Jam Side Down

Every Picture Tells a Story, Don't It?

Thanks to Matt Yglesias for digging up this chart. Take a close look (click to expand).

Health Care Spending
as a share of GDP

The story? We spend at least one third more for health care than any other modern country.  Health care is 17% of our economy -- about $7,900 per person -- so we are spending about $3 grand a head more than the average modern country -- a cool trillion dollars a year.

Spending an extra trillion is fine if we get better health care -- and better health. But we don't -- by any measure. You would be very hard pressed to find a single citizen of average means in any of these countries who would trade their health care coverage for an average US health care plan.

What each of these countries has that we do not is a national government committed to delivering health care as a universal public service like education, not a private privilege like a car. They also have, almost without exception, a medical board that reviews and communicates best clinical practices. This is critical, since health care costs are driven by physician treatment decisions. The key to controlling these costs is doctors who do what works the first time.

Health care turns out to be a lot like manufacturing -- you eliminate needless cost by relentlessly reducing rework. Get it right the first time by doing what works. Physicians vary widely in their treatments -- and many, many of them are wrong. If we want to lower health care costs, we need doctors who follow best established practices, not their "instincts" or their pocketbooks.

Prevention is a good idea, but prevention does not lower costs much-- all of the mushy bipartisan babble from the Senate this week notwithstanding. Health care is expensive because in modern countries, dying is expensive. It is arguably the definition of modernity -- you have enough wealth to give people high quality end of life care.

Some prevention lowers costs (childhood immunization) but some prevention increases costs. Smokers die faster and cheaper than nonsmokers, but nobody wants to reduce health care costs by passing out cigarettes. Prevention improves the quality of our life and lets us live longer but in most cases it does not reduce the cost of death. Progress means dying an expensive death from cancer at 80 instead of a cheap death from a heart attack at 65. But look at the chart: countries with excellent health and long life expectancies achieve this with much lower cost because they manage health care far better than we do.

A trillion dollars is roughly the size of the federal stimulus package. Put another way, if we did not waste money on health care, we could have a stimulus package a year without taxing anyone. The alternative is the most regressive tax imaginable: a trillion dollars of wasted spending. We pay it in taxes and premiums that in any other country we would keep as income -- and have better health care.

Look at this chart again. It tells an amazing story.

The Thriller is Gone

I was down two Ouzos in a country taverna when a snappy kick, snare, and hi-hat commanded my attention. A repetitive bass followed by a four note synth and shaker hooked me before the vocals had even begun.

And not only me. The banter in the crowded Greek bar hushed as people began to dance. They ordered the DJ to play the new hit again. Louder. And again. Soon the crowd was chanting "I Am The One. Who Will Dance. On The Floor. In The Round."

By 3 am we had danced to nothing but "Billie Jean" for five straight hours. We walked to the beach talking about how the precocious kid with the trademark grin and Afro had outgrown his bubble gum days. Michael Jackson's Thriller had blown a hole in pop music with a high energy blend of funk, rock, and disco. The effect was electric and, as I witnessed on a remote Greek island, felt in nearly every corner of the the world.

Quincy Jones, who produced Thriller, hated "Billie Jean" and wanted to cut it from the album. A reviewer termed the song "a five-minute-long nervous breakdown set to a beat" and "one of the most sonically eccentric, psychologically fraught, downright bizarre things ever to land on Top 40 radio".

The revolution will not be televised. It will be Tweeted, Blogged, and YouTubed.

Iran has crossed into promising and dangerous ground -- that moment when  political mobilization creates the possibility that chaos will give birth to progress or collapse in repression. Politics becomes a real and serious struggle as  history either leaps forward or falls back based on the cumulative impact of thousands of  people who cannot know what is going on or how it will end. In Iran, the mullahs have no illusions about the power of a popular uprising. They are the only Islamic oil dictators who understand insurgencies because it's how they got their jobs.

Events in Iran owe more to YouTube than to Twitter. Phone videos of crowds in different towns, of Basij brutality, and of the range of ages, incomes, and genders that make up the demonstrations all paint a compelling picture. A video of a young woman dying of gunshot wounds in the streets will be viewed a million times today and nobody who watches it will feel more charitably towards the Iranian government afterward. A poem read over the eerie sound of dozens people singing prayers into the black Tehran night is stunning even if you know no Farsi. Watch and listen to it below.

