Friday, September 04, 2009

Two Tiered Health Systems

In Britain 80% of the people rely solely on the National Health System. The elite 20% have private insurance and use an elite private health system without lines, with nicer rooms, and better service. That is a two tier system.

We have a two tier system in the U.S.. The difference is that in the U.S., the middle class is part of the top tier.

The danger for the middle class:
The top 20% are confident that under a public health system they will still have access to elite health care. They are probably eager for a system where they mingle less with the middle class. So, that's 20% that aren't afraid.

The bottom 20% figure they will be no worse off than they are now with the mishmash of health providers they have access to and it may be better because there will be more political interest in the facilities and procedures they use. So, 40% of the country is okay with and perhaps eager to move to something more like a British system.

The 60% who will drop down a level better keep fighting and not be fooled by soothing rhetoric. Otherwise, they will find out what kind of health care the elite think is adequate for the lesser classes.

Seven book--A book about the number Seven

Our friend David Eastis has just come out with the book "7 The Magical, Amazing, and Popular Number 7". I'll write more about the seven book once I actually get it in my hands, but the web site is If you are a septophile this book about seven should be of interest.

Saturday, June 06, 2009

Good news from the auto bailout

A little good news from the bailout. Roger Penske is buying Saturn and a Chinese company is buying Hummer. These are both really positive steps for GM and car buyers.

Saturn has a really cool opportunity to take cars that are built in other markets by companies that don't have U.S. distribution and bring them to the U.S.. Saturn could also specify cars they want built by Chinese or Indian manufacturers much like Apple specifies an IPod or a Mac. Either way, the Saturn brand stands for a different car buying and service experience so they add to the cars they sell.

Penske could bring the Smart Car into the Saturn fold since he already has U.S. distribution rights. He could play up Saturn's GM built hybrid and small cars. Saturn could look like a fuel economy and technology leader as well as a leader in car buying experience.

The Saturn brand can probably avoid the taint of GM costing taxpayers billions because Saturn has been deliberately kept distant as a brand from GM and Saturn is now out of the whole bankruptcy/bailout mess.

Hummer will be able to continue to offer their unique vehicles and people who like that sort of thing will have an opportunity to buy the sort of the thing they like. There is export potential for the U.S. plants and potential for the Chinese company to eventually build Hummer products in China and sell worldwide. Of course, like Ford, this Chinese company will have to negotiate with the union that owns their competitors. The Chinese company has the leverage that they can just shut down the plants and move the production to China. So, maybe the workers at the Hummer plants will make the national union give some ground.

Monday, May 25, 2009

What should have happened to Chrysler

It looks like Chrysler is likely to emerge from Bankruptcy shortly. That surprises me because I don't think Fiat brings much to the table and, without freeing itself of UAW domination, Chrysler is clearly not a viable company. I guess with enough taxpayer money, anything is possible. Until Chrysler is merged with the other taxpayer financed UAW payoff mechanism (GM), it will continue to rack up losses for the taxpayer.

What should have happened? The parts of Chrysler should be sold off free of UAW contract obligation and dealer obligations. That is what bankruptcy is all about. Factories, trademarks, parts, and real estate should be sold to whoever will pay for them to satisfy Chrysler's true obligations. The public will get a more competitive and innovative set of car companies.

Chrysler should be sold out of bankruptcy in 5 parts:

Jeep: This is where the real value lies. Jeep should sell for 2 to 3 Billion Dollars with Mahindra and Mahindra of India being the most obvious but not the only possible buyers. Kia, Honda, and Nissan could all benefit from owning the Jeep name.

Dodge Trucks: This is much less valuable than Jeep, but is still probably he second most valuable part of Chrysler. The Sprinter van, Dodge Ram Pick up trucks, and SUV's. Maybe 500 Million to 1 Billion.

Voyager/Caravan Minivans: Chrysler's minivan is an up-to-date model that sells well in a marketplace that Ford, Volkswagon, General Motors, and other automakers aren't in in an effective way. Any one of those companies could jump start their minivan line by buying the original at a bargain price. Bargain price would be right around 500 Million. Volkswagon already resells a private label version of the Chrysler Minivan so they would be a great candidate.

Chrysler automobiles: This is the "and the rest" of Chryslers car line. Dodge Challenger (they would have to drop the Dodge part unless this was bought with Dodge trucks), Chrysler 300, PT Cruiser, and all the other models in Chrysler's line-up and the brands in its rich history. Could be valuable to a Chinese or Indian company building a brand line-up. Up to 500 Million but probably less.

