Andy Kessler

WSJ: What Will California Ban Next?

https://www.wsj.com/articles/what-will-california-ban-next-11566158511

First they came for our plastic grocery bags. Then they came for our plastic straws. Now they’ve come for our plastic water bottles at SFO. Yes, you read that right. Starting Tuesday, the sale of plastic water bottles will be banned at San Francisco International Airport, one of the few places they actually make sense. California has many dumb laws and statutes and bans, but this one is especially brainless—spurred by futile self-righteousness.

After running late for your flight after a 30-minute security line only to have TSA confiscate your Fiji water bottle, you’ll now have to stop at a crowded water fountain to fill your own metal flask. Or buy an overpriced glass or aluminum bottle at the concession stand, paying another 10 cents for a bag. And your teeth will chatter if you drink through a paper straw. Of course you could risk dehydration instead: Men lose up to a half-gallon of water during a 10-hour flight. Oddly, you can still buy sugary drinks in plastic bottles at SFO; only healthy, calorie-free water is banned in plastic. You can’t make this stuff up.

Other fields are even worse. Starting next year, the California Building Standards Commission will require every new home to have solar panels. This will add $8,400 to the average cost of the state’s already expensive homes. With a shortage of about 1.4 million housing units, according to the California Housing Partnership, that’s a $12 billion unfunded mandate.

But maybe the housing shortage can be solved with yet another legislative “fix.” Last December state Sen. Scott Wiener introduced Senate Bill 50, which would allow developers to ignore certain local zoning laws within half a mile of train or subway stations and some bus stops. The bill would allow five-story buildings, high density and massive parking structures. Although the bill was tabled in May, many of its growing group of supporters argued it didn’t do enough to create incentives for affordable housing. That tells me another version of this bill will pass eventually. So here’s what may happen: Many towns will preserve local zoning pre-emptively by closing their train stations. Lose-lose situation.

So what? you might ask: Just take an Uber or Lyft. Not so fast. Also winding its way through Sacramento is Assembly Bill 5, which would reclassify “gig economy” workers as employees, entitled to full benefits and a $12 minimum wage. This means the cost of rides, deliveries and even manicures would go up, up, up. The bill is an overreach because most drivers truly are temporary workers. According to the delivery company Postmates, half of delivery workers quit after 80 days and about 45% work less than nine hours a week. Once again California legislators are trying for a trifecta: Fix a problem that may not exist, kill a very Californian innovation, and damage the employment prospects of the same workers they are trying to protect.

There’s more. Proposition 64, passed in 2016, allows Californians to grow six pot plants at home. Why not seven?

Read the rest here.

WSJ: Social Media and Hawley’s Folly

https://www.wsj.com/articles/social-media-and-hawleys-folly-11565551761

What does Missouri Sen. Josh Hawley have against Silicon Valley? On July 31 he tweeted (as opposed to sending by Pony Express) “Social media ‘innovation’? What innovation? Big Tech doesn’t deliver for the American people, and that’s the biggest problem of all.” The previous day the senator introduced S.2314, the Social Media Addiction Reduction Technology Act, which would smother with a giant pillow the innovation he claims not to see. Be warned: Regulation may soon arrive in Techland.

Who is this guy—and why does he think he can micromanage a trillion-dollar industry? Born in Arkansas and bred in the Show Me State, Mr. Hawley graduated from Stanford, then Yale Law. He became Missouri’s attorney general in 2017 and began investigating the classified-ad website Backpage. The site sued to stop the investigation, lost, and then Mr. Hawley sued it back. He was thwarted in gathering information by Section 230 of the Communications Decency Act, which I wrote about last month; the provision defines certain online services as platforms, not liable for the content their users post. The episode may have stoked Mr. Hawley’s disdain for social media and Big Tech. He also opened an antitrust investigation into Google the same year.

This antitech inclination hasn’t always defined Mr. Hawley’s persona. As attorney general he said, “American workers and American entrepreneurs can compete with anybody, anywhere if our government will stop making America a cost-prohibitive place to do business.” Hear, hear. When he won his Senate seat last year he ran mostly as a conventional conservative.

But even then he already had his enemies marked. His first Senate speech lamented the “cold and judgmental world of social media,” and things kind of went downhill from there. He even wrote a letter to Mark Zuckerberg more or less describing Facebook as one of the “forces parasitic on our national life.” Ouch.

