U.S. Real Productivity 1947-2010

It seems as if the United States has become much more productive over time. Using data from the BLS I use 1947 as a baseline of 100 and adjusted for yearly increases in productivity. The United States is 4 times more productive than we were in 1947! The greatest gains were seen in the 1990's. People argue that tax rates were higher and we still had a great economy during this time period. However, I would argue we had a great economy despite high taxes. People forget the technological revolution we had during this time period. What is interesting is that we still seem to have modest increase in productivity.

100,000 Hearts A Surgeon’s Memoir: Review

The other day I was at the grocery store waiting in line and flipping through Texas Monthly and noticed an article about heart surgeon Dr. Denton Cooley. The article mentioned his memoir was about to be published. When I got home I did some research online and found that it was available at the River Oaks book store (I actually received it before it goes on sale on Amazon). The book was a Christmas gift to myself. Cooley’s memoir is once of the best memories/autobiographies I have ever read. Even the book was written by a heart surgeon the book did not have very many technical. I was surprised by how well Cooley writes.

After reading the book anyone could say that Denton Cooley is in a true way an all-American. Cooley went to the University of Texas on a basketball scholarship. Not only did he play basketball, was in a fraternity, graduated with highest honors, and served in the Army after medical school. In medical school, he excelled as reaching the top of his class at John Hopkins. What is seemingly clear thought the book is Cooley’s work ethic. During his peak years he would wake up 5 a.m. every day and work 15 hours. Since 1947, Cooley has published over 1,400 articles which is prolific if you consider that not every article submitted to medical journals get published. Cooley also taught at the University of Texas-Houston medical school and the Baylor College of Medicine. Clearly, Cooley has led a busy life. On top of writing and teaching the thing he is most well known for is the amount of surgeries he has done. The Texas Heart Institute which Cooley is affiliated with has performed over 100,000 surgeries. Cooley stopped performing surgeries at 78 (he is currently 91). Throughout the book he is constantly innovating new techniques or using different devices to try to save the patient’s life. Cooley took on difficult cases that other doctors would have never touched. In the period between 1962 and 1967 the mortality rate for people that received heart transplants fell from 70% to 8%. Cooley and Domingo Liotta worked on the first artificial heart which allowed the first patient to live 65 hours. Today artificial hearts can last between 1-2 years. Cooley no doubt helped advanced medicine and promote Houston as one of the best medical centers in the world with St. Luke’s. The best part of the story is saved for last when Cooley who had a rift with fellow surgeon Dr. Michael DeBakey for 40 years make up.

The book is written from an honest viewpoint and demonstrates how humble Cooley is. Not only does Cooley talk about his successes but he also talks about unfortunate situations. All in all though, Cooley’s memoir inspires the reader to make a difference in the world. Cooley has touched so many hearts yet many more lives.

Big Pharma’s New Business Model: FDA Does Harm

In today’s Wall-Street Journal Dr. Scott Gottlieb points out the obvious problems of the FDA. Gottlieb argues correctly that advances in medicine have been hindered by too much regulation. The average cost for a drug company to create just one pill is roughly $1 billion. The FDA now requires more patients, more tests, and I believe regulates to the point where they create drugs that are too safe. The number of patients required for clinical trials have increased from 1,600 in the late 1970’s to roughly 4,200 in the 1990’s. This of course creates additional costs for the drug companies. Today the cost of enrolling just one patient in phase III (final stage) trials is $26,000. In 1987, the cost to develop a drug was $437 million (in 2010 dollars). By 2000, this number increased to a little over $1 billion (in 2010 dollars). The question is what is driving up the cost?

Note this is just for one patient. The number of tests that must be done on patients (blood work, x-rays, etc) has from just 1999-2005 has increased 59%. During this same period the amount of time required to complete clinical trials has increased 69%. The percentage of drugs getting approved has also decreased. 63% of drugs advance from Phase I to Phase II testing. However, only 33% of Phase II drugs get into Phase III. At Phase III the chances of a drug becoming approved are 80%. The percentage of drugs that get passed has been decreasing over time.

The FDA is focused on making sure that drug companies are producing safe drugs. The FDA can restrict what drugs people choose to take. This to me doesn’t make a lot of sense considering we choose what to eat, drink, and do with our bodies. The most common argument about why we need the FDA is because people simply don’t know enough about drugs. True, individuals themselves may not however this is why people seek out information. People can get vast information about diseases, illnesses, and drugs online. Individuals can evaluate their own risk-reward models. No system will be perfect. However, the question is what leads more people better off. Right now many people are suffering from pain and illnesses because the FDA won’t let XYZ drug company test their drug. One great idea is if patients want to take a drug not approved by the FDA to sign a waiver from the drug company saying that they can not later come back and sue. The FDA has little or no incentive when it comes to approving a drug. Have you ever heard of patients suing the FDA for not approving drugs that could have potentially saved lives?

