Driverless Car: Berlin

Researchers at Free University in Berlin have been experimenting with a driverless car. The driverless car is similar to Google’s Toyota Prius and has been driving around without completely by computer. The car can sense the road, people, buildings and trees up to 200 feet. As would be expected the car has a faster reaction time than that of a human being’s. The car costs around $552,000. I doubt this car will be on show room floors any time soon.
 
Experts claim driverless cars should be available in the next 10-40 years. This is probably a good estimate with the better estimate being the 40 years. The problem I see in developing driverless cars is ensuring quality on each one. Google and the researchers at Free University have made one of these cars, but once you start creating a thousand of anything it leads to quality control problems. As long as manufactures can prove the cars are safer than the human alternative I think people will buy them. Although, people will be reluctant at first to buy a machine that they can’t control. However, one could make the argument that air travel is done by auto pilot which essentially is a computer operating at 30,000 feet above the ground. The number of fatalities today is around where it was in the 1950’s. This is incredible given we have exponentially more drivers. A better measure is looking at highway deaths per miles driven which has dramatically decreased since 1921. Driverless cars in time will make us safer. The people most likely to buy the first cars will be people who have money, who don’t like driving, are bad at driving, or are prone to accidents. Taxi cabs would be put out of a business if a driverless car could pick up and drop off people.

The main argument for driverless cars I see as I mentioned in an earlier post is the amount of time that would be freed up to do other things. This alone would increase GDP, allow us to get more sleep, more fuel efficient cars, and give people even more leisure time. Driverless cars if proven safe would drive down the cost of insurance. We could even get to a day where cars do errands for people! Imagine if you could send a car to the store and the car could pick up groceries or go to Best Buy to buy something. I am imagining lines where store employees load cars and the car then drives back home to its owner.

The $550,000 cost of the current car will decrease over time. During the early stages of any new technology the cost is very high because very few people are doing it. However, once other competitors enter into the market the price will drop making everyone better off (once they finally decide to release a commercial version). Something tells me the price would have to be less than $100,000 for anyone to actually buy one. Time will only tell if or when this even happens. The future can’t be predicted no matter what the past shows because there are technologies just waiting to be discovered.

TCU Admissions 2011 and Historical Admission Rates

I updated my historical admission rate for TCU for 2011. For 2011, the acceptance rate at TCU was only 38%. I plan to update this graph with football rankings to see if the football rankings have had anything to do with this.

Source: TCU Fact Book

Koch Wealth

Seems as if the Koch brothers are creating wealth by pleasing their fellow man. Although, the brothers inherited the company from their father they still have grown the company by leaps and bounds. People forget that just because you inherit something makes you rich. People can inherit companies or money and blow through it very quickly. Most of the time this is the case with inherited wealth. One generation will create and the next generations will either give the money away or squander it.

Buffett Tax

This week President Obama announced the Buffet Tax. The Buffet Tax would tax people making people who earn more than $1 million. In Buffett’s article in the New York Times entitled “Stop Coddling the Super Rich” Buffett makes the case that he pays lower taxes than his secretary. This of course is true since Warren Buffett’s income is taxed at a much lower since Buffett earns all his income on capital gains which is much lower than ordinary income (income from working). However, what I find interesting is that Buffett leaves out the taxes that his company pays in order for him to receive that income. Buffett runs Berkshire Hathaway which is a large conglomerate of companies. When Berkshire Hathaway earns income that income is taxed at a corporate rate. In 2010, Berkshire Hathaway paid 29.4% in corporate income taxes. Generally companies pay 35% in taxes but companies can lower this rate through their tax department. Berkshire Hathaway then passes their income to shareholders which Warren Buffett is. The income is first taxed at the corporate rate then Warren Buffett pays individual taxes. So in essence this income is taxed twice. Warren Buffett claims his income tax rate is 17.4%. However, the true tax rate Warren Buffett pays is 46.8%. People don’t really look at the tax rate corporations pay because people assume corporations are paying the taxes not people. People pay taxes not corporations. If corporations pay taxes its less money they have to operate which lowers their return which lowers the return of millions of shareholders. If Warren Buffett really is claiming his tax rate is 17.4% then he is essentially saying that Berkshire Hathaway pays no income taxes. Clearly, this is nonsense. Buffett would have more money if his company didn’t pay taxes. It is frequently brought up that although corporations are in a 35% bracket they don’t really pay it. This point is valid although I would point out lowering the tax a company pays comes at a cost. Hiring accountants and creating tax departments are not cheap. This cost is never talked about though. A company can’t magically lower their taxes without a cost. It would be interesting to see someone study the cost of taxes if you included how much time, energy, and money it took for corporations to lower their tax rate.