Mr. Hawley’s new bill has all the worst instincts of the regulatory state—a disappointing achievement coming from a Republican. It would remove the autoplay feature from YouTube, end infinite scrolling on Twitter and Facebook feeds, limit scrolling time to three-minute sessions, set default limits on the use of platforms to 30 minutes a day, and outlaw Snapchat streaks (rewards for consecutive days of contact with friends) and most “gamification” (badges, rewards) for any online service. These diktats are the opposite of market freedom.

Read the rest here.

WSJ: Have No Fear of Facial Recognition

https://www.wsj.com/articles/have-no-fear-of-facial-recognition-11564955494

Englishman Francis Galton first noted the unique arches, loops and whorls in our fingerprints back in the 1880s. Thirty years later, Clarence Hiller confronted an intruder in his Chicago home and was fatally shot. The culprit fled, but not before leaving a fingerprint in fresh paint on a railing. Thomas Jennings became the first defendant convicted using fingerprints as evidence. This is now routine, but back then there was public hysteria over the fingerprint’s invasion of privacy and then questionable accuracy.

Today, with faces matched almost instantly via machine learning and artificial intelligence, fears of Big Brother have created similar hysteria—especially after Georgetown legal scholars discovered last month that Immigration and Customs Enforcement has access to driver’s license photos from 21 states.

So much so that the crime-ridden cities of San Francisco and Oakland, Calif., along with Somerville, Mass., have banned the use of facial recognition by law enforcement, even though local businesses can use it to track who enters and leaves their buildings. Pretty crazy.

Paranoid? Is someone watching you? Let’s get some constitutional rights out of the way first, especially “unreasonable searches and seizures.” In Katz v. U.S. (1967), the Federal Bureau of Investigation used an electronic eavesdropping device, attached to the outside of a phone booth, to record the defendant’s gambling transactions. Charles Katz won and the Supreme Court ruled that in a phone booth, “like a home, and unlike a field, a person has a constitutionally protected reasonable expectation of privacy.” On the flip side, the justices held that “what a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection.”

But we are still protected against dragnets (dum du dum dum)—the use of cameras or other surveillance to track collectively where everyone goes and what they do. Even in public, where you have no reasonable expectation of privacy, law enforcement can’t record everything in hope that someone commits a crime. The USA Patriot Act weakened some of these protections, but the 2015 USA Freedom Act fixed that.

There’s added hysteria around the potential bias in facial recognition’s mistakes.

Read the rest here.

WSJ: Great Books for a Brainwashing

https://www.wsj.com/articles/great-books-for-a-brainwashing-11564337511

It’s that time of year again. Soon-to-be college freshmen are whooping it up before being shaped into adults—cruising to Whataburger in mom’s Prius, sneaking cans of ruby grapefruit White Claw Hard Seltzer. Soon it will be goodbye to innocence and hello to an exciting new adventure. But first there’s—ugh—your summer reading assignment.

I’m all for reading, but when I dug around to see what books were assigned this year, I was thunderstruck. The selections are clearly intended to make new students “woke”—a push toward political awareness, an initiation into the cool social-justice league.

Stanford’s “signature common reading program” has two books and a collection of essays this summer. The first is “There There,” a novel set in Oakland about the “plight of the urban Native American.” It’s always troubling to see the word “plight”—you know you’re about to be manipulated.

The next book on Stanford’s list is “Silicon City: San Francisco in the Long Shadow of the Valley.” Uh oh, long shadows sound ominous. Sure enough, the author informs us that San Fran is rich, unequal and un-diverse, with “rapid gentrification, an epidemic of evictions, rising crime, atrophied public institutions.” Wasn’t Gavin Newsom mayor? Worse, it’s “a cautionary tale for the entire country.” Wait, shouldn’t students be focusing on the Bay Area’s unbounded success in driving the global economy by making productive tools that have lifted billions out of poverty? Of course not, because that nasty, long shadow obscures “the birthplace of the Beats, the Black Panthers, and the LGBTQ movement.” The message to students is that if you win, you lose.

The last item is an e-book (saving paper!): “The Just City Essays: 26 Visions for Urban Equity, Inclusivity and Opportunity.” I’m sure the first two or three essays are enough to get the “sustainable, equitable future” point across.

Yale is not to be outdone.

Read the rest here.

