Different Coffee Brands Are Just Price Discriminating

A service station cafe has been judged to have the best coffee in town – outbrewing specialist coffee chains.

Wild Bean Cafe, located in BP outlets, ranked highest overall for satisfaction and was deemed best tasting coffee in the latest Canstar Blue Customer satisfaction survey. It rated higher than coffee chains including Starbucks, the Coffee Club and Muffin Break.

However, the Herald on Sunday asked the country’s top barista, Hanna Teramoto from Espresso Workshop, to try five of the coffees, and her opinion was something else again.

Source: NZ Herald

There are many coffee shops in Wellington. But having sampled almost all of them, I’m not sure coffee quality trumps location in terms of where you get a morning coffee if that’s your thing. There are similarities to the analysis of wine – a lot of BS crowding out people who actually know what they’re talking about.

Picking Regional Winners

The government can’t pick winners. Some regions are seriously under-performing, but should the government “do something”?

Not necessarily, because “doing something” is often the beginning of the end for grass roots solutions to emerge in struggling areas.

Relative prices contain a lot of information and people will end up making choices that are in their best interests eventually.

A lot of the technology boosters haven’t got their heads around the fact that teleworking isn’t going to happen for a non-trivial proportion of the labour force.

The mirage of potential benefits that technology could bring to the regions is just that – a mirage.

I think we’re at the beginning of an even more aggressive urban consolidation. You can see in the media how people are being softened up for significantly higher levels of immigration without clear enunciation of the compensatory gains in raw after-tax dollar terms that will end up in their pocket.

It’s pretty basic labour economics stuff that most of the gains from migration accrue to the migrant themselves. My concern isn’t with immigration – it’s with how those “left behind” outside of Auckland and Wellington will be even more marginalised and ignored than they are now.

Let’s fix the problems we already have first. There are many of them in our own backyard. Step outside of the bubble you live in. Think about people instead of regression results. To paraphrase Thomas Sowell, ask, “And then what happens?” when people are trying to sell you one solution to an extremely complex problem. Cui bono?

LinkedIn Founder Reid Hoffman on Networks As Identities

Over at The Wall Street Journal (porous paywall):

“Your identity is now constituted by the network,” he says. “You are your friends, you are your tribe, you are your interactions with your colleagues, your customers, even your competitors. All those things come to form what your reputation is.” In short, you are no longer the only one in control of your résumé.

Certainly an interesting perspective.

Brief Thoughts on Growing Apart: Regional Prosperity in New Zealand by Shamubeel Eaqub

NZIER economist Shamubeel Eaqub has published a short book that looks at the growing divide between the “big cities” of New Zealand and the regions. It’s called “Growing Apart: Regional Prosperity in New Zealand” and is published by Bridget Williams Books.

Comparing incomes in different suburbs or regions around New Zealand with countries and GDP per capita was an interesting approach to take. That Wellington is comparable to Finland or Gisborne comparable to Greece is an interesting analogy.

The fact that the recession job losses were widespread across New Zealand but the recovery has been concentrated in a small number of places gives some ammunition to the idea that increasing returns to scale or urban agglomeration is a story we can tell about the rise of cities.

A  consequence of this dispersion of the fruits of recovery is that for many highly skilled workers in growth industries in Auckland, Wellington and Christchurch – there was no recession at all and many people in fact received continual pay increases and bonuses throughout 2008 – today.

Auckland benefits twice over by having more of its economy in industries that are growing and by having strong performance in those industries.

Regional industry mix and performance help explain why Gisborne and Northland are poorly performing relative to Taranaki or Southland. But are there other factors at play here not explored in the book?

I’m not convinced that there will be a negative demand spiral for regional airfares. Firms care a lot less about $300 flights to Southland than leisure travellers. In fact, Air New Zealand regional airfares are pretty reasonable when you think about the fixed costs involved in putting on a service to cities that in almost any other country in the world would not even enter into a discussion of the merits of air connection to major centres!

