An undertaking of great advantage, but nobody to know what it is

A reader writes:

Hi Dan,

In Melbourne we have been observing small white hand-written signs popping up on the sides of roads affixed to all sorts of posts and street signs.

The signs are all similar and say:
Lucrative Business

I've had a look at the site, and my "3 scroll page alarm" went off; any page with more than 3 vertical pages makes me suss.

The site never describes exactly what the business is.

Is there a name for these things? Are they common? This is the first I have come across.


Yes, they're common.

The deal is, there's some company like Herbalife or something with a bunch of "distributors" who, even when they strenuously protest that they aren't in the multi-level marketing business, do seem to chiefly be selling the opportunity to sell the opportunity to sell the opportunity to sell, et cetera, whatever nominal product is hiding somewhere within that vast sky-scraping trapezoid.

It's normal for all of the "distributors" to never mention the name of the particular trapezoid they're part of, but those classic endless "squeeze pages" often contain a subtle clue or two that the offer they're presenting is not quite as extraordinary as they say.

Just paste a phrase or three from such a page into Google, and see how many other people are offering the same amazing opportunity!

(It's easy to find duplicated testimonials, but you should also search for excerpts of the text allegedly written by the person who's making this particular never-to-be-repeated offer.)

"I ran my previous business for a little over 4 years and pretty much lost all my money." ("About 8,510 results" as I write this, but that's a huge over-estimate, because Google doesn't actually give accurate figures for string searches like this. Paging on through the results ends up with exactly 293 results, at the moment. Remember to click the "repeat the search with the omitted results included" link at the end of the original results, if you want to see how many pages Google actually indexes with your search string on 'em, including ones that're so similar to others that Google doesn't bother displaying them by default.)

"I left on my terms and it occurred due to this wonderful opportunity. Now I work for myself" (120 results)

"not afraid to try new things, I also had a willingness to learn" (This one actually seems to be unique to!)

"Imagine not having to beg for time off to do something so simple" (374 results, with a couple of differing opinions about what sport your putative son will be playing.)

"such a great group of people who are willingly assisting me" (Only two hits, again with variation of the words on either side; there'll be three hits when Google indexes this post. Few-hits searches like this one may be helpful in tightening the Venn-diagram intersection of all these get-rich-quick squeeze pages to figure out which of them, if any, are not trying to sell the same product.)

"further, I'd like to tell you what to watch out for. Too many" (228 results)

"bombarding them with constant sales pitches about how much money they" (268 results)

"Associates who have taken advantage of the opportunity I'm offering you have generated multiple streams of income" (215 results)

"This is a real, legitimate, Internet marketing system. The system works perfectly as long as you follow it exactly" (Well, obviously! Why would there be five thousand, one hundred and ninety copies of this text on the Web, if it weren't real and legitimate!?)

And, finally, "The testimonials presented are applicable to the individuals depicted and may not be representative of the experience of others." Wise words to live by - so very wise, in fact, that 346 Web pages contain them!

I'm absolutely 100% sure, of course, that is completely on the level and offering a real opportunity to sell worthwhile products that everybody needs.

But if you sign up for this particular incredible home business opportunity, you'll still have a problem, because there are obviously a large number of other people in the same damn business. Unless you have a scroll of genocide that allows you to annihilate all of the other functionally, and often literally, identical such opportunities floating around down in the noise floor of our wonderful capitalist world, you're likely to find that no matter how much you hassle your friends, relatives and employees, it's just mathematically impossible to get enough customers to make the big bucks you've been promised.

Perhaps the reason why the actual product is never mentioned on the squeeze page is that it's an amazing new discovery with a whole new wide-open market, and the sellers don't want to give away the secret.

When hundreds of other squeeze pages say the exact same thing, though, this theory seems a little shaky to me.

Pls snd $$ to get $$$$$, tnx

The pitter-pat of bogus PayPal money requests, from lazy thieves seeking obliging victims, continues.

I like this one.

PayPal advance-fee scam

Yep, this dude's running an advance-fee scam. If I send him $US200, he'll allow me to "collect [my] money". Except, of course, there is no actual money. There never is.

What I particularly like about this version of the scam is its pared-down, minimalist nature. "Matt Arcay" never sent me an e-mail, or anything. Just this money request. I have received not the slightest hint of the amount or source of the promised "your money" - just this ridiculous "if you want to collect your money simply agree to this and send the money, so you can receive your money".

(I don't know where scammers learn that odd repetitive grammar that repeats because it is repetitive grammar and redundant and says the same thing over and over. I've received similar messages from different putative locations, like this guy allegedly from Puerto, I'm sorry, I mean PUERTO RICO.)

Perhaps Mr "Arcay" did e-mail me separately, of course, but that message was spam-filtered, so all I received was the accompanying money-request e-mail from PayPal.

I wouldn't be surprised if this is the only way "Arcay" contacts prospective marks, though. If they reply asking what the deal is then he knows he's got a live one.

What he really hopes for, though, is a mark who just sends him the $200 immediately. That's probably because they reckon "Arcay" meant to send a ton of money to some other person but has accidentally picked the mark instead. So the mark wants to cash in before "Arcay" discovers his mistake.

In that case, "Arcay" has basically won the lottery. A cow like that probably has a lot more milk to give.

I don't know whether it's possible for a scammer in one of the classic famous-only-for-scams countries, like Nigeria or some other TPLAC, to open a PayPal account. This scammer could actually be in the USA - or "Arcay" could be a money-mule front man for a scammer in some other nation.

(There may be some way to report this blatant fraud to PayPal. I'm not eager to waste another morning trying to figure out how, though.)

Even if it's tricky for people in developing nations to run a scam like this, there's a huge incentive to do so. In urban Nigeria, many people don't even make 60,000 naira per annum, which as I write this is only about $US400. A Nigerian who makes $US1200 a year is doing pretty well, so it's hardly surprising that there's so much enthusiasm about chopping that much and more out of some dumb Westerner's giant wallet.

(The BBC's recent three-part documentary "Welcome to Lagos" is, by the way, excellent.)

Seeking (Economic) Enlightenment

I think I'm about as susceptible as any other human to having my opinions formed by someone else. All I have to do for this to happen is read someone else's opinion about something, before seeing that something for myself.

So when I found out about Economic Enlightenment in Relation to College-going, Ideology, and Other Variables: A Zogby Survey of Americans, by Daniel B. Klein of George Mason University and Zeljka Buturovic of Zogby International, I decided to read it for myself, properly.

The paper, you see, concludes that politically left-wing people know a lot less about economics than do politically right-wing people.

This has caused something of a stir.

I deliberately avoided reading any other analysis of the paper before I read it myself, and then wrote most of this interminable post. (Had I more time, I would have made this shorter.)

Then I put a bit on the end that links to other discussions of the paper, and summarises the stuff that I missed.

I did all this instead of writing about Lego printers or something because I've been thinking, recently, about scientific papers and their interpretation and reporting. Mass-media science reporting has, I think, never been lousier. If you really pay attention to mass-media science reports, you'll hardly have time to worry about GMOs giving you CJD and UFOs landing at HAARP, because you'll be too busy clearing out your pantry, because whatever stuff cured cancer last week has now been conclusively shown to cause it.

You can usually still get reasonable interpretations of new findings from something like Scientific American, but normal everyday news sources are worse than useless, spraying anti-facts all over the place daily.

If you want to know what some particular piece of research really means, you therefore have to go to the source yourself. This is an important skill for modern humans.

It's tempting to not read the actual paper at all - or just scan the abstract - and then read what some blogger you like said about it. But you really should dig into papers properly, at least occasionally. Now that it's so often possible to have the whole thing in front of you, for free, in a matter of seconds, there's no excuse for just reading what some newspaper journalist mistakenly thinks he read.