WSJ: Better Living Through Simulations

https://www.wsj.com/articles/better-living-through-simulations-11563738861

What was Neil Armstrong thinking about as he stepped on the moon? His first words were rehearsed, and he still blew it: “That’s one small step for man” he said, meaning to say “a man.” He then talked about how powdery the soil on the surface seemed. And then this: “There seems to be no difficulty in moving around as we suspected. It’s even perhaps easier than the simulations at one-sixth g that we performed in the various simulations on the ground.”

Armstrong was doing something no one had ever done before, but he was struck by how different it was from the simulations of doing something no one had ever done before. In other words, he was so well-prepared that the only shock was that the experience was somewhat off from what he had been trained to expect. Amazing—and a preview of today. The rest of us would have been jumping with glee like kids in a bouncy castle, unlike the cool, calm and collected Armstrong, who had taken multiple flights in a KC-135 jet to simulate low gravity.

Simulations helped create the computer industry. The first U.S. computer, the Eniac, ran statistical simulations for hydrogen-bomb blasts—not something you can test in the lab. Every chip in your personal computer and phone is simulated well before it is manufactured in billion-dollar fabrication plants. Simulating weather patterns has led to better though never perfect forecasts.

Commercial airline pilots log hours in simulators practicing situations, like hitting a flock of seagulls, that they’ll hopefully never face in real life. So do soldiers, surgeons, nurses—even truck drivers. Add cheap virtual-reality goggles, and all sorts of training can be enhanced, from tricky manufacturing to firefighting and law enforcement.

Simulations can be useful for nearly every product being designed today. Cars have long been tested in wind tunnels and crash labs, but most of that experimentation can now be digitally simulated before the prototype is ever built. Bridges and buildings are now modeled and run through worst-case scenarios before plans are completed. Design, simulate, fix, simulate again and roll out.

Read the rest here.

WSJ: Lessons From a Trip to the Moon

https://www.wsj.com/articles/lessons-from-a-trip-to-the-moon-11563137910

“It’s a 1202. What is that?”

Fifty years ago this Saturday, Neil Armstrong and Buzz Aldrin were 30,000 feet above the moon and descending in the lunar module. Behind their seats was the 70-pound Apollo Guidance Computer, with 2,800 Fairchild Semiconductor integrated circuits, each containing two logic gates and running at a speed of 43 kilohertz. It was programmed for the physics of a lunar landing, able to read data like speed, angle, altitude and fuel remaining. But a warning horn sounded. Mr. Aldrin typed 5-9-Enter on a keypad and the machine displayed the error code “1202.” In all their simulations in Houston—so many the “abort” button label practically rubbed off—they had never seen a 1202. So Armstrong asked.

Each program in the guidance computer used a 12-word, 16-bit data-storage unit known as a Core Set. The system had handled countless complicated tasks through the takeoff, approach and orbit, but something had gone wrong during the landing attempt. Turns out a radar used to track the Command Module was overrunning the Core Sets with bad data. Fortunately, the guidance computer had been designed to crash and reboot when that happened, and not lose data so it could continue its guidance function.

Imagine sitting in a tin can, about to make history, trusting a computer with your life, already white-knuckled, and getting the early equivalent of the Microsoft Blue Screen of Death. Each time the alarm sounded, the display went blank for 10 seconds as the computer crashed and rebooted. There were five alarms and crashes in four minutes, the last at 2,000 feet. With no clear sign of any systems malfunctioning, the astronauts and Mission Control scrambled to make sense. Armstrong’s heart rate hit 150. The display finally returned 800 feet above the lunar surface. Noting no data was lost, the flight controller in Houston, Charlie Duke, replied, “Eagle, looking great. You’re GO.”

There are many lessons from Apollo 11, and you’ll hear them all week. First, timing is everything: Inspired by John F. Kennedy, all six lunar landings occurred during Richard Nixon’s first term. Another obvious and overlooked lesson is that technology is an indispensable yet imperfect tool. I’ve had my iPhone crash trying to hail an Uber. I know, First World problem.

Apollo 11 was a source of pride, but also confusion. Whenever hurricanes and other freaky weather hit in the ’70s, my grandmother would explain it by insisting, “They touched something up there on the moon.” Sadly, climate thinking hasn’t advanced much.

People often ask whether space exploration is worth the cost. I’ve certainly been in and out of the “We went to the moon and all we got were Velcro and Tang” camp. Doubters now insist the money should have been spent to fight poverty in inner cities.

