Koss Corp.: The Same Old Story, Chap. 43,921

I never know what I'm going to blog about next, and neither do you. So we're even.

Today's subject is Sue Sachdeva, the vice president of finance for Koss Corp., a maker of stereo headphones located in Milwaukee. She's accused of embezzling millions of dollars from her employer between 2004, or 2006, and 2009. We're really not sure how much she took. The minimum seems to be $4.5 million, and the maximum would be $31 million. We'll get to those details in a bit; for the moment, we've got a member of Milwaukee's upper middle class caught red-handed with her hand in the till. The only real question for her right now is how much time she'll do.

As technology companies go, Koss is an afterthought. The company is so small that it has been exempt from standard reporting requirements, and its financial dynamics are simple. That's probably why Koss figured it could get by with a glorified bookkeeper rather than a real chief financial officer. When the bookkeeper was nabbed, the federal government's power landed on her like a ton of bricks. Which is where the latest chapter in modern irony comes in.

Now, I'm not saying that anyone should let Sue off the hook. I'm only pointing out that, as these things go, it was small potatoes. Take Cisco Systems, the gigantic California networking equipment company, as a counter-example. Back in the late '90s and early '00s, Cisco "sold" billions of dollars worth of equipment to startup telephone companies. Actually, they lent the equipment but were able to book it as sales, a bit of fiction integral to sending that company's stock price through the roof during the Internet bubble.

Alas, much of Cisco's stuff didn't work outside of carefully controlled and unrealistic laboratory conditions. The "sales," which were financed with loans, collapsed. Cisco's stock dropped by almost 90%, but not before billions of dollars worth of bonuses, stock options, trading profits, money management commissions, and investment banking fees were paid out. Now that Cisco has been relegated to selling things that work to customers that can pay for it, the stock trades for a little over one-quarter of its peak bubble price.

Sue's Penny-Ante Fraud

Let's have a closer look at the Koss fraud. Sue is charged with taking $31 million, but a look at the company's financial statements doesn't support that number. Or, to put it differently, if Sujata Sachdeva managed to swipe that much from Koss over the four to six years she's alleged to have taken it, someone needs to put her in charge of Citibank. That's how good she'd have to be.

Koss's finances, as reported to the Securities and Exchange Commission, have been stable over the past 12 years. Annual revenues have been $30 million to $50 million; cost of goods sold has run at 60% to 65% of sales; administrative costs, typically 18% to 22% of sales. During the years that Sue supposedly stole $31 million, Koss reported a total of $25 million to $30 million in both net income and operating cash flow.

To have taken $31 million from a company that generated less than $30 million prior to paying $15.5 million in dividends and buying back $9.1 million worth of stock, the clever Sue would've needed to be a juggler worthy of top billing in the Cirque du Soleil. It would have required a degree of falsification and manipulation of revenues, costs, and bank accounts that would have been utterly inescapable even to Grant Thornton, the company's sleepy outside auditor, and to Michael Koss, the class clown and son of the company's founder who held both the CEO and (clearly in name only) CFO titles.

So why is she charged with embezzling $31 million? Either I'm not seeing something in the numbers (unlikely), or the "unauthorized transactions" mentioned in her indictment were largely intracompany transfers intended to hide, at most, three or four million dollars worth of thefts. Maybe a lot less.

What Happened At Cisco?

To start, let's point something out: Cisco is roughly 1,000 times Koss's size, give or take. Last year's revenues round up to $37 billion. Lost in that rounding error would be Koss's revenues of $38 million.

Back in the late 1990s, there was a frenzy to bring high-speed Internet access to the masses. Part of that frenzy involved upgrading telephone lines from carrying voices, a narrowband activity requiring transmission capacity of 64 kilobits (thousands) per second, to data, requiring a transmission capacity measured in the megabits (millions) per second. Along with it, a new federal law required what had been the Bell System to lease their local wires to competitors, and allow them to put their equipment in Bell switching offices around the country.

Cisco, and its financial friends in California and New York, got involved in a big way. They sank money into startup Internet providers, and Cisco started "selling" them equipment. The financiers brought these companies public, with Cisco's involvement prominently mentioned to enhance the speculative appeal of their stock. Why was Cisco so important? Because, before all of this got going, that company had established a solid #1 position in computer networking. It's not too much of an exaggeration to say that, without Cisco's data routers, there'd have never been much of an Internet to begin with.

When it came to upgrading the telephone system to provide Internet access, Cisco seemed like a natural for the job. The reality was very different: Upgrading phone lines is much more complicated than it looks, and Cisco simply didn't know how to do it -- period. But it made a great story for Wall Street, and for a time the story was all that mattered. For a couple of years, not a lot of people cared if the stuff really worked. There was stock to sell, trades to be made, bonuses to be paid. Billions of dollars worth.

It all came crashing down in 2001 and 2002. The equipment that Cisco had "sold" to startup phone companies, on credit that Cisco itself had provided, sat unused, in many cases because it didn't work too well in the field. Customers defaulted on their loans, and most of Cisco's equipment wound up not in the telephone network but in landfills or silicon salvaging operations.  Cisco issued retroactive financial statements that wiped out the "sales," and left the upgrade business. The company's stock dropped from $80 a share to $10 a share, and everyone moved on.