I suspected that Economic Enlightenment in Relation to Blah Blah Blah was just a barrow-pushing junk survey, because that's what a lot of political polling is. Complete-garbage surveys are all that various interest groups need to move their barrows along, after all. It only took Sir Humphrey a minute to persuade Bernard that he simultaneously supported and opposed the reintroduction of conscription, so why try harder? Why cover your ideological nakedness with a real fig leaf, when a scrap of paper's cheaper?

Whether or not this particular study was junk, I knew I could easily find some journalist telling me that it was. Or that it wasn't. So I downloaded it myself (PDF), and read it. Feel free to do so yourself, before reading on to have my own opinions stamped on your brain.

The Buturovic/Klein Economic Enlightenment survey has a pretty clear conclusion. To the great delight of the Objectivist playpen in the Wall Street Journal's op-ed pages, this survey found that "the left" in the USA "flunks Econ 101".

The United States has, of course, no actual left wing that any of us foreigners can identify. When US "liberals" agree with policies that were too authoritarian for Richard Nixon, then they're only "liberal" in a relative sense. (That's right - US political blocs are defined by relativism! Or relativity, or something! My god - it'll be social justice next!)

The elephant-in-the-room problem with the Buturovic/Klein paper is that although it was conducted by Zogby International, a respected and above-board organisation, the actual respondents were from an "Online Panel", not a proper random sample. Zogby invited 64,000 people to take part in the survey, and those 64,000 were of course already biased in favour of people who can access the Internet and care to be involved in surveys.

(The Zogby Online Panel appears to be something you can sign up for. Surely you don't have to actively sign up to be surveyable in this way... but if you don't, how can they contact you without spamming? If the Online Panel is actually the same near-meaningless fluff as TV ratings, then the whole project is in dire danger at the outset.)

Anyway, only 4,835 of the people invited to participate responded. That's a 7.6% response rate, which is about par for the course for entertainment-value-only Internet polls. It's a serious, serious problem for any survey that's meant to have some scientific rigour.

You can try to balance things out by weighting responses so that the responders' demographics match those of the whole population; Zogby usually seem to do that with their own Internet surveys. But the authors of this paper didn't do it, and may not actually have been able to do it, if subsets-of-a-subset problems would have left them giving large weight multiples to very, very small slices of the respondent base, giving rise to error bars taller than the whole chart.

Here, though, is one of several points where this paper doesn't follow the standard Crap-Survey script. The authors didn't weight the data, but they make it all available online, so you can see what they were actually working from, and massage it yourself if you like.

(Here's the "survey instrument" in Word DOC format; here's the results in Excel XLS format.)

You may be wondering how the "Economic Enlightenment" survey defines "Economic Enlightenment". And, indeed, how it defines "the left" and "the right".

Well, Economic Enlightenment - "EE" from now on - is meant to be your ability to understand economic reality. Like, I suppose if you can understand that if you don't have much money then it's probably better to rent accommodation than to take out a large zero-deposit mortgage, then that's an economically-enlightened decision.

I think it's uncontroversial that most people in the modern Western world don't have a lot of economic sense. The credit-card companies wouldn't be sitting on such a wonderful green gusher of cash if people-in-general realised that holding your damn horses until you can actually afford something, rather than borrowing at 20%-plus to buy it, will let you own a lot more stuff. People keep borrowing big to buy a brand new car, too; I'd put that decision on my definitely-not-EE list.

(Actually, I think there's a bit of a no-real-left-wing sort of situation in the EE world, too. Look at all of the people in the affluent West who consider it completely normal to be deep, deep in entirely optional debt for your whole adult life. In comparison, anybody with the vaguest semblance of actual money-sense looks like some sort of Oracle of Infallible Wisdom. I dunno what Warren Buffett would count as on this scale; perhaps he'd be a strongly-superhuman Banksian economic Mind.)

The EE survey admits on the first page that their "designation of enlightened answers" may be a "controversial interpretive issue", and that they specifically went out huntin' for "leftist mentalities", without asking questions slanted the other way.

This is another big and significant problem.

Their page-3 example of a survey question, for instance, is "Restrictions on housing development make housing less affordable", with the usual multiple-choice answers from "Strongly Agree" to "Strongly Disagree" and "Not Sure".

The authors use this question as an example of how they "Gauge Economic Enlightenment", because a question apparently has to have at least this definite an "enlightened" answer to be worthy of contributing to an EE score.

But they admit that there are still confounding factors, because different people will have different opinions about what the question's really asking.

What sort of "restrictions", for instance, might we be talking about? Does "affordable" relate to initial purchase price alone, or purchase price plus maintenance and making-good of a shoddily-built house, treatment for the lung disease you got from un-"restricted" asbestos insulation batts shedding fibres into the HVAC ducts, et cetera? What does it "cost" if an electrical fault burns the house down, and you die? What if an un-"restricted" housing industry forms a cartel that builds houses out of damp cardboard and forces poor people to live in them - for a price that's exactly as un-"affordable" as makes the cartel the most money - or live in the park?

The paper doesn't really go into that much detail in its brief discussion of confounding effects, which given its respondents, all living in the troubled-but-not-total-chaos current mainstream US economy, is probably fair enough. There are infinite possible wiggy reasons why someone might mean something strange by their answer to what you thought was a clear question, and if your sample's big enough and random enough (which, once again, is a problem for this paper...) you can iron most of that out.

But I think there's one confounder that should have been mentioned specifically:

Deliberate lies.

Someone who's sympathetic to the current US "radical conservative" movement may personally believe that Sarah Palin is an idiot, but tell a pollster that she's a genius, just to Fight the Good Fight. Similarly, someone who wasn't paying attention during the most recent interminable US Presidential campaigns and so was under the impression that Obama had promised to immediately end both wars and nationalise Halliburton, may tell a pollster that he's 100% happy with the President even though he's actually very disappointed.

(For the same reason, I find it difficult to believe any survey about the sexual activities of teenagers. Religious loonies often seem to get very excited when a survey comes back saying that 90% of 14-year-old boys have had sex a thousand or more times. I don't know whether I'd rather those loonies are so upset because they actually believe the survey, or if they know that it's BS and are feigning belief to advance their own agenda.)

There's definitely some slanted question-selection going on in the EE survey; they admit as much. They had 16 multiple-choice questions in the actual survey, but they chose only eight of those questions to make up the final EE score for respondents. They say they eliminated the questions that were "too vague or too narrowly factual, or because the enlightened answer is too uncertain or arguable" - but I'd say the "narrowly factual" part shouldn't be a problem at all. Ask someone what an "interest rate" or "inflation" is; if they don't know, their EE score drops. An awful lot of people don't seem to understand income-tax brackets; there's another great question for a more factual EE test.

(Perhaps such questions would measure mere economic "literacy", not "enlightenment", though.)

Several of the dropped questions also seem to me to be more likely to get "leftist" answers, since they include, for instance, "Business contracts benefit all parties" and "In the USA, more often than not, rich people were born rich".

But here, again, is evidence that this isn't a pure obviously-fake barrow-pushing trash-poll. The paper tells you they dropped the questions, and why (rightly or not), and the authors also tell you what the dropped questions were. Leaving that last detail out is exactly the sort of thing that trash-pollsters do, because that way you can avoid disclosing that they, for instance, asked 50 questions and published only the ones whose aggregate answers happened to support their thesis.

(The downloadable full results also include responses to all of the dropped questions. I'd do some analysis of that data, if this post wasn't already the size of a holiday novel.)

On page 4 of the paper, there's a list of the eight questions they used, and the answers they deemed "Unenlightened":

1. Restrictions on housing development make housing less affordable.
Unenlightened: Disagree
2. Mandatory licensing of professional services increases the prices of those
Unenlightened: Disagree
3. Overall, the standard of living is higher today than it was 30 years ago.
Unenlightened: Disagree
4. Rent control leads to housing shortages.
Unenlightened: Disagree
5. A company with the largest market share is a monopoly.
Unenlightened: Agree
6. Third-world workers working for American companies overseas are being
Unenlightened: Agree
7. Free trade leads to unemployment.
Unenlightened: Agree
8.Minimum wage laws raise unemployment.
Unenlightened: Disagree

To keep this post under the 50,000-word mark, I leave determination of all possible well-reasoned but "unenlightened" answers to these questions as an exercise for the reader. Questions 1, 2 and 8 seem pretty straightforward, if simplistic, to me.

