Replaced by a Machine

I love the Omaha World Herald – I read papers all over the world and this one is the best local paper I’ve seen. The bias is largely limited to the Opinion pages and they do original research on local topics. For national and world news, they have reporters outside the Omaha metro, but they also include the best of the news wire articles. The paper is a readable length, yet it contains enough stories that you know what’s going on but not so many that it’s a repeat of the nightly news from the national broadcast networks. Mostly, I like the way they let the reader connect the dots.

A perfect example appeared on Sunday March 11, 2012 on page 10A in the print edition. Two stories occupy the three columns on the left side of the page. The story occupying the top of the three columns is about IBM’s Watson supercomputer (from Bloomberg news). Watson’s newest consulting client will be Wall Street bank Citigroup, Inc. “the third-largest U.S. lender.” Directly beneath that is a story from the Associated Press (AP) about Main Street abandoning Wall Street – seems that if individual “ordinary” investors do not start giving their money to Wall Street banks again soon, the re-inflated stock market bubble will deflate – bye-bye Dow 15,000.

How do these two stories relate? Well, Citigroup is feeding information to Watson on “sentiment and news not in the usual metrics” like what you post on Facebook or search on Google. Citigroup will use Watson to “analyze customers’ needs” and process that with their client data to figure out how to get you to put your money back where it makes them the most money in fees and commissions.

Watson doesn’t come cheap – according to the Bloomberg News article, banks spent $400 billion last year on “information technology,” helping to generate $107 billion in revenue for IBM. How can banks afford to spend billions of dollars to get consultations with a computer? The answer is in the AP article in the bottom of the same columns: “corporate America has racked up double-digit profit gains” since the official end of the Great Recession in 2009.

These two articles make me a little happy. The first one pleases the economist in me because an American company with a real product is going to thrive by charging Wall Street billions of dollars for something. The second article pleases me because it means that Main Street got the message – don’t eat the hot dogs at the Wall Street party because the fuel for the weenie roast is your future. Let the machines do it.

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Susanne Trimbath, Ph.D. is CEO and Chief Economist of STP Advisory Services. Dr. Trimbath’s credits include appearances on national television and radio programs and the Emmy® Award nominated Bloomberg report Phantom Shares. She appears in four documentaries on the financial crisis, including Stock Shock: the Rise of Sirius XM and Collapse of Wall Street Ethics and the newly released Wall Street Conspiracy. Dr. Trimbath was formerly Senior Research Economist at the Milken Institute. She served as Senior Advisor on United States Agency for International Development capital markets projects in Russia, Romania and Ukraine. Dr. Trimbath teaches graduate and undergraduate finance and economics.

Owen McShane: 1941-2012 lost a one of its first columnists, a regular contributor and good friend with the passing of Owen McShane.

Owen McShane (Robert Ivan Owen McShane) was born in 1941 and died on March 6, 2012. His long and successful career in public policy was built on a strong academic foundation. He graduated from the University of Auckland, earning degrees in architecture and urban planning.  He continued on to be awarded a masters degree in city and regional planning at the University of California, Berkeley. There he studied under fabled Aaron Widavsky, chairman of the Political Science Department. His master's thesis dealt with a US federal program intended to reduce unemployment and promote business development in central cities.

He joined the new City Development Division of Auckland City Council after graduating from the University of Auckland. After returning from America, Owen held positions in both the public sector and government. He was a columnist for the National Business Review  and has been published in many magazines and newspapers.

In recent years, Owen directed the Centre for Resource Management Studies in New Zealand. The Centre seeks to promote "a heightened awareness and understanding" of the environment and is committed to the "the promotion of scientifically robust, research-based and rational decision-making processes at all levels in matters concerning the environment." Owen was also a regular participant and presenter at the annual American Dream Coalition conferences.

Owen developed an understanding of economics, which assisted him in avoiding the disconnected romanticism that sometimes characterizes architecture and urban planning. Combining economics with architecture and urban planning made his contributions more effective by adding the crucial human element.

From Owen's perspective, rational urban policy was not determined by remote or theoretical visions of the city that he was trained to plan. The success of a city was rather judged by the standard of living experienced by its residents. For example, his How Can Cities with Unaffordable Housing be Ranked Among the Most Livable Cities in the World? (, June 9, 2009) may have been the first to point out that popular indexes of the quality of life in international urban areas routinely ranked the most unaffordable at the top. This kind of analysis led Owen to postulate that " genuine sustainable development" had to work from middle class people and families too" in The Disappearance of the Next Middle Class (, August 24, 2010).  