Sue, You Fool, You Didn't Steal Enough Money

What about the ill-gotten bonuses and trading profits generated from the misleading "sales" reported by Cisco and hyped by its management, and its various financial friends? Those stayed securely in the pockets where they had been deposited. Cisco's CEO, John Chambers, a man possessing enough oily charm to coax a smile out of the most hardened Russian hooker, decided he'd better quit charming Wall Street with tales of 35% annual growth as far as the eye could see. Neither he nor anyone else went to jail for theft or fraud. Meanwhile, back at little ol' Koss Corp., Sue isn't going to be so lucky. She won't keep a thing. The feds are going to pick her bones clean, right down to her $800,000 house. In a desperate attempt to win leniency, her lawyers are arguing that she's crazy. Such is life in flyover country when you didn't swipe enough dough to hire yourself a p.r. staff.

No doubt about it, Sue Sachdeva is a thief. So's the poor schmuck who knocks over some banks and finds himself pursued by an entire FBI task force, all while the CEO of the same bank is looting thousands of times more money with a stroke of a pen. What's the use in being outraged? The rich gettin' richer ain't exactly a new story. "Holy Ecclesiastes 1:9, Batman, what did you expect?!" Okay, okay. But you'll have to forgive me if I don't get all that outraged at Sue, or the bank robber. Theirs are ancient stories too. Truly, there is no new thing under the sun.

Obama, Lame Duck

How easily the Democrats fold. And just how predictable it all was.

Martha Coakley's election defeat in Massachusetts deprives Democrats of their 60th seat in the Senate. The Republicans can now block Obama's major priority, health care reform. The stimulus was too small, so the economic recovery will soon peter out. There will be big Democratic losses in this fall's off-year elections, and Obama will be rendered a lame duck.

Obama will try to follow Bill Clinton's "triangulation" between liberal Democrats in Congress and right-wingers in Congress. The strategy won't work, because Obama does not have Clinton's moderate credentials. When 2012 rolls around, the front runner will be Mitt Romney, and he'll pick Tim Pawlenty, the governor of Minnesota, as his running mate. Obama won't have a chance.

That's the baseline scenario now, and many people will trace it back to yesterday's Massachusetts senatorial election. Even though that loss was much more a function of a lazy candidate and a complacent and divided Massachusetts Democratic Party, the consequences are much wider.

Coakley and the Massachusetts Democrats: Oil and Water

This scenario was in the cards well before Coakley came along, but it's probably worth pointing out a thing or two about her and her campaign. Or more to the point, her lack of one.

I lived in Massachusetts for 11 years, and recall Coakley as a cipher and a cold fish whose claim to support seemed rooted in her gender. Women staff the middle levels of the Democratic Party; without them, you wouldn't have any phone banks or campaign rallies. Women badly wanted one of their own in a visible position, and Coakley was their vehicle.

I can't blame the Democratic women of Massachusetts for wanting to break the hold of the old boys club, but good intentions aren't enough. Coakley was arrogant, reserved, entitled, and lazy, refusing even to shake hands with voters. Once the Senate race came along, she decided that she had already "earned" it by serving time as the state's attorney general. After handily winning her primary election and looking at polling that gave her a 30-point lead, she literally went on vacation -- a trip to the Cayman Islands. Until the final week of the race, there was no Coakley campaign apparatus at all. Between the primaries and the special election, she made 19 campaign appearances; her opponent made more than 60.

Then there is the Massachusetts Democratic Party, which itself tends toward arrogance, laziness, and factionalism. Coakley was from the western part of the state, and began her career as the district attorney for Middlesex County, which comprises the northwestern suburbs of Boston. The bulk of the party apparatus is controlled by the Irish of Suffolk County, i.e., Boston. They don't get along too well.

When Coakley crushed the Boston faction's candidate, Michael Capuano, in the primary, Boston washed its hands of the race. For example, Boston's mayor, Tom Menino, didn't even endorse Coakley. The Boston Globe noted that, along Blue Hill Avenue, a major arterial through the heart of Jamaica Plain, a heavily Democratic neighborhood, there were only two -- count 'em, two -- Coakley signs to be seen on Election Day. Coakley won the usual big percentages in Boston, but the Democratic organization there did not mobilize to produce a high turnout.

Barack Obama, Meet Jimmy Carter and Bill Clinton

President Carter entered office with 62 Democratic senators to 38 Republicans, and 292 Democrats in the House to 143 Republicans. He should have had clear sailing, but the result was very different. Carter's first act was to clash with Democrats on the issue of water projects in the western United States. He was soon derided within the party for his aloofness and arrogance. Throw in a narrow personal base of popularity, a troubled economy, and a prolonged crisis following the seizure of the U.S. embassy in Iran, and Carter was toast.

So, too, was the Democratic Party's congressional and institutional apparatus, which had failed to adapt to the social, economic, and demographic changes of the 1960s and '70s, and changes in the global economy. Out of ideas and split between its liberal and conservative wings, it was ripe for a well-planned conservative invasion. Ronald Reagan was the vehicle, and thus ended a half-century of Democratic dominance in Washington

All of those conditions pretty much hold today; the Democrats have done little repair work. Democratic presidential victories in 1992, 1996, and 2008 have been narrowly-based flukes, based on popular unease about the economy and the personal appeal of presidential candidates. The Democrats have no unifying ideas to match extraordinary Republican unity behind a mixture of economic fascism and right-wing Christian social reaction.

