I keep thinking of ways to dramatically reshape the way we do science. They may not be practical, but I like thinking outside the box from time to time.

One set of related ideas I keep coming back to are the issues of compensation and focus. Grad students and post-docs are paid terribly. How terrible? Well, in my department grad students made about $14k-16k as a base stipend (and that level has not changed in almost two decades, inflation be damned), top students with national scholarships could take home about $33k. Yes, per year, with restrictions on seeking outside work. This is in part because they are said to be trainees who are learning how to be proper scientists. Except if they make it through the funnel and up the pyramid, or whatever visual metaphor you may choose, they teach and write grants and supervise — skills they are largely not being taught.

So the idea I toss around is that of a permanent post-doc, or professional bench scientist: a position for someone who will spend their life doing hands-on research, and who gets paid a professional salary for it.

Along with that would be wage/stipend increases for grad students: there is a lot of catching up to do just to get back to the inflation-adjusted level of poverty they were at a decade ago, let alone getting to the point where it is recognized that they are the driving force behind science, and that a senior PhD student is a professional with years of training and specialized expertise making less than minimum wage. One related option might be to shorten PhD programs — it runs the risk of devaluing the degree, but did the 4th and 5th years of my own slog through grad school add much to my development as a scientist that the 2nd and 3rd years did not already? How has the average time to graduation changed over the past couple of decades?

It’s a tough issue, and would represent massive disruptive changes, with no real advocate to push for it. I’m really not even sure myself if these wild speculations I sometimes have are worth any further consideration at all. I mean, even if that is a place we wanted to move to, how would we possibly get there?

In a sense, science is powered by slave labour. If we restricted entry into grad school so that a higher percentage of PhDs could stay in academia (and let the industries that end up hiring PhDs instead hire MSc grads or some newly-created in-between research-intensive 3-4 year expert degree); or reduced the graduation hurdle so that they only did 2 experiments instead of 3, and graduated before 31 years of age — or really any change along those lines — we would limit the amount of science that could get done on current budgets. Unless we truly were able to hire more efficient and productive talent (or focus and dedicate the talent we have) with the increased compensation, the fact is that less research would get done for today’s research budget. This seems an insurmountable problem.

Then I thought, what if instead of thinking of slavery as a harsh verbal rhetoric, I looked at it as an actual model? After all, that problem has been solved. Slavery doesn’t exist in the modern civilized world, but did at some point in our past. Many countries weaned themselves off, with the US having a particularly dramatic and definite end to the practice after the Civil War. How did the transition work out then? What lessons can we learn for transitioning the economic model of science? Unfortunately I’m not enough of a historian to say, so I will have to end here as some food for thought.

I always thought I managed to walk this line fairly well: I work hard and save for the future, with a plan to retire earlier than 65 (after all, who knows what kind of shape I’ll be in by 60), but still enjoy the moment. I’m aware of the power of compounding, and have internalized the math that saving & investing a dollar today means I can spend three in retirement. Inversing that, taking a year off from work now might mean I’d have to tack on 3-5 more working years at the end of my career before retiring.

That’s pretty simple logic on the opportunity cost of taking time off — and it gets even worse when you consider the potential damage of a gap to my career. So I’ve never really considered taking time off without a damned good reason to. Heck, even on my vacations I tend to find side projects to work on, even if they’re not the most profitable post hoc (e.g., book). But now that Blueberry is on the scene I start to wonder.

I missed my daughter’s first steps today. That’s not such a surprise, as even Wayfare has missed some of her firsts (she seems to show off for grandma), and I’m at work all day. Yet it kind of puts a sharp focus on something that’s really been bugging me about my job: I spend so much time commuting and working that I hardly see the whole reason I’m going through the whole mess. A few months ago when she was into her “stranger danger” phase, I went a full week without seeing her, and when I finally did she freaked out and cried because she didn’t recognize her dad. So missing her first steps is a moment that does make me — for perhaps the first time — step back and seriously consider taking some time off from my career.

