Protests against Uber -- I think we need the competition!

Michael Hiltzik wrote a column about Uber protests.  I usually agree with him..but I'm not sure this time

What the New Yorker magazine misses about the Uber protests - LA Times

I do agree that Uber & Lyft are destroying the taxi paradigm.  However, we do need to keep them in competition with Taxi companies.   Taxi companies are also free to set up their own smartphone app that rates drivers and customers.  I agree that 20% "commission" sounds steep, and I think that competition could drive that down to 10-12%.  On the other hand, drivers already own their car and presumably have no better "opportunity cost"  for the time they are spending.  So getting 80% of the fare is probably a lot better than what a traditional cab driver earns.  I also expect that cab drivers are on the "endangered species list" with self-driving cars on the horizon.  
I think that Uber/Lyft are doing to cab companies what Craigslist & Ebay did to newspaper advertising revenue.  I don't believe they are "employers."  If I make a business buying/selling on Ebay & Craigslist, and I agree to standards and fees charged by those businesses, am I their employee?  If I rent my home using AirBnB and receive payment from them isn't that similar to renting my car-driving service on Uber?  
This is a technological revolution.  I remember when grocery bar-code scanning was fought by the grocery union because they feared loss of jobs (stamping prices on goods) and loss of skill requirements (memorizing prices of unstamped goods).  However now it is fully accepted.  Consumers got much larger selections in stores (easier inventory management) and more accurate check-out.  Mark-ups in grocery stores can be less because of lower expenses.  A win-win for everyone!  Uber & Lyft are doing the same thing.  We shouldn't stop the change.  I believe we can manage the change, and help minimize or mitigate the damage to the displaced workers and businesses. 

Repeal of ObamaCare Medical Device Tax

The Union Tribune had an editorial today advocating the repeal of the tax on medical devices.  On rare occasions, the UT editorial staff goes above politics and states a well-researched opinion with a solid foundation.  This, isn't one of those times.  New hope for repeal of Obamacare tax | UTSanDiego.com  The UT complained that the tax was destroying jobs etc.

USA Today's editors the opposite side of the debate in their editorial, however they did publish a rambling opposition opinion by Tom Fogerty that complains that the tax somehow reduces innovation.  But back in 2013, Michael Hiltzik wrote a convincing column that the tax should remain-- I find I usually agree with Michael Hiltzik's opinion. .

First of all, the tax on the devices is only 2.3% which is hardly noticeable on a patient's medical bill. I don't know if there is sales tax added on medical devices but the 2.3% is probably less than 1/3 of the state, county or city sales taxes that would be added.  If there is not sales tax on such devices, then 2.3% is negligible compared to taxes on everything else.  Does the 8% sales tax we pay on electronic gadgets stop innovation?  Second, the 2.3% tax is reduced by the savings a company gets on their income tax, so that the 2.3% is actually around 1.4% after taxes.  The tax isn't charged on eyeglasses, hearing aids or exports.  So over half of the industry's products aren't affected.  Because it isn't charged on exports, it shouldn't affect international trade.  Yes, it is likely that the tax pushes up the price of those devices by the amount of the tax.  But we also know that a very large percentage of the cost of getting a heart stent, hip joint, knee joint etc is the cost of the operation and recovery.  The cost of the device itself is probably less than 25% of the total medical cost.  Also much of the cost is actually paid by the Government!  If a medicare, medicaid, military, or VA patient gets a new hip, the Government pays the tax as part of the overall medical bill.