Owen McShane was an untiring advocate of ordinary people, championing individual aspirations in a world that has increasingly been captured by bureaucratic theories that take little or no account of their preferences or their economic advancement.

Owen will be greatly missed both in New Zealand and far from its shores.

Photo: Courtesy of the Heartland Institute


No G-8 Summit for Chicago

Veteran Chicago journalist Ben Joravsky explains why Chicago’s better off without the G-8 summit:

One, we're not equipped to handle it. Two, we can't afford it. And, three, it has the potential to give the Republicans great campaign material for the coming election.

President Obama has done Mayor Emanuel a great favor, because there’s no real upside to the summit for Chicago. Banks on La Salle Street were planning to close. Many major corporations located downtown were telling their employees to stay home. The fear of violence from the demonstrators was bound to dampen economic activity. There’s no real need to showcase Chicago, international travelers are well aware of the town.

Some may view as an embarrassment to Emanuel. The Chicago Sun-Times reported to President Obama only gave Emanuel “an hour’s advance notice.”  But Emanuel is the lucky one. Violent demonstrations or not, the G-8 would have put the spotlight on Chicago. Do we want to shine a light on the recent loss of  200,000 people? The high retail sales tax? The bad public schools? The relentless legacy of public corruption?

President Obama helped his former Chief of Staff dodge a major bullet.

On Jane Jacobs: "Generating and Preserving Diversity"

“To understand cities, we have to deal outright with combinations or mixtures of uses, not separate uses, as the essential phenomena.”

“Cities need old buildings so badly it is probably impossible for vigorous streets and districts to grow without them.” -Jane Jacobs, The Death and Life of Great American Cities

One of Jane Jacobs's great insights was the importance of diversity and a mixture of uses to urban success.  Cities seem to be natural generators of diversity, but not universally so. Some places are lively and bustling while others remain inert. Jacobs attempted to diagnose this by identifying four key items she believed needed to be in place to actively generate diversity in an urban district:

  1. The district must serve more than one primary use, and preferably more than two.
  2. Most blocks must be short.
  3. Buildings must be mingled in their age, condition, and required economic yield.
  4. A dense concentration of people.

Some of these, such as block size, would appear to be relatively stable over time. Others respond dynamically, either bringing about or destroying diversity.  In the current “global city” era, we see two countervailing trends here, one tending to support diversity, the other to destroy it.

On the plus side, we’ve seen many formerly monolithic central business districts such as Chicago’s Loop or Downtown Manhattan see additional primary uses come into being. For example, Downtown Manhattan has seen a residential population boom. Chicago’s Loop also has vastly more residents than in years past, as well as the emergence of the so-called “Loop U”, a collection of colleges that collectively have over 60,000 students. Tourism has also taken on a more important role.

Similar trends have appeared in other cities. We see what were once 9-5 office districts or down at the heels industrial zones near the center take on several new primary uses, notably residential, educational, tourism, entertainment, and cultural hub activities.  These new primary uses bring different people, on different schedules, into the districts in question to help fuel a significant increase in liveliness and diversity.  This is exciting news for those of us who love cities.

On the other hand, we’ve also witnessed what may be a longer term threat. Jacobs also noted that diversity tended to destroy itself, particularly as one use becomes dominant and bids up rents to the point where other uses flee.  This results in a single-use office district, restaurant strip, etc.

The rise of the global city has seen outsized returns to those who participate in selected functions such as specialized finance or producer services. This has led to large cost increases in these cities which has displaced non-high end functions. Central cities are increasingly playgrounds for the rich, lacking in the diversity of people and uses that were once there.

From a Jacobsian perspective, one troubling consequence has been the reduction in the supply of older, obsolete buildings with lower economic yield requirements. Large numbers of older buildings, such as Class C office space or warehouses, have been demolished and replaced, or else converted into high end uses such as luxury condos. This is reducing the supply of lower rent buildings, undermining one of the pillars of Jacobs foundations of diversity. She noted how the hot areas tended to move around in cities as uses were displaced. So perhaps it is unsurprising that various districts in Brooklyn, for example, have become hipster and artistic havens while Manhattan has become more uniformly upscale and placid.