It’s also a bit of a timely issue because Wayfare’s mat leave has run its course, and yet Blueberry is still too young for daycare, leaving us searching for childcare options. It is heart-wrenching to even think of handing over our little girl to some stranger to watch over, yet it is also difficult to get by on just one income, particularly in this city. I know eventually she will have to go off to spend more time being raised by strangers than with us — at school if not daycare — but it doesn’t stop me from wondering if taking a year off now and draining my savings might be totally worth it. It sure seems nicer to spend some time at home taking care of my baby than to be able to take more time off at the end of my career, when the house will be cold and empty.

And this is the age when I want to be there for her: at 12 she won’t want to see “Da”, she’ll be at school for most of the day and then want to disappear into her room with a book or video/holo game when she’s not. Right now she’s thrilled to have me around, and the world is a magical wonderful place full of adventure and discovery. I want to be there to see her point to a bird singing in a tree and exclaim “Bir!” or to a passing jet and do the same*. I want to watch her dig through her bag of toys until she finds a match for whatever’s already in her hand, and then merrily bang the two similar items together. When she’s a teenager she’ll likely just infuriate me if I see her at all.

But the cold math is the same: Wayfare and I make more than a nanny or daycare service, so Blueberry goes off to the strangers’ arms while we work to keep our heads above water in this crazy world.

An alternative to quitting or taking a full leave of absence — indeed my preferred solution — would be part-time work: ideally I’d work 3-4 days a week, Wayfare would work 2-4, and with one of us having the flexibility to work weekends plus occasional childcare from the grandparents we’d be set. But unfortunately it’s tough to find part-time work — I doubt I’d be able to swing it at my current job, the HR system isn’t really set up for it. Indeed, a 9-day bi-weekly work option (adding ~1 hr to each day and then taking a day off every other week) is a recent experiment there, and that plan’s only around for the summer. Plus there’s too much for me to do to just cut back (though they could almost use another 0.5-0.8 FTE, so perhaps hiring a full-time person and dropping me down to 4 days a week would work for everyone if only the money in the budget could be found).

Health insurance is another hurdle: I get it, Wayfare doesn’t, so it made and continues to make some kind of sense for me to try to keep a stable full-time job while she gets to take the mat/pat leave and spend all the time with Blueberry, even though she’s actually the higher-earner in the family. The value of group insurance for someone so sickly nearly covers the spread in gross pay.

Taking time off would be an easier decision if I had more freelance experience and could use that as essentially a part-time career. Part of what makes me consider it so closely is that I do have some margin of safety in my planning: pushing a planned retirement age from say 60 to 65 is not so bad, not like moving it from 65 to 70 — it’s not like I’d be cutting things so close as to be taking major risks on my ability to work later in life (health, etc.).

Though really as I get more comfortable (even as I write this out) with the idea of sacrificing disposable income and retirement savings to spend time with Blueberry, the big remaining fear is the gap on my resume. It took months to find a decent non-academic job in the first place, and that included accepting the dreaded subway commute. It did kind of backfire on me: part of the reason I went for a non-academic job was to have more stable hours to spend time with my family, and here I am a year later lamenting how little time I manage to spend with my family. Part was for better (short-term) pay: it would have been a lot tighter on a post-doc’s salary, yet here I am considering throwing the financial plan out the window for shits and giggles (literally). With such a gap on my CV and publication record I doubt I would have the option of trying to pursue an academic career now — will it be the same for a non-academic career after a year of being a homemaker?

I just don’t know what to do. I suspect that all my considering and weighing will lead me back to the default choice: keep working, let the woman take the mat/pat leave, and after that let her work part time with hired help to cover the rest of the childcare. It’s kind of sad, but I don’t really see another path…

* - It is apparently babies who confuse birds, planes, and Superman.

On the right is the ducky I have (and let us not now get into the issue of why a grown man with a PhD has a rubber duckie of his very own). It is an “evil duckie”, yes, but it has been built from the traditional, recognizable form. On the left is a new duckie that Blueberry has.

I do not understand this duckie.

Frankly looking at this thing just freaks me out. It sits there on the bathroom counter at night, watching me brush my teeth.

The wrongness of it gets under my skin and gives me the willies. The strange spiral markings, the hyper-dilated pupils, the weirdly-shaped beak, the centre-line seam, and the tiny head positioned in the middle of its body, with just a bit of off-kilter attitude evokes a sense of being amongst the alien other that the red tint and horns of mine do not come close to doing. There is a part of me that does not want this evil thing to be anywhere near my child, though her abstract amoeba bath toy is totally cool with my subconscious as would be the red duckie with horns (which is supposed to evoke evil).