The fact people pay those fares means there’s enough value in those regions for people to maintain networks. I’d suggest that even in an area like Gisborne, there is immense wealth and profit accruing to a non-trivial number of firms. I think of the number of people from the East Coast who board outside of the East Coast but end up back there, they weren’t school leavers *in* the East Coast but manage value chains *in* the East Coast. It’s a very complicated story to work through because of the opaque nature of private capital (farms, family businesses etcetera) and how it works in New Zealand.

These are very brief thoughts on an excellent short introduction to the regional economies of New Zealand. At some point, if you think of regions as firms, some will reach a “shutdown point” where spending millions of dollars a year simply maintaining infrastructure will not be worth it any more. Zombie towns are real, but I’m not convinced more immigration is a panacea as some on the left have suggested as a way to revive the regions. You can’t force immigrants to go to areas where there are few highly skilled jobs on offer!

Understanding Complex Systems

Understanding complex systems takes far longer than we estimate initially.

Hindsight is easier than foresight.

One “shortcut” is to link new solutions to old solutions in different ways.

Could I have solved this problem using that tool or that technique?

Could this system work better if that process was automated?

This isn’t to say that we can’t understand complex systems in due course, rather that understanding complex systems is about unknown unknowns and bearing in mind that as fact patterns change over time, we might be looking at an entirely new system if the lens through which people interact with the system is changing rapidly.

How Would Thomas Piketty Explain The Case Of Sir Peter Maire?

When poor people write about rich people, they show their lack of real world knowledge. The most glaring omission in this wealth inequality writing is the lack of understanding of how volatile or “high beta” wealth can be.

Expectations of future profits can change significantly and thus the value of those expected future profits – your wealth – can change significantly as well over time. Making poor investment decisions is a really bad idea!

One of the most fascinating things about Thomas Piketty’s work is the lack of discussion of the idea that many wealthy people lose their fortunes while they’re still alive, let alone end up with children who embarrass their legacy with poor economic achievement.

How can Thomas Piketty explain the unfortunate reversal of fortune experienced by Navman founder Sir Peter Maire who has gone from Rich List to still-rich-but-his-ego-has-taken-a-massive-hit? (PAID) His r < g so his stock of capital has been falling…

There is a case to be made that a lot of the income inequality / wealth inequality shtick is emanating from academics and commentators suffering from status-income disequilibrium. The ups and downs of making investment decisions under conditions of uncertainty are completely outside their day-to-day reality! Of course they can’t comprehend the idea of reversal of fortune and explain such regular events credibly!

Not Voting Is Completely OK

Only some semblance of credibility keeps us from dusting off and rerunning our “youth vote” feature from three years previous. Fortunately – for me but less so for democracy – the question only grows more relevant every cycle.

In 2008, only about half of all eligible voters under 30 voted. In 2011, that number dropped to about 40 percent of the 720,000-odd under 30s who could have voted – meaning 432,000 votes went begging.

Source: Power Play with Craig McCulloch at Radio NZ

As I’ve written before, not voting in an election is completely OK. Not participating in a system or being able to participate at the level you think you should be able to doesn’t mean you don’t have the right to criticise it!

The mental back-flips people must perform to get to that position are interesting – do they think that women (who couldn’t vote for a very long time) or blacks in the US (who couldn’t vote for a very long time and still disproportionately suffer from things like voter ID laws), by virtue of not being able to vote, had no right at all to criticise the system they were living in?

A lot of young people are naive, idealistic and stupid. They think that their opinion matters, they think they understand how power is distributed in a capitalist society and they think that their policy ideas should take preference over those held by the rest of the (older) electorate. They could be completely right, but that doesn’t change reality.

We have to live in the real world – voting won’t change anything, the likelihood of your vote changing the outcome of an election is negligible and there are smarter ways to ensure that policies you want end up being the policies implemented by Parliament and the public service.