Democratic presidential candidates are elected not for their ideas, but on their "buzz," their p.r. skills, and on public economic dissatisfaction of the moment. Once in office they sputter, and when they hit a setback they sound a retreat. It happened to Carter and Clinton, and now it's happening to Obama.

The 2012 Election Should Be Strictly Economic, Right? Maybe Not.

Ever since 1948, it's been possible to call presidential elections by observing the direction of the national unemployment rate in the second quarter of a presidential election year.

If unemployment rises between March and June, as it did in 1952, 1976, 1980, 1992, and 2008, the incumbent party will lose decisively. If it stays level, as it did in 1960, 1968, and 2000, the incumbent party will lose narrowly. If it falls, as it did in 1964, 1972, 1984, 1988, 1996, and 2004, the incumbent party will win. Only in 1956, when unemployment rose in the second quarter, did the incumbent win anyway. And that's only because, unlike in other years, the change was small and did not represent an overall direction.

Obama's only hope is that the economy begins a real recovery by early 2012. Even then, however, I wonder whether the rule will hold. In 2008, the 0.5% rise in unemployment was very large by historical standards, but Obama won by only 7 percentage points. I think his race shaved about 5 points from his margin, and will do the same again. It's going to take a major economic upswing in early 2012 to save Obama.

But Is Obama Worth Saving?

What change have we seen from this president? The U.S. is engaged in two wars, like it was before. Health care reform will collapse, and the next act in the play will be the radical scaling back -- if not outright destruction -- of Medicare. Various Democratic constituencies will lose on the so-called "values" issues, such as gay rights and abortion. The Supreme Court will move to the right, as the emerging de facto Republican control of the Senate forces Obama to appoint conservatives to fill vacancies.

It's not an encouraging picture. I'd like to imagine that the Democrats will rally, but what is there to rally to? What do Democrats believe? Half of the party clings to the New Deal and the social liberalism of the 1970s. The other half of the party appears to be essentially Republican. There is little underlying consensus about what defines Democrats, something that the Republicans have no trouble doing.

Some will trace Obama's fall to the Massachusetts election, but I trace it to the spring and summer of 2009, when both the White House and the congressional Democrats refused to respond to the Republican Party's scorched-earth opposition to the stimulus and to health care reform. It was plain to see, but Obama and the congressional Democrats did nothing. I think it's because they didn't really know what they believe. That's a fatal problem in today's American politics.

Bottom line: Democrats, what do you believe in? Anything? Is it time to think about replacing the Democratic Party, and if so, with what?

Electric Car Costs

As the p.r. campaign for the Nissan Leaf starts to heat up, we're going to be hearing about cost comparisons between electric vehicles (EVs) and existing types.

Here in Seattle, electricity costs 9.14 cents per kilowatt hour (kWh). The Leaf will use 24 kWh to go 100 miles, which works out to a fuel cost of $2.20 for 100 miles, or 2.2 cents per mile. Gas is on the expensive side here, at $3 a gallon for regular. For a gas-fueled Japanese compact of Leaf's size, I'd estimate 30 miles per gallon, which is $10 for 100 miles or 10 cents a mile. The new diesels get 50 miles a gallon, and hybrids range from 40 mpg to 50 mpg, making their cost per mile 5 cents to 6 cents.

So, the Leaf kicks ass, right?

Not so fast. The Leaf's "gas tank" is a lithium-ion battery, and they wear out. Nissan says it will lease the batteries separately. It's reasonable to include those leasing charges in the fuel costs. Nissan hasn't said what the lease rate will be. In Seattle, the break-even point relative to a gas car would be $78 a month in typical use (12,000 miles a year), and $28 a month relative to a diesel.

Hybrids Use Batteries Too

Even though hybrid batteries aren't leased, their replacement cost is properly included in fuel costs. How much are those costs? Hard to say. A new one from the dealer costs $3,500 including installation, but no one knows how long they last. Toyota warranties the Prius battery for 8 years/100,000 miles, and the word seems to be that in normal use they last quite a bit longer.

There are a few ways to skin that cat. One would be to assume that a typical buyer of a new Prius would never have to replace a battery, and therefore the Leaf's battery leasing break-even point relative to a hybrid would be the same $28/month relative to a diesel. Some other hybrids get closer to 40 mpg, so the Leaf battery lease break-even points relative to them would be $50 or $55 a month. Another method would be to add a penny or two a mile to hybrid fuel costs (and therefore $10 or $20 a month to Leaf break-even battery leasing rates relative to hybrids) to reflect the reduced value of a used hybrid emanating from the buyer's realization that he will be on the hook to swap out the battery.

In the real world, the battery cost issue doesn't look like much of a problem for the hybrids. All of this might be cause for Nissan to forget about battery leasing and grant the same warranty that Toyota does. In that case, there'd be no leasing charge to add onto fuel costs and the fuel cost comparisons would look great. Could it be that the leasing idea is just a security blanket for customers worried about battery life? If so, then Nissan's leasing fee should be nominal, no more than $5 or $10 a month.

The alternative might lie in the nature of a true EV's battery versus a hybrid's battery. As the sole power source, an EV's battery is larger, heavier, and more expensive than a hybrid's. What about its longevity? The gas engine in a hybrid could mask battery run-down in a way that would be impossible in a true EV.  Nissan will have a pretty good idea along those lines, so to the extent that battery leasing charges are more than nominal, the message will be that EV batteries won't last very long.