This is not the only toy of hers that I find to be creepy — just the other day I came home to find a creepy stuffed horse in my bed, and wondered if the baby mafia was out to get me — but this is the one that turns my stomach the most.

One of the more typical examples is to hold on to an old property to rent out after you buy a new place to live in. The purchase you make at the time may not be speculative, but often the decision to hold on to excess property is — if you weren’t counting on large future gains, you would have sold off the old place, rather than take the risk and hassle of becoming a landlord.

Less obvious is buying preconstruction while owning. Even if you plan to sell as soon as the new place is finished, you have double the real estate exposure for the duration of the construction, which could be a few years. When people are advised not to time the market, that means they should be selling a their old place as soon as they buy a new one — even if the new one isn’t built yet — in order to limit risk. Many may chafe at that advice, in which case they shouldn’t speculate in the preconstruction market unless they have the capacity to take on the risk, and instead shop around for homes that are already built.

One of the more subtle effects on supply is the decision of whether to buy first and then sell, or go the other way around. Deciding to buy first then sell has a small effect on supply and is like a minor version of buying preconstruction (for a time you are exposed to double the risk). It is a small effect, and the market adapts to whatever way is accepted as the norm (or even some mixture of methods). But when the shift happens from one scheme to another en masse, it can sway the supply. Take the case where everyone considers that the way to transact in real estate is to buy your new place first, then go out and list the old one. If then everyone changes their mind, perhaps deciding that the market is softening and the old way was too risky, and sells first, it could shift months of inventory over all at once: suddenly new houses are coming on the market while inventory sits. If “the” way to transact is different in a “buyers’” market than in a “sellers’” market, then once the shift is proclaimed, it could lead to a short-term swing in inventory and put pressure on prices.

I think one of the largest effects of speculative holding is the shift that occurs in the supply curve under the influence of rising prices, the holding on in the face of steady price increases. Imagine if someone comes out of the blue and offers you $1M for the house you paid $500k for just a few years before. Many of you would be all over that deal, telling your neighbours about it who would rush out to list their houses and take advantage of the opportunity. You’d think the buyer was nuts and that it was a one-time, not-to-be-missed opportunity. Hey, you could go move to the next town over (where houses were still $500k) and practically retire on that kind of money. But if you got to the $1M offer via a succession of offers: one at $550k that you turned down, then again a bit later the buyer comes back to you offering $600k, then again a few months later with an offer of $650k… by the time you got to $1M in a few years, you would have been expecting that price, and possibly even projecting out to the $1.2M offer you were sure was in the works for you. The price itself was still just as insane, just as much of a windfall, but because of the path to get there you’re less likely to actually put your house on the market and take it. You were inoculated against the crazy, so it seemed right.

And finally, the incarnation of speculative holding that made me think to write this post: taking the house off the market for “when it recovers in the spring”. Sales in Toronto and Vancouver dropped double-digit percentages over the past year, to the lowest levels since the financial crisis. Prices barely budged, but were down a bit in many sectors. Thus it’s quite common to hear on the subway, in the restaurants, the newspaper articles and the chat boards that famous idea of trying to relist later when the market looks better. That is perhaps the baldest speculative holding of all: the person wants to sell, but will hold on in the hopes of higher prices later.

Superior Plus was recently featured in the Globe and Mail with a very bullish article, yet just after cutting their payout nobody loved it despite the attractive price (indeed, it’s almost doubled from that point). The business was not growing, but it was not crashing at the time of the cut, either. The problem had been too much debt taken on in the past, and no wiggle room with a 100% payout ratio to get it paid off. By slicing the dividend in half, SPB laid out a plan to start paying that debt off in a meaningful way. This was in my opinion the wiser use of their cash, especially given the interest rates they had to pay on the debt. It shouldn’t have been the first cut of many — just a one-off cut, that would likely last for five years or so before going back up. Investors liked the company at $10 before the cut, then even though the underlying business hadn’t changed, were only willing to pay $6 for it after the cut (and now, back to $12).