If you disagree with me, again, why are the people who lean left and are driving these “get out the vote” campaigns, simultaneously able to criticise the impact lobbyists have on policy but offer up voting as a solution for getting policies they want implemented?

The answer for young people is closer to “bankroll a major lobbying effort that puts campaign cash towards MPs or parties who prefer young people’s policy preferences”. But that idea would be too effective and rational, so it won’t happen. Getting things done in the policy arena could also reduce the opportunity for some political entrepreneurs to earn rents from the “disenfranchised youth” story.

Considering what some genuinely disenfranchised groups have done to ensure a seat at the table, this generation is a complete and utter joke – lusting for power without having the gumption to do anything credible to actually achieve it. The bigger joke is that a lot of the criticisms from older people are scarily accurate.

Voting Is Not The Answer

Every election there is always a bunch of naive silly buggers who come up with some “innovative” “Get Out The Vote” idea because “voting is important”, “your forefather’s died for your right to vote” or some other emotive claptrap that tries to paint non-voters as immoral shirkers, not permitted to criticise a system they may have serious reservations about.

They mustn’t have been paying attention in their sociology classes! There is no power for young people because of the demographic divide, and obtaining power doesn’t come from participating in a system with a heavy bias towards fulfilling the pet policy ideas of older New Zealanders – think of how housing affordability can never happen because of NIMBYism. If you think that voting is the answer, you should be nowhere near getting young people interested in politics.

There is a Winston Churchill quote that goes something like, the best argument against democracy is a 5 minute conversation with the average voter. Participating in the charade is simply giving assent to a system that won’t do anything for you. Young people need to figure out that they’re on their own, the ladder has been pulled up and there is no bailout coming for our generation. We just get to incur higher taxes in our peak working years to pay the tab the elderly have run up.

New Zealand Already Taxes Some Unrealised Capital Gains

They’re called the “Foreign Investment Fund” rules.

No one I’ve seen writing about income inequality or wealth inequality in New Zealand has discussed them.

This speaks highly to their credibility – before launching into “solutions” for a “problem” they don’t even make the effort of understanding the different taxes that wealthy New Zealanders actually pay!

Please tweet me links to wealth tax articles suggesting expanding the FIF rules to all assets if I’m incorrect here – inequality whingers aren’t even aware of New Zealand’s current tax rules, but several commenters on their articles are.

Pretty Much No One Understands Anything

Economic ignorance and political ignorance aren’t the only types of ignorance there are. But in an election year, the combination of the two can lead to some absolute zingers.

My concern at the moment is how worked up some Kiwis get at really small amounts of money like the $150,000 a wealthy Chinese businessman is alleged to have donated to Labour.

Furthermore, the $3 million Kim Dotcom has thrown into the Internet Party isn’t a lot of money. Because he is a joke, and is treated as such by the real politicians in the media, all of his money won’t have any impact on the outcome of the election.

I think that David Cunliffe rebuffing the offer of a Labour-Green coalition government campaign will go down in history as the death knell of the Labour Party.

Whilst Labour is still the Inner Party, because of the changing demographics of New Zealand and voter apathy, the Green Party is still growing its raw vote in double-digit leaps at each election – they haven’t hit diminishing returns yet! By 2020, they’ll be getting at least 1/3 of the vote.

I think the left need to chill out – they’re winning history, most of the structural reforms they got in a tizzy about have been rolled back or papered over with asset price inflation and middle class welfare. The long term trend of history since the 1700′s is that society’s zeitgeist moves further and further to the left.

Right wing government is an historical anomaly. Conservatives always end up losing, they can’t roll back major progressive achievements like interest free student loans and working for families tax credits. Pretty much no one understands anything about politics and the long term run of history. They think they do, particularly uneducated journalists on peasant wages, but they end up with egg on their face as time goes on and all of the scaremongering over made up things like inequality and neo-liberalism turns out to be completely silly and out of touch with reality.