Monthly Archives: October 2012

Plug-in Prius payback period…

I’ll start with a preamble, expressing hope that the tragedies and suffering from Hurricane Sandy can be limited to a minimum.  And, recognizing that there are undoubtedly other tragedies I’m unaware of, whose victims are just as deserving of such hopes — I wish them the best as well.

I’ll also note that the Red Cross has a variety of apps available for emergency situations, including an earthquake app where you can sign in after a disaster, so that concerned friends and relatives visiting the Red Cross website can find out if you’re safe.  (The chances of them reaching you by phone are slim, given how phone lines overload in emergencies.)

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The inevitable question was asked about the payback for our Plug-in Prius purchase (versus a different vehicle), using time-value-of-money, assumed electric and gasoline costs, and so forth.

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1.  I’m going to argue that this is the wrong question.  The Plug-in Prius isn’t an attempt to save money, it’s the end result of having saved money.  By “delaying gratification” for various things (most specifically, the gratification of owning a house) we were lucky to wind up able to afford the vehicle.  (We also contented ourselves with a very old car, and managed to avoid acquiring a taste for cigarettes, alcohol, or fancy cuisine.)

Consider that many couples go out for a fancy dinner on their anniversary: perhaps they go to a nice steakhouse, order three courses, and enjoy some red wine as well.  From a purely financial perspective, that’s nuts because McDonald’s is way cheaper, and there’s no way to achieve net savings on the fancy dinner.  Well, unless one considers the certainty of divorce by a spouse who realizes they’ve married someone who sees relationships as an accounting entry:

 “Honey, by eating at McDonald’s instead of a fancy restaurant for our anniversary for the next twenty-seven years, and investing the roughly-$100 difference in a no-fee mutual fund compounding at 8% per year… we’d have $10,000!”

In a similar way, we could have purchased a nice used car, or even a new but much less expensive non-hybrid vehicle.  But since we could afford it, we chose a car which would benefit our son, in much the same way that married couples who can afford it, spend a bit more money to celebrate their anniversary — which presumably benefits their relationship.

As a side note, here’s a recent study arguing that small-battery PHEV’s (such as the Plug-in Prius) and regular hybrids (such as the regular Prius) are the most cost-effective way of reducing societal gasoline consumption… and by extension, of reducing transportation-related GHG emissions.

All of which is to say that the Plug-in Prius wasn’t bought as a cost-saving measure so much as a conscience-saving one; and it was paid for by previous cost-saving measures.  :)

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2.  Payback questions are highly influenced by one’s assumptions about the (uncertain) future

In the article, I estimated that the Plug-in Prius would prove cheaper than the regular Prius, after about 150,000 electric-mode km.  This was based on several assumptions:

– the Plug-in Prius’ premium over the regular Prius was $8000     (safe assumption, I checked it)

– electric prices of roughly 7 cents / kWh from BC Hydro       (reasonably safe assumption: BC Hydro has a record of keeping rates low, despite the fact that raising rates would spur conservation.)

– all-electric distance of 20 km for 3 kWh, or about 20 cents, of charge    (safe assumption, based on personal experience)

– gasoline consumption of 1 L per 20 km    (reasonably safe, based on personal experience; there’re a lot of hills where we live)

– gas prices of roughly $1.40 per L     (extraordinarily risky assumption, given how the price of oil has fluctuated over the past decade!)

The calculation therefore works out to a savings of $1.20 per 20 km (6 cents per km) in electric mode, so the number of electric km required to save $8000 equals:  (8000/ 0.06) = 133,333 electric km.  Since I was being quoted, I added a safety factor to come up with the 150,000 km.  Which is probably the equivalent of about ten years’ driving.  Good thing we plan to own it for twenty!  ;)

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I could get very different numbers, depending how I chose my gas price assumption!  And choice-of-assumption is often how people on different parts of the political spectrum can come up with wildly-diverging results on various issues.  As an example, supporters of Public-Private Partnerships (P3’s) claim they’re cheaper than government projects.  Opponents argue that this is due to flimsy assumptions (here’s a paper a Canadian union wrote up) and that other arrangements are more economical.  I don’t know enough about the nuances to know which is more correct, but given how the fantastically wrong assumptions of the right-wing deregulation faction caused the 2008-on-and-lingering financial crisis, I doubt the benefits are quite as extensive as proponents claim!

Similarly, there’s been noise about how the US could surpass Saudi Arabia in the carefully-chosen category of “liquid hydrocarbons” production.   I want to devote a separate blog entry to this fallacy, but suffice to say that Saudi oil production is about 10 million barrels per day, and American oil production is… 6 million barrels per day, and barely climbing.  The balance largely consists of about 1 million barrels per day of biofuels (a ridiculously roundabout way of turning natural gas based fertilizer and coal-based electricity into a liquid fuel) … and natural gas liquids and condensate, none of which are practical for running vehicles.  True, they could be refined into gasoline — but you’d have to build or retrofit an existing refinery first!  Here, the silly assumption is that all liquid hydrocarbons are equivalent to oil.  They’re not.

All of which is to say that payback calculations often give a false certainty to decisions built on a foundation of fluid variables.