Other Gas/Diesel Costs

Anyone who thinks that the price of gas at the pump reflects its full cost is either blind, crazy, or Dick Cheney. Some time ago, I calculated the cost of the wars in Iraq and Afghanistan at 60 cents a gallon, or 2 cents a mile for gas cars and 1 cent for diesels. You'd probably have to double that cost in real life, to reflect opportunity costs, i.e., the benefits lost by not deploying the same resources in the productive economy.

So, we ought to raise the cost of gas to 14 cents a mile and diesel to 7 cents a mile. Which does not include the cost of the tears from the families of the dead in those wars, the agony of the wounded, the stress of division at home, or the irritation of having to learn about why Sunnis and Shiites hate each other and the Pashtuns hate us.

Then there is pollution, both smog that aggravates heart disease and asthma, and carbon dioxide that causes global warming. Gas and diesel are culprits, but so are the coal-fired power plants that will make electric cars go. My strong gut feeling is that internal combustion engines, in the aggregate, are worse for the environment than coal fired plants, but I don't know the numbers.

Of course, if we had good leadership, a reasonably clean government, and clear vision, we'd erect windmills to provide the fuel for EVs. But that is almost certainly an impossible dream, given the sorry state that we're in. Alas, for the foreseeable future, just about everyone outside of hydro-powered Seattle is going to have to assume that EVs will add to pollution generated by coal-fired power plants, and waste from nuclear plants.

The Bottom Line

Nissan has said that the cost of battery leases will not bring fuel costs for its Leaf above that of gas-powered cars. Nevertheless, I expect that the first Leaf will not be a value proposition. It'll cost more than a conventional car, and I expect that fully-loaded fuel costs will be higher than a diesel and close to those of a gas-powered model, if not higher.

But that's not unusual for the first version of a new technology. Over time, I expect the comparison to move inexorably in favor EVs, as gasoline gets more expensive and volume production of EVs and components brings costs down. EV mechanics are radically simpler than gas and diesel vehicles, and hybrid batteries are already getting cheaper. Alternative forms of electricity storage -- larger-scale capacitors -- are on the drawing boards, and they'll be cheaper and offer much better range.

You can expect the oil companies to mount a stealth p.r. blitz against EVs soon. All kinds of numbers will be thrown around. Whopping lies will be told, and the stenographers of the media will be all too happy to pass 'em along under the guise of "reporting" on the "controversy behind the numbers." But from what I now know, I'll be in the EV camp.

Addendum: "Miles Per Gallon"

EVs face an issue when making fuel economy comparisons with conventional vehicles. Because a true EV doesn't use any gas, any "miles per gallon" figure is theoretical, based solely on comparing the costs of electricity and gasoline. And then there is the battery cost issue; should that be included in an "mpg" figure, or not?

At 2.2 cents a mile for electricity, and gas at $3 a gallon, and without battery leasing or replacement included, the Nissan Leaf gets "136 mpg." If gas goes to $4 a gallon and electricity stays the same, then the Leaf gets "181 mpg." In the summer of 2007, I paid $5 a gallon for regular at a station near L.A. That year, the Leaf would have gotten "227 mpg." All without using a drop of gasoline.

The point: Beware of "MPG" claims for pure EVs. Think "fuel cost per mile" instead.

Advice To An Aspiring Journalist

An old friend's niece wanted advice on a future career in journalism, including whether or not she should pursue the editorship of the University of Illinois' Daily Illini. I sent two replies, one a brief note urging her to try for the job, and later the one below.

I decided to put down some thoughts about the crisis in journalism. In doing so I risk the sort of pedantry that begins to afflict people once they hit the age of 40 or so, and typically keeps growing over time. I'll try to steer as clear of it as I can, but some of it is inevitable.

Newspapers have been the heart and soul of journalism for a couple hundred years, and they are dying. It's not simply a shift of publishing technology. The Internet, which is misunderstood, has made it possible for everyone to be an unfiltered publisher, and censor, and more importantly it has steadily eroded the financial base that makes newspapers possible. I doubt newspapers as we know them will exist in 20 years, and maybe not even in 10 years.

A side note about the Internet. There is no “Internet,” per se. Rather, it is a label applied to the family of technologies that allow access to data libraries stored on computers connected to the telecommunications network. What once existed to carry voices between two points now carries digital codes that evoke sounds and visual images. The telecom network itself has been a series of computers since the 1970s, and the peripheral devices connected to that network have been computers since the 1990s.

In the last 15 years or so, the peripherals have envolved to facilitate very cheap mass storage of coded data, high-capacity transmission all the way to the endpoints, and easy manipulation and transformation of data to allow its presentation as sounds and images. The effect has been to critically undermine a publisher's ability to control what information he possesses, and to create alternative means of delivering it.

It Started With The Loss of Classified Advertising

Before E-Bay and Craig's List existed, I created a business plan for computerized classified ads. I did it as a business school exercise in 1989. I noted that 40% of newspaper revenue consisted of classified advertising broken down into four categories: employment, housing, automobiles, and general merchandise. Classified ads were ripe for the picking. Newsprint rubs off on readers' hands; space limitations prevent full descriptions and pictures; searches and comparisons were tedious; rates were expensive; distribution of information was local and therefore inefficient.