This does not, of course, mean that the folks with the white hats will win. Freedom fighters got crushed in Tienanmen two decades ago and in Burma recently. It helps perhaps that the Iranian revolution now has a definable color: green (the color of Hamas, Hezbollah, and all things Islamic). Orange in Ukraine, Rose in Georgia, and even Cedar in Lebanon or Velvet in Czechoslovakia suggest that branding one's revolution helps. (The overthrow of Saddam has been called the purple revolution because of the inked fingers at election time. It may have been purple, but it was no revolution. To their eternal shame, Iraqis played a trivial role in the overthrow Saddam Hussein.

Iranians are taking huge risks and their movement will have major repercussions. It helps that a huge portion of the population has internet access that the government cannot block. Using VPN, proxy servers, and services designed to circumvent censors, thousands of Iranians have broadcast recent events in real time. Twitter streams on Friday peaked at over 200,000 tweets per hour (perhaps !% of all tweets contain new information, videos, or photos -- but that's still huge). John Perry Barlow predicted a decade ago that the Internet regards censorship as damage and simply routes around it. So, it turns out, do citizens who wish to be free of oppressive governments.

Iranians have pioneered new street tactics. They organize at pro-government rallies, because it is a good time to build support. When demonstrations were made illegal, some people took to their cars, jamming streets and shutting down cities. As the above You-Tube demonstrates, people singing from their homes into the urban night is eerie, inspiring, and really hard to shut down.

Iran is a great country and an important one -- something few places can claim. The US is also great and important, but we are the last country that should try to insert itself here. The people who criticize Obama for not being more outspoken on behalf of Iranian insurgents have forgotten history -- unlike most Iranians. They forget that the CIA overthrew the left-leaning government of Mohammad Mosaddeq in 1953 after the threatened to nationalize US oil companies. Having restored the Shah, the CIA, led by Norman Schwarzkopf's father, helped set up the Savak -- the despised Iranian secret police. By the time the ayatollahs overthrew the Peacock throne three decades ago, nearly a third of all Iranian men were Savak agents or informers. Obama has remained supportive but determined to not let the US become an issue in an insurgency that is and needs to be Iranian.

Tonight and in the coming nights, send your hopes and prayers to the people of Iran. There is a good chance that they will need it.

"We must say openly the things we hold in our hearts and that too often are said only behind closed doors."

I slept soundly through the 3am alarm I set so that I could catch Obama's speech live from Cairo. It would have been worth getting up for. Its empathy, intelligence, directness, and unusual rhetoric assure that this speech will survive along with his Philadelphia discourse on race, his Notre Dame address, his talks on the economy and international security, and one or two others as very impressive efforts to reframe destructive, highly charged discussions. These speeches reflect a deep understanding of both the American mood and the global situation. They are impressive, important, and worth study. Obama really is our Reagan.

At one level of course, all a US President named Barack Hussein Obama had to do to succeed in Cairo was to show up. Dark skin, an Islamic middle name, a nominally Muslim father, and a boyhood spent partially in Indonesia keep lesser men from the Presidency -- but these are nontrivial assets in the Islamic world.

Obama is plainly convinced that many of the private opinions held by leaders in the Middle East are at odds with their public views. Privately, everyone agrees on a two state solution, fears a nuclear Iraq, and sees the benefit of women's education. Democracy, women's equality, Israel's right to exist, the existence of the holocaust, religious tolerance, the rule of law, are all far more acceptable in private conversation than in public. Obama's speech, at one level, tries to take the covers off and make these private agreements public. He is outing Islamic liberalism with a bit of a tough uncle approach. It is a smart idea.

At another level, no speech matters much. Israelis are not going to stop building settlements and Hamas is not going to stop attacks on civilians because of a speech, even a very good one. People who are bitter and in many cases ignorant do not become compassionate and informed overnight.

Critics quickly denounced the talk as too tough or not tough enough, which misses the point. A president wields a small number of blunt, powerful tools and global speeches are among them. They are designed less to change minds (speeches don't often do that) than to lay groundwork and create opportunities for diplomatic openings that cannot always be scripted or even known in advance. A speech like this also creates expectations of follow-through and Obama got expectations up very high. Fine.

