Isaac Laquedem

Jane Ace tells off a hospital that asked for a gift

On March 9 the Wall Street Journal published this article by Alexandra Samuel about feedback fatigue, describing how "in their eagerness to deliver a better customer experience" by incessantly asking for reviews and evaluations, "companies have created a new kind of bad customer experience: feedback fatigue."  Ms. Samuel cites two studies that discovered that customers don't like the surveys.  "Repeated surveys," she wrote, "may make customers reluctant to return."  She described a 2014 study as showing that "over-surveying by different organizations leads to exhaustion with all the requests for feedback."  

The article brought to mind one fine example of a business being less than careful with its customer outreach, way back in 1974.  The particular business was a New York City hospital, and it sent this letter to a former patient, Jane Ace.  I've shortened it a bit:

December 6, 1974

Dear Mrs. Ace:

As a recent patient you have seen how our hospital serves its community by providing a full range of medical services, offering a high level of nursing service together with physical amenities, enabling the hospital to treat the patient as a person, rather than a number.  We are appealing to former patients like yourself to contribute to the hospital's Capital Improvement Fund . . .

[Signed by the president of the hospital]

Mrs. Ace and her husband Goodman Ace were well-known radio personalities, and he was a veteran humorist.  He felt that the letter wasn't appropriate, and wrote the following response, which has stuck with me since I first read it in 1975:

December 8, 1974

Dear Sir:

As a former patient I did notice your high-level nursing service together with its other amenities, and I would dearly like to contribute to your hospital fund.  But, you see, on November 11 I died in your hospital.  Maybe we can get together later.

Sincerely, Jane Ace

 

The Laquedem coronavirus relief plan, part 2: the Airline Relief Plan

My previous post tackled student loan relief.  I'm ready to start on the airline industry's pleas for money.

The United States airline industry has been making the rounds on Capitol Hill, attempting to persuade legislators that it is so essential to the American economy that Congress should give it a priority position (early boarding?) when Congress hands out relief to businesses.  Certainly the airline industry is important to our economy, but that doesn't mean that any particular airline is itself important.  The planes, airports, and other infrastructure aren't going anywhere, even if their proprietors go broke.

Several commentators have pointed out that the major airlines would have been better able to weather the COVID-19 depression if they had used the profits of the past five years to pay down debt instead of buying back stock.  The major airlines spent billions of dollars buying back their companies' stock over the past five years, money that's no longer in their tills to get through downturns.  How much stock did they buy back?  Since March 2015 United bought back at least 134 million shares, reducing its outstanding shares by 35%.  American bought back at least 265 million shares, reducing its share count by nearly 40%.  American was so confident about its business prospects that even in 2020 it's bought back 2 million shares so far.

In the meantime ridership has plummeted -- even those Americans who can still travel don't want to -- as airlines have withdrawn from overseas service and cancelled many domestic flights, leaving airlines unable to cover their fixed operating costs.

The airlines profess that they are repenting of their sins.  The leaders of ten major passenger and freight airlines (including UPS and FedEx) have promised Congress that if Congress will grant them $29 billion in aid, they will not lay off any employees until at least August 31, they will not buy back any stock or pay any dividends until they've repaid the aid, and they will limit executive compensation in some unspecified manner.  They want the aid in the form of loans, not equity investment.  Here's a link to their letter.

I have a certain sympathy for the predicament in which the airline companies find themselves.  At the same time, it's time for them to eat some of their own financial cooking.  They've gotten away with serving "airline food" for years.  It's time for them to eat their own cooking.  Hence the Laquedem Airline Relief Plan.

The first element is that the United States will provide the $29 billion in aid, but with a few financial twists:

    1.    The United States will provide the aid, not as a loan, but by buying stock in the airlines, at the lowest price at which the stock has traded in the past three months.  For example, United stock hit a low of $21.28.  If the aid to United is set at $2.128 billion, then the government will buy 100,000,000 shares of United stock at $21.28/share.

    2.    The airline may buy the government's stock back at cost plus 6%/year simple interest, any time in the next 5 years, if the airline has made an operating profit for 4 successive quarters and if the airline is not borrowing money to buy the stock back.  I envision that the airlines that survive the depression will buy the government's stock back, a few shares at a time.