I myself am a fan of a progressive flat tax. This would free up corporate accountants and individuals from calculating their tax rate. Tax revenue would no doubt increase because it would be very hard if not impossible to shelter income if people paid one flat rate. Right now there are many legal ways to reduce taxes although billions of revenue is never collected because the tax system is so complex that very few people even understand it. The only problem I worry about is that if we raised more revenue it would lead politicians to want to spend more. It would be as if politicians went to a buffet and realized there was even more food than they thought.

I myself am a fan of Warren Buffett when it comes to his investing advice. However, his political views leave much to be desired. If Buffett really felt he was paying to little in taxes he could always voluntarily pay more. No one is stopping him from giving more money to the government. His actions show he is okay with paying the existing tax or else he would voluntary give more. You can’t say you are for raising taxes if you comply to pay lower rates than you otherwise would.

200th Blog!

I am happy to annouce this is my 200th post! I appreciate everyone that reads my blog. Apparently, according to my blog statistics I have people reading my blog not only from the United States but all over the world in places like India, Russia, and Asia. I am actually surpised I have still continue to blog. When I started blogging I didn't think I would be doing it that long (thought I might run out of topics to discuss). I hope to continue blogging!

The True John D. Rockefeller Sr.

 
Even Rockefeller was unemployed....
“Each morning, he left his boardinghouse at eight o’clock, clock in a dark suit with a high collar and black tie, to make his rounds of appointed firms. This grimly determined trek went on each day-six days a week for six consecutive weeks”-Page 44

John D. work ethic from the early days…
“Starting each day at 6:30 A.M. he brought a box lunch to the office and often returned after dinner, staying late. One day he decided to throttle his obsession. “I have this day covenanted with myself to be seen in [the office] after 10 o’clock P.M. within 30 days”-Page 49

War on Poverty: Fail

Interesting chart from Dan Mitchell showing that poverty was already decreasing before the "War on Poverty" was declared by LBJ.

Case for More Lawyers

People often complain that there are too many lawyers. I would make the argument we don’t have enough lawyers. What I mean by this is that occupational licensing restricts the number of lawyers than there otherwise would be. According to the American Bar Association in 1963 there were 135 law schools with around 9,600 people getting law degrees. By 2009, the number of law schools increased to 200 yet there were over 44,000 law degrees awarded. One could argue that the number of law schools has increased by not at the rate of law schools being awarded. Four times as many law degrees are being awarded yet there hasn’t even been a doubling in the number of law schools. From 2009-2010 the attrition rate for all law schools was 9%. This means that 91% of first year law students stayed in school.

Nearly all law students take the same classes. Anyone that goes to law school has to take contracts, torts, criminal law, property, and other courses. Usually in a graduate degree program you can specialize in a certain area. For instance, for an MBA people can choose to have a concentration in Finance, Marketing, Management or whatever the school offers. Law school is just a general degree stating you have completed the courses and passed them.

