Supersonic planes, NYC housing, US healthcare, the cotton gin, and more. Enjoy!
(1) Why Did Supersonic Airliners Fail?
Supersonic airplanes are an awful business: (1) building a commercial plane is already ruinously expensive, and supersonic speeds add even more expenses (custom engines that work differently at sub-sonic vs. supersonic speeds; exotic alloys that function at higher temperatures; etc.); (2) the planes are uneconomic for airlines because of 5-7x higher fuel consumption vs. sub-sonic planes, so 50% of the weight is consumed by fuel); (3) the noise from sonic booms restricts them to flying routes over water only (the Concorde’s only route for decades was JFK to Heathrow); and (4) the resulting high costs can only be recovered with ticket prices that nobody will pay (“as late as 2003, the Concorde had trouble filling its NYC to London route). We’re stuck with 737s.
(2) The Hotel Guest Who Wouldn’t Leave
NYC’s 1969 Rent Stabilization Act mandated that hotels built before 1969, whose rooms could be rented for less than $88 per week, must allow their guests to sign a lease to rent a hotel room. In effect, this law creates a rent-subsidized apartment inside a hotel. A guest at The New Yorker Hotel in Midtown used this law to get a subsidized apartment in the hotel, but took this too far when NYC’s housing court accidentally gave him a “final judgment of possession” of the hotel. He used this to take the deed of ownership for the hotel, producing a messy dispute with the owners. The owners eventually reclaimed control of both the hotel and his “apartment” within the hotel because he never paid his subsidized rent. Now he has free housing in prison.
(3) How the Netherlands Built a Biking Utopia
In the post-war era, the Netherlands was actually designed with automobile-centric infrastructure similar to the US (the article has old pictures of car-clogged streets in Amsterdam). How did the Netherlands move towards the walkable and bike-friendly cities that everyone loves today? They created policies to discourage driving (car-free Sundays, market rates for public parking spots, more bicycle lanes, etc.) and improved public education on the (still underrated) harms of driving cars: fatal accidents, hitting pedestrians, obesity from less walking, pollution, eroding city centers, and so on.
(4) Finding the Adjacent Possible
Could consumer subscriptions become even bigger than B2B SaaS? A few companies are leading the way: “The willingness of consumers to pay for digital products has increased drastically due to pioneers like Netflix and Spotify educating the market […] Duolingo is now a $10 billion public company, which nobody would have believed 10 years ago.” The retention concerns with consumer subscriptions are possibly overstated: consumers are not as sticky as businesses [but] if you look at them in year two or three, [consumer subscriptions] actually look more similar to a [B2B] SaaS company than you would think.”
(5) Why Did We Wait So Long for the Cotton Gin?
Most inventions are built on a scaffolding of earlier inventions. But some inventions could have arisen much earlier than they did (e.g., bicycles and semaphores). Another invention that should have been created earlier was Eli Whitney’s cotton gin, which mechanized the ginning (separating the seeds and fiber) of cotton. The problem was well-known, the solution was simple (requiring only basic mechanical insights), and required no new technologies (it was a just wood and metal frame). So why wasn’t it invented until 1793? The author thinks that a “culture of progress” is the answer.
The connection between reading, writing, thinking, and understanding. “Writing isn’t just a way to convey ideas, but also a way to have them […] if you need to solve a complicated, ill-defined problem, it will almost always help to write about it, [and] someone who is not good at writing will almost always be at a disadvantage in solving such problems. You can’t think well without writing well, and you can’t write well without reading well […] you have to be good at reading, and read good things. People who want information might find other ways to get it. But people who want to have ideas can’t afford to.”
(7) History of Health Insurance in the United States
A wonderful overview of the origins of US healthcare system: Blue Cross, Blue Shield, employer-based coverage, Medicare, Medicaid, the Affordable Care Act (Obamacare), and more. One interesting detail is that physicians initially hated insurance because it hurt their ability to price discriminate with richer patients, and the AMA fought the insurance networks to the point of revoking licenses of participating physicians. As for other quirks of US healthcare (employer-based healthcare, excessive utilization, higher prices, etc.), the biggest reason is the exclusion of employer-based healthcare from income taxes. Most people don’t realize that their healthcare is compensation.
(8) Mitch Rales – The Art of Compounding
Mitch Rales is the co-founder of Danaher, one of the most successful conglomerates in history. This is his first major public interview since 1985. Topics covered include: (1) their early days doing deals with >100% LTV financing; (2) the Kaizen “continuous improvement” manufacturing and the path to creating the Danaher Business System; (3) transitioning from industrial tools to healthcare equipment as Danaher’s focus; (4) the challenge of scaling a large conglomerate; and (5) his near-death experience in a helicopter crash while on a fishing trip to Murmansk in 1998.
(9) In Which British Writers Scold America on Trade
The Economist opposes Biden’s tariffs based on the first lesson of economics 101 (“free trade is always good”). But they discount the value of national defense. The second lesson of economics 101 is the guns and butter tradeoff: “The motivation for tariffs and other interventionist policies [was] the military threat that China represents. Without manufacturing, it’s very hard to fight an industrial war. Fine wine, management consulting, and overpriced eldercare may command high prices in peacetime, but when bombs are dropping on your city, they won’t offer a way of fighting back. If the US [has no] manufacturing industries in a war with China, the result could be much more dire than […] slower adoption of EVs.” America loves butter, but we love guns even more.
(10) God: An Aging Product Outperforms Expectations
Some amusingly blasphemous analogies between religions and businesses: “Religions offer a product (salvation), have a network of providers (priests and imams), and benefit from good distribution networks […] economists would describe [the Reformation] as a monopoly provider (Catholic Church) being broken up, resulting in an increase in consumer choice (Protestantism) and the price of services declining (indulgences were out) […] US religious organizations had revenue of $378B [in 2016], more than Apple and Microsoft combined. Better yet, churches usually pay no tax. God may be great; His full-year results are greater.”
(0) Miscellaneous Fun
Declining inequality. Pachelbel’s Canon in D. A fight over NYC’s Seaport Tower. The UK’s latest craze is paddleboarding. The difficulty of in-flight productivity. Too much certainty is a terrible thing. London’s Museum of Homelessness. The story of Berlin’s Tresor nightclub. European farmers are still angry. Who could run Apple after Tim Cook? The value of memos. Another great explanation of the US healthcare system.