    3.    All existing stock option grants to management and the board of directors will expire 60 days from the date of the aid.  The option owners may exercise them within the next 60 days, or not at all.  The airline may not reprice them to allow the executives to exercise the options at today's price instead of the price at which they were granted.  This effectively makes the stock options worthless, which is the idea - since the senior managers and directors participated in the company's bad decisions, they should not profit from the bailout.

    4.    The airline will not issue any new stock options, repurchase any private shares, or pay any dividend until it has purchased all of the government's shares.

    5.    Executive compensation is capped at $750,000/year, or in the alternative at 30 times the salary of the lowest-paid full-time employee as of March 1, 2020.

I accept the industry's argument that it is something in the nature of a public utility, an essential service for American business and consumers.  In recognition of the claims of its managers that it provides a public service, the Laquedem Airline Relief Plan also has two operational requirements.  One is to provide better service to communities and the other is to improve the passenger experience in the air:

    6.    The federal government will require each recipient airline to provide daily passenger jet service to at least one community that had daily passenger jet service at any time since 1986 and that has since lost its jet service.  I picked 1986 because that's when the federal government deregulated the industry and stopped ensuring that communities that needed air passenger service would receive it.  The principle is the same as the one that gives electric power companies exclusive territory in exchange for their promise to serve everyone within the territory.

    7.    Within one year after receiving federal aid, each recipient airline will refit its coach sections to have at least 34 inches of seat pitch.  (Seat pitch is not the same as legroom.  It is the distance between a point in one row of seats and the same point in the next row of seats.)  The sale of any seat with less than 34 inches of seat pitch will be prohibited after a certain date.  If we taxpayers are going to save the airline industry we should require the lucky beneficiaries to improve the quality of the product.  There's no reason for coach travel to be comfortable only for people of the stature of Martin van Buren.

Let's use the airlines' need not just to make them improve their financial management but also to make them offer a better product.

The Trump Administration kicks a bad banker out on his assets, and high time, too

Eleven years ago this week - in fact, during the first days of the Obama administration -  I offered a Laquedem Plan for how the federal government should deal with the bankers whose carelessness, fecklessness, and recklessness threatened to bring down the banking system and, with it, the nation's economy.  I proposed that the government should buy up the bad assets of the major banks and then make the bad bankers leave their sinecures and work for the banks with the bad loans that they had created - the "Kick the bad bankers out on their assets" plan.

A year and a half later I went farther, and proposed that the Federal Deposit Insurance Corporation should treat the bad bankers the same way that life insurance companies treat those with serious and chronic health problems: declare them to be uninsurable, or, more exactly, declare that any bank that engaged any of the bad bankers to be an officer or director would not be eligible for FDIC insurance.  The FDIC, I thought, should start a "no-fly" list of its own to protect our nation's financial institutions.  As far as I know it didn't happen under the Obama administration.

You may recall the interchange between Senator Elizabeth Warren and John Stumpf, then the chief executive officer of Wells Fargo, when he was testifying before (read:  haled before) a Senate committee about his bank's having created millions of fake bank accounts and issued millions of bogus credit cards so that account representatives and mid-level officers could meet their sales targets.  Mr. Stumpf lost the debate and shortly afterward, retired -- very gently and lucratively -- from Wells Fargo.  That was about all that happened to him . . . until this week.  Much as I disagree with President Trump, I was delighted to read today that the Office of the Comptroller of the Currency has obtained Mr. Stumpf's agreement to pay $17.5 million to the Treasury and to never, ever work in any financial institution again - think of him as the Pete Rose of the banking world.

My delight in the OCC's expelling Mr. Stumpf from civilized financial society is tempered, however, by the fact that he got in trouble not for running his bank into the ground but for using unsavory methods to make $billions for the shareholders.  I suppose that makes him a good bad banker.  For its next expulsions the OCC should select the bankers who lost billions - the bad bad bankers.

Jakob Kryszek (1918-2019) and the American dream: He who dies with the most joys wins

The most religious of rabbis might have forgiven Jakob Kryszek if he had become an agnostic.  Born in the small Polish town of Poddębice in 1918, the fourth of six children in a devout Jewish family, he moved to Lodz in 1937 after his father died.  There he went to work for an uncle who knitted socks - until Nazi Germany invaded Poland and sent the Jews of Poland first to ghettos and then to the concentration camps that became death camps.  He never again saw his mother and his siblings.