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3.  Opportunity cost for companies is different than opportunity cost for individuals

It’s common in industry to assign a time-value-of-money, when deciding whether to move forward with capital expenditures.  This is tied in with the opportunity cost of a spending decision: the lost benefit of not doing a different project which would have also saved money in the long run.  A related metric is the payback period, being the time it takes for the savings to offset the up-front cost.  That’s the easiest to discuss without getting into detailed math, so I’ll focus on that.

A chemical plant has a zillion ways of reducing processing costs, so it’s not uncommon for spending decisions to have to pay for themselves in two years.  Other businesses might be a bit more lenient, but from what I’ve seen, three years seems to be a common cutoff.  Companies can’t afford to spend money on a project with a ten-year payback, because there are so many other projects which are more cost-effective.

Unfortunately for Mitt Romney, corporations aren’t people.  Unless a person is speculating in real estate or fad collectibles, there aren’t many purchases they can make, which will pay themselves off in a two- or three-year period!  As for the time-value-of-money, ING’s high-interest savings account currently offers a whopping 1.35%.  As for those who might be tempted to use the stock market’s historical average of 8%-per-year as a time-value-of-money metric… that hasn’t really (or should that be, “really hasn’t?”) worked for the past decade.

All of which is to say that business-type financial measures lose their meaning when applied to personal spending decisions.  Transposing them from the business context to the personal-finance context, is one of the dubious assumptions noted in (2) above.  :)

“Call Me Maybe” follow-up is a Major Second song…

I heard Carly Rae Jepsen’s new song Curiosity on the radio yesterday, and was fascinated that it’s a Major Second song.  By which I mean the song undergoes a key change upwards partway through — and to use the musical term, the key change is a “major second”.

If you purchase the song (like I did :) ) — or simply hear it on the radio — you can listen for the key change at about 2:10.

Regrettably, I can’t tell if it’s a Four Chord song.  :)

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Like the Four Chords, the “major second” key change is part of every musican’s toolbox, and is generally used to give songs an uplifting extra “push” two-thirds of the way along.  Vaguely like the seventh-inning stretch in baseball, I suppose, or the twenty-minute tea break in cricket.  :)  The fact that Ms. Jepsen used it, is perfectly fine; indeed, she uses it pretty effectively.

Other notable Major Second songs in my iTunes collection, or which otherwise come to mind, include:

– Diana Ross’ Chain Reaction (at roughly 3:00)

– Whitney Houston’s I Wanna Dance With Somebody (3:15)

(I’m presuming Mariah Carey has used it too, but don’t know many of her songs)

– Michael Jackson’s Heal The World (4:30 in my version, which stretches about 6:30 long)

– and also his You Are Not Alone (3:45)

– Shania Twain’s Any Man Of Mine (2:45)

– Oasis’ Hey Jude tribute, All Around The World (4:45)

– Kylie Minogue’s Your Disco Needs You (2:45)   (only the bridge)

– Taylor Swift’s Love Story (3:15)

– and personal favourite Pet Shop Boys’ gay anthem-turned-basis-for-soccer chants, Go West (3:30)

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The last mention, however, has to go to Aussie comedy trio Axis of Awesome, with their masterful How to Write a Love Song (2:30 and then again at 2:50!)

Obama regains “Eye of the Tiger” in 2nd Presidential Debate

I missed the first Presidential Debate last week, but gathered from the chatter that Mitt Romney stole a round from a woefully-underprepared President Obama.  The commentary gave the sense that Obama prepared for the event in the way Apollo Creed prepared for the fight in the first Rocky movie.  As Apollo’s trainer told him after the champ got knocked down the first round, “he doesn’t know it’s a damn show, he thinks it’s a damn fight!”

Media leaks even suggest that Obama actually thought he won the debate for most of the next day, until some metaphorical kid burst his advisor-bubble with a “hey, the emperor is naked” moment.

I saw portions of the second Presidential Debate yesterday night, in which “2008 Obama” reappeared, thoroughly out-debating and out-classing Romney, whom the moderator caught in a massive factual error (see about 1:20) – Romney insisted it took Obama two weeks to call the attack on the American Embassy in Libya a terrorist act, whereas Obama had in fact called it an “act of terror” the next day.  Ah, the perils of relying on Fox News for one’s facts.  :)

Returning to that first Rocky movie, Obama pummelled Romney the way Apollo pummelled Rocky in Rounds 2 through 14.  For you cultural orphans who haven’t seen the movie — it was the 8 Mile of its day! — this video clip provides a good summary.  The rest of the movie is largely filler.  :)

And incidentally, on the topic of 8 Mile, in its climactic rap-battle Rabbit disses arch-nemesis Papa Doc’s privileged upbringing, saying (in a totally NSFW clip):

I know something about you, you went to Cranbrook – that’s a private school!  

Given that Romney actually DID go to Cranbrook as a kid, bullying a gay classmate no less, it’d be beyond awesome to have Obama use that as a one-liner in the last debate!  :)

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Combined with Joe Biden’s casual beat-down of Paul Ryan in the Vice-Presidential debate, things are looking up for the Democrats.

