Tag Archive for 'San Francisco'

The Income Ratio Problem

Income inequality is one of America’s biggest problems. My issue is not with what the wealthy make — even though they are richer than ever — but those on the other side of the socio-economic spectrum. I see it on the streets in San Francisco, one of America’s richest cities, with the chronic homeless problem but also with the local crime alerts constantly buzzing my phone.

American politicians are now jumping at this issue. The Progressive Left with its self-appointed mouthpieces of AOC and Elizabeth Warren are shaping the dialogue towards higher taxes. But unlike the reason why income tax was first introduced— which was to temporarily fund war — instead, their goal is to redistribute wealth in society. A point I’m sympathetic to due to the income inequality I see daily. But that equally kills a part of me, the enterprising side, as there is nothing more demotivating than to get taxed for your work.

And as much as I like that Jesuit heading up the Catholic Church these days, I disagre that inequality is the root of social evil. Consider this instead:

Income inequality in substance is the problem but framed the wrong way. It’s housing, health, nutrition, travel cost reduction that’s needed (not the penalisation of those who strive).

May 04 2019

The basic principle with a hypothetical

Let’s say Donald makes $1000 a month and Elizabeth makes $10 a month. And for Elizabeth to live a good life, with affordable housing and abundance to meet her nutritional needs, she needs $11 a month. If we tax Donald 70%, then Elizabeth can share with other low income people the $700 from Donald. But the cost of this, is that Donald will not be motivated to make $1000 or more realistically, he will find a tax scheme that reduces the chance he will pay the $700 which defeats the purpose of the tax.

Let’s look at it from another angle. Let’s say that Elizabeth still makes $10 a month. But it turns out, to cover her lifestyle costs, she only needs to pay $1. Why do we need to tax Donald if Elizabeth has what she needs?

Education is leading the charge

Of course, this sounds obvious but it’s not to politicians or papal leaders for some reason. Consider the explosion of online learning platforms like Udacity, Coursersa, Khan Academy to name a few — it’s a golden age of learning which previously was monopolised by universities and schools that charged expensive tuition to fund their expensive real estate. What’s happened in the world of MOOCS is that the cost to produce and distribute educational content has almost fallen to zero. We are in the midst of a transformation in society where a Stanford level of education is, quite literally, becoming free.

How to make housing cheap

Now let’s consider housing. San Francisco is one of the most expensive real estate markets in the world. Rent control, despite good intentions, has distorted the market and amongst many other issues is the reason why over 30,000 units sit vacant as landlords would rather not rent their properties (property values are also higher if without a tenant). The neighborhood groups prevent high rise apartment complexes from getting built, reinforcing the fact this is a big city acting like a small city. Add restrictive zoning controls like PDR that prevent residential development due to the politics of protecting blue-collar votes (and institutionalized with the ill-conceived Proposition X which prevents the cheapest way to create mass housing through the conversation of warehouses) and not to mention transportation and sewerage systems that cannot sustain population growth — and voila, you have a city that will always be too expensive. And will only get worse.

If Silicon Valley is grounded in San Francisco and there will be always jobs which is what’s largely driving demand to this global cultural city, then how else can we solve for limited housing supply? Here’s a hint: people drive to work…
Imagine the day when flights from Sydney to London will go from 24 hours to 4 hours, which is not a matter of if but when as the technology already exists (rockets going up and down versus planes flying sideways). Investments in transportation allow people to work from different cities, states and countries.

Or imagine if companies can support remote workforces where they don’t have to physically go into an office. Progressive Silicon Valley startups are now making this the defacto standard as the war on talent is settling in that direction.

Let’s change how we view the problem

Ideas like Universal Basic Income sounds great in concept, but also makes me nervous because higher average wages leads to demand-push inflation. But flip the idea — don’t give people more cash, give them cheaper access to goods and services they need. As you can see with the examples of education and housing, it’s already happening in the market.

We need government policies and investment in what will drive the cost down of life and human growth. Income redistribution due to higher taxes are almost as foolish as the wars that they were originally created to fund. Let’s start thinking about income inequality instead as a Income Ratio Problem, where improving the ratio of costs to income can be solved not just by increasing income but by more intelligently through reductions in cost. This can be done with capital investment, smart policies, and human ingenuity and not by eating the hand that feeds us — human incentive.


I’ve landed safely – finally!

It’s been an interesting experience so far. When I was at Sydney airport, waiting in the check-in queue which was chokka-block, my mind drifted and I kept perving at one of the airport workers. Unfortunately, every time I looked, she caught me out. But it obviously paid off, because she let the guys in front of me as well as myself to jump the queue and line up at the business class section which had nobody waiting!

So as I am checking in, making idle chit-chat with the attendant, she tells me I have been upgraded to business class. I told her she was making a mistake, because I’m just a plebian that got lucky with the queue situation, but it turns out that because the flight was over booked, and because I am a “high-level customer”, I had my seat upgraded! United Airlines is part of star alliance, and due to my trip to Greece in 2003, I had acquired ‘Silver Status’.

As I walked to my gate, I looked for my passport to board the flight. It was missing. Somewhere between immigration and the gate, I had dropped my passport. With 15 minutes until the gates closed, I ran around like a chicken on ecstasy. It was finally found by some guy underneath the X-ray machines – it must of slipped out of my plastic travel case as I was collecting my items. Reconfirmation of a lesson previously learnt #1: When they say never lose sight of your passport, it means literally, never lose sight!

As I am sitting in my business class seat, thinking I had used up my luck for today, I started speaking to my neighbour. Anyone ever heard of GATX? Me neither, but apparently they own most of the aircraft we fly on. Anyway, it turns out I was sitting next to Alan Coe, the guy in charge of the company’s two-billion-dollar aircraft division! Naturally of course, I asked all the pesky questions like how he got to where he is, and what he looked for in interviews. Even though we spent most of the flight sleeping, the chats I had with him about his life were really interesting. Although he has probably forgotten about me now, his words of wisdom will most likely make an impact on my career.

After that, the flight was rather uneventful. I had to transit via San Francisco and Chicago Airports, before I actually got to Dayton in Ohio. The only fun I had was asking a woman in San Francisco to look after my bags, whilst I went to the toilet – I did not give her a chance to reply, and when I got back she told me she had wet her pants, because you are not allowed to leave bags unattended (bombs and stuff). She was still shaking as we walked on the plane

My friend Debbie thought I was coming the next night and wasn’t at the airport. My phone battery had nearly died, and she was not answering her phone, but luckily I got through to her eventually and just in time. She abused me for misinforming, and I apologised profusely (even though they are not – always say a woman is right – until they realise they are wrong). However when we checked the e-mail I sent her with my flight details, she was wrong and she is indulging herself in some humble pie. Reconfirmation of a lesson previously learnt #2: Women are the same no matter where you are.