Whether or not these global city effects will ultimately lead to a self-undermining success is unknown. But the loss or upscale conversion of older and lower rent buildings in our central cities, while something to celebrate in many respects, should be a long term concern to those who care about truly sustainable urban diversity, especially if taken too far.

This piece originally appeared as a part of the City Builder Book Club's discussion of Jane Jacobs's "The Death and Life of Great American Cities."

California's Bullet Train --- A Fresh Start and a Change in Direction

A new strategy is beginning to emerge toward California’s embattled high-speed rail venture. The strategy is designed to rescue the project from a possible defeat at the hands of the state legislature, gain friends and supporters among local transportation agencies, win converts among independent analysts and turn around a largely skeptical public.

The plan combines the existing commitment to proceed with construction of the first rail segment in the Central Valley with near-term actions aimed at upgrading rail facilities at both ends of the proposed LA-to-SF high-speed line. Specifically, the so-called "bookend" strategy will involve "blending" high-speed rail service with commuter rail service in existing Bay Area and Southern California rail corridors.

At the northern end of the line, between San Francisco and San Jose, bullet trains would share track with Caltrain commuter trains. Both would benefit from new investments in electrification, signaling systems, bridge replacements, passing tracks and grade crossings elimination. Similar type of improvements would be introduced at the Los Angeles/Orange County/San Diego ends of the line, benefitting LA’s Metrolink and other Southern California commuter rail and transit systems.

Improving the urban "bookends" of the system will make it possible to increase the speed of local commuter trains and thus bring immediate benefits to large segments of California’s urban population. It will be a good investment whether or not the overall $98 billion high-speed rail project ever goes forward, said Will Kempton, chief executive of the Orange County Transportation Authority (OCTA) and Chairman of the independent Peer Review Group advising the High Speed Rail Authority.

The investments will be funded with a portion of Proposition 1A funds, supplemented by matching funds from local government agencies. Up to $2.3 billion in bond money and its $950 million "interconnectivity" fund would be committed to these near term improvements according to well-informed sources. This would provide approximately $1.4 billion for Southern California and $900 million for the Bay Area, assuming a 60/40 split. Another $2.7 billion has been already set aside for the 130-mile Central Valley segment, leaving roughly $4 billion of Proposition 1A money for future HSR construction.

The new strategy has evolved from discussions held by the High Speed Rail Authority’s new chairman, Dan Richard with the Governor and his fellow board members. In a conversation we had with Chairman Richard several weeks ago, he was frank to admit that significant changes must be made in the Authority’s way of doing business if the bullet train project is to retain the support of the state legislature, overcome the skepticism of independent critics and turn around public opinion. The Authority must find ways, in the Governor’s words, to do things "better, faster and cheaper."

While supportive of the Governor’s vision, Richard saw a need to show signs of near-term progress and not have to wait until 2033 to demonstrate the benefits of the investment. The dollars spent on the "bookends" could have "an immediate and dramatic effect," he told us.

Turning to the Central Valley project, Richard freely admitted the ham-handed way in which the Authority dealt with the affected property owners and local governments. He made plain his resolve to restore trust and rebuild the agency’s credibility with the Valley constituencies. We also were struck by his refreshing willingness to reach out to the program’s critics, in contrast to the Authority’s often arrogant and dismissive posture of the past.

Richard’s new strategy is beginning to bear fruit. Six Southern California planning and transportation agencies, including the Southern California Regional Rail Authority (Metrolink) voted as a group on March 1 to support the development of high-speed rail "while providing funding for local early investment projects in

Southern California that will improve rail service immediately." The Authority hopes to stimulate similar expressions of support in Northern California by working closely with the Bay Area’s Caltrain and San Francisco’s Municipal Transportation Agency. The Peer Review Group, which has long supported the "bookends" approach, can be expected to provide an additional boost to Richard’s strategy.

As for the initial Central Valley segment, its construction, initially planned to begin in September, has been pushed back. The slowdown is due to the need to revisit the environmental report whose initial version has run into a storm of objections concerning the proposed route. The revised draft report will be subject to another round of public hearings before the route through the valley is finalized. Assuming the state legislature authorizes the bond funding, construction in the Central Valley is now expected to begin in early 2013, although court challenges may cause further delays. Critics are expected to continue questioning the value of that investment, fueling continued controversy and increasing the project’s vulnerability.