Today, Ebay and Craig's List dominate the advertising of general merchandise. Auto Trader.com dominates the advertising of used cars. Housing is a mixed bag, with the newspapers hanging on mainly because all real estate is local and they've gone on-line themselves. Employment is also an area of strength for newspapers, because it lends itself to centralization yet is local. The alternative press, which once rested heavily on personal ads, many of them explicit, has been decimated by the growth of online personals, including but by no means limited to Craig's List.

None of this will change, and the result has been the gutting of newspaper budgets and staffs. There has been a downward spiral in which there is less and less of interest in the newspaper, because there aren't the staff members to produce original content. Meanwhile, the Internet's facilitation of easy, unfiltered publishing alternatives has created a thriving competitive threat among the blogs. None of this has been helped by the newspaper industry's general lack of management vision and talent, as exemplified by the inability of virtually every one of them to charge their readers for online access.

I think that readers eventually will pay for online access, but by the time it happens newspapers will be dead and their content will be changed forever. As an old guy, I find this lamentable, and worry that we will lose some critical benefits newspaper journalism has delivered over the years, most notably the detailed scrutiny of government, and their function as a shared reality tying communities together. If I were younger, I might be more inclined to see the great opportunities ahead. You're in college and an aspiring journalist, which means that you are heading straight into a tornado. I hope you're a storm chaser is all I can say, because this is one hell of a storm.

The Traditional Journalism Career Path Is Dying, or Dead

The old model of attending journalism school and then getting a job at a small market newspaper, and then climbing the ladder toward the major metros, is dying fast and in fact may well already be dead. The major metros are getting rid of people, and soon enough I think we'll start to see some major cities without even a single newspaper. At or near the top of my list would be San Diego, but maybe it'll be a different place. I'm not sure that it really matters.

So, if you still want to be a journalist, what do you do? For starters, I don't think it's possible to make any fixed plans in that industry past college. What you can do, though, is take advantage of the opportunities within the college environment to think about what's happening and prepare yourself for what's coming in your life.

The economic underpinnings of newspapers, and their function in society, are vanishing, but where they still exist you should be involved. The opportunity to be the editor of the Daily Illini is not to be passed up. The only way to learn about journalism is to practice it, and the campus paper is an excellent vehicle for that. Also, as I noted in a prior e-mail, it is an executive, leadership position that will augment your appeal to any potential employer in any field. Of all the decisions you face, that one is the easiest.

Beyond that, I think you'd do well to explore the elements that go into journalism. Study the history of journalism. I don't think you need a full course in the subject; instead, ask a professor for a book or two. Basically, you need to understand where journalism came from to begin with, so you can understand its essential appeal over time. It started as travel writing, including specialized reports from diplomats, traders, spies, and military forces. Journalism was in demand by people who needed reliable information.

From there, it grew into political activism. All of the American newspapers prior to the Civil War were controlled by political factions. The first amendment says nothing about accuracy or objectivity; it was assumed that out of the cacaphony, people would glean the truth. Today's blogs are pre-Civil War journalism, with all of the same warts. The next phase was introduced by the Civil War; people wanted reliable, truthful battle accounts. Objectivity was a creature of the marketplace, and it was facilitated by technological advances that permitted wide, cheap distribution of the product. It was supported by paid advertising from businesses who also had a commercial interest in a credible product that would be widely read.

The Timeless Elements of Journalism

What's relevant about all of that is that people have a hunger for reliable information. Newspapers will die, but the demand for reliable information will not. That's the key here. It is enduring and timeless.

In considering what's reliable, a journalist needs to be able to separate fact from opinion. Even if the objective model that predominated after the Civil War, and especially after World War II, goes away for a time, those who present slanted viewpoints need to grasp and accommodate objective reality. There are eventually limits on what level of propaganda readers and/or viewers will accept. So, if you have the time left to do it, I'd recommend an introductory philosophy class, and if it's offered, a logic class.

Journalism has always been a rapidly spoiling product, so I think there is only limited utility in detailed study of great journalism of the past for its own sake. To the extent you do study past journalists, do it as a means of getting to the timeless essentials. There, I'd recommend Mark Twain and H.L. Mencken for their descriptions and commentaries on their times. I think they were the greatest we had, and that their critical methods go to the heart of what journalism will always be.

As for writing itself, most journalism is forgettable, hackneyed crap. People rarely have the time to do it any other way. Two exceptions that I know of were the Kansas City Star of the 1950s, and the New York Times of the 1980s and 1990s. The Star of that era produced something akin to daily poetry, using an economical, unvarnished, factual, direct style that was also wryly humorous (often hilarious) and somehow left enough room for the reader to do some thinking on his own. The New York Times, at its peak, was complete yet concise and occasionally even lyrical, and got to the essence of the matter. Even today, albeit diminished, the Times has moments of greatness. In any case, it is worth finding and reading archives of the Star from the '50s and the Times from the '80s and '90s as models for great daily exposition. 

Campus Journalism: Look Past Student Government

If you wind up as the editor of the Illini, latch onto anyone who has a passion for telling stories in a clear, concise, economical, relevant, and interesting way. In college newspapers, the prize goes to those who show up. One thing I would point out (and tried to point out to others when I worked on my college paper) is that a university is a treasure of interesting people and topics. The average college paper spends way too much time on the student government, and far too little time on the amazing things happening in the various academic departments.

