Bell Labs: Another View

The NY Times had a piece praising the way Bell Labs innovated. I beg to differ. First I was at Bell Labs from 1964 thru 1972, at various times and at multiple locations. I was there from undergrad days until just after my PhD from MIT. From 1986 through 1989 I was also Head of R&D for what was then NYNEX and is now Verizon. Thus I speak from firsthand experience, more than anything the author of the piece can do.

The author states:

Why study Bell Labs? It offers a number of lessons about how our country’s technology companies — and our country’s longstanding innovative edge — actually came about. Yet Bell Labs also presents a more encompassing and ambitious approach to innovation than what prevails today. Its staff worked on the incremental improvements necessary for a complex national communications network while simultaneously thinking far ahead, toward the most revolutionary inventions imaginable. 

I could not disagree more. In my opinion based upon a decade of direct presence and exposure I contend that Bell Labs is the antithesis of how research and technology development in a corporate world should be done! In fact if one follows that model one will fall into a world which we no longer live in. It is a world devoid of creative destruction, a world devoid of any truly competitive innovation, a world where we would have a very small fraction of what we have today.

The author also states:

He personally helped design a building in Murray Hill, N.J., opened in 1941, where everyone would interact with one another. Some of the hallways in the building were designed to be so long that to look down their length was to see the end disappear at a vanishing point. Traveling the hall’s length without encountering a number of acquaintances, problems, diversions and ideas was almost impossible. A physicist on his way to lunch in the cafeteria was like a magnet rolling past iron filings.

Now I spent time at Murray Hill, Whippany, Holmdel, and Indian Hill, I also was at the West Street office on my first days. In reality it was all too often a 9-5 location with Chess Clubs, model airplane clubs, amateur radio clubs, bridge clubs, which occupied many hours in excess of lunch. In my ten years of exposure I failed to see much of what the author contends. My conclusion is a generality, but one based upon a broad exposure.

Now to the facts. Bell Labs was set up to support Western Electric, the manufacturing arm of AT&T. Western was the sole supplier to the Bell Operating companies, BOCs. ATT was a Government sponsored monopoly exempt under the law from antitrust restraints along with baseball. Bell Labs was thus a way to develop technology for the operating companies and also to create patent rights to prevent any other entrant into the business. It was a Government sanctioned monopoly which effectively insured telecommunications related technology development was suppressed everywhere except in Bell. Somehow the author seems to miss that point.

Now a second fact, the BOCs and ATT had a different profit making rule. Unlike the normal market where the price is set in an open free market place by supply and demand, and profit was revenue less expenses, the Bell equation was materially different. They, namely the BOCs and ATT, set rates, actually the Government claimed to do so but in reality, in my opinion, ATT told the Government what to do, and there were times of some disagreement, but eventually in my opinion ATT got what they wanted.

The rates and economics of the business from my perspective generally worked as follows:

1. Revenue was set based upon rates.
2. Revenue equaled costs, operating and depreciation, plus a return on the capital plant investment.
3. Profit then was the rate of return on capital, usually somewhere between 12-18%.
4. Costs had nothing to do with profit, and profit was maximized by designing the least efficient means of production, namely the more capital per customer the more profit.
5. There was no incentive to reduce costs or improve technology.
6. It was a monopoly.

Thus Bell Labs was motivated to get as big as possible and to be as inefficient as possible. However the PR issues were at the fore, so to keep the Government at arms-length they publicized what they did in research and did a great deal of Government development work. For example they did work on undersea sub detection and the Nike anti-missile program.

The author of the article praises all of the Labs development. Let me make a few corrections:

1. Internet: According to Bob Kahn, as I recall having discussed with him, when he was head of IPTO at ARPA he went to Bell Labs to seek their help to deploy packet switching by utilizing some of their modem designs and networks. Bell Labs management, there were a great number at the meeting, which was all too common, informed him that they would take an exclusive contract from ARPA and design and build what Bell thought was right and that Kahn could watch the results. Fortunately Kahn rejected the exclusive deal and in his brilliant way created the core group who “invented” the Internet, despite Bell Labs! I was fortunate enough to play a small part in that effort when I was at Comsat, getting the first satellite connections operating.

2. Satellites: John Pierce boldly published a design for dozens of satellites as necessary to perform as a communications net of limited capacity. He stated that it was technically impossible to have a synchronous satellite. Believing Pierce Comsat was funded assuming dozens of satellites and launches. Hughes soon thereafter launched the first synchronous orbit satellite and only 3 were need for all the world! Pierce was proven wrong as was Bell Labs. Perhaps the Pierce design was consistent with the massive capex overspending as was pandemic at Bell. Harold Rosen at Hughes was the driving force of this new world and he rather than Pierce should have the recognition. Again the author seems to have missed this point. Bell launched Telstar, and then just withdrew as competition arose.

3. Digital Switches: Bell Labs refused to move to digital switches, they had developed the No 1 ESS, a project I had worked on, and wanted to allow a "normal progression" as I recall. They thus stalled. The Chairman of ATT at the time, as I was told, was frustrated and he went to Bell Northern Research, the Bell Canada arm, which AT&T at the time owned, and asked them to build a digital switch. That switch became the basis for Northern Telecom, one of the most advanced switches for a few decades.

4. Modems: In the early 1980s, with the advent of PCs, companies such as Telenet and Tymnet grew and modems were need. Bell refused to do this because it would reduce costs. Instead a small company called Hayes built one of the first digital modems to work on these separate networks. It allowed what became the Internet to grow.