Global Electric Motor cars: These are around town electric cars. I don't know if this helps a company with fuel economy averages or not. Worth something in any case.

I think sealed bids without government pressure would have gotten the secured creditors 3 to 4 Billion and taken the warranty obligations off the government's and creditors hands (gaining the relationships with existing owners makes taking on the warranty obligations generally a win for buyers of the brand names). That is more than the 2.6 Billion the creditors got with Obama's blunt warning that the government would punish anyone who tried to break up their deal with Fiat.

The courts didn't think this was clear enough an expropriation that they should block the deal. It's an extreme long shot that the Supreme Court would rule the Federal Government doesn't have the power to take over a business or overrule the bankruptcy court and find that the secured creditors aren't being fairly compensated. They could find that the president doesn't have the power to do it without an act of congress that actually authorizes it, but I think an act of congress would be forthcoming so that would just represent a small delay.

Its a big loss for taxpayers and car buyers that the governement is propping up losers and not letting new companies with new technology and aggressiveness re-assemble the parts of the auto industry. We are losing out on the gain from creative destruction while magnifying the losses.

Five Guys versus In-N-Out

With Five Guys Burgers and Fries open in Beaverton and West Linn, OR, it is time to compare the two good tasting fast food burgers. First, my 12 year old daughter's opinion, "Dad, there is no comparison, In-N-Out is way better."

My opinion is more nuanced. Both have good testing, fresh, never frozen Hamburger. The Five Guys patty is a little more satisfying probably because it is a little larger. The In-N-Out Bun is better toasted and better matched to the size of the rest of the burger. The Five Guys Bun is just too large compared to the patty and even though it is toasted, it isn't toasted enough. Even with a double, it seems like a lot of bun for the meat.

The Five Guys burger is also too large overall. At In-N-Out a single is great if you aren't very hungry and a double is a large meal. At Five Guys, a "small cheeseburger" is a large meal. A double or normal "cheeseburger" in Five Guys language is too big under almost any circumstances. Their fries are similarly over sized, but since a family of 5 can share the large fries or a family of 3 can share the "small" fries, the size is less relevant.

Five Guys has a better selection of toppings, including green peppers and mushrooms which aren't available at In-N-Out.

Both In-N-Out and Five Guys have fresh cut and fried potatoes, not frozen. At In-N-Out you can see them cutting up the fries in the Window, at Five Guys they have bags of fries in the store. In-N-Out cuts there fries to a very kid friendly McDonalds style fry. They taste like McDonald's fries did in the sixties when they used to be fresh cut in the store. Five Guys has beefier style of fries with a bit of skin on the ends. They are fresh and very good. Five Guys also offers a Cajun style fry which has some spice seasoning added to the fry. I like the regular fry better, but it is nice to have a spicier option. In-N-Out wins for Kids Fries, but the Five Guys fry is a bit better for an adult.

For Milk Shakes, In-N-Out wins by default. Five Guys has no milkshakes. In-N-Out Shakes are a real plus since they are very creamy and the chocolate shake has a very good chocolate flavor.

Five Guys has Hot Dogs, which I haven't tried, but it gives you another option. Five Guys also has free peanuts while you wait.

In-N-Out always has a drive through. The Oregon Five Guys do not have drive throughs. The drive through is very convenient picking up dinner for the family. Five Guys is always crowded with a line and ussually a little jostling for a seat. We have always found a seat, but is more hectic than picking up food for the family and bringing it home.

Both In-N-Out and Five Guys are somewhat premium priced compared to Burger King or McDonalds (and well worth it) but Five Guys is a little more premium priced. I am ussually surprised how much it costs to feed my family of five. I think In-N-Out is a bit better deal.

Final verdict? If there was an In-N-Out in Beaverton, Lake Oswego, or Tualatin, they would get quite a bit more of our burger business than Five Guys. But Five Guys is a really great addition to the Oregon burger scene and they will get most of our business until In-N-Out comes to Oregon.

When will In-N-Out come to Oregon? Now is a great time. They could get great leases and land deals for the 5 or 10 locations they would need to make their logistics and distribution work. In-N-Out is not franchised it is corporate owned, so I have to believe cash is available for a slam dunk expansion like the Portland area. They must have noticed that the Five Guys in Beaverton jumped to the top of the sales charts for all Five Guys location. They also must know that taste will tip toward Five Guys as familiarity breeds preference.