Find yourself a Mark Twain, or better yet two of three of them, and send them into the biochemistry department to see what diseases they are getting ready to loose upon the world, or cure, or both. Ask the history department what parallels they see between now and then. Explain why so many English majors want to kill themselves. Are football players really that stupid, or do they just inhabit a non-Euclidean alternate universe? The list is endless, and just about all of it is ignored by the average college paper. Report it with style, grace, verve, passion, acceptance, some mercy, and a great sense of humor, and you'll be shocked at how many people will be clamoring for what you produce.

I've gone too far already, so I'll wrap this up with my sincere and heartfelt best wishes. I hope you apply for that editorship, win the job, and then run with it. I don't think you'll regret it. I tell my nieces that nothing they read is ever wasted, and I pretty much think the same about anything you write, as long as you care about the subject, respect your reader's intelligence, and value his time. Good luck!

An Electric Game Changer

One reader of this posting will recognize himself. We worked together in the investment business in the '90s, and he'll remember one of my mottos, which was to look for products and trends that would change your life.

There were some life-changers in the 1990s and this decade. Falling interest rates and budget surpluses during the Clinton years, laparascopic surgery, cellphones, Microsoft Windows, video gaming, visual computing (think "You Tube"), broadband, the convergence of computers and communication (think "the Internet"). All of these things have had major impacts on people's lives, and those who saw them early made a pile of money.

I see another life-changer coming soon: the electric car.

I've been interested in them for quite a while. A couple years ago, I drove to the middle of Oregon to look at someone's converted Ford Ranger pickup truck with a useable range of 25 miles on a charge. It was a long drive and a friendly conversation, but the vehicle wasn't reliable enough to justify the purchase. I wonder if the seller ever thinks about the guy who drove 300 miles from Seattle, didn't buy his truck, and advised him to pay off any debts because we were heading into a real estate crash and depression.

The reliability issue is about to be solved, and usable range will be extended to 100 miles. The vehicle is the Nissan Leaf, a subcompact that looks a lot like a Toyota Yaris or a Honda Fit. The main difference is that is doesn't have a gas engine. It's not a hybrid, but a pure electric car.

I saw one on display in Seattle last weekend. Nissan says they'll start selling them here at the end of next year. I hope to be among the first retail customers. Right about the same time, Chevrolet will introduce the Volt, a hybrid that will get 40 miles on a charge, with batteries then replenished by a small gas generator on board. A bunch of other real car companies have said they'll be introducing electric vehicles in 2011 and 2012.

Not All Electrons Are Created Equal

I've never been much of a believer in the current generation of hybrids like the Toyota Prius or Ford Fusion. They get 40 to 50 miles per gallon, a level of economy that I regard as trivial. Plug-in vehicles are in a different category, especially the all-electric models.

Nissan's forthcoming Leaf will be accompanied in the Puget Sound area by charging stations that, in 25 minutes, can recharge the car to 80% of capacity. At home, it'll fully recharge overnight on a 220-volt circuit. In the winter, with the heat on, the range will be 70 miles. In summer, with the A/C blasting, it'll be 80 miles. For all-city driving, the range will be 10% higher. The car will cost about $30,000 including the battery.

The average American motorist drives 28 miles a day. Give that person an electric car with a 100-mile range, and you've eliminated his gas consumption, period. That's the game changer. Before very long, you'll have a whole group of drivers who don't use any gasoline at all.

And remember, this is only the beginning. Once these things get up and running, we're going to see rapid improvement in battery technology. Performance will improve and costs will decline. Electric propulsion systems are inherently simpler and cheaper than gas. The guts of the new all-electric cars are going to ride a cost and performance curve that will look an awful lot like personal computers. I bought my first new computer in 1990 for $3,000. Today, I can get a much better one for $600.

(Incidentally, I've never been any kind of fan of the Tesla Roadster, a criminally overhyped converted Lotus Elise produced in small batches by a Silicon Valley boutique. I have been waiting for car companies to get into this game. Nissan and GM, and the next set of entrants, are car companies. Unlike Tesla, a car company -- even GM -- won't deliver a vehicle without working brakes and a range of one-fifth the claimed level, two years late and 20% more costly than expected, at a loss of $40,000 per unit.)

The Implications of the Shift

Oil companies are not going to like this very much at all. Demand for their product is stagnant due to the current economic depression, and commodity prices are always set on the margin. I expect to see much lower gas prices within the coming decade, as demand begins falling. By 2030 or so, gas consumption in the U.S. is going to decline by 75%. Just wait.

The coal companies, on the other hand, will probably do well, because those cars will need electrons. An intelligent government would be racing to erect windmills to supply the new power -- windspeeds are higher at night, when those vehicles will be recharging, and the U.S. is chock full of windy spots. But the reality is different: We live in a deeply corrupt country, and Big Coal will use its influence to block meaningful investment in alternative power generation. There will be a few prominent wind demonstration projects, but I don't think we'll see widespread implementation.

(An aside: Seattle is a special case on the electricity front. We get 90% of our juice from hydro, 5% from wind, and 5% from hydrocarbons burned during peak demand periods. Electric vehicles will be charged mainly at night, and won't cause the burning of any additional coal or natural gas. Where I live, an electric car really will be a "green" alternative. Major smugness points for this one!)