I also at first thought it was pretty hard to reason your way to the "wrong" answer for question 3, as well - but then I realised how many ways there are to measure "standard of living", besides "number of features in your car" and "number of televisions in your house". Is "standard of living" the same as "mean household income"? If not, how not? Answers on a postcard, please.

And the rest of the questions, not to put too fine a point on it, seem to me to be wide friggin' open. Not least because of the lack of any clear definition of terms.

I know, for instance, that there are people in the USA who seriously advance the idea that no Third-World workers for US companies are being exploited in any way, because apparently being paid a quarter of a living wage toward the large debt you incurred when you started work in the crap-for-fat-Westerners factory isn't exploitation. But if you take the completely crazy position that maybe some people in the Third World are being exploited by US companies, and therefore disagree with assertion 6, you're officially Un-Enlightened.

The very next paragraph of the paper, entertainingly, says that any objection such as this is "tendentious and churlish".

I may now find myself required to challenge the pinguid, sesquipedaliaphiliac diplozoon responsible for this paper to a duel.

Let us now move beyond the lack of imagination of the authors as regards valid objections to their definition of enlightenment, and their questionable... question... selection, and move on to the demographic differences between the people who scored high, and low, in EE (whatever, if anything, the EE score actually measures).

The paper's headline "discovery" is that going to college didn't give respondents a statistically-significant higher EE score.

I imagine that tertiary education specifically involving economics - or just a weekend personal-finance-management seminar, for that matter - would have an effect on the EE score - at least, for the four questions that really do seem to have pretty clear objectively-correct answers. But since most university students wisely avoid the dismal science with the same zeal with which sane people avoid the Continental postmodernists, it's hardly surprising that just passing through a university does not cause one to pick up knowledge of economics by osmosis, without studying it.

(Colleges won't make you study it, either. Later in the paper, it points out that of "50 leading universities" surveyed by these people, exactly none had compulsory economics courses.)

It's practically a truism that knowing a great deal about one subject has little to no effect on your knowledge of other subjects. Actually, people who're very knowledgeable about one thing often incorrectly assume that they've got the right end of the stick about some completely different subject. Scam artists love Ph.Ds. (See also, "Engineers' Disease".)

Research that confirms the "obvious" is still valuable, even if it's routinely reported in News Of The Weird stories and derided by politicians who're trying to reduce "wasteful" government spending. (By, of course, taking funding away from anything that they reckon sounds a bit silly, and giving it to the people who've given them a rent-free flat.)

Still, though, EE and college education being uncorrelated doesn't look like a big discovery to me. (If the EE testing method itself is fatally flawed, of course, then no correlation, or lack thereof, means anything.)

What else you got, guys?

Well, there's the left/right thing.

One very simple way of pigeonholing people as "left" or "right" in political ideology is to just to ask them, which this survey did. Once again, the lack of a real left wing in the US political dialogue means that a reborn Dwight D. Eisenhower would now be categorised as a State-trampling tax-and-spend socialist enemy-emboldener - but never mind that for now. The survey asked respondents to categorise themselves as "Progressive/very liberal", "Liberal", "Moderate", "Conservative", "Very conservative", "Libertarian", "Not sure" or "Refuse to answer".

And lo, those who admitted that they were infected with the terrifying disease of "progressivism" scored the very worst on the EE scale, with a neat diminishing-wrongness progression as you proceed toward "Very Conservative". And then a score a little better again - though not statistically-significantly so - for the brave and hardy "Libertarians"!

Once again, this was presented according to proper scientific standards, with a full breakdown and confidence interval listed. The error bars are wide enough to, as I said, mean the Very Conservatives might actually have beaten the Libertarians, but the overall order is clear. And the authors mention, again, that questions specifically aimed at "typical conservative or libertarian policy positions" might have changed the results. (Like, I dunno, maybe "Illegal immigrants are a major drain on the American taxpayer.")

But they, again, conclude, "Naaah." (I paraphrase.)

Next we get a bunch of little tables demonstrating that people who voted for Obama have miserable EE (but people who voted for Nader or the Green Party's Cynthia McKinney score even worse - though the error bars are of course really large for these unpopular "wasted vote" candidates).

Who else scored badly? Oh, just black people, Hispanics, citydwellers, Jews and Muslims, union members, and people with no direct or familial connection with the armed forces.

Who else scored well? "Atheist/realist/humanists", people who did not consider themselves to be "a born-again, evangelical, or fundamentalist Christian", and people who go to church "rarely" or "never". I'm not sure what this is supposed to mean, but it's amusing.

Oh, and "Married" people beat every kind of single person, and beat by a wider margin people in a "civil union/domestic partnership". "Asian/Pacific" respondents scored even better than white folk. NASCAR fans scored better than others, too. (Somewhere in America there must be a married Japanese-American NASCAR-loving atheist Republican who has a perfect model of the entire world economy turning and twinkling in his mind's eye.)

And Nader and McKinney voters may have scored miserably, but people who voted for the Libertarian candidate Bob Barr got an average score even better than those wily McCain voters, though again with a big enough error bar that they might not really have scored higher in a bigger survey.

Registered Libertarian voters scored better than people affiliated with different parties, and in response to "Do you consider yourself to be mostly a resident of: your city or town, America, or planet earth", Planet Earthers scored worst, followed by "not sure/refused", then "my town", then "America". (Presence or absence of a subsequent "Fuck Yeah!" was not recorded.)

All this isn't quite the results that a modern US "radical conservative" would really want to see, but that's just because religious beliefs and a good EE score appear to be incompatible (though "Other/no affiliation" for the religion question scored even worse than those silly Muslims!). Apart from that, the results are driving straight down the radical-conservative road. In brief, the authors' thesis that conservatives and Libertarian-ish people have higher Economic Enlightenment than members of the Pinko-Green Communist Alliance was solidly supported across the board of their questions.

There were several really nice line-fits, too. I mean, check this out:

Income versus 'economic enlightenment'

The more you make, the more economically enlightened you are! Makes sense, doesn't it, kids?

But wait a minute. Look at that tiny little error bar for those brilliant high-EE "$100K+" respondents. A smaller error bar means a larger sample. Did they really have more respondents making $100,000 or more than any of the other income brackets?

According to the raw data - yes, they did! The breakdown for the 4,835 respondents was:

No answer: 593 (12% of respondents)
Below $25K: 277 (6%)
$25-$35K: 337 (7%)
$35-$50K: 541 (11%)
$50-$75K: 941 (19%)
$75-$100K: 757 (16%)
$100K+: 1389 (29%)

Now, this was total household income, not the personal income of the person answering the survey. But the median and mean household incomes for the USA in 2004 were $44,389 and $60,528, respectively. I doubt that either figure has shot up past $100,000 in the last six years.

When 29% of respondents are making around twice as much as the average income - the number of $100K-plus responses is only marginally smaller than the $35-$50K and $50-$75K respondents put together - serious "skewed sample" alarm bells should start ringing.

The paper does have quite a bit of discussion of the problems with their testing technique, but of course concludes that none of them invalidate the study. Or mean that they should have applied weighting to try to un-skew their strange self-selected sample.

(There's also, once again, the possibility of deliberate deception. Respondents might seek to give their ideology-driven answers to other questions more weight by claiming household income much higher than what they actually make.)

On finishing reading the paper - which, gentle reader, means that the end of this epic saga of a blog post is also in sight - I figured that the main problems with it were this obviously unbalanced self-selected sample, the lack of any weighting to attempt to compensate for the sample bias, and the selection of the questions used to construct the EE score.

Apart from that, I reckoned this was a decent paper. It's rather sad that the best you can say about so many media-touted studies is that they conform to the minimum standards for an academic paper - presenting methodology and results, and not blatantly lying. But still, it's better than nothing.