What about Burgerville? Burgerville is a fresh, local food concept location with frozen beef! It seems a bit crazy. The Burgerville patty is bland tasting and just doesn't keep with the rest of the quality ingrediants the have. Burgerville needs to make "Fresh, Never Frozen" a mantra for the Beef and the fries and push the local food conept they have going. If they did that, they could compete with Five Guys and even In-N-Out on the basis of drive throughs, milkshakes, hometown business, and a wider menu. With bland, frozen hamburgers they are toast when In-N-Out comes to the Portland, Oregon area.

Tuesday, May 12, 2009

BCS must die--College Football Playoff Proposal

I know every college football fan has a playoff proposal in their heads. The 2008-2009 College football season was a true testament to the futility of the BCS. The New Years Day games were both limited in number and interest, an undefeated team didn't get a chance to play for the "National Title", and the "National Title" contestants probably weren't the two best teams in College Football.

My playoff proposal preserves the importance and prestige of the New Years Day bowl games and should make boatloads of money for the power conferences. The boatloads of the money part is what I think could get it accepted. So, here it is:

-16 team playoff with a play-in round for all at-large teams and the conference winners from conferences without a conference champion. So, 32 teams have an opportunity to win their way to the championship.
-The play-in round takes place the same weekend as conference championship games.
-The round of 16 takes place Christmas Eve and December 23.
-The round of 8 is on New Years day with 4 traditional New Years bowl games including the Rose Bowl.
-The final 4 is the first Saturday that is more than 6 days after New Years Day.
-The Championship game is the next Saturday.

Management would be by an NCAA committee who would select at-large teams, seedings, play off locations, and negotiate with the big bowls which match-ups they get New Years Day.

The play-in round--Same weekend as conference championships, would include Friday, and even Sunday games if needed. Seeded so conference champions get the top seeds and play lowest seeded at-large teams. 11 play-in games plus 5 conference championships. That gives 16 at large spots to make sure the major conferences and Notre Dame have every opportunity to be over-represented. All the conference champions have an opportunity to win their way to the next round, so even the Mountain West couldn't complain. If the PAC 10 and Big 10 still are not advantaged enough to get them on board, their champions could get a bye into the round of 16. It would only cost 2 of the at-large spots, leaving 14. The play-in round doesn't lengthen the season at all, many teams already play that weekend in championship games.

This round would be played at the higher seeded teams home stadium or alternate if that stadium doesn't meet playoff minimum standards.

Pac 10 Champion versus At large
Big 10 Champion versus At large
Big East Champion versus At large
Moutain West Champion versus At large
WAC Champion versus At large
Sun Belt Champion versus At large
At large versus At large
At large versus At large
At large versus At large
At large versus At large
At large versus At large
SEC Championship
Big 12 Championship
ACC Championship
MAC Championship
Conference USA Championship

Round of 16. This is Christmas Eve and December 23 and involves 8 games among the 16 winners of the play-in round. All teams would be re-seeded for this round. All games would be neutral site bowl games. Sites and match-ups would be selected by the committee. This is where all the minor bowls would go.

Round of 8. 4 New years Day bowls! Preserve the tradition and just as importantly the money. These are neutral site and are selected by the committee in consultation with bowl committee. Rose Bowl, Orange Bowl, Sugar Bowl, and Cotton Bowl restored to prominence in selecting a true National Champion.

Final 4. 2 bowls the first Saturday more than 5 days after New Years day. The Fiesta Bowl and another bowl.

National Championship Game. 1 week later. Only extending the College football season 1 week from what it is now.

The cost: 2 teams play an extra 3 games over what the max played now, 2 more teams play an extra two games, 4 teams play 1 extra game and the season lasts one more week. The benefits: more money, tradition, a meaningful post-season, fair representation for minor conferences, over representation for money conferences, a real champion. It's got to be worth it.

Sunday, May 10, 2009

Confirmation on El Pollo Loco Beaverton

This link confirms what they told me at the Wood Village El Pollo Loco. The Beaverton location is opening at the end of June:

El Pollo Loco restaurant closes its doors

However, the Vancouver, WA location is abruptly closed. I wondered if they moved the equipment from the Vancouver location to the Beaverton location. It was odd that the building in Beaverton has appeared finished so long but not opened. In this economic environment I have assumed the franchisee is out of cash. The building has been for sale but the price seems way out of line for the building (over 1 million). Even if you assume the lease is good for the duration, the returns don't seem high enough to justify taking any risk at all.