5. IP Networks: The IP based networks came from small companies such as Cisco, and wireless came first from Motorola and then new entrants such as Qualcomm. Telecom as we know it today grew despite of Bell Labs not due to it.

The author, in my opinion, is totally blind to where true progress was made, it was made with the entrepreneur, not the massive corporate research center. I would argue that Bell Labs was a major drag on inventive elements in telecom. It was Codex and modems, Cisco and routers, and many other entrepreneurial companies which lead the way. Entrepreneurial companies work in a Darwinian fashion, success is rewarded and failure falls away. Bell Labs, for many generations, in my opinion, and based upon my experience, actually thwarted development. Perhaps that story may someday be told, not the one sided tale contrived, in my opinion, from some PR machine.

Obvious or Not

In Science in 1991 Vogelstein et al published one of their many results on colon cancer and its related genes and a Science writer presented the above picture in a summary article. The above paradigm has become common place amongst a wide class of cancers. Namely we see a set of well defined genetic changes that lead to intermediate steps in a cell and eventually to a cancer.

In this weeks NEJM the authors have concluded that colonoscopies with the removal of adenomas actually improves survival.

The authors state:

We previously found that polypectomy reduced the incidence of colorectal cancer in the NPS cohort.The present study suggests that adenoma removal significantly reduced the risk of death from colorectal cancer, as compared with that in the general population, and in the first 10 years after polypectomy, reduced the risk to a level similar to that in an internal concurrent control group of patients with no adenomas.

Our comparison of observed deaths in the adenoma cohort with expected deaths in the general population, based on SEER data that were specific for age, sex, race, and calendar year, may have underestimated the reduction in mortality that may be achieved with colonoscopic polypectomy in screening populations. Because all the patients in the adenoma cohort had adenomas, including 57.3% with advanced adenomas, they represented a higher-risk group than the general population

 Now this is no surprise, namely that survival is better. However what is a surprise is that there should be any deaths at all for those being closely watched with polyp removal. Namely if colon cancer, adenoma type, are following the Vogelstein paradigm, then careful colonoscopies would in almost all cases catch and remove a polyp before going to a final stage, especially one of metastatic potential. Thus one should have assumed that zero mortality was expected and anything but would and should be questioned.

 The authors state:

This prospective study has some limitations. First, a small number of trained endoscopists performed the colonoscopies according to a study protocol that required examination to the cecum, adequate preparation, careful inspection of the colon, and removal of all identified polyps, features that are consistent with reports of high-quality performance. Consequently, the NPS observations may not be generalizable to present community practice, for which reported incidence rates of colorectal cancer after polypectomy are higher than those reported in the NPS

Indeed there are concerns, for why were there any mortalities if the colonoscopies were done as we would expect.

You see, if we believe Vogelstein, and after 21 years the belief is fact, that when we remove an adenoma we are removing the pre-malignant cells, that is those cells which will eventually become the cancer stem cell, and their progeny, then we remove any future malignancy from that source.  Thus what then is the source for the cancer which consumes the patient.

Perhaps looking at the data may provide some evidence but then again perhaps not. The paper qua report does not offer that detail. Thus one wonders if the Vogelstein model is in error or that there may be some secondary but highly significant issues in the patient pool.

One should have concluded total removal of any colon cancer, not a 50% reduction in death from that cause. This should in my opinion be the conclusion of this report, instead the press seems to laud the reduction in death rate by 50%, not the fact that it really should be 100%! Was the adenoma the cause, where else did the cell come from, had it metastasized already, where was the resulting stem cell hiding, is the Vogelstein model wrong, does this effect happen elsewhere, such as in melanoma in situ? What of the presence and then absence of HGPIN, was that a removal of a CSC?

This result raises many questions from the aspect of a systems model for cancer. Unfortunately few seem to be considering them. Hopefully it will instigate a few.

Obesity

The OECD issued a report on obesity and their projections are as we had predicted, the US is just plain fat!

They state:

Governments can help people change their lifestyle by making new healthy options available or by making existing ones more accessible and affordable. Alternatively, they can use persuasion, education and information to make healthy options more attractive. This gentle approach is more expensive, hard to deliver and hard to monitor. A tougher approach, through regulation and fiscal measures, is more
transparent but it hits all consumers indiscriminately, so can have high political and welfare costs. It may also be difficult to organise and enforce and have regressive effects.

There is motivation and there is punishment. There also is the Department of Agriculture which is the dominant culprit in the US, just look at school meals, that is one of the problems. In the old days, you brought lunch or better went home for lunch. Now there is no home to go to and the law demands you consume the junk the DoA serves up. Recall that the DoA budget is doubled under the current Administration's Budget proposal, instead it should be eliminated!

They continue:

Denmark introduced a tax on foods containing more than 2.3% saturated fats (meat, cheese, butter,
edible oils, margarine, spreads, snacks, etc.) in 2011. Consumers pay 16 kroner (EUR 2.15) per kilogram of saturated fat on domestic and imported food, which is equivalent to up to 30% more for a pack of butter, 8% more for a bag of chips, and 7% more for a litre of olive oil. Tax revenues are expected to be over EUR 200 million per year, and saturated fat consumption is expected to decrease by 4%. Denmark had also increased its excise taxes on chocolate, ice cream, sugary drinks and confectionery by 25% in 2010. Also in 2011, Hungary introduced a tax on selected manufactured foods with high sugar, salt or caffeine content. Carbonated sugary drinks are among the products targeted by the new measures. The tax does not concern basic food stuffs and only affects products that have healthier alternatives. The Hungarian government is reportedly expecting to raise in excess of EUR 70 million per year from the tax. 2011 was also the year that Finland introduced a tax on confectionery products, while biscuits, buns and pastries remained exempt. The tax, originally intended to be set at almost one euro per kilogram of product, was subsequently dropped to EUR 0.75 per kilogram. At the same time, the existing excise tax on soft drinks was raised from 4.5 cents to 7.5 cents per litre.