The speech was also aimed at American audiences. Egyptians little know or care that Morocco was the first country to recognize the USA, that 7 million Muslim-Americans earn a bit more than average in the US, or that a Congressman recently took his oath on Thomas Jefferson's copy of the Koran. These and other gems were inserted for domestic consumption and one can only hope that they will be consumed.

I am proud to see this President represent our country with intelligence, toughness, and compassion in a part of the world that has done little to credit itself during the past century and frequently wallows in victimization. It is a fine speech -- check it out below or read a transcript here.

Redesigning California

Update: our local public radio station broadcast the two minute version of this post. Listen to it here.

Most clichés about California are true: we are both America’s most urban state and its most agricultural. We are home to more national parks, more immigrants, and a better public university than any other state. We have Silicon Valley, Hollywood, and Yosemite. We fashion ourselves seekers of talent, lovers of risk, and inventors of the future, gamely shrugging off earthquakes, fire, and drought. My family has been here since the 20s and we won't leave.  

We take for granted that California is the Golden State. When our comically dysfunctional state government cannot agree on a budget, we mutter about idiot politicians, shake our heads, and chalk it up to local color.

But our problems today are no laughing matter. The complete failure of state government now threatens everything we love about California. Today's special election would extend temporary taxes, free up some spending categories, and borrow against future lottery proceeds but would not solve our problems and is unlikely to pass in any case.

Tomorrow morning, Californians will confront their failed state. There will be blame and recrimination enough for everybody. Increasingly however, citizens will contemplate the conclusion reached this week by the Economist: our governance process is broken and in need of fundamental reform. A new batch of politicians will not do the trick. The evidence of failure is not hard to find:

• The home of the property tax rebellion is now a high tax state. Californians famously limited property taxes by passing Proposition 13 in 1978 but now lead the nation in sales taxes, car taxes, and gas taxes. Personal income taxes are the second highest of any state, corporate income taxes are the highest in the West, and capital gains the fourth highest in the nation.

• State spending has skyrocketed. State employment is up from 719,000 in 1997 to 895,000 in 2007 – an additional 176,000 employees. That means the state created more than 60 new positions every working day for ten years. Adjusted for inflation, state government spending per person is up nearly 20 percent. We have the nation’s seventh highest GDP/capita but our unionized prison guards, teachers and nurses are the highest paid and among the most powerful in the nation.

• Our public service needs have exploded. California currently has the fourth highest unemployment rate in the nation – a shocking 11.5%. We are home to the nation’s two largest traffic-jams - Los Angeles and the San Francisco Bay Area. Our desert economy depends on a creaky water system with a 75 percent chance of catastrophic failure in the next few years and Sacramento’s ancient levees expose that city to greater danger of catastrophic floods than New Orleans. State prisons are so overcrowded that a federal judge has ordered the release of 10,000 inmates. The University of California, an engine of mobility for generations, is being ravaged. 20% of all residents of Los Angeles County receive public welfare of some kind. This is a big deal: with 10 million people, LA County would be America’s eighth largest state and the world’s twentieth largest country by GDP.

• Talent is leaving. In the past ten years, 1.4 million more Americans moved out of California than moved in. The loss of talent is much worse than the net numbers suggest, since most who leave the state are employable taxpayers while many who arrive are immigrants with few marketable skills. Out-migration has slowed in the past year mainly because Californians cannot afford to sell their homes for an enormous loss.

• Our fiscal house has collapsed. Combine the above with a devastating economic downturn, and California now has the lowest bond rating of all 50 states. We face a $42 billion gap between revenue and spending. The state has halted income tax refunds, public works projects, federal stimulus spending, and may kill 20,000 state jobs.

How did the Golden State come to political and fiscal ruin and where to from here?

How the Kindle Helps Destroy Textbooks

When Bill Clinton was elected President in the early 1990's, encyclopedias were a $1.2 billion dollar business in the US. The best encyclopedia, Britannica, owned half of the market and advertised "more than 80 Nobel laureates" among its contributors. A Britannica set cost over $1,000. They were sold door to door by over 2,000 commissioned salespeople who were skilled at persuading middle class families of the essential educational advantaged that 25+ matched volumes would bestow upon their children. World Book, owned by Warren Buffett, was number two.

