Andy Kessler

WSJ: The Gig’s Up for Freelancers

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https://www.wsj.com/articles/the-gigs-up-for-freelancers-11572208945

I’ll give up my keyboard when you pry it from my cold, dead hands. Didn’t Charlton Heston say that? Don’t tell anyone, but this weekly column may be illegal next year—all because of the latest self-wounding law from the statehouse in Sacramento.

California is so stupid. It was kind of funny when San Francisco’s airport banned plastic water bottles, prompting travelers to guzzle Gatorade instead. It was annoying when supermarkets were forced to charge for plastic bags—and a few folks may catch dysentery from bacteria festering on unwashed reusable burlap bags. Ditto for Berkeley’s ordinance banning natural-gas hookups to eliminate carbon emissions by 2045. It’s Berkeley: They’ll enjoy eating avocado toast while they shiver.

Yet Golden State legislators outdid themselves by passing Assembly Bill 5, signed last month by Gov. Gavin Newsom. Effective Jan. 1, the law reclassifies most independent contractors as full-time employees. This codifies the state Supreme Court’s 2018 Dynamex decision about “misclassified” freelancers.

The new law was pitched as a simple measure to provide contract workers with benefits like sick leave and health care. Yet as the dust clears, many ugly details are emerging. There were lots of carve-outs: for doctors, lawyers, accountants, psychologists, insurance agents like Jake from State Farm. But here’s something weird: Freelance journalists are limited to 35 submissions a year per “putative” employer. Wait, what?

The author of the law is a former labor organizer, Assemblywoman Lorena Gonzalez, who you can bet had union help in writing the thing—it’s easier to organize employees than freelancers. Ms. Gonzalez told the Hollywood Reporter her goal is “to protect and preserve good jobs. We’re trying to create new good jobs and a livable, sustainable-wage job.”

And the 35 number?

WSJ: Tech Treadmill Wears Firms Out

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https://www.wsj.com/articles/tech-treadmill-wears-firms-out-11571599552

Does technology provide a competitive advantage? Companies are counting on it. In March McDonald’s spent $300 million buying an Israeli artificial-intelligence startup to personalize menus based on weather and trending items. Now they’re considering license-plate recognition systems for drive-through lanes. Based on your history they might offer to supersize your order, or just hand you your usual Happy Meal. CEO Steve Easterbrook says, “Technology is a critical element of our Velocity Growth Plan.”

The problem is that adopting a useful technology doesn’t mean your advantage will last. I’ve long been amused by a succession of Harvard Business Review pieces that demonstrate this point. In 1985 Michael E. Porter wrote “How Information Gives You Competitive Advantage,” then in 1990 came Max Hopper’s “Rattling SABRE—New Ways to Compete on Information,” and finally in 2013 we got Rita Gunther McGrath’s “The End of Competitive Advantage.” Each of these takes describes a different stage in the life cycle of corporate tech.

Hopper was, as Harvard professor James Cash noted, “the first person who really defined the marketing leverage that could come from using technology.” In the late 1950s Hopper helped build Sabre, an automated flight-reservation system, and in 1981 he helped design the first major frequent-flier program to give American Airlines a competitive “AAdvantage.” Yet by 1990 he worried that the game was over, suggesting that technology was “table stakes for competition.” Hopper noted that “SABRE’s real importance to American Airlines was that it prevented an erosion of market share.”

That insight comes to mind watching the Streaming War of 2019. Netflix and Amazon have a huge lead in streaming video. But eventually everyone uses the same technology.

Tim Cook wants in, so Apple TV+ launches Nov. 1 with (probably overpaid) Jennifer Aniston and Reese Witherspoon. Robert Iger wants in, and Disney paid (probably too much) for control of BAMTech, the streaming-video technology developed by Major League Baseball, which it is deploying for streaming services Disney+, ESPN+ and Hulu + Live TV. AT&T wants in and paid (again likely too much) for Time Warner to create HBO Max. NBCUniversal wants in too. See the trend? Google ought to rename its streaming service YouTube TV Max+.