These are actions which have merit. But as I have noted it is the very Government which decries this that at the same time not only supports it but denies options, just look at the recent case of the child who brought lunch from home having to eat fried chicken nuggets! The problem is not obesity it is the Government.

PCA3 and Prostate Cancer

The FDA has recently approved a PCA3 test assay which is owned by a Canadian company, Gen-Probe. This opens up a whole new avenue for examining PCa amongst men. I examine some of the issue here at a fairly high level.

There has been a great deal of discussion regarding PSA and its lack of sufficient specificity and sensitivity to PCa and there is some evidence that PCA3 will improve the situation. This is yet to be determined in extensive clinical trials. One of the problems with PSA is that it is reflective of total prostate volume and it also naturally increases with age. Thus a male of say 70 years of age and with a 70 cc prostate may easily have a PSA of 2.5 just based upon the size and age factors. 

Likewise if the male were 40 and had a 35 cc prostate then this may be indicative of PCa. In a recent paper by McGarty, we  detailed the issue of PSA sampling and the percent change, ie velocity, as a means to assess the nature of the underlying cause. Namely the more prostate basal cells and luminal cells the higher the PSA. As we shall see there is better correlation with PCA3 but the underlying molecular and cellular dynamics do not appear as well defined at this time, namely we have a marker with no clear underlying genomics cause.

The PCA3 measurement is define as follows:

PCA3 Score = 1000 [mRNA PCA3]/[mRNA PSA]

where [mRNA PCA3] is the concentration of mRNA of PCA3 and the same for the denominator. The range is such that a PCA3 score of less than 5 gives a very low likelihood of PCa and >35 gives a very high probability. The issue here often is repeat biopsy. The suggestion then is that one use PCA3 as a test for repeat biopsy indication (see Gen-Probe PCA3 documentation). Details on ROC for PCA3 are not broadly available and repeatable at this time.

PCA3 was first discussed in 1999 in a paper by Bussemakers et al, at which time it was called DD3. In their abstract the authors stated at the time:

The DD3 gene was mapped to chromosome 9q21–22, and no homology of DD3 to any gene present in the computer databases was found. Our data indicate that DD3 is one of the most prostate cancer-specific genes yet described, and this makes DD3 a promising marker for the early diagnosis of prostate cancer and provides a powerful tool for the development of new treatment strategies for prostate cancer patients.

It further turns out that PCA3 is a noncoding mRNA and thus there is no protein resultant. This was speculated by Bussemakers et al when they published their work in 1999. The key question seems to be why does PCA3 increase when there is a PCa and what is the details of the mechanism. Furthermore where does PCA3 fit within the context of the many pathways we know exist in PCa development.

As Cao an Yao report:

The DD3PCA3 encoding gene is located on chromosome 9 (9q2122). The gene includes four exons and three introns. In PCa, the most frequent mutation is the selective splicing of the second exon. At present, there is a vast body of ongoing studies on PCA3. Hopefully they can further confirm the role of PCA3 in the occurrence and the development of PCa and provide new treatment targets for patients with PCa. Hessels suggested that using quantitative reverse transcriptase polymerase chain reaction (RTPCR) for the detection of urine DD3PCA3 was a valuable molecular detection method in patients with PCa and could help reduce unnecessary biopsies. 

In a multicenter study designed to examine the diagnostic capacity of urine PCA3 detection, the AUC of urine PCA3 detection was 0.66, while the AUC of serum PCA3 detection was merely 0.57. The sensitivity and specificity of PCA3 detection were 65% and 66% , respectively  . Recently, researchers have suggested that serum PSA level plus PCA3 detection was the most promising diagnostic method for PCa . All these studies show that PCA3 is probably an important urine marker for PCa. It also provides a new clue for developing noninvasive detection methods for PCa. Hence, PCA3 may have considerable significance in multiple tumor marker screening of patients for PCa in the future.

Thus one of the questions is what is PCA3 and why does it reflect PCa presence. We know that we are measuring mRNA concentrations, and we know that in measuring them we have experimental evidence that PSA reflects total cell concentration. But what of PCA3, what does that reflect.

In a recent paper by Clarke et al the authors attempt to clarify what the role of PCA3 is.

In order to understand further the importance of the PCA3 gene in PCa we undertook a more detailed investigation of this gene and its chromosomal locus. This investigation points to a considerably more complex transcriptional unit for PCA3 than originally reported including additional novel exons. We describe a number of novel PCA3 splice variants with more specific expression in PCa tissues and metastases. We also demonstrate that PCA3 is embedded in the intron of a second gene, BMCC1, a gene implicated in controlling oncogenic transformation and that both genes showed increased expression in PCa and metastases. The absence of a TATA box element within a human gene promoter has been associated with promiscuous transcriptional initiation. The PCA3 gene does not contain an upstream TATA sequence and it was therefore of interest to determine whether any additional transcription initiation sites existed for PCA3

Perhaps this relationship to BMCC1 may lead to some insight. They continue:

BMCC1 is upregulated in PCa and androgen inducible Since PCA3 is upregulated in PCa and since we showed here that this gene is embedded in a second gene BMCC1, implicated in cellular proliferation, we determined whether BMCC1 was also differentially regulated in PCa. We used a set of RT-PCR primers that span that region of the BMCC1 gene (exons 6 and 7), specific for the full-length BMCC1-1 transcript. Expression of BMCC1-1 was evident in normal prostate and BPH specimens and was upregulated in PCa and metastases. This was confirmed using primers corresponding to the BCH C-terminal region of BMCC1 and for BMCC1-2. 