TCU Historical Admissions 1999-2011 and AP Football Ranking

TCU’s football program has gained national recognition in the past couple of years. My freshman year at TCU (2005) I remember TCU beating Oklahoma who was highly ranked. Since 2005 TCU has been ranked every year except 2007. Around this same time I noticed applications to TCU were dramatically increasing. I was curious as to how much of the increase in applications could be explained by the football program. When I looked at the TCU Fact Book I found that a higher ranking really didn’t correlate with the increase in applications. For instance, the largest percentage increase came in 2007 when the prior AP ranking for TCU was 22 but the increase in applications was 37%. However, after TCU won the Rose Bowl and was ranked #2 and the number of applications increased 36%. The largest increase in the number of applications (not percent) did come after the Rose Bowl win. Also was it interesting is that the acceptance rate of TCU has gone down dramatically. In 1999, the acceptance rate was only 75%. For 2011, the acceptance rate was a mere 38%. In a little over a decade it has become twice has hard to get into TCU!

Congrats TCU Poinsettia Bowl Winners!

Congratulations to TCU last night for winning. TCU didn’t play their best however they came out with the win. Skye Dawson had a magnificent catch that lead TCU for the go-ahead touchdown. TCU will be taking home $750,000 for the win (less after they divide it up between the Mountain West Conference). TCU is going to the Big 12 division next year which should be interesting. I am proud to have graduated from Texas Christian University!

Income Inequality: Top 1% Myths

Time magazine recently named “The Protestor” the person of the year. No doubt this year we saw complaints between the bottom 99% and the top 1%. However, although many people in the bottom 99% may be complaining I would question whether they have all their facts. According to Federal Reserve data 33% of the people in the top 1% in 2007 were no longer in the top 1% in 2009. Note that this is only over a two year time horizon. Less than 15% of people on the Forbes 400 stay on the list for over a 21 year period. Also it is important to note that inherited wealth is in fact the minority of people on the Forbes 400 list. What is even more interesting is that according to the Edward Wolff of NYU is that the percent of inherited wealth has been decreasing. In 1989, 23% of the top 1% inherited their wealth. By 2011, this percentage decreased to 9%. Also it is interesting that income inequality is lower now than where it was in 1995. Also the concentration of wealth in the top 1% is lower now than where it was in 1998.

People will always want more. This desire is part of human nature. What seems puzzling is why people are envious of other people who work harder, longer, and smarter than themselves. To me if someone wants to work 80-100 hours per week earn all that money and contribute to society more power to them. As long as they are not asking for government money everyone should be fine with this arrangement. We could of course cure income inequality by having recessions. Everyone would feel more equal yet it would come at the price of growth and expansion. One point people forget is that the top 1% often take the most risks. This is known what Robert Frank describes as the “high-beta rich”. Frank makes an interesting argument that the top 1% has more because they took more on more risk. This is common sense. Often people who have large amounts of wealth have most of their net worth tied up in their stock options or their business. The majority of Americans don’t have stock options and live off their paychecks. Since a large percentage of people in the top 1% have their net worth in one asset they have to constantly worry about what happens if that asset implodes. This means that the super rich have much more volatility in their net worth than say the average person. One year you might have $200 million and then the next $50 million if the stock market drops.

Income inequality should make people want to work harder (if they decide they want more money). Complaining about why other people are successful does nothing for any individual. Everyone wants more money yet very few people want to do what is required or necessary to get there. We can’t forget that people are paid on value creation and productivity.

Special thanks to Robert Frank for giving me the idea for this post.

Amazon Price Checker

Amazon.com recently came out with an application for phones that allows individuals to use their phone to scan barcodes of any item and instantly the price of that item. The application will scan the barcode then show the price of item available on Amazon.com.

The other night I was curious about the application so I downloaded it myself. I wasn’t at a store but I started to scan a bunch of books on my shelf and realized how cheap it would be to replace them!

Clearly, Amazon is trying to lure their business their way by showing people that their prices are cheaper. If someone wanted to compete with Amazon they could create an application that could scan every single price online and display the cheapest one. Retailers are upset because they obviously charge higher prices than Amazon. However, although retailers may complain consumers benefit. I doubt you will hear any consumers complain about the application. Would you complain about paying lower prices? In a world filled with millions of prices being able to find a cheaper price is always good. Although, Amazon has low prices they don’t always have the lowest. For instance, I bought some DVD’s from Amazon and then found the exact same DVDs cheaper at Best Buy because they went on sale a day after I bought them. If someone wanted to give Amazon a run for their money they could create an application that could scan the whole internet and all local stores. Also Apple has an application/assistant called Siri that answers questions for people. I am sure in a couple years this application would be able to do similar things by voice recognition. While we’re at it Siri could answer questions like “My car is low on gas where the closest and cheapest place to fill up?” Amazon’s price scanner is turning shopping into a consumer’s paradise.