A New Perception

Regardless of what ultimately becomes of the Central Valley project, the new urban "bookends" strategy is bound to profoundly modify the public perception of the bullet train venture. While the Governor and Chairman Richard maintain that the ultimate year 2033 goal of a 2 hour 40 minute train trip from LA to San Francisco has not changed, the practical effect of the new strategy will be to shift the focus from achieving that distant vision to effecting concrete near-term improvements— investments designed to benefit millions of present-day commuters in California’s two largest metropolitan rail corridors.

Given California’s budget deficit, given the uncertainty of further federal support for high-speed rail in general and for California’s HSR project in particular (see below), and given a lack of any evidence of private investor interest, the"bookend" program of investments may indeed end up as the key accomplishment of the Proposition 1A initiative. While bullet train visionaries will regret this shift in the focus, pragmatists will welcome it as a prudent and realistic response to the growing skepticism. From an economist standpoint, the bookend strategy will be viewed as the best use of scarce financial resources. The public will see it as a victory for common sense: a decision that wisely  places greater value on satisfying present-day needs than on the promise of distant-in-time benefits.

Could Washington come to the rescue?

Meanwhile, in Washington, the Administration continues pursuing its fantasy-land rhetoric. "We envision an America in which 80 percent of people have access to high-speed rail," Transportation Secretary Ray LaHood reiterated in a recent blog. "We’re committed to this program... there’s no going back... we will keep the momentum going" he stated at a February 29 high-speed rail conference sponsored by the U.S. High Speed Rail Association.

Except that this momentum, if there ever was one, has long since vanished. No funds for high-speed rail have been provided two years in a row, including the current (FY 2012) year. Nor are any HSR funds likely to be appropriated  in the next year’s budget. Congressional reaction to the Administration’s $2.5 billion HSR request in its FY 2013 budget submission has ranged from cool to dismissive. The President’s high-speed rail program is "a vision disconnected from reality" members of the Senate Budget Committee told Sec. LaHood at a recent hearing on the Administration’s transportation budget.

Rep. John Mica (R-FL), chairman of the House Transportation and Infrastructure Committee was even more blunt. "If the president thinks his proposal for high-speed rail is going to fly, he’s pipe-dreaming," he told participants at the February 29 rail conference. In short, all signs point to continued congressional unwillingness to support a federal high-speed rail program. This sentiment seems to cross party lines: neither the Republican-controlled House nor the Democratic-led Senate have included HSR funds in their reauthorization bills. Rep. Jeff Denham’s (R-CA) bill would specifically prohibit new federal funds from going to California’s bullet train project during the entire life of the bill.

For California, the implications are grave. Without further federal funds, the State of California will be obliged to seek a fresh infusion of public and private funds by 2015 if it is to continue pursuing its $98 billion bullet train vision. Will a new bond initiative or a public-private partnership succeed? Time alone will tell.

Information Technology and the Irrelevance of Architecture

Throughout history, architecture served as the primary communication device of common cultural values. Whether inspiring religious awe or displaying the power of an empire, great works of architecture went beyond mere utility to reflect the shared expression of time and place.  Modern architecture, with its right angles and smooth surfaces devoid of ornamentation expressed the early 20th Century zeitgeist of efficiency and mass production. In many ways, the Modern architectural language also conveyed common cultural values of the time as it became the model for socialist utopia.

The information technology revolution of the late twentieth century changed the role of architecture forever. With digital information readily available at our fingertips, buildings are no longer needed as a communication device. This new paradigm has largely gone unnoticed by the architectural establishment, which itself has been through a series of futile stylistic phases in recent decades ranging from the campy Postmodernism to the cynical Deconstructivism. The soul-searching continues today, as leading architects promote the use of technology to justify the creation of wild, superfluous forms that are for the most part nothing more than self-referential, sculptural contortions.

Function still matters, but building design often no longer serves the higher aim of communicating a shared culture to a civic audience. Rather, it is the mobile IT products created by companies like Apple that do a superior job of communicating and transferring information while at the same time filling a human desire for great design.

