Super Bowls.

This economic brilliance was on display in September, when Belichick traded disgruntled receiver Deion Branch to the Seattle Seahawks for a first-round draft pick. The Seahawks gave Branch a $39 million contract, guaranteeing that they would achieve little value-added at that position. So Belichick burdened the salary cap of a rival with a fat obligation, and took home a valuable draft pick for his own team.

Belichick keeps winning because so many others in the league behave so strangely. Two economists, Cade Massey of Yale and Richard Thaler of the University of Chicago, studied years of draft history and found that teams make systematic errors that reflect a serious economic illiteracy. Coaches and general managers place too high a value on the top few picks, and too low a value on picks a bit further down.

Just some food for thought for you as you half-nap, half-watch an uncompetitive football game, with a ball of stuffing and turkey floating in your stomach amidst a sea of gravy, and your mind encased in a post-feast, triptofan induced fog.

Next up: why baseball is proof that trickle-down economics works.

(Just kidding)

Re: Destination Versus Convenience Gamblers

At the risk of sounding cutsie, it seems to me that the most accurate method of categorization might be to say that there are gamblers, and then there are gamblers. I don't think, for example, that Andrew captures the salient distinction here:

The study found that most (meaning numbers in the 80% range) Lincoln and Newport patrons have made a visit to Foxwoods or Mohegan Sun, but most Foxwoods and Mohegan Sun patrons haven�t visited Lincoln or Newport. The sensible conclusion is that the most significant partition of the gambling population is not between destination and convenience gamblers, but between slots-only players and more diversified gamblers. Diversified players are not satisfied by slots alone, so they go to the destination casinos (Foxwoods or Mohegan Sun). Slots players, on the other hand, will go anywhere where there are slots (Foxwoods, Mohegan Sun, Lincoln Park, or Newport Grand) regardless the other activities that might be available.

For this partitioning to be accurate, it would have to be true that the Lincoln/Newport customers who visit Foxwoods/Mohegan Sun play slots almost exclusively, and I'm not sure that's the case. This is not to say that Andrew isn't correctly identifying a shortcoming of the convenience versus destination gambler analytical scheme. The problem with that scheme, however, is not one of category, but of conceptualization: convenience/destination isn't a partition, but a spectrum. The equation yields a ratio of convenience to the gambling experience.

Some people treat gambling as merely a pastime. They'll go all the way to Foxwoods for the Big Casino experience, rather than Lincoln or Newport for down-and-dirty gambling, but the $154 loss of the average Lincoln Park visitor would be an expensive night out no matter where they went. Other people more specifically enjoy the thrill of gambling, and the convenience of finding it will carry more weight, with the "experience" factor serving mainly for periodic differentiation. And still other people treat gambling like a drug and will go wherever they can get their fix; the longing for trips to an addiction mecca, while the stuff of daydreams, falls away once the urge has been sated.

Presented thus, it becomes clear that, no matter the category, the proximity of the Big Casino experience makes a difference. If addicts can get the big score more easily, they'll be more likely to pursue it. If pastimers can save money and effort by getting the authentic casino experience closer to home, then they'll do so. But the notion that a full casino will not cannibalize the business of smaller and less glitzy venues is experientially absurd. The only way its appearance will not result in a decrease for the other outlets is if it helps to transform pastimers into addicts, which would be devastating for Rhode Island more fundamentally than through a mere loss of tax revenue.

Oppressor of America

Well, after extensive efforts since the company devoured Fleet, Bank of America has finally succeeded in persuading me to take my business elsewhere. From several varieties of inconvenience to an extremely unpleasant job fair to the fees (my God, the fees!), the behemoth has finally overcome the natural inertia against changing banks.

The company's corporate approach to handling customers was consolidated for me in a single policy that I discovered a number of months ago: if a customer should write checks for more money than is in his checking account, the bank offers the service of automatically transferring the funds from his savings account. Charging a fee for such a thing is fair — it is the customer's error, after all, and one that a bank understandably discourages — but Bank of America takes the fee out of the checking account, without automatically transferring that amount as part of the service.

During a particularly hectic time last year, when I simply had to handle my finances on autopilot, I fell into a cycle of not transferring sufficient funds to cover the fees that were automatically being withdrawn from my checking account, and those fees piled up. When I called to complain, the bank did forgive a handful of them, but my awareness that somebody within the organization had made the decision to arrange fees in such a way as to trip up busy customers left me resolved to, at some future date, quit the bank. Now that I've discovered another policy having to do with numbers of transactions that conflicts with a banking strategy that I've followed since I was fourteen, I won't delay any longer.

In fact, the entirely different feel that I've gotten from Bank of America than from any of my previous banks makes me wary of financial trends toward automation. It used to be mainly on general principle that I preferred to handle each paycheck and bill — so as not to lose touch with the flow of my money. But now I think automatic deposits and withdrawals may represent a much more insidious trend. How much higher the barrier is to changing banks when doing so requires one to recall and then figure out how to change bank information with any number of third parties!

I fear that movement toward the ideal of convenience — not just in finance — may lead to a more oppressive corporate culture, as each company becomes akin to a monopoly of its own client base.