That Jakob Kryszek was not among the six million Jews killed in the death camps or elsewhere in the war was a matter of improbable chance.  He was working in a Lodz factory when Germany began to bomb Lodz.  Later in the Lodz ghetto he volunteered to work on the crews building the Autobahn because he was told that his siblings who remained in the ghetto would get extra food rations.  When the ghetto residents were sent to the death camps he was at first sent to a work camp because of his experience on the highway crews.  As he later passed through death camps -- Birkenau, Buchenwald, and Auschwitz among them - one  happenstance after another kept him alive.  Once when bombers attacked the camp he ran to the fields instead of going to the bomb shelters, which the planes destroyed.  Later when he and other prisoners were in rail cars, Allied airplanes strafed the cars and a bullet passed through his leg and broke his femur.  A friendly Polish doctor was able to pin the broken pieces together, creatively but without anesthesia.

Years later, as Mr. Kryszek recalled his years in the camps, he said that in the camps, "to remain alive was really absolutely circumstantial. We could not figure out [how to remain alive]; it was not a matter of figuring out how to do it to stay alive. It was fate."

Fate brought him through the war and gave him another three quarters of a century.  Mr. Kryszek died not in Poland in 1939 from German bombs nor in 1945 from Allied bullets and battlefield surgery but in Portland this Wednesday from the ills of age, having lived to celebrate his one hundredth birthday last year and then to greet his first great-grandchild two months ago.  Along the way he came to America and moved to Portland, where he went to work for an old-line knitting mill, Columbia Knit.  (It is unrelated to the younger and larger Columbia Sportswear.)  He later bought and expanded Columbia Knit, using knowledge that he had acquired from his uncle in that vanished European world of long ago, and achieved the American dream.  In civic life he became active in ensuring that the Holocaust is remembered, first by contributing to the Oregon Holocaust Memorial and later by speaking about his family and his own experience.

His time in the death camps made him fearless in the commercial world.  Once he had a disagreement with a business connection, who told him, "If you don't settle this dispute on my terms, I will sic my lawyers on you and they will tie you up in court for years. It will be the worst experience of your life!"  Mr. Kryszek smiled benignly as he replied, "I was in Auschwitz for a year. What can your lawyers do that's worse than that?"

His war experience also made him quirky with his time.  He would occasionally bring a small project to a lawyer and then sit placidly in the lawyer's office watching the lawyer type the document he wanted instead of going about his business.  Did he want to ensure that he wouldn't be overcharged?  He was thrifty in small things; one who didn't know Mr. Kryszek's life story might have taken his thrift as a sign of parsimony.  He was actually quite generous: the same fate that had taken his brothers and sisters from the world of his youth gave him nearly 75 years to preserve their memory, and he freely shared the richness of time with the world around him.  And every year, every month, every day, every minute that he enjoyed of his long and vibrant life after the war was both a joy in itself and his own private victory over the nation that, 75 years ago, had done its best to try to kill him.

יעקב בן אברהם

תהא נפשו צרורה בצרור החיים

The Janus case on compelled union dues: it's time to extend the same protections to shareholders

This week the Supreme Court held, in a case called Janus v. AFSCME, that public employees could not be compelled to pay "fair share" fees to the unions that negotiate their contracts with the government, overturning 40 years of precedent.  The majority said that to compel public employees to pay anything to the union is a form of compelled speech that violates the First Amendment, because it requires people to subsidize a message with which they may disagree.  The decision is likely to weaken the economic power of the unions that represent state and local government employees, which mostly support Democratic candidates.

I oppose forced speech of all kinds, and the decision doesn't bother me -- if we can extend it to other forms of forced economic speech.  Consider retirement funds.  Private individuals can invest in all sorts of things, but as a practical matter a large pension fund (think of Oregon's Public Employment Retirement System or California's even larger CALPERS fund) must invest most of its capital in the stock market, which more than any other investment provides a reasonable amount of income, appreciation, and liquidity.  The stock market is simply a collection of corporations, most of which engage in political speech through lobbyists, public relations, and affiliated political action committees.  If we are going to give people the right to opt out of subsidizing political speech with which they disagree, then let's expand the principle, and allow pension funds to compel the corporations in which they hold stock to lay the cost of their political efforts on only those shareholders who agree with them.  There's no reason for a government pension fund that holds shares in Wal-Mart to subsidize any of Wal-Mart's political efforts with which the fund's governing board disagrees, for example, efforts to oppose increasing the minimum wage.  If compelled political speech is bad when unions do it, it must be equally bad when management does it. 