Similarly, HR.UN had to cut their dividend when capital markets froze up in 2008 and they were caught with their pants down and a half-finished building. They used the cashflow they would have given to unitholders to fund the construction, with a plan to reinstate the dividend at the conclusion of the project. Partly due to this, and partly due to general market uneasiness, there was a point at which you could have bought H&R for roughly a quarter of where it is today. Even if you factor in that the overall market was down roughly 50% at the time, H&R had shed an additional $3/unit. So there might be some value to looking into companies that have recently cut their dividends in case there is an over-correction in the price.

I think Extendicare might fall into this category now. I bought some a few months ago on the thesis that their payout ratio was near the edge: they had refinanced some debt into low-interest long-term form, which is good, but profitability concerns with Medicare cuts left them dancing around the 100% payout mark. I figured they could go either way on a cut, but it would likely be shallow (to get them down to an 80% payout ratio), and that the US and its insurers were likely done trying to squeeze care homes for additional savings. Now clearly I was wrong on the depth of the cut, and possibly on the rounds of cost-cutting coming to an end, but I don’t think this is just the first of many: in the conference call they say that basically they can now fund the payout entirely from the more stable Canadian operations. That should make EXE a pretty decent buy at these levels (<$6). I wouldn’t be too surprised if 2 years from now it’s back at $8 and that’s when all the bulls come out of the woodwork to exclaim in the press about what a great buy it is at that price.

Any other potential over-corrections to look into out there?

Well this morning I had to get up earlier than normal, so Wayfare agreed to take the monitor from me whenever she got up to pee in the night. Normally I wouldn’t even hear her come in to get the monitor, but for whatever reason today I did wake up to the creak of a floorboard. And you now have to keep in mind that I’m more than a little bit sleep deprived.

I heard the floor creaking and got really freaked out, I was like “someone’s in my room” and then part of my inner monologue was like “it was probably Wayfare getting the monitor” and then I waited, heart pounding, for about a minute, and slowly,
s
l
o
o
o
o
w
l
y
reached my hand out to check if the monitor was there AND IT WAS GONE just LIKE I EXPECTED but somehow my brain only latched onto that first bit and for like 20 seconds I was all OMG someone is in the house and stole the monitor and they’re going to steal my baby and do I call 911 first or am I being crazy and I should just rush out and stop them and the police aren’t going to do anything and I don’t want to accidentally wake Blueberry up at this ungodly hour but I have to rescue her yet these guys are obviously pros and probably have guns with silencers I mean come on they snuck into my room to grab the monitor so the sensor pad wouldn’t go off when they snatched up my baby and seconds matter here get out of bed and… oh, right, Wayfare.

So I’m off to bed early tonight.

This is an interesting perspective. As someone who is currently “overhead” I can, to a certain extent, agree. Besides my current day job, I also recently picked up an interesting freelance gig. A donor hired me to rewrite and revamp a fundraising brochure for a local hospital. Because I’m being paid directly by the philanthropist and not the foundation, my fees will not appear in their books as overhead, though I hope that the work that I’ve done indeed helps multiply the donations they eventually receive regardless. (You can see a PDF of the brochure here.)[Update: I did a second related one.]

To some extent there is a need for scale in philanthropy. A charity attempting to say fund research looking for a cure for cancer is not going to be able to make much of a dent with an annual budget of $100k — that’s barely one research grant (and even then the lab has to have some other source of core funding). It takes millions to be able to have enough to get together a panel of peer reviewers to examine grant proposals, or to buy expensive pieces of infrastructure such as PET scanners. And that takes some kind of investment to scale up — whether resources for advertising, or the volunteer effort to go viral on the internet.

But there’s a limit. At some point you could just be raising money to pay people to try to raise more money. In the talk he mentions that charitable giving has been stuck at 2% of GDP for decades. If there is some sort of mechanistic reason for that — it’s the amount people are capable of giving, or some sort of unconscious philanthropy budget in the population as a whole — then pushing for more overhead is just shifting the charity spending around, and in fact a net negative due to the overhead. It is possible that, by being able to tackle large challenges smaller organizations could not, we would be better off with one (or a few) massive billion-dollar charities spending a total of $240B than with a bunch of smaller million-dollar charities spending $275B with lower overhead costs. But if outcomes are directly related to dollars spent, more overhead would indeed simply mean more waste.