("Yeah, that car he sold me WAS full of rust, but at least it really was a car, not just a couple of bikes covered with tape.")

Perhaps I'm so easily impressed by any paper that achieves the basic benchmarks for publication in a peer-reviewed journal because I'm so used to examining the rather different evidentiary paperwork of true out-there crackpots. Those guys often insist that their magic potion or antigravity machine has been tested by some prestigious institution or corporation - UCLA, Bristol-Myers Squibb, the US military, and of course poor old NASA. But when you ask who actually did the test, and when, and whether it was published anywhere... well, you may end up with a photocopy of a photocopy of a photocopy of something that might originally have been on university letterhead. Or test results from special secret scientists or car-gizmo testers who always seem to find things that nobody else can. But you'll probably only receive abuse.

Compared with that, this paper is a magnificent solid-gold triumph of the scientific method.

What, I now wondered, do people who do not bear the mental scars of numerous encounters with extremely independent thinkers make of the Buturovic/Klein study?

I returned to the page that, seemingly years ago, alerted me to the study's existence in the first place: This question on Ask MetaFilter.

Commenters there linked to this FiveThirtyEight piece by Nate Silver - who has an economics degree.

Silver has previously written that Zogby's "regular polls" were acceptably accurate in the last US Presidential election. But "Zogby Interactive", the "Internet Panel", has consistently been appallingly inaccurate. Because, yes, you really do get on the Internet Panel by just signing up at the Web site!

Knowing this, I feel I now have no option but to class any actual academic researcher who uses the Zogby Internet Panel, but doesn't weight the results and stretch the error bars accordingly, as being deliberately deceptive. There is no excuse for pretending that the Internet Panel is directly representative of anything but itself, even if you take care to ask an unbiased series of questions, which Buturovic and Klein clearly did not.

In this particular case, Silver once again points out the lousiness of the Zogby Internet Panel, and the questionability of the "Economic Enlightenment" questions. He also mentions that some of the questions do not have a clear answer even according to professional economists, " Klein should know, since he's commissioned several surveys of them."

This does further damage to the headline "college education doesn't teach economics" finding; actually, the more you learned at university about economics, the more likely you appear to be to give the "wrong" answer for one of the EE questions. This turns that finding into a tautology.

Nate Silver's conclusion from this is that the study is "junk science". If Silver's post had been the only thing I read about this study then I'd agree with him; having actually read the study, I still agree with him, because what he noticed lines up with what I noticed.

Another MetaFilter commenter pointed out that the questions asked will allow anybody who sticks to mainstream US "conservative" viewpoints to, regardless of their actual level of comprehension of what they're saying, get an excellent EE score.

Commenters also came up with a number of theories about why the paper is the way that it is, for instance perhaps because of a conscious or, just barely possibly, unconscious desire to contribute to the US radical-conservative echo chamber about universities being hotbeds of crazy left-wing brainwashing.

(It's true, you know. By and large, the more education someone's received, the more likely they are to hold "leftist" political views. Clearly, brainwashing is the only possible explanation for this.)

And then there's the issue of mining for correlations. If you measure a lot of things and then shuffle the data around until you find something that correlates with something else, you may have discovered a real relationship. But as a dataset increases in size, the chance of finding a statistically-significant but entirely spurious correlation in there somewhere approaches one. Hunt through the data until you find similar-looking graphs and you may indeed have discovered that G causes R, or that R causes G, or that both R and G have a common cause that you didn't measure. But G and R may also appear connected by a pure fluke.

The Buturovic/Klein poll contains a sort of back-door correlation-mining; the question selection seems to have guaranteed the overall "conservatives smart, liberals dumb" conclusions.

(Another commenter was surprised that there wasn't any Laffer Curve BS in the survey. And yet another commenter cunningly attempted to lengthen this post by mentioning a two-question ideology-versus-science test involving "deadweight loss".)

Someone also said that Zogby "is a bit of a joke among other pollsters". But I find it hard to dislike John Zogby himself:

Honestly, I could have better used the hours I spent poring over this study. You could probably have better used the time you spent reading this page.

But there is, at long last, a point to this beyond just debunking that one fatally-flawed study. It is:

The next time you see a reference to a scientific paper on a subject that interests you, if it's possible to dig up the paper without having to trek to the nearest university library or something, do so, and read it for yourself.

(If you've got a standard worse-than-useless newspaper science article in front of you and you're trying to figure out who the "scientists" are who've allegedly discovered the cure for oh-god-not-again, Google Scholar is a good place to start. Note, however, that the modern mass-media science story is based on press releases from university and corporate PR bodies, who are famous for sending puffed-up announcements about studies that haven't actually quite been published yet. If it ain't been published, you ain't gonna find it in Google Scholar, PubMed or anywhere else.)

You need advanced education to understand some scientific papers. You're probably not going to get a lot from a paper about, for instance, cryptography or particle physics, unless you're already quite knowledgeable in those fields.

But a lot of papers, definitely including many of the psychological, sociological and medical/epidemiological papers that are so popular with the newspapers, can be comprehended with nothing more than a bit of light Wikipedia use and basic knowledge about statistics and probability. That latter knowledge is, of course, useful in all sorts of other situations too.

(You can get a basic tutorial in stats and probability from Wikipedia too, or in a more structured and entertaining form from the classic How to Lie With Statistics, and/or Joel Best's much more recent Damned Lies and Statistics. John Allen Paulos' Innumeracy is also excellent.)

At the very least, it's a salutary mental exercise to understand what a good study's saying, or to figure out what's wrong with a bad one. And it can also tip you off about the reliability of different sources of information about scientific discoveries. Who knows - you may find that your local newspaper has a science reporter who's actually good!

The developed world is entirely built upon a foundation of science, and the basic interchangeable unit of scientific research is not, as one might suppose, the undergraduate lab assistant, but the published paper. To float along on the surface of the world's science and technology without ever looking at the papers from which it is all built is like eating meat daily without taking any interest in what happens in a slaughterhouse.

I've been to a slaughterhouse.

I find reading scientific papers somewhat less unpleasant.

Power factor. Again. I'm sorry.

Regular readers will know that the world currently teems with "power saving" devices, which are alleged to use Power-Factor Correction to save you money on your electricity bill.

These things are absolutely excellent, except for four minor flaws.

One, little plug-in PFC gadgets don't actually correct power factor at all, two, little plug-in PFC gadgets don't actually correct power factor at all, three, domestic electricity customers aren't billed by power factor anyway, and four, domestic electricity customers aren't billed by power factor anyway.

I realise that, technically speaking, that's only two flaws, but I thought they were such big ones they were worth mentioning twice.

At the other end of the commercial spectrum from the BS plug-in power savers, there are big industrial units designed to correct the atrocious power factor of certain particularly serious offenders, like really big electric motors, or really large numbers of smaller motors. Usually these sorts of correction setups are just capacitor and/or inductor banks carefully matched to the load; sometimes they're "smart" devices that adjust themselves to correct varying power factor, which is what you'll get if, for instance, you've got a factory full of big motors that keep changing speed and load.

This sort of PFC, and similarly large-scale PFC that's implemented by the actual power companies (typically in the form of big capacitor banks at substations and other distribution transformers), is entirely genuine, quite useful, and very expensive. But if you're billed by power factor, or if you're a power company that wants to minimise the mass of metal in your whole distribution network, PFC is essential.

In between the little rip-off plastic home-user things and the vast custom capacitor banks in power stations are, as you'd expect, PFC devices for medium-load applications. Yesterday I corresponded briefly with someone who's trying to sell such devices.

Regular readers won't find anything very new and exciting in this correspondence, and I wouldn't blame any reader for only lightly scanning at least the first giant block of quoted text. I'm posting this mainly so that Google searchers will be able to find a little more info about this field in general, and this product in particular.

(Also, I've suffered for my art, so now it's your turn.)