Imagine the fun if PERS could tell Wal-Mart that its board disapproves of Wal-Mart's lobbying efforts and that it insists on being excused from paying for them.  If Wal-Mart's political speech costs the shareholders 3 cents/share/year, then PERS could insist on Wal-Mart paying it a special dividend of 3 cents/share/year to compensate for the expense.  Shareholders who support Wal-Mart's politics could still pay for the work; shareholders who oppose Wal-Mart's politics wouldn't have to bear the expense. 

Fair, as the wags occasionally note, is fair.  Why should the law deny government retirement funds a right that the court has granted to government employees?  I wouldn't want to suggest that the court's majority might be two-faced about the issue, but the case, fittingly, is named after a plaintiff named Janus.

T.T. "Saki" Tzantarmas (1936-2017), the New Copper Penny, and the American Dream

The unlikely life of Theodosios T. Tzantarmas began in 1936 in Thessaloniki, the second-largest city in Greece and one with a lively reputation for challenging the government: it was the locus of the original Young Turks, who started the revolution that ultimately overthrew the Ottoman Empire.  Not everyone born in Thessaloniki becomes a revolutionary, but neither does everyone born there become a boxer, a pipefitter, a tavern owner, and a thorn in the side of city government.  In his 81 years, T.T. Tzantarmas, known as "Saki," did all of those things.

Most of his Portland friends knew Saki Tzantarmas, who died in Portland on July 20, as the owner of the New Copper Penny Bar & Grill, a rambling establishment devoted to drinking, betting, and celebration that until last year dominated the interchange of Interstate 205 and Foster Road.  Even people who never stepped inside recognized its sign as a Portland landmark, with its copper-colored profile of Abraham Lincoln in the style of a one-cent piece. Why a penny and not a dollar?  Mr. Tzantarmas came to this country, he said, without a dollar -- but he did have five pennies in his pocket.

By 1960 he had made his way to Portland, where he was working as a pipefitter, and the stories began.  He told friends that he had boxed professionally, and an image from 1965 shows Saki with noted Mexican welterweight Gaspar Ortega - but his boxing record at boxrec.com identifies him in just one match, with Don Marshall at the Portland Armory, which he lost in a technical knockout.

Boxing was not Saki's future, though he retained the fighter's stance and build the rest of his life.  A few years after his boxing match he bought a rundown tavern, which he named the Copper Penny.  When the business was forced to relocate in 1973, he moved the tavern to Southeast Foster Road just east of 92nd Avenue, renaming it the New Copper Penny.

Saki himself lived a life of contradictions.  Expressive verbally, he disliked writing.  Elegant in dress when he wished -- he could make a purple tie look impressively masculine -- he could also appear in the New Copper Penny looking like a patron who was about to be thrown out, instead of as the owner who even in his late 70s could still do the throwing.  Thrifty in business -- some might say tightfisted -- he was personally generous to friends and family, quietly helping friends in need.  Even his family name carried its own puzzle: nominally Greek, it might have derived from the Italian surname Zantani, or from a similar Turkish name.

As he expanded his business onto the entire block on Foster Road, he built the contradictions of his own life story into the New Copper Penny.  The oldest part of the business was a clean plain room with a concrete floor, stark like the Greece of his youth.  A middle section contained the off-track betting parlor and video poker machines, a nod to the practicalities of running a tavern in Oregon.  And a dilapidated passage with fraying carpet led to the elegant Pantheon Room (pictured here), a classically-decorated banquet hall, with Greek pillars lining the walls, reminiscent of the ancient glory of his homeland.

Under pressure from the Portland Development Commission to get out of the way of gentrification, Saki sold the New Copper Penny site, and the tavern, club, and banquet hall closed last year to make way for apartments.

An old story tells of the man who came to this country with nothing, started a business, became a success, and sent his son to college to become an accountant.  After graduating, the son examined the father's books and told his father that he couldn't tell from the books what the father's profit was.  The father said, "I came to this country with five dollars.  Take five dollars out of the till.  Everything else you see is the profit."  When Willamette Week interviewed Saki Tzantarmas in 2014, he pulled five copper pennies out of his pocket and showed them to the reporter.  The five coins were what he had brought to America sixty years ago.  Everything else -- his family, his friends, his property, and his story -- was the profit that he shared with the city that he adopted.  It would be a fitting memorial to T.T. Tzantarmas if, somewhere in the foundation of the monolith that is replacing the New Copper Penny, the developer would embed five copper pennies.