His friendship with Buffett notwithstanding, Bill Gates destroyed the market for encyclopedias in 1993 when Microsoft launched Encarta, the world's first digital encyclopedia. Encarta had been a challenge to build: Britannica and World Book had both turned down Microsoft, which was forced to turn for content to Funk and Wagnalls -- an encyclopedia sold in grocery stores. But the quality of the Encarta content didn't matter, since its quantity was limited to five CDs. Encarta was sold on CDs in part to promote the use of CDs in computers. The disks contained perhaps 20 video clips -- you could watch them all in well under an hour. Not only did computer retailers have no idea how to market a box of CDs, but Microsoft priced Encarta $395 when they launched it. At first, the product went nowhere.

Three years later, a lot had changed. Every new computer had CD drives, Microsoft had dropped the price of Encarta to $99, and Britannica was bleeding so much cash that its owners sold it for less than its book value. Encarta had grown to $100 million in sales even though total spending on encyclopedias was $600 million -- half of what it had been three years earlier. Microsoft was deliberately shrinking the industry, not growing it.

 By 2001, Encarta had once again doubled in size again and again chopped the market in half. That year, an entrepreneur nobody had ever heard of destroyed the encyclopedia business for good. Jimmy Wales started an open source wiki with no revenue model and no competitive barrier beyond the passion of the devotees of the site he dubbed Wikipedia.

Britannica long ago became an unimportant niche product. Two months ago, Microsoft surrendered and killed Encarta. In 17 years, they had used digital media to transform a $1.2 billion print business only to see the market demolished altogether by open source content.

Keep encyclopedias in mind when you consider the future of textbooks. Like encyclopedias, textbooks will be quickly weakened by digital media and then destroyed altogether by open source content. College textbooks as we now know them will cease to exist (K-12 textbooks will take a lot longer, since their purchase is usually mandated by state school boards. These were surely the folks that Mark Twain had in mind when he noted that "First, God created idiots. That was for practice. Then He created school boards").

The seven large textbook publishers, campus bookstores, textbook rental sites (especially the one that has been comically overcapitalized by a venture fund that should know better) are all heading for waters that will not only be rough -- they will be pirate-infested.

Pirates? Yes. Amazon's announcement of the Kindle DX this week, along with similar announcements likely to follow from Netbook makers and from Apple, will enable large scale textbook piracy. Amazon knows it and TechCrunch figured out pretty quickly as well.

The Peter Pandemic

Three days ago, I felt like crap. Sudden onset aches, chills, and nausea with a 100 degree plus fever.

I didn't go home because I did not want to expose my family to Mexican pig flu. I had not been south of the border recently, but plenty of people around here have been, so I figured my exposure was not zero.

I called my doc from the car and headed to the hospital. He called back and persuaded me to go home. Without respiratory symptoms, he wasn't worried about swine flu. I slept in a separate part of the house anyway, just to make sure. And felt better the next day.

A flu scare is not a trivial thing. In sight of my office is one of the largest wards of the disastrous 1918 flu pandemic -- Oakland's Kaiser Convention Center.

But 2009 is not looking like 1918. We do not know what course the H1N1 virus will take but it is hard to build a bad scenario out of the numbers we have seen so far.

An unfortunate toddler hauled to Texas from Mexico is the only US casualty of this wimpy epidemic. Imagine if instead of one death this week, we had seen 1,400 people dead from flu -- 200 a day. The media would be in a panic -- and so, trust me, would everybody with a fever caused by dodgy seafood.

But 1,400 deaths per week from flu is normal during flu season in the United States. Tragic and worth fighting -- but normal. Some 36,000 people die during the six cold months of each year that we call flu season.

Welcome Fallow Travelers

OMG it's a Fallows avalanche! And here we are with the site only half dressed! Goofy stuff about bikes and Barack lying everywhere. Pick up and get dressed, people -- we have company!

Well, make yourselves at home and feel freee to dig around. I'm told there's a pony here somewhere....

....I'm half crazy, all for the love of you...

What is it about bicycles that provoke frenzied human creativity? Or at least goofiness?

For reasons hard to fathom, this vital question appears to have been neglected by the blog o'sphere. Thus, as my contribution to Earth Day, it is time for a roundup of bikes peculiar, ingenious, or just plain strange.

Let the velorution begin.