From: Tim Otto <>
Subject: Active and dynamic PFC.
Date: Wed, 3 Mar 2010 20:15:51 -0600

Dan, I was reading your article and wanted to share with you our new technology. I agree with you on a residential level that the current PFC units don't save you money ,but when you take PFC and only put it in the circuit and remove it there is a savings. I am reaching out to all the blogger on the net and am asking them just to consider that what I'm saying is real. We have seen savings and when the product which just went to mass production get here I am reaching out to all bloggers on all continents to get a unit in their hands. I don't want to sell it to you. It will sell its self when you see it work. On the business side the meters do read different here in the states and the savings is much greater. Please take time to read the PDF study and when we hit your continent we can get one installed for your testing.
Why is power factor correction an important part of reducing co2 emissions and is there any new technology available to ad to the global effort? Yes, let me explain where this large void is occurring. Large industrial power users (demand side) have been using power factor correction (pfc) for years on large motor driven equipment because its too costly paying the power providers for this wasted reactive energy (poor p.f.). There is a demand (penalty) charge on their monthly bill including all commercial users. Several companies build PFC units by incorporating capacitors in various amounts to match the loads of running motor(s) to offset this penalty. These units are large and tailored to do a cost saving job for this industry. The user and power provider both see a power usage benefit.

Home and commercial users share the burden of poor power factor and extra power must be provided to offset this waste. Air conditioning, furnace blowers, refrigerators, freezers, washers, dryers, fans, garbage disposals, dishwashers, lighting with ballast or transformers, pool pumps etc all ad to the burden. Whitby Hydro Energy Services of Canada did a series of test in 2005 by taking a group of homes and using pfc devices with a set amount of capacitance. Their conclusion: ‘The result of the pilot indicated that the addition of capacitance indicate that installation of the units on mass will reduce the generation requirements through the province and we recommend that the findings of this pilot be shared with the government officials as a viable means to help address the supply and transmission issues within the province”. The full 15 page PDF report is attached.

[The above quote isn't quite what the report actually says, but it's basically correct. Yes, the report does actually use the term "on mass". Hey, give 'em a break - they're in Ontario. Nobody speaks French there.]

No doubt Whitby Hydro could save on power generation so why not mandate to use pfc units on homes and business and save a new power plant from being constructed? To make this possible a pfc unit would have to turn on and off when motors and ballast/transformer type lighting were operational and make constant capacitance adjustments to correct the different loads and voltage fluctuation drops caused by peek demands. A good pf correction is .95-.96 and going higher can cause frequency modulation problems. Present pfc units are fixed or variable and cannot perform the computerized functions that would be required. This is where Power-CEOtm (Computerized Energy Optimizer) fills this gap. Our patented (USA and most countries) power factor correction units is the first to incorporate the proper technology for global usage. Here is what the patent-holder has to say: “We are confident that our patented “Power-Factor-Correction” technology is light years ahead of the other PFC systems. By and large, most PFC systems are either “Static” (designed for a specific amount) or a hybrid of “Limited Automatic,” designed around several variables and are thus referred to as automatic. However, our power-factor-correction technology is fully and completely Dynamic/Automatic in that it will turn on precisely the amount of correction required in order to attain a PF of .95 and not only that, in the event an additional load turns on or is introduced into the system requiring additional compensation, our Smart System will automatically and instantly adjust to the new required setting. When any load which was requiring the compensation either turns off/on or changes its setting (for example, motors with varying loads), our PFC system will readjust and continue to readjust as needed in order to provide as near to a PF setting of .95 continuously as is feasible.
The current US President, as well as our previous President both stated when talking about the Kyoto Protocol and Copenhagen Meeting on the Environment, that they believe technology will be developed which will help us reach ascertainable goals without significantly hampering commerce. As you will see, Power-CEO™ is one of those technologies.”

Midwest Research Institute, a Government funded institute, has been involved since
2001 helping with technology issues until Power-CEO was completely viable and ready to market, and UL approval has been met. Plamen Doynov the senior engineer from MRI has this to say: I am intrinsically familiar with the technology. I was involved in the development of the original analog implementation during a contract with McDaniel brothers. Consecutively, we performed performance testing of the digital implementation of the technology. A copy of the performance report can be provided. In the report one can see that the testing of the technology confirms that it performs very well as a dynamic power factor correction unit. I am not writing this email as a representative of MRI. As an independent, not-for-profit, contract research institute, MRI has a strict policy not to endorse products, technologies, or cervices. Given an opportunity, MRI has the capacity to test and evaluate very broad technologies and systems. Should you need assistance from MRI in testing, evaluation, or further enhancements of the Power-CEO, I can facilitate the arrangements. Plamen Doynov

Power-CEO is ready for production and can comply to any world specification. Power-CEO is ready to meet the demands of lowering power consumption.

[Attached was a PDF report from Whitby Hydro Energy Services, "Power Factor Correction at the Residential Level - Pilot Project", which is available from here, and quickly viewable in-browser here.]

My reply:

I agree with you on a residential level that the current PFC units don't save you money ,but when you take PFC and only put it in the circuit and remove it there is a savings.

I'm not sure what you mean by that. By definition, there's only a saving for people who are billed by power factor, or for people who are in the business of generating and transmitting electricity.

On the business side the meters do read different here in the states and the savings is much greater.

I'm also not sure what you mean by this :-).

There is a demand (penalty) charge on their monthly bill including all commercial users.

Really? How's a "commercial user" defined, then?

The local corner store here is unquestionably a commercial electricity user. I don't think they're billed by power factor.

Home and commercial users share the burden of poor power factor

Yes, in the indirect sense that power in general is made more expensive when electricity utilities have to cope with higher kVA than kW. But no home user will achieve any direct savings by improving their own power factor.

Whitby Hydro Energy Services of Canada did a series of test in 2005 which, according to the PDF you attached, they had to install special meters at the homes in order to see any difference, because of course the standard electricity meters do not measure power factor.

Even if all of the houses connected to the tested transformers were directly billed by power factor, though - so if your power factor is 0.9, you pay 1.11 times as much as someone with a PF of 1.0 - the reported improvements in the two transformers with the PFC added would only reduce consumers' power bills by less than 5% and less than 3%, respectively [I averaged out the five tested months in the PDF report].

There'd have to be a penalty rate far in excess of the actual extra volt-amps used to make it attractive to install a PFC system that cost more than a very small amount.

What does your product actually cost? How large would a customer's current power bill need to be to pay your product off in, let's say, five years, assuming it somehow allows that customer to reduce their power bills by even 5%?

No doubt Whitby Hydro could save on power generation so why not mandate to use pfc units on homes and business

Uh, because people don't want to buy expensive things that won't save them, personally, any money :-)?

I am unconvinced that widely-distributed household PFC installations, as opposed to the PFC systems already being installed in electrical substations, are a cost-effective proposition, even if you make them mandatory and have the taxpayer pay for them.

As a "retail" product for voluntary installation by homeowners, they appear to be a total non-starter.

A good pf correction is .95-.96 and going higher can cause frequency modulation problems.

Wait - so now you're saying that the 99.22% and 97.5% five-month average figures from the Whitby Hydro transformer study (versus 94.7% for an unmodified transformer) are undesirable?

The Power Medix device mentioned from page 11 of the PDF you sent apparently went considerably above 96%, as well. I find the figures there rather questionable, though; uncorrected power factor is way down in the .75 to .80 range at night. If that's the result of a water heater or geothermal heat pump or something, clearly that one something is what the power company should be giving that household a free power-factor corrector for, not the whole house.

If your special patented product carefully keeps the PF close to 0.95 at all times, I don't see that there's much of an improvement to be gained. Even if domestic consumers people start being billed by power factor. Which I doubt will happen any time soon, since it's hard enough to even explain what power factor IS to people, much less get them to re-elect someone who took their money because of it :-).