There is also the issue of highway construction and maintenance. It is now financed mainly through gas taxes that average about 40 cents a gallon. Stagnant gasoline demand has already pinched the funds, but they ain't seen nothin' yet. I expect a mileage-based system to replace gas taxes for owners of electric vehicles.

There are also potential foreign policy implications. If lightning were to strike and the U.S. also got serious about alternative forms of heating and cooling (through the use of ground-source heat pumps I discussed in this post a while back), the U.S. could turn its back on oil imports and the trade deficits and geopolitical messes that go with it. Not that I think this will happen, mind you. There are too many other interests conspiring to keep us in the Middle East.

The Risks to This Forecast

There are all kinds of reasons to doubt my enthusiasm. After all, the Nissan Leaf gets only 100 miles on a charge. Even people who average 28 miles will want more of a reserve. And what about long trips?

But those aren't objections I worry about. For starters, there is more than one market for cars. Electrics will begin as second vehicles. As performance improves and costs fall, you'll see more people with a primary electric vehicle. Gas-electric hybrids with meaningful electric-only ranges will appear. (Note to General Motors: 40 miles on the Volt simply isn't enough. Your new car is neither fish nor fowl, and I think it's going to flop until you extend the battery-only range.)

The bigger risks are the following: First, that the Obama administration's weak responses to the depression prove ineffective, and the current malaise deepens so dramatically that even a life-changing innovation fails to make an impact. It has happened before. Television was ready to roll in the 1930s, but the depression and then the world war kept it on the shelf for 20 years.

Second, the oil companies find a way to block the change. At the very least, people should get ready for a wave of anti-electric publicity, focusing mainly on range limitations and the expense of the new vehicles, and whatever initial performance quirks emerge as the technology is rolled out to the masses. They'll be labeled as a type of "greenwashing," simply a relocation of the smokestack from the vehicle to the local power plant.

If they are as popular as I think they'll be, electric cars will upset some big, rich apple carts, one of which is piled high with money that routinely makes its way to Congress. This is one area, however, where American corruption could benefit the rest of us. True, the oil companies will be giving it their best shot. But so will Big Coal, and so will the electric utilities. If I were a typical member of Congress who cares about nothing but the money, I'd have my hand out to all of them.

Cynical as I might be, I'm also an optimist. I realize that many of you who are reading this will scoff at that idea, having heard me go on and on (and on) with my doom and gloom about the economy and politics. But amid all of the well-justified discouragement, our best minds have a way of producing life-changing ideas and products. I think the electric car is going to be one of them.

Poor, Smug Peter Watts: An Ego Bruised

To the barricades!

Peter Watts is a Canadian science fiction author whose name I'd never heard until a week ago. I still don't know who he is other than that he writes books that some people like -- and that he doesn't seem to accept the reality the guards at the U.S.-Canadian border have the right to stop you and search your car. And that if you screw around with them, you'll be arrested and maybe even prosecuted for it.

The incident happened December 8th in Port Huron, Mich., where there is a bridge and border crossing into Canada. I have crossed at Port Huron three or four times, most recently when I visited Toronto this past September. Typically, people are questioned and cars are (sometimes) inspected by guards of the country that you're entering. Cross into Canada, and the Canadians do it. Cross into the U.S., and the Americans do it.

In addition to the standard procedure, the U.S. sometimes stops outgoing travelers at random for a check. It's basically about drugs, with a dash of post-9/11 security enhancement. Peter Watts was returning to Canada, and he was selected at random for an outbound screening after paying the toll on the bridge back to Canada. That's where the jailarity ensued.

Instead of sighing and letting the agents do their thing, Mr. Watts stormed out of his vehicle to protest. The border guards ordered him back into his car. When he refused the order, the guards arrested him. He scuffled with them; the guards say Watts tried to choke one of them, and Watts claims that he was "beaten." We do know that the police impounded his rental car, threw him in their jail for a few hours, and have filed charges.

U.S. newspaper account

Because Mr. Watts is a smug writer with an equally smug fan base, he was able to gin up some publicity, first on a popular blog, and then in one of Canada's newspapers that picked up on the blog account. And of course, his own blog has offered its own searching, comprehensive account biased version, complete with fawning support from his peanut gallery. Most recently, when criticized for his behavior and challenged to explain his behavior that day, Mr. Watts took the coward's way out, refusing a complete explanation and censoring his critics.

Peter, your story happened to have caught the attention of this reader, who has traveled to 25 countries, crossing national borders more times than he can count. That includes the Canadian border, where oddly enough, there are border guards and inspection stations. On both sides. Guess what? You don't screw around with border guards. Not yours, not ours, not anyone's. They don't care how many books you've written.

Be careful what you wish for, Peter. And good luck on your future crossings. Hope you're not in any hurry.

Follow-Up

The Port Huron, Mich. district attorney apparently has said that Peter Watts won't be prosecuted for his border hijinks. Does that mean Peter will now explain why he stormed out of his car to cause a confrontation, refused an order to get back inside, and scuffled with police? Mr. Watts refuses to provide such information, calling it "evidentiary."