WSJ: The Key to the Long Expansion? Logistics

https://www.wsj.com/articles/the-key-to-the-long-expansion-logistics-11562526973

“You can’t recommend those stocks,” a Wall Street strategist insisted in 1986. “We’re in the third year of a four-year expansion. They won’t work.” Being naive, I did it anyway. The expansion lasted a total of almost eight years, until July 1990. Strategists don’t know much, but to be fair, it was a B-school accepted truth that expansions last four years. Another expansion began in 1991 and lasted a record 10 years. And this month we broke that record. Since June 2009, the U.S. economy has kept growing. Every day is another record.

Did you ever wonder why we are enjoying a decadelong run? What changed? Everyone wants credit. Was it the Federal Reserve and its relentless stimulus? Nope. The Fed creates the money the economy needs, but not the need itself. Obama or Trump policies? A divided Congress? Demographic shifts? A strong or weak dollar? Actually, none of the above. The answer is just-in-time. You can thank all those freshly minted consultants you see in premium economy crisscrossing the country with their AirPods and Allbirds and airy attitudes.

In the previous era, before pervasive computing, economies would live and die by inventory cycles. Heck, biblical times record seven years of feast and seven of famine. The expansion starts, consumers buy, investment and hiring ramp up, wages and prices rise, inflation emerges, consumers buy ahead of price increases, investment peaks, inventories build, consumers are tapped out, recession starts, inventories are drawn down, and layoffs begin—then start all over every four years. Until recently, price signals didn’t travel very fast, and inventory tracking used clipboards.

In a micro version of this cycle, the videogame industry had a huge bonanza in the early 1980s that ended in ’83 with bust of the highly anticipated “E.T. the Extra-Terrestrial” game. Warner Communications literally buried about 700,000 unsold cartridges of “E.T.” and other titles, and lost more than $500 million. The semiconductor industry got stuck with loads of chips in inventory that had to be written down. It was ugly. After a similar inventory mess related to then-newfangled personal computers, the tech world started implementing just-in-time delivery. Companies like Compaq would ask for chips to be delivered Tuesday for PCs shipped on Wednesday. This gradually smoothed out the cycles of a very volatile industry.

Thirty-six years later, much of the global economy has perfected this just-in-time supply chain. Digital cash registers and bar codes log consumer purchases. Logistics software allows manufacturers to track every production detail everywhere on the globe. Data is fed into giant databases that forecast demand. Manufacturing, transportation and retail are a highly choreographed water ballet of delivering inventory right before it’s needed. Exactly the right amount of toothpaste is magically dropped onto Walmart shelves each night.

WSJ: Kill Section 230, You Kill the Internet

https://www.wsj.com/articles/kill-section-230-you-kill-the-internet-11561924578

The internet was almost killed in its cradle. Will it happen again? In October 1994, an anonymous poster on Money Talk, a bulletin board run by the early online service Prodigy, accused Long Island brokerage firm Stratton Oakmont of fraud. Yes, that Stratton Oakmont, of Leonardo DiCaprio and “Wolf of Wall Street” movie fame. Fraud central. But in 1995 Stratton Oakmont sued Prodigy for defamation. The firm claimed the online service was liable as a publisher because Prodigy posted content guidelines that human “board leaders” enforced and deployed software that screened for offensive language. Sound familiar?

Amazingly, Prodigy lost the case. This prompted Congress to insert language into the Communications Decency Act of 1996, known as Section 230: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

That’s all it took to enable the online world as we know it today. Online companies can claim they are a bunch of disk drives and, with few exceptions, innocently passing along whatever their users post on them. Without Section 230, tort lawyers would have smothered the internet. Facebook , Twitter and Google today would be Little Tech—if they existed at all.

Section 230 also allows companies to restrict content that is “obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected.” With these “community standards,” online companies can remove anything and can’t be sued.

There’s a wide lane between moderating hate speech (Facebook Live of Christchurch shooting) and crippling free speech (banning conservative voices). OK, but Facebook and the like are often governed by the court of public opinion, with its varying views on fake news, identity politics and political meddling. Seems lots of folks are triggered by what they see online. But Facebook, YouTube and Twitter’s community standards are murky and vague and seem to change daily, so the dogpile to regulate or even break up tech giants grows, with the addition of new bodies across the spectrum from Elizabeth Warren to Ted Cruz.

Are online companies publishers? Should Section 230 be repealed? Heck no.