 

Donald Trump pivots to China

At least, that's how I interpret the juxtaposition of Mr. Trump firing James Comey as director of the Federal Bureau of Investigation at the same time that his son-in-law's sister is selling real estate investments and visas to the Chinese.

United Airlines: offering multimodal transportation to its paying customers

The Federal income tax (second in a series) and the Laquedem Cosmic Federal Budget Workweek

I enjoy reading the descriptions of natural history that condense the life of the universe into the scale of a single year, sometimes called the Cosmic Calendar, so that if the Big Bang happened on January 1, the solar system formed on September 2, life on Earth started on September 21, fish appeared on December 17, the ice age ended on December 31 at 11:59:33 p.m, and so on.  I also appreciate the similar scaling of the federal income tax and the concept of Tax Freedom Day, the day of the year on which the nation has earned total income equal to its federal and state income tax burden.  It's in late April.

Something I read inspired me to condense income taxes and the federal budget into a single workweek -- the Laquedem Cosmic Federal Budget Workweek.  Imagine that your annual work and income are condensed into a single workweek of five 8-hour days, each running from 9:00 a.m. to 5:00 p.m. (For this exercise, skip lunch and breaks.)  The tax freedom moment is Tuesday at 1:29 p.m., including state taxes.  Your federal income tax freedom moment is Tuesday morning at 9:20 a.m.

But let's take this scale one step farther.  If your income tax is allocated ratably among the $2.854 trillion (net of certain offsetting revenues including Social Security and Medicare taxes) that our federal government spends, for how much of the LCFBW are you working for which program? 

The answer is that from 9:00 to 10:52:19 Monday you're working for the Defense Department, from 10:52:20 to 12:37:26 you're funding other discretionary spending, from 12:37:27 to 1:19:39 you're funding the interest on the national debt, from 1:19:40 to 2:24:08 you're funding Medicaid, and from 2:24:09 to 3:51:23 you're funding the gap between Social Security and Medicare tax revenues and expenses.  For the rest of the Monday (remember, no breaks!) and 20 minutes Tuesday morning you're supporting everything else the government does that has some mandatory element, including SNAP (food stamps), federal and military retirement benefits, the earned income credit, some veterans' programs, and unemployment benefits, net of all offsetting revenue.  

Mr. Trump proposes to cut funding for the National Endowment for the Humanities, the National Endowment for the Arts, and the Corporation for Public Broadcasting.  How much of your workweek goes to support those three programs?  Last year the federal government funded public broadcasting with $445 million and sent about $150 million each to NEH and NEA.  On the Laquedem Cosmic Federal Budget Workweek scale, one minute equals $5.708 billion and one second equals $95 million.  The answer, then, is that the $745 million for those three programs together correspond to about eight seconds of your workweek.  If you read at a respectable 300 words per minute, in the time it took you to read this post you funded your share of the three programs twelve times over.  Now get back to work.

Federal Income Tax Policy (first in a series)

In January, Senator Mike Lee (R-Utah) proposed eliminating the corporate income tax.  As president-elect, Donald Trump wanted to lower the top corporate tax rate from 35% to 15%.

They may wish to review the history of how the nation's tax burden has shifted from corporations to individuals.  In the early years of the federal income tax, the burden lay about evenly on individuals and corporations.   In eight of the first ten years, the government actually collected more from corporations than from individual taxpayers.  That tenth year -- 1943 -- was the last year in which the United States government collected more income tax from corporations than from individuals ($9.56 billion from corporations and $6.51 billion from individuals).

The last year in which corporations paid as much as two-thirds as individuals was 1954 ($21.1 billion from corporations and $29.5 billion from individuals).

The last year in which corporations paid as much as half as individuals was 1967 ($34 billion from corporations and $61.5 billion from individuals).

The last year in which corporations paid as much as one-third as individuals was 2006 ($353.9 billion from corporations and $1,044 billion from individuals), and before that was 1977 ($54.9 billion from corporations and $157.6 billion from individuals).

The tax cut that the Republicans champion has already happened.