If you can only afford equipment for one location, the Beaverton location is a much better choice than the one they had in Vancouver. The Beaverton location is close to the Five Guys that became the highest grossing Five Guys location in the country soon after opening.

Looking forward to being able to pick up an El Pollo dinner on the way home...

Sunday, May 03, 2009

Chrysler bankruptcy, good; liquidation better

I'm glad Chrysler made it into bankruptcy court so that the creditors will get some protection from the law instead of having to rely on politics and executive fiat (pun intended). I must admit I was disgusted with President Obama's remarks about the _secured_ creditors unwillingness to share the "sacrifices" that other "stakeholders" were making.

Under the law the secured creditors are the first ones who should get any payout before any one else takes money out of the company. To steal their money is one thing; to use the prestige and power of the presidency to demonize them for asking for what is theirs under the law is something else. I hate to see such unfairness and I hate to see the presidency demeaned in an attempt to disguise base theft. We didn't elect Blagojevich president, I hope.

So, what's happening here and why do I say liquidation would be better? The government is trying to keep the UAW firmly in control of Chrysler so they can continue the UAW brokered auto monopoly that has enriched union leaders, auto executives, politicians and various hangers on for many years. The expense of it has been borne by car consumers who today pay hundreds of dollars more per car compared to what a competitive market would produce and get less innovation than a competitive U.S. market would produce. As Blagojevich would say, I've got this f'en Auto Industry and its f'en golden.

Having a domestic monopoly to keep it comfortable and powerful labor unions to keep it poor, the industry has fallen far behind and to keep paying millions to the union executives, lawyers, auto executives, and politicians taxpayers are going to have to start kicking in. The stockholders and unsecured creditors have been sucked dry. That leaves the taxpayers paying Billions in tax dollars to prop up the monstrosity known as the U.S. auto industry.

So, how would a Chrysler liquidation help? Chrysler has valuable assets:
The Jeep Brand
A very extensive dealer network
Other brands
Technology, in particular truck and SUV technology
Global Electric Motor cars producing neighborhood electric vehicles
Factories, parts inventory, car inventory, etc.

In a liquidation foreign auto makers could bid for those assets. Most importantly, they would bid for those assets unencumbered by UAW contracts or obligations and existing dealer obligations. I could imagine Hyundai/Kia greatly improving its dealer networks and taking advantage of the Jeep brand globally for 3 or 4 Billion dollars. How about India's Mahindra and Mahindra or Tata or a Chinese company? Any one of these companies building cars, trucks and SUV's in this country without the UAW would force GM and Ford to really compete, force the UAW to be reasonable and business like in its contracts and deliver value and innovation to the consumer. They would also build more cars here than a UAW controlled Chrysler ever will. With the UAW Chrysler is worthless and will only exist as long as taxpayers will continue feeding it.

And if I'm wrong and no one wants most of Chrysler? It's a couple million cars a year capacity out of an industry that is globally millions of cars overbuilt. It gives GM, Ford, and Toyota their best chance to prosper.

But it is the fear that the parts will be used by non-UAW car makers that keep politicians working overtime to keep Chrysler in the UAW fold. This effort was useful in showing how government control of the banks keeps them from pursuing their economic interests and gets them into line politically. The TARP banks wanted to accept the deal to keep Chrysler out of the hands of a bankruptcy judge who should apply the law and protect creditors. They didn't want the ire of this administration. I've got this f'en bank thing and its f'en golden.

I hope this bankruptcy judge is very courageous and applies the law. I hope foreign automakers and other entrepreneurs have the courage to make offers to the court for Chrysler's assets in liquidation. Obama's little rant was designed to show that people who get in the way of UAW sanctioned reorganization by taxpayer cash infusion and fiat will earn the administration's anger. Welcome to industrial policy Chicago style.

Saturday, May 02, 2009

El Pollo Loco Beaverton Coming Soon!

The El Pollo Loco that has been sitting empty in Beaverton, OR taunting flame broiled marinated chicken lovers on the West Side is going to open soon! According to staff at the El Pollo Loco in Wood Village, Oregon it is opening at the end of June. They told me this in English and I heard them tell other customers in Spanish. Two languages, so it must be true, right? It's still not on the El Pollo Loco web site, but they wouldn't lie to us, would they? Please let it be true!!!!!!!

Les Schwab, Wow

Customer service that exceeds expectations is often smart business. Recently the low inflation warning light on my Kia Minivan lit up. I filled the tire at a gas station and went on my way. Later I noticed a nail stuck in the tire and put getting the tire fixed on my to do list.