Indeed amplification of this isoform gave better discrimination between PCa and BPH. Extending these experiments to PCa and other cell lines revealed that both genes were highly expressed, specifically in the PCa cell line LNCaP. In addition BMCC1-1 was detected in a second PCa cell line DU145 but at lower levels. PCA3 is also expressed in DU145 but required further rounds of amplification for detection. The shorter BMCC1 isoforms (BMCC1-3 and/or BMCC1-4) were also detected (using primers specific for the BCH region) in an EBV-transformed lymphoblastoid cell line (JHP), but the longer BMCC1-1 isoform was not detected. Previous data have shown that the level of PCA3 can be induced in LNCaP cells after treatment with dihydrotestosterone, which mimics the effects of binding of the androgen receptor (DHT). We determined whether BMCC1- 1 was also responsive to hormonal induction. The results …. demonstrate that both PCA3 and BMCC1 are maximally induced in the LNCaP cell line at a concentration of 0.5 mM DHT.

Thus there seems to be some means of related induction but again no definitive relationship to well defined pathways.

The following is the PCA3 and PSA ROC for comparison. Note the following (see de la Taille):

The area under the curve of the receiver operating characteristics (AUC ROC) of the PCA3 Score was compared with that of serum total PSA, PSAD and % free PSA. The diagnostic accuracy of the PCA3 Score was statistically significantly better than that of serum total PSA, PSAD and % free PSA. The greatest diagnostic accuracy of the PCA3 Score was obtained at a cut-off of 35: specificity 76% and sensitivity 64% . At a sensitivity of 80%, the PCA3 Score specificity of 58% was higher than the 44% for PSAD and 27% for serum total PSA and % free PSA.

The following from de la Taille is the comparative ROC. It appears that from the limited data available that the ROC curve is substantially better with PCA3 than PSA alone.

The key questions remaining in my mind are:

1. What pathway elements does PCA3 reflect. What genetically is happening and what is the underlying system model. This is always an issue. As with primary medicine we have underlying physiology, here we must have some underlying genomics.

2. What are the cellular mechanism which control PCA3. Again this is a pathways issue.

3. How sustainable is PCA3 ROC for this assay. Many tests have been done and FDA approval is merely acceptance of some limited tests.

4. How does one relate PSA and PCA3. Note that the PCA3 measure does reflect PSA concentration, so we have not abandoned PSA.

5. Why do we normalize PCA3 on PSA? If PSA has such a variability are we normalizing on something which is inherently unpredictable?

References

1.               Bussemakers, M., et al, DD#: A New Prostate specific Gene, Am Assn Cancer Res, 1999.

2.               Clarke, R., New Genomic Structure for Prostate Cancer Specific Gene PCA3 within BMCC1, Plus One March 2008.

3.               de la Taille, A. et al, The PCA3 Assay Improves the Prediction of Initial Biopsy Outcome, 1 CHU Henri Mondor, Paris, France; 2 CHU.

4.               DeMarzo, A., et al, Molecular Alterations in Prostate Cancer as Diagnostic, Prognostic, and Theraputic Targets, Int Soc Uro Path 2008.

5.     McGarty, T.,  PSA Evaluation Methodologies, MIT/RLE Draft Paper 2010, http://www.telmarc.com/Documents/Papers/2010%20PSA%20Evaluation%20Methodologies%20Short.pdf

6.               Rattue, P., Repeat Prostate Biopsies, Medical News Today, February 2012.

7.               Schmidt, U., et al, Quantitative Multi Gene Expression Profiling of Primary Prostate Cancer, The Prostate V 66 pp 1521-1534, 2006.

8.                Wang, R. et al, Rational Approach to Implementation of Prostate Cancer Antigen 3 into Clinical Care, Cancer, Nov 2009.

9.               Wright, J., P. Lange, Newer Potential Biomarkers for Prostate Cancer, Rev Uro V 9 2008 pp 207-213.

Oil, Iran and the Economy

Iran has terminated oil sales to England and France. This is of course all over the European Press and the Guardian states:

Iran announced on Sunday that it had stopped selling crude oil to British and French companies, in a move that may put further pressure on the price of oil amid heightening political tensions.

The price of Brent crude – the benchmark for oil – had been rising last week because of tensions with Tehran, which had warned it might cut oil supplies to the Netherlands, Greece, France, Portugal, Spain and Italy in retaliation for Europe's latest sanctions. On Sunday, a spokesman was quoted on the Iranian oil ministry's website as saying: "Exporting crude to British and French companies has been stopped … we will sell our oil to new customers. We have our own customers … The replacements for these companies have been considered by Iran."

 And Les Echos states:
 

L'Iran a cessé de vendre du pétrole aux compagnies pétrolières françaises et britanniques, a déclaré dimanche le porte-parole du ministère iranien du Pétrole, Alireza Nikzad, cité par le site officiel du ministère.« Les ventes de pétrole aux compagnies britanniques et françaises ont cessé », a déclaré M. Nikzad.Mercredi dernier, un autre responsable iranien avait déjà annoncé la suspension des exportations de pétrole vers plusieurs pays européens. Cette annonce avait alors été démentie dans la journée.Cette suspension des exportations intervient avec quatre mois d'avance sur l'embargo mis en oeuvre par l'Europe. Les Vingt-sept ont décidé de ne plus importer de brut iranien à compter du 1er juillet afin de sanctionner Téhéran au sujet de son programme nucléaire.