America Obesity Epidemic?

People often talk about obesity being an epidemic. As if there was something in the water that was somehow making us all larger. Recently, in the news there was a story about how Americans are now 20 pounds heavier than they were 20 years ago. The average weight for men is around 196 and 160 for woman (note these figures are self reported). Around 62% of Americans are overweight or obese. You have to be careful because many times people are overweight or obese as defined by BMI (Body Mass Index). This can be misleading because some people have more muscle which makes it appear they are overweight. There is a prediction that by 2030 more than ½ of Americans will be obese. The problem with this prediction is trends don’t persist forever. People start to wake up and realize they are overweight and start working out and start to eat more sensibly. The problem is often is it hard to keep up this up. There are predictions that life expectancy will decrease in the coming years because we have so many overweight people.

Many people have tried to pinpoint the causes of the rise in weight gain. Some people blame genes, shifts in the role of work lives, and individual choices. Blaming genes to me is a red herring. I would agree that some people might carry genes that could make them more likely to be heavy but I don’t think somehow overnight genes just made people bigger. A better explanation might be because of the changes in the role of the family. Years ago most housewives cooked nightly meals for the family. Times changed and housewives moved into the labor force. This would allow less time for making home cooked meals like in the good old days. Today, it seems as if people get more take out, fast food, or pick up pre-made meals from the store. According to a survey done by CBS in 2005 21% of families ate out at restaurants 2-3 nights a week. Around 17% of people ate fast food 2-3 nights per week. Years ago people rarely went out to a restaurant to eat (usually it was for a special occasion). Fast food companies like McDonalds, KFC, and even Taco Bell were are formed before the 1970’s but people didn’t really start eating at these places until the 1980’s and 1990’s.

However, what I find interesting is why everyone is so worried about how much other people weigh. Shouldn’t we be more concerned about our own health? Somehow people think overweight or obese people are a problem. If anything it helps non-overweight/obese people because it makes them relatively more attractive. I suppose people don’t like the “externality” of looking at large people (which I am sympathetic to). However, people should be able to eat and drink what they want. We all should have the freedom to choose what we put into our bodies. After all we own our own body.

Black Friday: Waste of Time (Why You Don't Have To Go To Wal-Mart, Best Buy, or Macy's)

The internet has transformed all of our lives. If you ask most people if they could live without it I have a feeling very few could actually say yes. The internet allows people to do wonderful things like send mail across the world, pay bills, and order items. With the holidays approaching I want to focus on that last thing of ordering things. In the United States, we have an event called “Cyber Monday”. Essentially Cyber Monday is a day where people go online to order gifts for themselves, family, friends or loved ones. This of course is after Black Friday where people wait in tents all night in order to secure great deals on gifts. This year stores many retail stores like Wal-Mart, Best Buy, and Macy’s opened at midnight instead of opening the usual 3 or 4 a.m. like they usually do. This year alone over 220 million people participated in Black Friday. To me I never understand why people spend hours waiting in line to save some money. Of course, there will be other great deals (maybe even online) but what is the opportunity cost of waiting in a line

For those that don’t want to wait in line there is always the internet. In 2011, consumers spent $6 billion from November 28 through December 2. Clearly, this is a lot of money and many retailers are involved. What is interesting however is how online shopping makes things much more efficient. Back in the day people would drive from store to store looking for deals (they may had help from ads or coupons). Today people can find what they want and find it at the cheapest price and have it shipped right to their doorstep without going outside. If anything the internet decreased gas consumption because we don’t have people wandering around wasting gas (not to mention people are also saving gas through their navigation systems). The counter argument might be it takes trucks and cars to deliver all these items people order. This may be true however if you notice UPS and FedEx have trucks that carry hundreds of items and know the most fuel efficient way to deliver these items. FedEx expects to deliver 17 million packages on their busiest day. UPS last year exceeded 25 million deliveries.

Data from Price Grabber shows than 37% more percent of people will shop on Cyber Monday than last year. The major reasons people listed for shopping online were finding the best deals and basically not having to go to the mall. If you think about it people have expotentially more options and a better chance of getting a better deal sitting behind a computer than walking around the mall. Truly technology is glorious.