In my industry there are estate planners who have to go to law school. Some people can claim they do estate planning, however estate planners are the people that usually write wills, create trusts, and will show up to court if there are any problems with the estate. However, estate planners may only have one or perhaps two courses on estate planning in law school yet in theory these should be the only one or two courses people need to become an estate attorney. There probably is some background knowledge you might need before the course, but I seriously doubt three years is needed. Lawyers might be overeducated because they take one time courses that they never use again. In a way this is like college, where you take many classes yet very few are actually used in your job. One explanation as to why colleges and law schools do this is to help students discover what they want to do.

The American Bar Association (ABA) creates a cartel by deciding if a law school can become a law school. Of course they have an incentive to restrict the number of law schools. If the ABA can restrict the number of law schools they can restrict the number of lawyers which increases their value. The ABA is claims it is voluntary I don’t know of any school that isn’t ABA accredited. In order to sit for the bar exam you have to attend a ABA accredited school. So even if there were ABA schools it would be worthless since in order to become a lawyer you have to pass the bar. California allows anyone to take the bar exam which might help explain why the pass rate is between 35-55%. There was a documentary I saw just about the bar in California called “A Lawyer Walks into the Bar”. One guy in the documentary had taken and failed the bar 41 times. Apparently, anyone that goes to University of Wisconsin doesn’t even have to take the bar and graduates are ready to practice law. I really don’t think people need three years of courses to practice law. Especially considering there are many different types of law. In my own state of Texas there are around 24 areas lawyers can practice in. It would be make more sense to offer degrees in these instead of law school.

One show that has destroyed this whole notion of needing a law degree is “Suits” on U.S.A. The show is about a young guy who has never been to law school yet knows all the laws because he has studied law books and has a photographic memory. Current law is based off previous law or precedent. If we let anyone who wanted to become a law school there would be more lawyers which would not only drive down the price of lawyers, but allow more people to get legal education. Some people now may go into other fields because they are rejected or because law school is too expensive. By allowing anyone to establish a law school it will increase the supply of lawyers.

The laws of supply and demand are always in motion. I have a feeling the ABA will continue to maintain their cartel like status given so many politicians and legislatures are lawyers. However, everyone would benefit if we allowed anyone to become a lawyer.

We Don't Have A Spending Problem, We Don't Have Enough Taxpayers

This sums everything up so beautifully...(H/T Mark Perry)

24/7 Culture

Often people talk about how we have a 24/7 lives. This seems to be true in one sense but false in the other. Today people are working fewer hours than ever before and have more time for leisure and enjoyment. Sites like YouTube, Facebook, and Netflix prove our standard of living is higher because people have more time for leisure activities. To think that these days someone could find rare footage for almost nothing is astounding. In today’s society, we have an on demand culture. People can access information 24 hours a day 365 days a year via the internet.

The biggest difference I see is the access to information. Now we can research things that use to take hours looking through books in a matter of seconds. Researchers have can now spend less time trying to find the data and more time creatively thinking about what they want to spend time on. So if we were to take someone that was working 60 hours in 1980 and someone working 60 hours today the person working 60 hours in 1980 would be very unproductive in modern times. Today a typical business person can check messages while waiting or sitting in a car. Years ago someone might call a business and they would get the secretary to take a memo and it would have to wait for the next day. In today’s society, we are more connected and wired than ever in human history. So in essence a worker could be working less hours today and still be more productive than the worker of generations ago because of technology.

One thing I have noticed is that technology has allowed us not to have to plan as much. If two people were dating in the early 1990’s they would have to call each other (assuming the person was home) to make sure they were going to pick up their date at the right time. Today in less than a second we can change plans. I think people take this for granted.

Although, there are some people who wish we could go back to the yesteryears of only having three TV stations, phones without text messaging, and in general simpler times. This of course is foolish and silly. We all benefitted from these technologies that not only made live more enjoyable but easier.

I just did a search for 24 hour restaurants in Houston and found 16 (not including Whataburger, McDonalds, Waffle House, Denny’s, and IHOP) which are also open 24 hours a day. I would be interested to see if there was any type of data on whether or not 24 hour restaurants have increased over the decades.

It looks like 24/7 culture has only benefitted society and has not taken anything away.