The current US President, as well as our previous President both stated when talking about the Kyoto Protocol and Copenhagen Meeting on the Environment, that they believe technology will be developed which will help us reach ascertainable goals without significantly hampering commerce.

I wouldn't say that in the press release, if I were you. We both know that few-per-cent improvements in power factor are not at all the sort of thing that heads of state are talking about when they make speeches like that.

Your repeated use of the word "patented" as if patents are only awarded for worthwhile inventions seems to me to be another unfortunate tactic.

Power-CEO is ready to meet the demands of lowering power consumption.

Another claim I think you should stop making.

A poor power factor, BY DEFINITION, does not mean that ANY more power is actually being consumed, except for the amount lost to resistance from higher current flows. That's significant for a power company, but vanishingly small for a home user. And even for most industrial users; they only care about PFC if they're billed by power factor.

In reply to this, all Tim sent me was:

Hears a link ,see what the power company has to say.
Also has anybody done a test where every item was corrected in a structure ?

My reply:

Hears a link ,see what the power company has to say.

That page says:

How correcting power factor can save money
The PSNH demand charge is based upon kva demand for LG customers and upon 80 percent of the kva demand for GV (Commercial and Industrial) customers who have a power factor of less than 80 percent. Power factor correction may offer a savings opportunity for some customers.

"LG" is one of PSNH's "Large Business" tariffs, for "demands in excess of 1,000 KW" (PDF; domestic power consumption is more like 1 to 2 kilowatts, depending on what sort of "average home" you're looking at).

Small businesses are only even possibly affected by these issues if they actually have a low power factor, which outfits that aren't running lots of low-power-factor gear - typically, large motors without PFC capacitors already on them - will not have.

Stores with a huge bank of fluorescent lights may have a lousy enough power factor to be interested by this, but I think modern electronic ballasts have largely solved that problem. The same goes for computers; PCs used to have a pretty consistent 0.7 to 0.8 power factor, which could add up for a whole office full of them, but nowadays most PC PSUs have PFC built in, for exactly this reason.

Also has anybody done a test where every item was corrected in a structure ?

Only if the power factor is actually low enough to make the cost of correction attractive, which in normal domestic situations it is not.

Homes that draw a lot of power often draw it for things like electrical heating, which is almost entirely a simple resistive load with a power factor of 1. And in any case, to say it one more time, no homeowner is going to be interested in PFC if they're not billed by power factor. I am not aware of any nation in which private homes are billed by power factor. You'd think that there'd be some huge housing developments that were billed that way, but if there are, I haven't discovered any.

Since you did not choose to answer my questions, I can only presume that you have no answers for them. Sorry, but I cannot take further time to correspond with you if you're not actually offering anything new.

I don't know what the deal is with people like Tim. He doesn't seem to be deliberately running a scam, but he also keeps saying that products like his are for some reason going to become popular for home and small commercial electricity users. Those users don't actually have any reason to install a power-factor corrector unless they feel philanthropic toward the power company.

And if you do want to do the power company, or the planet, a favour by taking some load off the electricity grid, a much better idea for domestic power consumers is to look into a grid-connected solar system, which can genuinely reduce your power bill.

In many countries, new home solar-power installations are heavily subsidised by the government, for either purchase price, feed-in tariffs, or both. You may also be able to get a subsidy if you install a solar water heater, which is a simpler and less expensive investment than a photovoltaic solar electricity system.

Even if you can get a power-factor corrector for free, though, there's absolutely no point installing it unless you are for some reason using quite a lot of power, with a lousy power factor. Even houses that use a lot of electricity - electric heating in cold climates, big air-conditioners in hot countries, a giant bank of metal-halide lamps in the garage for some reason - don't necessarily have a lousy enough power factor for any add-on PFC to be necessary.

Hey buddy! Wanna buy me a computer?

The computer on which I'm writing this is still the dual-core Athlon I wrote about in early 2006. Since then, it's had some new RAM, a new video card and about as many hard drives as I could stuff into it, but the faithful old mildly-overclocked Athlon 64 X2 3800+ has kept on chugging along.

I've been planning to upgrade for ages, but my income's taken a serious dip lately. Most of my money comes from ads of one kind or another - annoying ones from Burst Media, less annoying ones from Google, and my various you-can-buy-this-from affiliate links to Aus PC Market - and the global economic slump has hit all of these sources pretty hard. I'm currently making maybe 60% of my income a year ago, and less than half of what I made a couple of years before that.

So I've been putting off upgrading, and putting it off some more, and continuing to put it off, on account of how computer gear gets cheaper and faster pretty much by the week. But lately, my income has been dropping faster than component prices. 50%-tax-deduction-bonus or no 50%-tax-deduction-bonus, I just can't swing a new computer, and see no real prospect of being able to in the near future.

The sensible course of action for me now is, of course, to stop complaining and just keep my old PC. Maybe, to minimise the chance of catastrophic failure, I should buy a new boot drive and clone the old one onto it; I've already done that once, and I've similarly upgraded a couple of data drives. (If your computer is more than a few years old, I strongly recommend you upgrade the boot drive, too. Every hard drive will die one day; people often add more drives to their PC, but they seldom upgrade the boot device, because it's a hassle. But a dead boot drive can be really, really annoying. Waiting six hours for a clone operation is greatly preferable.)

I'm in no danger of actually running out of money, you understand. The cats, and staggering numbers of freeloading cockatoos, are going to keep getting fed. And my life remains ludicrously luxurious compared with that of most of the world's population.

I also keep perversely doing unprofitable things, like picking fights with scam artists and expanding my reprinted magazine columns (like the one I just put up, or this vastly expanded one from last year).

But many of you seem to quite like that stuff. And I haven't had a donation drive since September 2008. And back in 2002, you suckers faithful readers together donated up the not-insubstantial purchase price of...

Tamiya Pershing tank

...a 16th-scale Tamiya Pershing tank kit.

So what the hell.

Anybody want to pitch in a few bucks to buy me a shiny new computer? If you do, my PayPal donation page is right here. Or you can just click this button:

You can send me an Amazon gift certificate too if you like, but all I can do with that is buy books and DVDs, since Amazon ship nothing else outside the USA. Oh, and if you're in Australia and would like to bank-transfer some money to me, e-mail me and if you sound trustworthy I'll give you my bank details. Since those bank details are sufficient to make fake cheques, though, I'm not putting them on public display.

NOTE: I'm not the only person tightening his or her belt at the moment, and I'm far from the most deserving recipient of your charity. If you're tossing up whether to send $5 to Amnesty International, Oxfam, the ASPCA/RSPCA or me, for pity's sake support human rights, poor people, or furry animals, not some dude who just wants a new computer to go with his vast monitor.

But if, on the other hand, you should decide to forego a nice breakfast at a cafe for toast at home, and then send the money you save to me, I'd be very grateful.

I would also be perfectly happy to accept a portion of the government stimulus money you would otherwise just blow on a plasma TV, or indeed a cut of the cheque that arrived addressed to your dead great-aunt.

However and whenever I get a new PC, I will, of course, whip up an article about it, like the one about my current computer and the one about the computer before that.

In the improbable-but-delightful-to-contemplate event that you all give me more money than is necessary to buy a new PC, I hereby pledge to spend it on a better theremin than the baby one I got cheap without instructions on eBay, and then record an actual tune played on said theremin, no matter how much harm this does to my relationship with my Significant Other and/or pets.

Mad Kevin's Crazy Bargains!

This is a bit of a specialised post. It will only be of interest to people who:

1: Are in Australia, and
2: Have an Australian Business Number, OR
3: Are an independent primary or secondary school student, or caring for one or more children who go to primary or secondary school, and meet some other requirements, and
4: Would like to buy new computer gear, or other business-related stuff. Computers only, for the "student" part of the deal.

Everybody else should skip this post. So should people with a short attention span, because I do go on a bit. If you stick with it, though, you could end up paying a substantial amount less tax.

Please note, however, that I Am Not An Accountant, and nothing in this post should be treated as accounting, legal, matrimonial or any other kind of advice. But this is what our accountant told us, and you'd better believe I'm going to take action based on it.