Consider a parallel with investing: you could pay a brilliant manager some percentage of your funds under management, and they might be able to beat the market for you. But there’s only so much return out there to be had: if everyone else hires an investment manager then everyone is on an even footing and is back to getting basically average returns… less the overhead to the managers.

There were three other points of his I want to discuss.

The first was on compensation. The big unanswered question for me was whether you would get value for that extra $300k spent on talent in his hypothetical. Perhaps everyone is better off if the MBAs pursue for-profit $400k salaries and donate $100k to the charity, who can then hire an $87k/year executive. If the charity tried to hire someone for $400k, would they get more than the ~$300k difference back in value? Charities, after all, don’t have all the things to manage that for-profit businesses do: maybe the extra money buys you advertising and capital markets experience, which you just don’t need as a non-profit. And why doesn’t that logic apply all down the chain? We pay grad students and post-docs a disgraceful pittance for trying to find the cures to our modern medical ailments, but brilliant technically-minded and driven people can make far more in the private sector. Would we have long since solved this pesky cancer problem if we were only willing to retain top talent in the research enterprise by setting post-doc starting salaries at $400k, and grad student stipends at $75k?

The second was on the whole comparison of the for-profit and not-for-profit sectors. You see, the two are very different fundamentally. When I give my money to Coca-Cola for a beverage, or to Amazon for a book, I am transacting with them for something. I don’t care how much they spend on overhead, because I am making my decision on whether or not to give them money based on what they are giving me in return at that moment. I need to only extend a small amount of trust to them (trust that Coca-Cola hasn’t diluted my Coke Zero, trust that my book from Amazon will arrive undamaged in a under a week), and I have recourse if my trust is violated: I can demand my money back, sue for breach of contract, etc. But once I send my money to them and receive my item, it is no longer my money. It’s their money, they can do with it as they wish.

Giving money to a charity is a completely different thing. I’m not getting a thing or a service, I’m giving my money to the charity to make the world a better place. I am trusting them to put my money to good use. Though the money is out of my hands and I have no recourse to get it back once I give, at no point do I consider it “their money” to do with as they please. Maybe they could give me a better “product” if they spent three times as much on overhead as I had reasonably expected — but that is a lot of trust for me to give. While only people donating staggering amounts of money expect to be able to direct their donations precisely, I still expect that, in general, my donation will be used for the stated purpose — ultimately mostly directed towards some kind of program spending rather than churning overhead or as risk capital. Their use and governance of the money will continue to be the concern of the donors, and so there is a very real reason for spending on overhead and risky activities to be perceived differently than in the for-profit sector.

In an analogy to investing, let’s say that there was a company that raised $100M in a stock offering to pursue a business idea. They went out the first few years and spent $90M of the money doing what had to be done (hiring people, renting office space, advertising etc.). After a few years of losing money they discover that the business model is just not viable. To continue is to throw good money after bad so they wind up operations. As a shareholder, through the first few years you would have been obliged to let management take the risk and pursue the business, spending your capital on whatever “overhead” was needed to do so. After it failed, you would expect that any residual money ($10M in this example) would be returned to you as the business was shuttered, and promptly. If they dragged their feet in the wind-up, paying salaries for years, burning through your capital with no purpose you would rightly be pissed at that loss.

In the not-for-profit sector, overhead spending that is going to have a multiplicative effect is difficult to discern from the telemarketer full employment program. How do you know whether you’re in the phase of risk capital spending that is pursuing the innovative business model with lots of potential, versus the phase that is basically the insiders stealing from the other contributors of capital? The risk-reward equation is not the same in the not-for-profit and for-profit examples, and the governance is different: profits are much easier to measure than “impact” or “do-goodery”. And as unethical and despicable as it was for the executives in the hypothetical example to burn the remaining shareholder capital after it was clear nothing would come from it, it is even more morally repugnant to live large off people’s charitable donations — hence the aversion to overhead spending.