Now that there's no chance he'll actually be held accountable for his behavior, Peter Watts ought to be able to tell us why he chose to be such a jerk. I won't be holding my breath for his explanation, much less any actual discussion with this garden-variety juvenile. When things don't go his way, what does a child do? Like Peter Watts, he picks up his marbles and storms off in search of someone else to blame.

Second Follow-Up

The Times-Herald of Port Huron, Mich. obtained a copy of the police report on the incident. It details Watt's irate behavior on Dec. 8th, his refusal to get back into his car, and his struggle with the officers who arrested him. Watts and his fans have argued that he exited his car merely to ask the officers "what was going on." Is that a lightbulb joke, as in "How many Canadian sci-fi authors with a doctorate does it take to ask the border patrol what's going on as they search a car at the border?"

In any case, from the newspaper's rendering of the police report, it's reasonably clear that Watts intended to provoke an incident that day. Peter, if nothing else, you should have learned that America is a country where anyone's dreams can come true.

Peter Watts and Smug White Privilege

Ask a black person about white privilege, and you'll get a knowing smile. Ask a white person and they'll tilt their head like a confused dog. What are you talking about?

The idea is that, merely by being white in America, someone is surrounded by a variety of privileges, most of them minor in themselves, but which add up to a superior status. Be anything but white, say a lot of black people, and you'll find out just how unprivileged you are. Police will deal with you as a suspect. Cab drivers won't pick you up after dark. Waiters won't serve you very quickly. Shopkeepers will follow you around the store. Doormen at bars will look for ways to exclude you.

It goes on and on. And it's not just the little stuff. Try getting an interview for that crucial first job out of college if your resume mentions that you were president of the African-American Business Association. See what happens if you are stopped for speeding while racing to the hospital because your wife was hit by a car and is dying. Be the best golfer in the world, and find out how quickly it doesn't matter when it's discovered you've been screwing every blond chick on the PGA Tour.

White people see little or none of this, little or big, and tend to be incredulous and laughably defensive when it's pointed out. Yet, no matter what, they will cling to their privileges to the bitter end. One of them being the idea that they can hassle the police in course of their duties, and get away with it. And if they're Canadian, and a writer, and have a doctorate, Katie bar the door.

It reminds me of when I was driving a cab to get through college. I gave a ride to a white, female professor. We got to her destination in the middle of a driving rainstorm. Her bicycle was in the trunk, and she expected that I would get out of the taxi, in the rain, and grab her bicycle for her. It wasn't a heavy bike, and the trunk was already open. She had to get out of the vehicle anyway, so I told her she could get her bike on the way inside.

Indignant, she got her bike and started walking away. I called over to her, and she came over to the window and told me she wasn't going to pay the fare. What good would it go for me to have gotten out, I asked her. All that would've accomplished is that two of us would get wet, when only one of us needed to. Not only that, but I don't have anywhere to dry off, and I need to work for the rest of the day. You can just go inside and grab a towel.

It didn't matter. In her mind, I was supposed to get wet for her. In her case, it was white class privilege. I was a taxi driver, a servant, and for some reason I was obligated to suffer. It's a good thing for me that I wasn't black, because when I grabbed that woman's wrist through the open window of my cab, held her there in the rain, and radioed in for the police to be sent, I knew that I wouldn't be arrested for it. In fact, the police came and told her to pay the fare. She did so, and called the cab company after she dried off.

At the end of my shift, the dispatcher asked me whether I had really told her that she'd never worked a goddamned day in her life and that no one was going to take my money away from me. No, of course not, I said, with a smile. I'd never say such a thing. Not ever.

Back to poor, smug Peter Watts. There he was at the border. Apparently, white privilege doesn't cut it at the Port Huron crossing. Maybe they've busted too many mild-mannered Canadians with drugs in the trunk. Or maybe they've taken those lectures to heart about being 60 miles from Detroit and you'd better treat everyone the same, or your ass will be in a serious sling.

Who knows? I'm sure that Mr. Watts would vigorously deny that he expects special treatment, but you really have to be part of the Smug White Asshole Class to think it's okay to start a confrontation with a border patrol officer, disobey that officer's reasonable orders, and resist arrest.

And what of Mr. Watts's equally smug, lily-white fan club, some of whom have been posting blog comments to the effect that hard-ass tactics would be okay on the Mexican border, but not on the Canadian border? I could be wrong about this, but I'll be surprised if Peter Watts is getting any upsurge of support out of the African-American community for his juvenile little stunt at the Port Huron border crossing.

A Fun Fact to Know and Tell


On his blog where critics are now barred for asking inconvenient questions, Peter Watts has ridiculued the idea that he could have been screened as a terrorist.

Hey Peter, remember the millenium plot? You know the one that was foiled by a U.S. Customs inspector in Port Angeles, Washington not long before Jan. 1, 2000? Want to know how that was foiled? I have the inside skinny, told to me by a senior officer of the Canadian military who was posted in Victoria, B.C. at the time.

The U.S. Customs inspector wasn't the one who fingered the would-be terrorists. What actually happened is that they were profiled by Canadian border guards on their exit from Victoria. Interestingly enough, Canadian and U.S. law enforcement work together. The Canadians told the Americans, and the people were rousted at the dock in Washington State.

Of course, white Canadians could never, ever be involved in terrorism, just as white Americans couldn't be. Just ask Timothy McVeigh, you fool.