 Le Monde states:
  

L'Iran a cessé de vendre du pétrole aux compagnies pétrolières françaises et britanniques, a déclaré dimanche 19 février le porte-parole du ministère iranien du pétrole, Alireza Nikzad, cité par le site officiel du ministère. "A la suite de la décision officiellement annoncée par le ministère des affaires étrangères, le ministère du pétrole a cessé ses ventes de pétrole aux compagnies britanniques et françaises", a précisé M. Nikzad. "Nous avons prévu de livrer notre pétrole à d'autres clients", a-t-il ajouté. Cette décision ne devrait pas impacter dans une grande mesure les importations françaises de brut, qui se sont élevées en 2011 à 58 000 barils/jour de brut iranien, soit 3 % de ses besoins d'or noir. "La décision iranienne n'a pas de conséquences pratiques directes", a expliqué Jean-Louis Schilansky, président de l'Union française des industries pétrolières (Ufip). Dans les faits, souligne-t-il, "la France a pratiquement cessé d'importer du pétrole iranien" depuis 2011 et ces livraisons "représentaient une très faible part de l'approvisionnement" hexagonal, de l'ordre de 3 à 4 %. Le Royaume-Uni est lui aussi dans la même situation.

 Even China Daily has covered this as follows:
 

Oil ministry spokesman Alireza Nikzad-Rahbar said as the oil minister had earlier announced about the probability of halting oil exports to some European Union (EU) countries, "the Oil Ministry has stopped oil sales to British and French companies." The Islamic Republic has no problem in selling its crude oil to its customers, Nikzad-Rahbar said. "We have our own oil customers and the replacements for these (British and French) companies have already been considered and we will sell the crude oil to new customers instead of the British and French companies." The spokesman's remarks, which did not specify the time of the sales' cut to the British and French companies, were posted on the website of Energy and Oil Information Network affiliated to the Iranian Oil Ministry.

The irony is that the NY Times has yet to reference the event.

This will be a major event this week as oil prices are likely to explode. Needless to say it will further dampen Europe in the midst of the Greek mess and then filter to the US. Unfortunately no one seems to be focusing on this here.

Unemployment Claims Down

Unemployment claims are down again, yet still a bit high as shown above on NSA basis. The chart below normalizes per Pop and provides a better view:

Note that we are still above the lower level of 1 per 1,000 seen in 2005. Yet we are well below the 3.25 in late 2008.

Hypochondria in the Age of Personal Genetics

One of the things a young medical school student often experiences as they study new and oftentimes dire diseases is that they too soon sense the symptoms of some of them. Dengue Fever is often a common complaint in Boston, despite the fact that there never was any known such case.

Then there are CAT and MRI scans. One can guarantee that if one has one that the radiologist will find something, often something totally independent of any symptom you may have and that something will result in more tests. Most of which eventually will result in nothing too serious, for after all we all age.

Now for personal genomics, and Bloomberg provides and interesting piece on the discovery of genetic defects which may possibly at some future time result possibly in some disease which may possibly be serious.

The author states:

Then my eyes were drawn back to the top of the report and a variant called JAK2-V617F. I realized then that the list was ranked in order of medical importance. Clicking on an entry brought me to a few pages of medical information, and those pages were linked to published scientific and medical studies. I began reading about JAK2 more closely. 

This wasn’t good. The report classified the JAK2 variant’s clinical importance as “high,” and its impact as “well- established pathogenic,” meaning harmful. It’s seen frequently in people with rare “cancer-like” blood diseases. Indeed, as the report said, doctors test for the JAK2 variant to confirm cases of these diseases, called myeloproliferative disorders. 

Well, what does this mean?  Knowing this can one do something to mitigate the downside? What value is this knowledge? As one reads on it seems that there is nothing to do other than wait. So do we want to know this? Genetic diseases are often a small class of diseases and all too often we cannot do much. Take Marfan's syndrome, the enlargement of the aorta which often could rupture. On can diagnose it by looking at the patient, sunken chest, thin, long fingers etc. But so what, just watch, tell the patient, replace the aorta? How much, what cost, what risk?

The article raises a plethora of questions which it does not answer. It is more a personal journey into the hypochondria of disease awareness, which often is of little value.

Budget 2012: Some Thoughts

The Administration issued its budget for 2012 and following years. It is worth a look. First note above the explosion of anticipated income taxes from individuals. This can only be achieved if the Government increases taxes on a massive scale. All other elements rely on this drastic assumption. It is unrealistic but it necessary to justify the budget.

I have used 2000 as a baseline year. Why:


1. No wars
2. Stock Market up and down
3. Balanced Budget

I will provide six images which I fell tell a story.

First receipts and outlays. The outlays had jumped in 2009 with the new administration and then ramped up from there. Why? One reason was stimulus etc bu frankly that does not show as a large bump of almost a trillion so one wonders where it went. Second receipts dropped, unemployed and no taxes collected and then not even SSI taxes. But long term there is no attempt to correct expenditures. With little inflation one wonders why the increase, just SSI and Medicare, not really as we shall see.

This shows the same but with a per Pop, per person, ratio. Here we should not see the impact of a growing population, but we do. So why? Too much expenditures.

This is the same but as a % of GDP. Outlays were 25% of GDP! And they are not going below 22.5%! This is a problem.

This is receipts by type showing the major increase is by income taxes, and only and the middle and upper class.

This is SSI. Focus on On Budget numbers and we see they are growing as more people go back to work, hopefully. The on budget has no deficit. The off budget does!