I recently read the book America's Bitter Pill by Steven Brill.  It is a very long and very detailed description of how the ObamaCare --Affordable Care Act --was put together, and the struggle to get the important website up and running.  The negotiations among the many stakeholders in the process of developing the bill was very complex and very intense.  As part of the plan, it was recognized that by adding all of the new patients through Obamacare, some businesses would reap sudden windfall profits.  Doctors, hospitals, Insurance companies, pharmaceutical companies and medical device companies would get a huge boost in sales and profits when new patients were added.  As part of the process, all of the participants gave up some "share" to make it fair to all.  The medical device companies share was the 2.3% tax.  They are now experiencing that windfall in sales and profits.  However they have spent $150 million over the past 5 years to lobby and make contributions to political campaigns in the hopes of eliminating this tax.  The problem is, if the tax is eliminated then next the other businesses, such as hospitals, will then want to also eliminate their "share."  The Republicans know this, and understand that if that tax were eliminated, it would possibly cripple Obamacare.  That, I believe, is their main goal. They have been working very hard to find some way to make the ACA appear to have failed, so they can more easily kill it.  They want to kill it, not because it doesn't work, but because they don't want credit given to the Democrats or Obama.  The "NIH" or "Not Invented Here" complex.  The Republicans killed the Clinton medical plan, and had many opportunities to present their own.  However they have never proposed any plan that appeared to work.

Concerning the tax effect on innovation.  A device such as an improved hip replacement part would sell just the same with the additional tax as without if the improved device, is, in fact, improved.  How many patients would worry about a 2.3% tax when selecting the best hip replacement joint?

It is revealing that Tom Fogerty and the San Diego Union Tribune editorial board carefully avoided any mention of facts or fairness among the industry stakeholders in Obamacare. Their editorials cited unsubstantiated loss of jobs and innovation as the rationale -- none of which meet the test of facts.  You have to wonder if the editorial was written as quid pro quo for the medical device manufacturers placing ads in the newspaper? 

Supreme Court ruling puts state regulatory boards in crosshairs

I've always thought that state regulatory boards were in a strange "conflict of interest" situation that made them appear to be working to restrict the supply of people in their profession more than trying to protect the public. Even when their obvious goals were to protect the public, they were always under suspicion and had to go out of their way to avoid the "appearance" of a conflict of interest. Michael Hiltzik's column in today's Los Angeles Times explains how that situation might change a lot based upon the February 25 2015 Supreme Court ruling on NORTH CAROLINA STATE BOARD OF DENTALEXAMINERS v. FEDERAL TRADE COMMISSION.  See Michael's article at this link.
Supreme Court ruling puts state regulatory boards in crosshairs - LA Times

Michael Hiltzik


With respect to this Supreme Court case, it is clear to me that "tooth whitening" does not require the same sort of regulation that dentistry requires.  However, It probably does need some sort of regulation to protect the public from poor sanitization etc.  The essence of the case is should a state regulatory board be exempt from antitrust law, which would, in effect, protect professionals serving on a state board if they "restrained trade" by monopoly-like practices.  See this SCOTUS Blog.  The fact that the Dentist profession wanted to maintain control over that procedure does appear to be an attempt to restrict the supply of teeth-whitening service providers and keep the profits from that service for the Dentists.  The same concept could apply to almost every other state licensing board, in every state.  Doctors, dentists, contractors, lawyers, hairstylists, swimming pool maintainers, and Realtors all are in the same situation.

One of the problems is that the best people to write laws about a specific profession and enforce those laws are the people who know the most about the field.  So, for example, the Dentists propose the laws, serve on the Dental boards, and hole hearings and either perform or recommend discipline when malpractice is determined.  Discipline is often very slight and usually very slow, even for egregious offenses.  Professionals are viewed as loathe to discipline members of their own ranks.

Another part of the problem is that the top members of a professional hierarchy are often the ones who serve on boards regulating professional requirements for "lower tier" professions.  For example Dentists are the board members who write and enforce the rules for dental hygienists and dental assistants.   Medical doctors serve on the boards that license physician assistants, nurse practitioners, nurses, and the many other lower-tier medical professionals, such as phlebotomists, or x-ray technicians,  General contractors serve on the boards that regulate lower tiers such as plumbers, electricians, carpenters, tile setters etc. In Michael's example, Veterinarians regulate Veterinary Technicians  That puts those at the top of the hierarchy in a position where they can restrict what those lower tier professionals are able to do in their state to make sure that the members at the top of the hierarchy continue to get their "cut" of the revenue from those lower tier workers.  For example, requiring all dental hygienists to work under the direct supervision of a dentist in a dental office -- as opposed to allowing them to open their own office. To reduce the appearance of this apparent conflict, the boards often have "token" representation from the lower tier professions on the board, such as one Veterinary Technician on a board of Veterinarians.