If you meet the above requirements, be advised that the Australian Government, as part of that economic-stimulus malarkey that's suddenly become so trendy, is itching to give you a refund on new equipment of all sorts for your business, and/or computers for the education of yourself or your kids.

It's like a mail-in rebate except, you know, not a scam.

The first deal is called the "Small Business and General Business Tax Break"; the second is called the Education Tax Refund. Each of them allows you to claim a significant amount of money back on eligible expenses.

The Small Business Et Cetera Tax Break is the big news, if you ask me. It gives you a bonus 50% tax deduction, if your business has a turnover of less than two million dollars a year and you pay at least $1000 for some deductible asset.

(If your business turns over more than two million a year, you get a bonus 30% deduction on expenses of $10,000 or more.)

Suppose you buy some tax-deductible business-related thing, like a computer, that costs $2000. Further suppose that you're paying 30% tax on the portion of your income you used to buy it.

Without the Tax Break, you'd deduct the $2000 from your taxable income over whatever period you usually do, and thus get a total $600 ($2000 times 30 per cent) tax refund by the time you've finished depreciating the computer's value to zero. (In most cases, as mentioned on that ATO page, this'll take either three or four years; you can depreciate a laptop computer by 33% per year, or a desktop computer by 25% per year.)

With the Tax Break, you get to deduct $3000 from your taxable income, giving you an extra $300 tax refund, for a total of $900.

To put it another way, 100%-deductible things are now 150%-deductible.

The Tax Break's 50% deduction also, to use gaming parlance, "stacks" with existing deductions. You still depreciate the computer's capital value to zero over a few years, and whatever other shenanigans you've got going with your accountant also still apply. Everything works as it did before, but you get an extra 50% deduction from your initial deductible purchase expenses.

(The only thing the Tax Break doesn't stack with are the previous versions of itself, which worked the same way but gave a lower deduction bonus.)

The Tax Break also applies to any business equipment purchase over the $1000 (for businesses with turnover below two million dollars) or $10,000 (for higher-turnover businesses) threshold.

("Substantially identical" items, or items forming a set, can be grouped together for price-threshold purposes. So if you buy $1200 worth of computer parts from various dealers and assemble them into a PC yourself, you ought to be able to apply the Tax Break to the total price.)

But you don't have to buy a computer to qualify for the Tax Break. Cars, cement mixers, cattle-prods, circus tents; pretty much any capital acquisition that qualified as a business deductible in the first place now gives you 1.5 times the previous deduction (or 1.3 times, if you're in the higher-turnover category).

Business-related computer hardware often seems, of course, to bear a strong resemblance to not-very-business-related computer hardware; a significant number of "educational" computers also seem to be equipped with unnecessarily powerful graphics cards. Where you draw the line is a matter for you, your accountant and your chosen confessor. If something's only half used for business purposes and so only 50% deductible, you can of course still apply the Tax Break to it, provided the deductible portion of the expense is over the $1000/$10,000 threshold.

The Education Tax Refund isn't as exciting, partly because of the requirement that the gear be purchased for the edification of some ungrateful student, but mainly because it only applies to computer equipment and related stuff, like computer repairs, Internet access and so on.

The Education Tax Refund is a straight cash-back deal, though, not a taxable-income-reduction one. You can claim back half of your eligible expenses, up to a ceiling of a $375 refund per primary-school student per year and a $750 refund per secondary-school student per year. You can also roll over expenses above the refund limit to the next year if you're still eligible then.

So if you've got one high-school student and you buy them a $2000 computer, you can claim a $750 refund on the first $1500 of its price the first year, and another $250 on the final $500 of its price the next year.

This is all explained on the Education Tax Refund site and in this very-sensibly-named explanatory PDF. The Tax Office also has a FAQs and Examples page.


The catch

I did a bit of hunting for people criticising the Small Business and General Business Tax Break, to see if there are any pitfalls that've evaded me. The most negative analysis I could find was this post at Dynamic Business.

To answer it point by point:

1: The Tax Break is bad for cash flow. You may be getting a ton of money back, but you only get that money back as part of your tax refund; there's no discount on the actual purchase price of whatever you bought. And you only get the money back in instalments, over whatever period you're allowed to use to depreciate the goods; if something takes many years to depreciate to zero, the benefit per year may be trivial.

If you do your buying before the end of the 08-09 financial year, of course, you shouldn't be waiting very long for at least the first instalment of your refund.

2: If you don't actually have enough cash on hand to buy whatever refund-eligible thing you want to get, you can end up losing money if you borrow in order to buy.

You could still actually end up ahead if you buy a new computer for your small business on your credit card before the end of this financial year, and use the first chunk of the refund to help you pay it off. But if you buy shortly after the start of the next financial year, you will of course not get your first refund-chunk as quickly.

So, you know, don't do that.

(As a general rule, Don't Buy Stuff You Cannot Afford. Video on Hulu here, but not accessible outside the USA.)

3: Some people miscalculate what an additional 50% deduction is worth to them. As the Dynamic Business blogger points out, if you're only paying 30% company tax on your income anyway (or you're not making a huge amount more than the average wage; at the moment the Australian $34,001-to-$80,000 tax bracket is 30%), an additional 50% deductible only adds up to another 15% off the real price of the item. That's nice to have, but not mind-blowing, especially when you have to wait a few years to get it all.

So, uh, yeah - 50% higher deductible doesn't mean you get half of the purchase price back. Sorry about that.

(But the Education Refund does work that way, up to its ceiling.)

4: The Australian car industry really wants the Tax Break to persuade you to buy a vehicle. Or several vehicles. Also, you have to make sure the car is registered to the entity claiming the deduction, blah blah blah, Fringe Benefits Tax, blah.

Don't buy even one new car, if you don't need a new car.

Aaand... that's pretty much it for the Tax Break's down-side.

The Education Tax Refund has, as I mentioned above, other restrictions and ceiling deduction amounts. The only further "catch" I can see for it, though, is that the Education Refund doesn't "stack" with other deductions. If the computer you're buying for your kid is also the computer you're buying for your home office and thus tax-deducting, you can't claim the Education Refund on it to whatever extent you've claimed some other deduction or refund on it. (So if it's a $2000 computer, and you're claiming it as 50% for your home office and thus deducting $1000 from your taxable income, you can only claim a maximum of $500 Education Refund on it. But if you've got an ABN, you could apply the Small Business Tax Break to the business deduction!)

The Education Refund will be similarly reduced or eliminated by any other tax offsets, reimbursements, payments, kickbacks, hush money, or cash flung at you by a weeping tax officer you've just forced at gunpoint to dig a shallow grave out in the bush.


Is it worth it?

If you're wondering when you should buy computer equipment, the answer is almost always "later".

Wait as long as possible before buying new IT gear, if your old gear isn't actively impeding your ability to do business. Everything gets cheaper and faster with each passing week. And the current incarnation of the Small Business Tax Break will keep running for any purchases made before the end of the 2009, so you don't have to leap into action and buy new stuff right now. Unless, of course, you'd like to reduce this year's taxable income, as well as next year's.

The Education Refund offers, in return for its more annoying conditions, better value within its limits. If a new computer was going to be completely non-deductible in any way at all, as is usually the case for ordinary consumers, and if you meet the criteria for the Education Refund and have enough kids of the appropriate age to cover the cost, you really could get that computer for half price.

If you've been seriously considering getting new gear anyway, the Small Business Tax Break's 50% bonus deduction is quite substantial, too. The government isn't giving you the extra refund at the time of purchase, but they really are giving you - OK, to be completely accurate they're giving you back - that much money.

(The size of the bonus deduction depends, of course, on what tax rate you're paying on that part of your income. As I mentioned above, Australian individual tax brackets currently top out at 45%; company tax, which may well apply to people claiming the Tax Break, is a flat 30%.)