And the last point I wanted to discuss was that of spending more overhead as a percentage to scale up. In the presentation he just kind of implicitly assumes that to scale up an organization might have to spend a larger percentage on overhead. But should this be so? Shouldn’t scaling up offer economies of scale? If instead of spending $100 to raise $1000 at a bake sale, a charity should spend $100M on organizers for a massive event and TV air time, then shouldn’t that investment be expected to pull in $1B for program spending, rather than just $250M as his 40% figure would indicate? Now again, maybe the efficiencies come on the spending side (perhaps spending $250M in one organized way with a unifying strategy does more cumulative good than spending $1B in separate $1M chunks).

So while I can see some of his points about needing large-scale charities to tackle large-scale problems, and that sometimes investments have to be made (to train people, to build infrastructure, etc.) and sometimes more overhead has to be spent (for strategy, for advertising), I do not fully agree. Sometimes overhead is just money not going to program spending, and I would hope that scaling up would bring about more efficiency rather than less. The not-for-profit and for-profit sectors are have larger fundamental differences than he suggests. And when you come right down to it, I want to be able to know that my charitable donation is going towards the stated purpose and not to the Canada Foundation for Telemarketer Employment. Maybe looking at the percentage of spending on overhead is not the best way to choose where to donate — perhaps we need some impossible measure of impact per dollar donated — but we will naturally gravitate towards metrics that are easily enumerated.

WTF were they thinking? Unless the train is actually on fire, there is no reason for pulling it in the middle of rush hour halfway down the leg — take an extra 40 minutes to finish the loop and, if for some reason it must be pulled at Davisville, pull it on the northbound leg. Or given the weather, why could they not have limped one more station to the indoor St. Clair? It makes me wonder whether malevolent spirits haunt and possess the TTC, for that is the only explanation.

Then that same day on the way home, the train lost power at York Mills.

Including leap years, assuming my vacation days escalate with the corporate schedule, that there are 11 stat holidays in a year, that I will have on average 9 flex/lieu/sick days per year, and that I retire at 60, there are only 5699 more days to deal with rush hour on the TTC…

But it is not an event that happens often or lightly. In general, governments do not suddenly seize assets — that’s not what good governance is about. Of course, if the hole is big enough and the options limited (as in Cyprus) they may not have a choice, which gets into a moral lesson about not choosing “bread and circus” leaders.

There’s a slightly higher chance of loss with more “virtual” assets and those that can be divided for tax (e.g., the income trust Halloween massacre). But the government could decide to appropriate your house, eliminate your principal residence capital gains exemption, or tax your assets instead of just your income.

This knowledge may not help you sleep well tonight. Do remember that it is quite unlikely. Ideally, your government would be open and logical, so you could anticipate such moves (or rather, sleep soundly anticipating the lack of such moves). Of course, for the Harper government that was my big beef with the income trust fiasco — not that they decided to tax them, but that they broke an explicit promise not to do so, with no justification given. How were we to know what the next materially important decision would be? Ditto with strategically important takeovers — there was next to no way to anticipate what might or might not be allowed. In the depth of the US financial meltdown some (e.g. John Hempton) complained that the FDIC just stepped in and closed certain banks over the weekend, arbitrarily deciding to make bondholders whole while wiping out equity and preferred holders — though in a more controlled liquidation and wind-up, it’s likely that either the bondholders would take a haircut, or the preferred shareholders would be left with some value. The process is often just as important as the outcomes…

First there was Sync, which was awesome. It was a blackberry app that synced my contacts, some other crap, and importantly, my calendars with my BB. After shutting it off there is still a mechanism to sync the blackberry calendar and contacts list with Google’s — but it is far inferior. In particular, Google Sync was able to figure out that I can have more than one calendar in my account, whereas the crap I’m left with will only sync the main calendar, forcing me to manually sync up with my shared calendars.

Then iGoogle was given the kiss of death. It still operates, but constantly reminds me that it will be “sunsetting” soon. For those that didn’t try it, it was just a way to customize your Google homepage. You’d have your usual search box, and then boxes for RSS feeds or little widgets. It was basically what the Windows 8 start screen was except better and properly encapsulated in a web browser. And now, Reader will be going too.

The thing is, I don’t understand why they’re being killed off. Was Sync really so hard to maintain? Does syncing all my calendars through an app take up much more Google bandwidth than having my BB sync one?