There is a good argument for having those "top tier" professionals serve on the boards for the lower tier jobs.  The top professionals are the best educated, usually have the most experience, and have the most to lose.  Since the top profession is dependent upon the lower tier, they do need to make sure that they are protected from poor performance from lower tier employees.  In many instances, the top profession's liability insurance acts as an umbrella for the other employees.

Serving on a board is usually in imposition on professional's valuable time.  Even though most of the boards do pay members for serving it often doesn't represent the full "opportunity cost" to a professional for attending board meetings.  They have to make room in busy schedules, they have to consider their employees, travel time, overnight accommodations near the meeting location (often near state capitol cities).  and impact on friendships, professional society positions, and personal liability.  The goal of altruism and serving the state to improve their profession could easily be overshadowed by the possibility of increasing total earnings by making minor changes in board rulings, license exams, or laws.

I see this Supreme Court ruling as an opportunity to structurally change how many services are provided and reduce the cost of those services to the public, by reducing the ability of professions to earn excess profits from monopolistic pricing.  I'm amazed at how much more reasonably priced similar services are in other countries.  Dentists in Thailand go through almost the same sort of training, and require the same types of equipment and office operation as used in the US, but high-quality services are provided at much less than half of the costs in the US.  I believe services are cheaper in every country of the world.  Why do we pay so much more in the US?  Possibly because of this sort of board oversight.

My suggestion is that board structures be changed throughout the US.  The Supreme Court ruled against the current structure, but did not suggest how it could be corrected. The only advice was that:
1) the challenged restraint on competition is clearly articulated and affirmatively expressed as state policy and 
2) the policy is actively supervised by the state. 

 I will be greatly interested in hearing what the experts come up with.  However here are some of my suggestions:
1. No voting member of a professional state regulatory board should be a member of the profession being regulated.
2. Boards should, however, be made up of state-licensed professionals from other professions, with no two members from the same profession, and none, of course from the profession they are regulating. Board members shall have short term limits to make sure that many have opportunities to serve.
3. States need to provide "active supervision" over the board and the professions.  So all boards should serve in an advisory role to a state official.  A state civil servant shall be assigned to approve all recommendations from the board, and the civil servant shall be nominated by the executive branch and confirmed by the legislative committee(s) that control the profession. The number of civil servants could vary depending upon the number of legislative committees a state has, the size of the profession, etc.
4. Boards should have a budget, from which they can hire professionals (often from the profession they are regulating) to perform studies and provide recommendations to the board.  In general, the budget should be proportional to the number of people in the profession being regulated, and should be funded from fees collected for testing, licensing, and annual license renewal fees.
5. It seems crazy for a state to establish a statutory restraint on competition, so I doubt that would happen.  But if for some reason a state wanted to do so, it could.  Conversely, I believe states should encourage competition and should include the requirement for the boards to take steps to encourage competition as much as possible.

Conservative hostility to Dodd-Frank continues unabated - LA Times

Michael Hiltzik described the battle to block or change the Dodd-Frank law which attempts to prevent another bank meltdown (too big to fail) and need for resulting governmental bail out.

Conservative hostility to Dodd-Frank continues unabated - LA Times:

The reason we had the financial melt-down in 2007 was because the financial industry and their many well taken care of politicians in congress and senate refused to put the type of mortgage-backed securities under some sort of regulation.  The Dodd Frank bill was an attempt to close some of the many loopholes in banking regulation.  It passed mostly along party lines, and now the Republicans would like to gut the law any way they can.  I'm not sure the bill does everything that is needed.  Also, I'm sure that the industry will come up with some new, creative way of sidestepping the law and will create some new "bubble."  However this is the best we have now--and sadly, the Republicans have not come up with anything better.

As an investor, I want confidence that the investments I make are property represented and the executives involved are ethical.  I think most investors are still on the sidelines because of the fear that another meltdown might occur.  Passing some tighter rules for financial controls and disclosure seems to be a very minimal step toward improving the confidence of the investing public.