The implications for urbanism are enormous. Cities, as they are thought of in the traditional sense of high-density concentrations of people and buildings, are no longer required for a productive economy. No other place represents this new reality better than Silicon Valley. Rather than being an exalted futuristic urban landscape as one might expect given the amount of innovation that goes on there, Silicon Valley is a non-descript amalgam of low-density suburban villages. The headquarters of internet giants like Google, Yahoo! and Facebook are just as anonymous—bland office parks that turn inwards and are indifferent to the street.

Los Angeles Times architecture critic Christopher Hawthorne blasts this reality in a critique of the proposal for the new Apple headquarters, which he calls a ‘retrograde cocoon.’ The proposal is a huge four-story concentric ring set among a park-like setting in the Silicon Valley town of Cupertino which Hawthorne laments as what he sees as the continuation of an unfortunate land-use pattern of low-density sprawl.

Urbanists cannot afford to ignore the fact that technology is unsympathetic to architecture. Computer programmers and IT innovators, people who require countless hours of focused concentration, might actually prefer the pastoral landscape and low-key nature of Silicon Valley to the noisy and bustling urbanism that define what we traditionally think of as a ‘city’. Taking this into consideration, the new Apple HQ is an appropriate design for its purpose and also serves as reminder of the irrelevance of architecture in the twenty-first Century.

This essay originally appeared in the architecture journal CLOG: APPLE

Adam Nathaniel Mayer is an American architectural design professional currently living in China. In addition to his job designing buildings he writes the China Urban Development Blog.

The White House Transportation Re-authorizaion: An "Unserious" Proposal

The Administration's $476 billion six-year transportation reauthorization proposal ---included as part of its FY 2013 budget submission ---has met with indifference if not outright skepticism in the transportation community. For one thing, the proposal comes at a time when both houses of Congress have already developed and are actively pursuing their own versions of reauthorization legislation. For another thing, the White House proposal is a close replica of the FY 2012 reauthorization proposal -- a proposal that had been soundly rejected last year by the Republican House and the Democratic-controlled Senate alike. Lastly, the White House proposal is viewed --both in its levels of spending and its approach to funding --- as totally disconnected from political reality The New York Times called it "more a campaign document than a legislative proposal."

The six-year budget provides a total of $305 billion for highways, $108 billion for transit and $47 billion for high-speed rail. It calls for an average funding level of $79 billion/year --- almost double the $40-42 billion/year proposed in the House and Senate reauthorization bills.

The total spending authority over six years would exceed the expected revenues by $231 billion. To offset this deficit, the Administration proposes to use "savings" achieved from "reduced Overseas Contingency Operations"--- bureaucratic jargon for ending military operations in Iraq and Afganistan. Such offsets have been dismissed as "an accounting gimmick," "imaginary" and "meaningless" by both Republicans and Democrats on the Senate Budget committee during recent hearings on the Administration's bill.

The White House has not helped itself by announcing that "After the six-year reauthorization period, the Administration is committed to working with the Congress on a financing mechanism." (p.158 of the DOT budget). In effect, the White House is saying, Let the next Administration figure out how to pay for the program. For our part, let's just pretend it's paid for with an imaginary "peace dividend" from ramping down overseas military operations.

Senate Minority Leader Mitch McConnel (R-KY) has called the FY 2013 budget submission "so unserious and political that even members of the President's own party don't want to have anything to do with it." Sen. Jeff Sessions (R-AL), the Budget Committee's ranking member, described the proposal as "not connected to reality." Few Congressional aides we have talked to had anything charitable to say about it. In sum, the White House reauthorization proposal, like its FY 2012 version, is considered "dead on arrival."

As one Washington wit put it, "it makes you wonder why the Administration keeps coming up with the same proposals over and over again and expecting different results. Didn't Einstein say...?

Academics Find Chicago Most Corrupt Big City

One of the great failures in studying the politics of American cities has been the assumptions political scientists have used. Many academics assume that politicians work toward serving the public interest. In this naïve or dishonest world, an informed public (aided by a vigilant press) votes for candidates that rise above petty self interest to promote the common good. Recently, The University of Illinois-Chicago Political Science department released an impressive empirical study on corruption. Chicago is number one in public corruption. The facts are rather disturbing, “Since 1973, 31 more aldermen have been convicted of corruption. Approximately 100 aldermen have served since then, which is a conviction rate of about one-third.”