Finally some select departments. HHS is the major grower due to Medicare, Medicaid and ACA! Remember ACA kicks in for 40 million more people! SSI continues to grow but no surprise there. Defense declines.

Why in God's name has Agriculture exploded! DHS is also high but Ag! What do they do...It has more than doubled, and it is not salaries.

One should ask, why should we  increase any expenditures from a 2000 level, exclusive of the mild to zero inflation during this period. Second, we must handle Medicare and SSI, mainly through adjustments of eligibility age and increasing rates for Medicare as well as caps based on income. That is critical. SSI can and will take care of itself if and only if that is all it is used for. But there is a catch, the SSI stats were predicated on Fed interest rates well above 5%. Since the Fed drove those rates down the SSI fund will run short. This is but one example of how the Feds actions are harming the overall economy. One need go no further than these few charts to lay out a course for the future. If we do not then we face collapse.

China and Its Leaders

The NY Times has a brief commentary on technically trained national leaders and it states:

China has even more scientists in key positions in the government. President Hu Jintao was trained as a hydraulic engineer and Premier Wen Jiabao as a geomechanical engineer. In fact, eight out of the nine top government officials in China have scientific backgrounds. There is a scattering of scientist-politicians in high government positions in other countries as well. German Chancellor Angela Merkel has a doctorate in physical chemistry, and, going back a bit, Margaret Thatcher earned a degree in chemistry.

The BBC ( also see BBC) also has an interesting piece on the putative next head of China:

Who is Xi Jinping? It's not an easy question to answer. The man the Communist Party is busy grooming to be China's next leader can be read in so many ways. He is a communist "princeling," the equivalent of royalty in the Party, born into power and privilege but who then lived in a cave. He is a man who has spent his life in the Communist Party but who knows what it is like to be outcast. He has convinced businessmen he is their champion, while overseeing a system where the state controls huge chunks of the economy. He has shown himself to be irritated with foreign criticism of China but has sent his daughter to study at Harvard under a false name to hide her identity. His wife, Peng Liyuan, a singer, has, for most of his career, been far more famous than he has. When he was first announced as China's next leader-in-waiting, he was already vice-president, but people still joked: "Who is Xi Jinping? He is Peng Liyuan's husband."

And yes he is a Chemical Engineer from Tsinghua University. In many ways we have lawyers and Harvard and China has engineers and Tsinghua. What would happen if we had EEs and MIT?

These combinations and contrasts will be interesting to watch especially in light of the chaos currently in Washington.The problem is that they come from two different worlds, and I do not mean China versus the US, I mean engineers and lawyers, two different planets. I doubt that anyone in the Administration could even interpret, mindsets and world views not languages.

MIT Admissions Hack

Now I do not want to be too old a curmudgeon but I saw this MIT new admission "hack" where a balloon was sent with the admissions letter to some tremendous altitude, 91,000 feet. Admirable but I wonder what if this got sucked into an engine on a 737 or entangled in the prop of a single engine aircraft. Just a thought. Prior planning prevents poor performance.

Where Is My Free $50 Bill?

Today the Administration in its Solomon like manner agreed to not force Catholic institutions to violate their religious beliefs but at the same time provide "free contraception" to those insured. Now the Government is not providing the free stuff, the Insurance carriers are. Let me see, can I get some of those free $50 from the printing house, I now use them instead of $20s, they buy the same at the gas pump and the grocery store.

Better yet, if you made a bad real estate decision the Government will give you free $20,000, well not directly, they made the bad banks do that, that is after they gave the bad banks billions.

Does anyone start to see a theme here somewhere.

There is no free lunch. Someone must pay, and that someone is those of us paying taxes. As I indicated before the current administration is spending $1,000 per month per person, up from $650 under the prior set of folks. And the new budget just gets worse! Any suggestions from out there?

POST NOTE: Again Greg Mankiw has keen insight into the obvious, a rare trait amongst many. As he states:

Yet it seems that the White House yesterday switched from A to B, and that change is being viewed by some as a significant accommodation to those who objected to policy A.  The whole thing leaves me scratching my head.

 My conspiratorial mind says that the Administration orchestrated this whole mess to get what they wanted in the first place. Did the Insurance industry have a hand here. As usual one must ask if anything is really as it appears, or is Mankiw's head scratching a true sign that is was not stupidity but a strategy. Then again perhaps I spent too much time in Russia.

Catholics Need Not Apply

In reading the comments in the NY Times regarding the Administration accommodation to the HHS mandate, I am amazed by the near abject hatred on the part of those writing towards Catholics. I wonder if they ever read what they write. They make the Brits seem to be an accommodating and accepting group. We may all be safer with the Penal Laws, at least we knew where we stood.

This issue can be divided simply: (i) for the Individualists, the individual makes choices and Government should not mandate except when life and limb are at stake, ie murder, (ii) the Progressives, who firmly believe that there exists a select group to which they belong this group has been granted truth by some non-Kantian manner and that those not so endowed must obey them, since they lack the gift of truth. Fundamentally it is hubris, a group believes that they are correct and all must follow and the individual be damned.

This exercise was a brilliant move by the Administration, they feint to the left, then "accommodate" to the right, get what they want, and move on. A classic Russian chess move. But it has drawn out the vitriol of the left against Catholics. What group is next. Perhaps some of the left leaning bishops will see that they have been in error, so much for guitars in church!

As Camus and Dostoevsky said, we all die alone.

Yield Curve at All Time Lows

The above shows the lowest yield curve seen. Note the tremendous drop in the 30 year. It is like selling vodka at a penny per bottle. That was the case in Russia before the collapse.