Yet when a company adopts a new technology, it can’t set it and forget it.

WSJ: What’s a Wealth Tax Worth?

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https://www.wsj.com/articles/whats-a-wealth-tax-worth-11570995598

Why do liberals think rich people have money just lying around, like Scrooge McDuck swimming in a giant pool of gold coins? That’s the myth behind plans to tax Americans’ wealth, as Sens. Elizabeth Warren and Bernie Sanders both propose.

Ms. Warren wants an annual asset tax of 2% on households worth more than $50 million, and 3% if you’re worth more than $1 billion. Mr. Sanders would tax “extreme wealth” starting at 1% on households worth $32 million and topping out at 8% on those worth $10 billion or more. Whereas the Soviets confiscated wealth virtually overnight, at least Bernie will take a dozen or so years to pilfer most of your savings.

University of California, Berkeley professors Emmanuel Saez and Gabriel Zucman estimate that Mr. Sanders’s tax would raise $4.35 trillion over 10 years, while Ms. Warren’s would raise $2.75 trillion. But something seems fishy—oh, Messrs. Saez and Zucman advise both campaigns on their wealth-tax plans. I doubt they account properly for how levies on wealth would shrink the tax base. Can we get some outside audits please?

Even setting comical revenue projections aside, the wealth-tax idea doesn’t stand up to scrutiny. Never mind that it’s likely unconstitutional. Or that a wealth tax is triple taxation, heaped on top of a 21% corporate tax plus 20% capital-gains tax when someone sells shares to pay it. (I concede that it definitely would provide lifetime employment for tax lawyers.)

The most preposterous part of the wealth-tax plans is their supporters’ insistence that they would be good for the economy. Only in an upside-down world could anyone think “a wealth tax is pro-growth,” as a New York Times columnist has claimed.

Start with the spending side.

WSJ: An Investment Tip From Mr. ZIP

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https://www.wsj.com/articles/an-investment-tip-from-mr-zip-11570393678

Here’s an enduring lesson about investment. In the mid-1990s, well before streaming (2007) or Blu-ray (2003) or even DVRs (1999), I was convinced that every television would someday have an attachment to record and play back shows digitally. Digital videodiscs were available and personal computers had only expensive read-only drives. But I figured drives that also let users burn DVDs would soon take off, so my partner, Fred, and I started scouring Silicon Valley for technology that would benefit.

In the small city of Milpitas—ZIP Code 95035—we stumbled upon a company named Elantec Semiconductor, which had gone public in 1995 at $7 a share. Cowen Inc. and Hambrecht & Quist were the underwriters, for those who remember those days. Don Valentine of Sequoia Capital and Apple Computer fame was the (pedigreed) chairman. It had $30 million or so in revenue but wasn’t really growing. When Fred and I found it, the stock was broken, trading around $3. It had 10 million shares, so it was trading at a lowly one times sales.

We started visiting the company, meeting the CEO and CFO once a month. They told us they had developed a little $2 laser-diode driver that could allow a compact-disc drive to burn data onto a blank disc. Lights flashed in my mind when I heard this: Could their laser driver do the same thing for DVD drives? Someday, I was told, but it would be really expensive. Even so-called CD-R drives for PCs were still $500. Gut check—time to move on? Nah.

We weren’t discouraged. Everything that comes out of Silicon Valley starts out expensive, then sells like hot cakes as costs decline. We were long-term investors—patience was our middle name. So we started buying stock at $3. It started ticking up: $3.13, $3.25, $3.50. We were geniuses! Then we got too busy to buy more shares for a few days and the stock slid back to $3. Turned out we were the ones driving up the thinly traded stock!

So we slowly kept buying shares and continued to visit the company for updates. Elantec’s only competitor for laser-diode drivers was Toshiba, and because Toshiba also sold CD drives, every other Japanese CD company bought from Elantec.

Around the same time, music was becoming available online through MP3 downloads, which Napster had made easy.