The study shows that Chicago city council isn’t the only place in Illinois racking up felony convictions. Illinois Governors have an “ethics problem”:

Since 1970, four Illinois governors have been convicted of corruption. Yet only seven men have held this office in this time, meaning more than half of the state’s governors have been convicted in the past forty-two years. Otto Kerner, who served from 1961 until his resignation in 1968 to accept a federal judgeship, was convicted in 1973 of mail fraud, bribery, perjury, and income tax evasion while governor. Dan Walker, who served from 1973 – 1977, was convicted in 1987 of obtaining fraudulent loans for the business he operated after he left office.

George Ryan, who served from 1999 – 2003, was found guilty in 2006 of racketeering, conspiracy and numerous other charges. Many of the charges were part of a huge scandal, later called “Licenses for Bribes,” which resulted in the conviction of more than 40 state workers and private citizens. The scandal involved unqualified truck drivers receiving licenses in exchange for bribes that would ultimately end up in Ryan’s campaign fund. The scandal came to light when a recipient of one of these licenses crashed in to a van and killed six children. But perhaps the most famous of all Illinois corrupt officials is Rod Blagojevich, who served from 2003 until his impeachment in 2009. Blagojevich was ultimately convicted in 2011 of trying to sell the U.S. Senate seat vacated by Barack Obama. Other charges included his attempting to shake down Children’s Memorial Hospital for a campaign contribution in return for funding and his trying to extort a racetrack owner.

When Rod Blagojevich reports in March  to Littleton, Colorado, American history will be made. Illinois will have to back-to- back Governors in jail at the same time. What is it about Chicago and Illinois voters that gets them to vote for crooks? The data in the study is based on Justice Department numbers going back to 1976.

As we move closer to the next Presidential election, Barack Obama’s association with Chicago’s political culture is bound to be an issue once again. How could a Chicago politician rise so far, so fast, without questioning the corrupt part of the country he comes from? It’s something to keep in mind when you read this study.

China's Expanding Motorways

In some ways, it has been an "annus horribilis" for transport in China (Note). There was the tragic high-speed rail accident in Wenzhou (Zhejiang), the fastest trains were slowed, construction was slowed or, in some cases stopped, and a top railway official was removed for misappropriation of at least a billion Yuan (more than $150 million).

However, China's freeway (motorway) system has achieved a milestone even Deng Xiaoping might have dreamed. In 2011, The Beijing Review reports that China's intercity freeway system became the longest in the world, longer that of the United States, which had been the undisputed leader for at least 50 years.

China added 11,000 kilometers (7,000 miles) of freeway (grade separated and dual carriage expressway) to its national interstate expressway system (National Trunk Highway System) in 2011. With a length of 85,000 kilometers (53,000 miles), China's intercity freeway system exceeds that of the US interstate highway system by 10,000 kilometers (6,000 miles). At the end of 2008, the US interstate highway system was 75,000 miles long.

China has built 83,000 kilometers (52,000 miles) of interstate freeway in just 11 years. Much of the US interstate construction was completed over a period of 25 years, from 1956 to the early 1980s.

It is unclear whether the total length of freeways in China is greater than that in the United States. In China, many urban freeways are not included in the National Trunk Highway System. There are also non-interstate freeways in the United States.  Complete data on these roadways is not available.


Note: This characterization of a "horrible year" was made famous by Queen Elizabeth II in a major speech in 1992.

See also: China Expressway System to Exceed US Interstates, January 21, 2011.

2011 Canada Census: Strong Growth & Suburbanization Continues

Statistics Canada has just released the first results of the 2011 census. The nation's population rose to 33.5 million, from 31.6 million in 2006. This is a 5.9 percent growth rate, up from a 5.4 percent rate between 2001 and 2006 and nearly one-half above the 4.0 percent growth rate from 1996 to 2001.

Suburbanization continued apace in Canada's largest metropolitan areas. Overall, the suburbs accounted for 83 percent of the population growth in Toronto, Montreal and Vancouver, with 17 percent of the growth in the central municipalities. In the other major metropolitan areas (Ottawa-Gatineau, Calgary and Edmonton), the central municipalities themselves encompass nearly all of the suburban development, so that the core-suburban population increase proportion is masked.