The above shows the same but at other spots. Look at the 30 year drop.

The above is the spread. It also has been locked at all time lows. Money seems frozen in the banks and not much has changed.

Finally above shows the curve in some detail but the 90 day Treasuries are rising sharply, the reason for the spread drop, not the 30 year alone.

Unemployment and Debt

The above chart is chilling. It plots Treasury Receipts, Expenditures and Deficit per person per month for the past seven years. Initially Receipts and Expenditures were close, not bad. Then things start to fall off the cliff. We now spend more than $1,000 per month per person for Federal services and collect just over $500. We used to spend and collect close to $650.

Now use a bit of logic. If we had a 5% unemployment and we went to 10% then we lost about 5% of the revenue stream. That is 5% of $650 or about $40. So where did the other $110 get lost? Maybe it is the 1%? I don't think so. So that is the first question.

Second, we are now spending $1,000 per person, up from $650. Where are we spending that. If we are paying unemployment, so be it but that is a relatively small amount per person, not enough to get there. Also we stopped collecting SSI, dumb but that would be in Receipts not expenditures.

So should we worry, I suspect so since no one seems to have discussed this and we have gotten sidetracked by the current slam on freedom and rights to choose, namely the birth control issue. That is just fodder added to the mess.

Just to collect more data we show below the new unemployment claims, raw and per Pop.

And per Pop:

We typically run at 0.1% but as of last month we are still at 1.3-1.4%. That is not as good as the Administration spins it to be.

But back to the first curve, it is essential to watch this one, it is the Table of Doom!

Laws Against Catholics

The Penal Laws in England stated the following as regards to the Irish Catholics (See Duff, Six Days to Shake an Empire, 1966, pp 59-60):

No Catholic permitted to vote in parliamentary, county, borough or corporation elections.

No Catholic permitted to stand for parliament, or for a county or borough or corporation.

No Catholic permitted to hold a commission in the army or navy, or a post in the civil service.

No Catholic permitted to be a member of a learned pro­fession, except medicine, and in that only a chosen few.

No Catholic permitted to open or administer a school.

No Catholic permitted to teach.

No Catholic permitted to carry a firearm without a licence, seldom granted.

No Catholic permitted to own a horse worth more than £5.

No Catholic in trade or industry permitted to have more than two apprentices (except in the linen industry, which was to the Ascendancy's advantage).

No Catholic permitted to manufacture or sell books or newspapers. (This included all printing.)

No Catholics permitted to marry a Protestant

No Catholic estates permitted to be entailed.

No Catholic permitted to take or grant mortgages.

No Catholic permitted to take a lease for more than 31 years, and then at two-thirds the annual value.

No Catholic priest permitted to enter the country from abroad.

All Catholic archbishops and bishops must leave Ireland under the penalties for high treason. One priest only permit­ted to each parish, however large.

All Catholics were made to pay special taxes. All Catholic owners of land were subjected to special re­straints and disabilities.

All of any Catholic's estates must at death be divided among all his children.

No Catholic priest permitted to move one step outside his own parish.

We may have had of laws like this before, and perhaps again, even here in the US. And by the way, many of these are still on the books in England! Is the current HHS ruling the first new "Penal Law" for the US?

Individualism, Progressives and Contraception

The current flap over the demand by the Federal Government that Catholic institutions provide birth control in direct violation of their beliefs has been framed in two ways. By the Individualists it is what right does the Government have to tell me what to do when it violates my faith. To the Progressives this is women's health.

Now women often spend  hundreds if not thousands on makeup and skin creams, not yet covered by ACA but perhaps not far away, and likewise thousands on iPhones and other stuff but the law demands that all employers fund certain types of medication. On the other hand the law seems to be creeping along so that it will refuse PSA tests and prostate biopsies while funding birth control. Logic? Hardly.

But it does go to the heart of one's world view. To the Right it is the right to be left alone and make individual choices. To the Left it is that there is a central authority that deems what is best and we then all MUST follow it. Just read the comments in the NY Times and other outlets as to public views.

This is a true core issue, not the contraception issue, but who tells whom what to do and at whose costs. I had major problems with the current health care bill from the start. I imagined a morbidly obese GS 9 telling me what I can and cannot do, even with my own money. I was told the fear was unfounded. Yet we have a head of HHS doing just that to a Church, well "First they came for the Catholics .... and then they came for me, and there was no one left..."

One should remember that the current President was educated at Columbia University, a school which has had a long standing dislike, to say the least, of Catholics. I personally experienced that in 1960 when I was denied admission to Columbia expressly because I was Catholic, in writing, from a Dead! Thus perhaps we should not expect any different treatment from alumni. But as for the Individualists this is just another nail in the coffin of our freedoms, the creation of a country that De Tocqueville would hardly recognize.

The Progressives fundamentally believe that their truth is a universal truth, the only truth, and despite the belief of others they must all follow this humanly discovered truth. This, more than any other issue, is and must be the core of the discussion in the upcoming election. Do we have individual liberty and rights or is there some elite group whose ideas we all must follow, or else.

One is not forced to work at a Catholic Hospital, or University, and although I support universal health care, it is primarily for those tragic moments when survival is at the fore, not for runny noses, wrinkles, or even contraception. There must be a point when the individual makes a choice, and not the Government.

What of the employers who will fire someone who smokes, someone overweight, why are they free to do that. I agree they should but then why this flap over contraception. It is not cancer surgery, it is not testing for breast cancer, prostate cancer, it is in many ways akin to decongestants.