Unfortunately, the outlook is more nuanced – negative, even – for progressives.  The American right-wing has moved their goalposts so far to the right, Obama inevitably looks good by comparison.  As such, he gets support from American liberals (think New York Times readers) and the American left (think Michael Moore).  Back in the day, it was said that Bill Clinton was the first black President, because of the extraordinary support he enjoyed from the African-American community.  Future historians and students of politics might well call Barack Obama the first black Republican President, because he’s basically governed as a moderate Republican.  Despite high hopes, BHO has fallen well short of FDR.  And in some key ways, he’s indistinguishable from GWB.

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Plug-in Prius press

Today’s (Oct 12, 2012) Burnaby Now has an article on how we came to purchase our Plug-in Prius.  Many thanks to Jennifer Moreau for making me sound articulate, and to Jason Lang for doing his valiant best with a not-quite-photogenic subject.  :)

The photo was taken at a bank of charging outlets at BCIT’s Burnaby campus.  Amusingly, while regular parking spots are $3 per hour, charging spots are $3.25 per hour.  So, there’s a $0.25 / hour premium for the charging service.

Since the outlets will deliver about 1 kWh per hour, that translates to an electricity price of 25 cents / kWh, about 4x BC Hydro’s standard rate.  Of course, that’s probably justified by the fact that BCIT had to do a bunch of work to install the charging posts in the first place.  :)

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We live uphill from BCIT, so driving there involved a lot of downhill driving — enough downhill driving that the brakes regenerated enough energy to give the vehicle 1.7 km of all-electric range.  Since 3 kWh is good for roughly 20 km of electric-vehicle range, that would imply the vehicle recovered about 250Wh.

So, what does 250 Wh represent?  Well, it’s about enough energy to power a hair dryer for ten minutes.  Which gives a sense of just how much energy hair dryers consume!!  :)

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Addendum: just for clarity, the line towards the end of the article should be read, “he’s done the right thing and saved money”.  The right thing isn’t the saving of money, in this particular case; rather, the saving-of-money would be a nice bonus in addition to having done the right thing.  :)

Muslims in America and other hidden ethnic histories

Yves at Naked Capitalism cross-posted a wonderful Alternet piece by Lynn Parramore, eviscerating the idea that Islam is new or alien to America.  In truth, the Muslim faith has had a long (if lightly-populated) history in the United States.  Islam arrived in America so early, the Puritans hadn’t even burnt their first witch!!

While the 1620 voyage of The Mayflower is deeply mythologized in the American psyche, the 1630 arrival of devout Muslim Anthony Janszoon van Salee in the New Netherlands, gets a lot less attention.  Which is a pity, because he seems to’ve been a business magnate — he had the foresight to buy Manhattan real estate back when it was cheap!  (It seems he once owned the land on which Wall Street was built.)  On top of that, he winds up being an ancestor of Cornelius Vanderbilt, one of the richest men of all time.  Why is this Horatio Alger-style “self-made man” not already an American legend??

(For those of you keeping track, van Salee arrived a short ten years after The Mayflower.  According to Wiki, New England executed its first “witch” seventeen years later, in 1647.  And the Salem witch trials occurred in 1692/1693.)

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It’s deplorable that a fringe of American society wants to pretend the country is / should be Christian, on the flimsy and faulty premise that it was founded as such.  While the first pioneers in the 1600’s may have been passionately religious, by the late 1700’s the colonies were led by men whose intellect helped shape the Age of Enlightenment: or, as it was also known, the Age of Reason.  For many of them, the philosophy of choice was Deism — the atheism of its day, attacked by the righteous cacophony of religious conservatives.

One example is Thomas Paine, whose pamphlet Common Sense may have done more than any other document to galvanize the independence movement.  He was ostracized later in life for his scathing criticism of Christianity, his funeral attended by a mere six people.  The more potent case is Thomas Jefferson, author of the Declaration of Independence, who created his own Gospel — commonly known as the “Jefferson Bible” — by literally cutting-and-pasting the four gospels of the New Testament into one combined, miracle-free, Resurrection-less narrative.  (Definitely not the behaviour of the faithfully devout, or one considering the text holy.)  To quote from the Wiki article:

[It] begins with an account of Jesus’s birth without references to angels (at that time), genealogy, or prophecy. Miracles, references to the Trinity and the divinity of Jesus, and Jesus’ resurrection are also absent from his collection.

With “Christians” like that, who needs atheists?

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Holding a mirror to country and community reveals hidden ethnic histories of our own — and not just of the Aboriginal peoples, who have suffered seemingly-interminable injustices over the centuries.  In my home province of British Columbia, Vancouver and the surrounding suburbs has seen an influx of east Asians in recent decades.  (My wife among them.)

As of the 2006 census, 45% of residents in the suburb of Richmond claimed Chinese heritage.  Given that the Chinese population grew by 20% in the five years from 2001 to 2006, it’s possible that as I write this (2012) Chinese-Canadians are the majority in Richmond.  Delving further, we see that “visible minorities” in Richmond have a formidable 2/3 majority!  Which makes for some exceptional cuisine.  :)

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