Computer shops all over Australia, including m'verygoodfriends at Aus PC Market, have been seeing a drop in sales in recent months. Australia's economy seems to be in decent shape and doesn't look likely to follow the USA down the plughole, but people have still been putting off buying new stuff until they're sure they won't have pawned it and moved into a cardboard box under an overpass by this time next year.

If you've achieved that small level of personal financial confidence then I, in my capacity as a person entirely unqualified to give taxation advice, strongly recommend you accept the Government's gift.

I certainly will.

(Once again: I'm not an accountant. Please don't sue me if there's anything wrong with the above. Do please talk about this in the comments, but contact your own accountant if you need authoritative answers. There's also a "Business Tax Break Infoline" at 1300 337 921.)

Wayne Maber of Maber Business Services is our accountant, and helped me to understand all this.

Posted in Money. 4 Comments »

Truth is out of style

Robert X. Cringely would like us all to know that what the business world needs is more bullshit.

Apparently he's very impressed with some Indian entrepeneur - I think he's called Sumantra Roy - who is making tons of money, thusly:

1: Figure out that there seems to be a market, "older women stuck with (or thinking about getting) naughty parrots", to whom could be sold an expensive e-book of information about these creatures.

2: Realise that you don't know a thing about parrots.

3: Buy some books about parrots.

4: Realise that you don't know a thing about writing, either.

5: Hire some guy to read the parrot books and make you an all-new parrot e-book of your own, which you can sell to the abovementioned middle-aged ladies.

6: Make one of those God-awful mile-long CLICK HERE YOU IDIOT marketing Web pages [which, thanks to a commenter below, I now know is called a "squeeze page"], full of BIG TEXT and dodgy testimonials. Including one testimonial that goes on and on, from the supposed source of the info in the e-book. This supposed source is called "Nathalie Roberts", and she has a friend called "Wayne" who had a parrot called "Polygon". Nathalie has twelve years of "school of hard knocks" knowledge about parrot care and training!


7: Profit!

7b (optional, and inadvisable): Cheerfully admit to Cringely that Nathalie Roberts does not exist, and all that "experience" was just slapped together from four parrot books by some work-for-hire guy who sure as hell ain't gettin' a cut of your (alleged) hundreds of thousands of dollars a year.

8: Get presented by Cringely as the kind of go-getting entrepeneur that the world needs more of. I mean, if anybody refused to do this sort of thing because of "ethics" or "morals" or any shit like that, they must be standing on, to quote Rob, an "egalitarian soap box".

The fake Nathalie Roberts is, Cringely says, "like Betty Crocker". You all remember when Betty was presented as a real human being who personally baked all of General Mills' products, right? Yeah, me too!

And anyway, Cringely reckons that all this stuff must be A-OK, because "I have yet to find people bitching and moaning on the Internet about being cheated by Parrotsecrets".

The Internet, Cringely kindly explains, provides us all with a "remarkable self-policing system of commerce". I presume that this explains why things like, I don't know, the standard ads you see next to a Google search, are so wonderfully scam-free.

So there y'go, guys! A product being sold to middle-aged women doesn't have a tide of complaints about it on the Web - so it must be kosher! Every Internet discussion board, as we all know, is just packed with women called Mildred who were born in 1952 - so obviously there cannot possibly be a problem with this product!

The absence of complaints could not possibly have anything whatsoever to do with the rather small intersection of the two sets,

A: Everybody, young or old, who has enough familiarity with the Web to be able to find a place to complain about a dud product where casual Googling will find the complaint, and

B: People who do not automatically categorise any single Web page with many different sizes and colours of text, that you have to page-down 28 times to get to the end of, and which is trying to sell you something, as a scam.

But all of this is a little academic, because right after Cringely said that, a commenter found this site. It's what you might call a... portal page... leading to rather a lot of complaints about Sumantra Roy and his numerous ventures.

Apparently Roy's got a bunch of other similar animal-related sites (which makes his total alleged income a bit more plausible), on which he's followed the same formula of making up someone who supposedly wrote a book and so on and so forth. And he's got a finger in the "Search-Engine Optimisation" pie as well, and... oh, it's all too horrible.

About the best argument anybody in the Cringely post's comments can come up with in favour of this "entrepeneur" is "OK, it's bullshit, but all marketing is bullshit, man!"

Well, OK, yeah. Coke won't really make you young and popular, Bernie Madoff never really made any trades, and those AAA-rated structured investments were all actually worthless. And whenever a financial crisis comes along, there are indeed always spivs who stand ready to find people in trouble and take away even that which they hath.

And apparently, because that's normal, it's also OK!

So get with the program, you unemployed layabouts! Get yourself on the winning team! There can never be enough middle-men, and truth is out of style!

Scams, glorious scams

It wasn't too bad from time to time seeing you answer questions about scams and hoax devices, but now it seems like a lot of your energy and brain power is wasted on that stuff. As a long time reader, every time I see a new letter answered that ends with "I'm sure it's a hoax but I just wanted to ask you" I die a little inside. You'd think by this time, with as much as we are all connected to the world, news, and technology we would just realize that if it's too good to be true it probably is... and if it ends up being true, we'll know about it soon enough. Anyway, take that how you will, I'll still idolize you in any case.


That'd better be a golden idol, and a damn big one, if you know what's good for you.

Unfortunately for Jordan, though, I find scams and hoaxes fascinating. Not so much when it's the the same scam over and over, like those ridiculous "power saver" things, of course. But there's always something new.

Just today, for instance, I discovered that New York City currently contains hundreds and hundreds of locksmiths. Do a Google Maps search and it looks as if the city has a life-threatening case of the measles.

It turns out that almost all of these companies are fake. They get themselves listed as "emergency locksmiths" in the phone book, Google Maps and so on at a fake address (which may be the address of a legitimate locksmith). And then, when someone has one of those special lock-related emergencies and calls the "local" company, the rip-offs commence.

Apparently, what they usually do is make you wait while they drive to your place from wherever they actually are, and then charge you way more than they quoted. In this respect, they're a bit like the numerous rip-off camera stores that also infest NYC.

But there's a lot more a crooked locksmith could do. I imagine burglary and locksmithing go together very well - it's ever so much more civilised to let yourself into a victim's house through the front door while he's at work, rather than break a window. Many of the bogus locksmiths seem to be completely incompetent, though, so I suppose there aren't all that many gentleman thieves among them.

Bogus-locksmith disease appears to be more communicable than the bogus-camera-store version. The camera stores are still pretty much restricted to New York, but the locksmiths are spreading right across the USA.

The novelty in this scam is the intersection with online mapping systems, which are being made useless by the tide of fake-company spam that makes it impossible to see which "local" locksmith is actually real. Word of mouth has always been the best way to find good local tradespeople, but until someone comes up with a way to filter the fakes out of services like Google Maps, there's now no other option.

(I wouldn't like to be the person trying to fix this. If the fake-filtering accidentally removes some real locksmiths from the map, I bet someone's going to get sued. Perhaps people could just call locksmiths at random, and whenever one arrives demanding far more money than he quoted, shoot him. That could work.)

Apart from the mapping thing, the locksmith scam is just boring overcharging of captive customers. It doesn't have the elegance of a classic grift, like the one where a door-to-door salesman sells elderly people a safe for their valuables that's disguised as a Bible, then breaks into the house a week later to retrieve the safe and its contents.

Some of the classic scams have been made impossible by advancing technology. Look at the "replace all your light bulbs for only $5" one, for instance. The scammer in this case actually started out with only one house-worth of bulbs, and from then on he just moved used bulbs from each house to the next, collecting his fee each time. Now that people are using expensive compact fluorescents, though, that one doesn't really fly. (There's still this dumb variant and the Robin Hood version, but that doesn't make any money.)

Some scams that seemed to die have been reborn, though. For a while there it seemed that the boiler room, for instance, was dead, because you couldn't get away with faking stock trades after everybody switched to Internet brokers. But now it turns out that the boiler rooms just got much bigger and took a new name - "hedge funds".