The problem is that we have empowered HHS and the hundreds of new agencies under ACA with powers we could never imagined. Remember, "you will see what is in the Bill after you pass it..." We are just beginning to see. The future looks terrifying.

POST NOTE: Just after posting this Greg Mankiw linked to a Cochrane Opinion in the WSJ which adds to the argument. Now Cochrane has a great economic argument but I further believe that the real issue is a battle of world views, Individualism versus Progressives, liberty versus Government control. When reading comments the Progressives write, they have a fervent religious belief, albeit ungodly, in the sole correctness of their conclusions and opinions. The Individualist says that anyone may hold any opinion, the Progressive demands that everyone comply with theirs. The issue is not what the Catholic Church says but that the Government believes that it is sine qua non, above all. The Progressive believes in a Government which has become a usurper of liberty. The question is; what world do you want your grandchildren to live in, unless of course you are consuming all those free contraceptives. In which case you may not really care.

China, Canada, Oil, and the Election

China Daily rep[orts on the completion of the agreements between China and Canada giving China access to most of Canada's oil reserves. They state:

Wen Jiabao on Wednesday urged the forging of a long-term, stable and diversified partnership with Canada in the energy and resource sector.

"The negotiation on China-Canada investment protection agreement has concluded. We hope to sign the important document as soon as possible to facilitate two-way investment," Wen told visiting Canadian Prime Minister Stephen Harper in the Great Hall of the People.

Harper came to Beijing Tuesday for his second China visit since taking office in 2006.

Calling the two economies highly compatible, Wen proposed to draw up an all-round plan on boosting bilateral economic cooperation based on joint research on economic complementarities.

One wonders what the current Administration may think regarding their decisions to thwart the US relationship here. It will drive costs sky high while playing into the hands of a potential global competitor or possibly even worse.

Law of Unintended Consequences

Some tax lawyer wrote a piece in the NY Times today suggesting that the IRS get taxes from shares held at a then market valuation of some sort. He states:

This tax would not affect the middle class, or even most wealthy Americans. Nor would it affect small-business owners. It would affect only individuals who were undeniably, extraordinarily rich. Only publicly traded stock would be marked to market. 

Some would argue that it is inherently unfair to tax “paper gains” before they are realized — Mr. Zuckerberg won’t receive $28 billion in cash; he holds only paper. Moreover, markets are inherently volatile; one year’s paper gains is another’s real losses. However, these arguments are far less credible when paper losses give rise to real tax refunds. Moreover, in a downturn, the mark-to-market tax would act as a fiscal stimulus — the cash refunds would offset a declining stock market. 

This proposal follows the Ronald Reagan model by broadening the “base” of tax without increasing rates. In fact, Reagan was responsible for the last major reform of our antiquated realization system when he signed a law requiring taxpayers to pay a tax on interest that accrued on bonds but was not paid. 

The most profound effect of a mark-to-market tax would be to level the playing field between wage earners, on one hand, and founders and investors on the other. Superwealthy holders of publicly traded securities could no longer escape tax on their vast wealth. 

Now leaving aside the sanity of this scheme one should examine the unintended consequences.

Let us assume I start a company. I put say $1 million of my money in it. It gets going. I need more money, and I get a first round of financing at a $9 million pre money valuation and raise say $9 million. My one million is now worth $9 million and I must pay 35% tax on this $8 million gain even though I never saw a penny and am still out $1 million. 

So why would I start the business? And if I do a second round at say a $40 million pre money, my first round investor must pay tax on $11 million and of course so do I. Why would he want to invest, his rate of return is destroyed just then and there!

So what will happen, well we will find ways to do start ups in say Mauritania or some other place that does not have this strange way of taxing. 

It seems clear to me that this fellow is clueless about the entrepreneur. The money was meant to grow the company, employ people, pay taxes, not give money to the Government. I guess it is now clear why we will be in this mess for a real long time.

Why I Hate Dickens

When I was quite young my grandmother handed me the above set of Dickens. She had been the head of the Socialist Party in New York and ran for Senate and NY State Treasurer. Never won. Yet I had to read Dickens so that understood the problems of the underclass. Now at the time I did not know that I was the underclass but by reading Dickens I was to see that there were those who were oppressed by the rich. Kind of the Occupy folks of today, but they are not really underclass.

Now I read all of these, and trying to see how they related to New York in the early 1950s was a bit of a stretch. You see Dickens understood the British class society, and we in the US, at least then, had a somewhat classless society. Or at least none of us saw any limitations on what we could achieve. For Dickens and the Brits class and your position in society defined your very existence. For me it made no sense. Thus book by book I read understanding that this world made no sense and even if it did as an American I could change it, I was not set in concrete. After many conversations even my grandmother was a believer.

I never made my grand children read this nonsense, yes nonsense. And today is Dickens' 200th anniversary of his birth. Perhaps for some he presents a world of meaning but for others he presents a planet on which we have no knowledge and we would never even want to understand it if we did. Thus unlike so many fans of the man, I felt he was the low point of my youth.

The Employment Numbers

The above shows the employment numbers from a telling perspective. The curve showing percent in base has declined again, allowing the decrease in the reported numbers. And this is WITH the seasonally adjusted numbers. Thus the number is truly less optimistic than what has been presented.

The above shows that using the base of employables before the collapse that we are still at 12% or higher in unemployed. The rate may be declining but not when adjusted for the base.

The above shows population and employed. Note the dip but also note that we are now barely keeping pace in rate of growth. This does not bode well. The numbers are "good" only because they have been adjusted; adjusted by seasonal number and adjusted by reducing the employable base.