WSJ: The Future Isn’t What It Used to Be

https://www.wsj.com/articles/the-future-isnt-what-it-used-to-be-11560714338

Founded in 1867, the Keuffel & Esser Co. commissioned a study of the future for its 100th anniversary. If you’re of a certain vintage, you might have used a K&E slide rule. Their “visionary” study was a huge dud, missing completely the electronic-calculator boom that came a few years later. They shut down their slide-rule engravers in 1976. As Mark Twain said, “It’s difficult to make predictions, especially about the future.” Or was it Niels Bohr? Maybe Yogi Berra?

My father was a proud member of the Book of the Month Club. Bored on a visit home in 1989, I devoured that month’s selection, “Megamistakes” by Baruch College professor Steven Schnaars, where I read about K&E’s study. The book’s message was simple: Don’t be fooled by prevailing opinion, and don’t extend trend lines into the future. Mr. Schnaars chronicles how 1950s jet-age thinking morphed into ’60s dreams of a space-age utopia. A 1966 study by conglomerate TRW forecast manned lunar bases by 1977, autonomous vehicles by 1979 and intelligent robot soldiers by the ’90s. AT&T ’s Picturephone service, ultrasonically cleaned dishes, cheap energy forever, future shock everywhere—all wrong.

Of course, the 1973 oil embargo changed everything. But by the end of the ’70s, expensive oil was considered permanent and the future was about scarcity and energy saving and we’d all be driving small cars with CB radios and living in R. Buckminster Fuller-inspired geodesic domes. General Electric even ramped up production of small refrigerators. Mistakes!

Then the ’80s came along. A bull market and cheap oil lifted the ’70s fog, but everyone believed the Japanese would soon rule the world since they were kicking our butts in manufacturing and the Imperial Palace in Tokyo was worth more than all the real estate in California. Personal computers were mere toys. Oh, and the Soviet Union was a world superpower. Megamistakes!

After the ’87 crash and first Iraq war, the prospects for economic growth in the ’90s were dim. Then Netscape and its browser went public in 1995 and we were off to the races again. By 1999 techno-utopia was in full swing, and all you needed was a good name like burnmoney.com to raise millions and be worth kazillions. Gigamistake!

The Nasdaq’s dot-bomb implosion and 9/11 changed the mood quickly. In 2003 I tried to pitch a book about Silicon Valley and Wall Street and was told nobody would care about them ever again and asked if I knew anything about bioterrorism or Islamic fundamentalism. Uh, no. But I wish I knew about house or derivative flipping - that’s what the aughts were about, until the Great Recession. The 2010s were about holding cash, maybe in your mattress, vs. owning stocks. Oops— Apple , Amazon and Microsoft would soon flirt with trillion-dollar valuations. Teramistake?

WSJ: A Panda Could End the Trade War

https://www.wsj.com/articles/a-panda-could-end-the-trade-war-11559507419

China gave the U.S. two giant pandas in honor of Richard Nixon’s 1972 visit—Ling-Ling and Hsing-Hsing. (We gifted two musk oxen. Fair trade?) China must have been trying to tell us something. “Ling” in Mandarin translates to zero, which happens to be the right percentage for tariffs. Zero, zip, nada, goose egg.

Last July, President Trump and European Commission President Jean-Claude Juncker agreed to “work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.” It’s not a done deal, and autos are—wink wink—national-security threats, but there’s that big fat zero.

Tragically, the U.S.-China trade war is out of hand and both economies are slowing. I’ve lost track of 10% and 25% tariffs on $200 billion in goods, or is it $325 billion? One more round of sanctions and already-expensive iPhones will pop another $200. No one wants that. It’s time to go back to basics.

I get it. We run trade deficits with China. They make all our shoes and toys and lots of apparel and Hibachi grills. So what? You don’t like cheap sneakers? But in the next breath, we hear about intellectual-property theft and subsidies of state-owned companies and that China will soon spend double the U.S. on innovation. We hear the screams from the Mnuchin-Navarro-Lighthizer mercantilist wing of the Trump administration that “something must be done!”

So we get threats and tariffs and whispers that it’s all just a negotiating tactic to stop China’s trade abuses—the art of the trade deal. Some art—now China telecom giant Huawei’s products are banned in the U.S., causing giant disruptions for U.S. software companies and chip makers. U.S. companies are discouraged from hiring Chinese engineers. Soybean exports are curtailed. Critical rare-earth metals from China might get cut off.

Why the impasse?