My expectation--I would have to leave the car for a couple of hours, pay $20.00 or so to get the tire repaired. I generally buy tires at Costco. Costco will repair tires free if you bought the tires at Costco. But these are original tires, so Costco won't even repair the tire for a fee. So, Sears Auto Center, the Dealer, Les Schwab are the choices that come to mind. Last time I had a tire fixed it was Sunday, so my only choice was Sears Auto Center and it took half a day.

So, I decide I'll try Les Schwab. I figure I'll go after work and leave the car there since they close at 6:00 PM. The next day I'll take the train to work, and pick up the car after work.

I pull into Les Schwab at 5:30. As I'm walking up, the Les Schwab worker comes out to greet me. I tell him the problem, he looks at the tire and asks for my keys. I ask how long it will take, he tells me 15 minutes. In less than 15 minutes he comes out gives me my keys and asks me to come to the counter to sign the work order. I ask how much it will be, he says its no charge. I tell him I didn't buy the tires at Les Schwab, he tells me its still no charge.

So, where do I buy tires next time? I'm sure going to get them fixed at Les Schwab. I'll feel like a free loader if I buy tires at Costco and get them fixed at Les Schwab. So, unless their prices are totally out of line I'll feel compelled to buy tires at Les Schwab from now on.

Smart business decision to repair tires free. Good customer service to come out and serve the customer quickly when you are not busy with other customers. Nice for Les Schwab that their competitors have set my expectations for service very low.

Sunday, March 01, 2009

Rescue Portuguese Water Dog

I laughed when I saw that the Obamas want a "rescue" Portuguese Water Dog. My mom got a Portuguese Water Dog (PWD, Portie) puppy a couple of years ago. They had to wait 6 months and sign an agreement that basically made them the caretakers of the dog, not the owners. They can't transfer the dog to anyone else without the breeders approval, they were required to spay her, required to take various veterinary care of her, etc. etc..

Portuguese Water Dogs are a boutique breed. My impression is there are no "backyard breeders" both because there is no demand and because breeders are very careful who they allow to have their dogs.

I don't think there are rescue Portuguese Water Dogs. You really have to want one and have thought about it in order to get a Portie. If the Obamas find one, my guess is it will come from an Obama supporter who suddenly finds they can't take care of their one or two year old Portie and gets permission from the breeder to let the Obamas "rescue" it.

If they really want rescue, I think they will end up with a Labradoodle or some other more popular breed.

Update: After I wrote this I found the link for the Portuguese Water Dog Club of America rescue
They say to try to contact the breeder first if you know of a dog in need of rescue. I'm guessing the rescue part of the club is not too busy....

Saturday, January 17, 2009

Walmart Wages Not Virtuous?

Commentators often imply that low wage employers are less virtuous than high wage employers. They make it seem like it is just a question of the employers generosity what wage rates they pay. In reality, low wage and high wage employers are seeking and employee different people. It is not obvious that a low wage model is less virtuous than a high wage model.

For example, McDonald's typically pays minimum wage to entry level employees. In California, In-N-Out pays significantly more than minimum wage to entry level employees. At In-N-Out, it is easy to see that the employees are more enthusiastic, work faster, and get your order right more often than McDonald's employees. So, why is it more virtuous hiring better employees who no doubt have other options? Isn't there virtue in hiring the first time employee, the employee who is a little slow, the employee from a disadvantage background who needs more training in customer service?

Walmart is the employer usually castigated for low wages. They hire more disabled, more people fresh off welfare, more people who just aren't productive enough to earn better wages than anybody else. It seems to me it is a great service to society to give these less productive people an opportunity to work. Costco pays better wages and has better benefits. Costco employees are efficient, friendly, and probably have a relatively long tenure at Costco. Costco employees have better alternative opportunities. Why is it so virtuous hiring better people at a better wage?

Paying higher wages is not virtuous, nor is it generous. It is a business strategy that can really pay off in better service, higher productivity, and lower training costs because employees stay longer.

Paying low wages is not stingy and it is not bad for the country or the economy. It is simply hiring the people who aren't yet productive enough to earn higher wages elsewhere. It involves investing in training and business processes that make those employees productive. It also means more turnover because once you have given employees an opportunity to learn to be productive and provide good service (or just show they can be productive and provide good service), employees can often earn better wages elsewhere. A cost to the low wage employer, but a very nice service to the economy.