149 Comments
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C-man's avatar

Being interested in intellectual history, I’m always trying to figure out: was DOGE the culmination of James Burnham’s critique of managerial technocracy? Sam Francis’s populist-nationalist antiglobalism? Is there some Paul Gottfried in there? Spengler? Schmitt? Anybody? What is the lineage here?

And then you realize - nothing. It was like four 22 year olds right-clicking and selecting “delete” a bunch of times. “lol who needs weather forecasters” is about as far as they got.

At least if there were an ideological project it’d be an ethos, Dude.

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Sean O.'s avatar

The ethos, if anything, was that the federal government's financial situation could be improved by cutting payroll (amongst other things). Unlike in most companies, however, payroll is not close to the largest of the government's expenses.

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BK's avatar
2dEdited

This is where the DOGE people just have no idea what they're doing. They could fire 100% of the staff at HHS and it would reduce the budget of HHS by 1%.

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Sean O.'s avatar

Exactly.

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Just Some Guy's avatar

Pensions on the other hand are a pretty big expense across all of government but DOGE had no attention to detail.

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Sean O.'s avatar

Pensions are politically untouchable. I've already prepared myself for the next Dem federal trifecta to bailout the State of Illinois to the tune of hundreds of billions of dollars.

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Just Some Guy's avatar

Compromise: Illinois gets bailed out on the condition that they switch all employees to defined contribution plans.

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Thomas L. Hutcheson's avatar

Massively un-Ygelesiasian policy. Like student loans but with more concentrated and less sympathetic beneficiaries.

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Sean O.'s avatar

It is absolutely terrible policy. But the Democratic Party is the party of government employees, so they will do it anyway.

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Thomas L. Hutcheson's avatar

I don’t write about politics. I’m writing to influence what advocates advocate.

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ML's avatar

Why does the government need meteorologists, you can just go to the weather channel. This is the level of thought that went into this, right from the top with musk and trump.

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Thomas L. Hutcheson's avatar

Implausible.

We need a real explanation.

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evan bear's avatar

Isn't it just that (a) they see the types of people who are likeliest to be employed by the federal government as enemies and want to hurt them, (b) they see the duties carried out by these federal workers as worthless and want to destroy their offices? Is that not an ideology?

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Falous's avatar

(a) I think was a large part of the Trump circle

After Election I was actually thinking seeing the various articles and posturing from Federal circles about a new "Resistance" that this was very unwise LARPing about "resistance" based on the fairly mild Trump I and very dumb to posture about when he actually won over Hárris/Biden* - if you're actually facing authoritarian willing to do real authoritarian stuff, one thing you don't do is run around posturing in public about it. That's LARPing (Live Action Role Playing, i.e. not fully serious, playing pretend with scary phrases words, but not really deep down w full belief).

There's a source of problem - LARPing using crises terms,etc but not really actually in crisis or acting as real crisis. Drama & click-bait language seeking to make more bog-standard plug along things more fun and sexy.

Except if it turns out not to be a LARP but something like the real deal, you are really fucked as you've not really acted like the serious genuine threat.

the "Resistance talk" likely fed into action (as if you're really making an authoritarian play, if you on authoritarian side are kind of LARPing yourself, you want to target)

my experience in other places, real "resistance" doesn't publicly LARP.

(saying Biden as FallSecond half of Harris campaign reverted to being Biden wearing a mask in a way from over-dominance of Biden people resp for Biden-up-to-withdrawal)

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evan bear's avatar

It sounds like you think Trump is in the right because the people he hurts deserve to be harmed.

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Falous's avatar

It reads to me that you need to develop critical thinking and reading skills, and develop an understanding of how to read for understanding outside of your narrow universe.

Nothing in the above expresses any approval of Trump.

What is does do is indicate that an online posturing pre-Jan-to-early-January was Not Wise To Do if one was expecting real authoritarianism - not merely waiving and posturing about Authoritarianism but actually soft expecting Trump I repeat. (which evidently many were expecting, I was I will be honest, not something I loved but could grit teeth through).

and opining that LARPing habits where online Click-Baiting Drama Language habits using Drama Terms (Fascism!, Authoritarian!) without actually really expecting them is (a) consistently leading to boy-cried-wolf devalue, (b) leading to getting wrong-footed when something like the real deal starts to occur.

Improvement and correction comes through understanding error, not excusing it.

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Sean O.'s avatar

Many in the Trump administration probably see federal employees as enemies. But MAGA writ large seems to believe that federal employees don't do anything and are just getting fat off taxpayers' dime, and MAGA wants to get revenge by forcing federal employees to experience what non-federal employees experience every day: getting laid off.

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Falous's avatar

Probably a component, the 2nd part and the working class component of MAGA voting (not to treat this as an immutable real thing).

As a larger component of a working class backlash against the over-dominance-presence of professional class (writ large the college educated working in knowledge components of all sectors, and especially in the knowlege industries / services-to=IT) that becomes politically channeled in a specific way now that the Parties have had a heavy sorting where Prof Class / College Educated (4 yr degree plus) are so heavily overweight to Democrats - particuluarly the urbane urban-to-suburban Prfl classes concentratedin large metro areas.

And Democrats public orientations in presentation, zones of concerns (Democrats large vs Party given Party is basically a brand name) becoming so hugely Prof to Academic Clases inflected and oriented.

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Jesse Ewiak's avatar

Again, USAID deletion was not a thing, even in Project 2025, other than typical waste and abuse.

It happened because Elon Musk and people like him saw some racist memes.

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Miles's avatar

As an older person in tech, there is an intuition around firing the people who have been here a long time and have maybe gotten slow and lazy. Replace them with eager fresh faces who will work harder. :(

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Thomas L. Hutcheson's avatar

Probably we need some real research in this. Is "we don't need a weather service" that just any naïve computer guy woud think? What did DOGE think it was trying to do besides targeting DEI?

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C-man's avatar

Yes, we need an investigative journalism dive into this - but we’re not going to get it any time soon.

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Bennie's avatar

Speaking as a libertarian who wanted to take a chainsaw to the government, I think the problem with DOGE was that it was working from the bottom up, rather than the top down- where you ask the big picture questions about what the government should and should not be doing - and could not see the proverbial forest from the trees.

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Thomas L. Hutcheson's avatar

"ask the big picture questions about what the government should and should not be doing"

This does not lead to a chainsaw approach. It's much more likely that what government should and should not do (activities with NPV>0 and NPV<0) are well mixed if not emulsified in any given government agency.

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Falous's avatar
19hEdited

The problem with DOGE is it began with total misidiagnosis - like this in fact.

Neither Top Down nor Bottom Up change anything if one does not address the rule sets. Not so much if Gov s/b doing X but is Gov doing X in a way that is efficient and market oriented/responsive - Steven Koltai (who I do know personally although close to) note on his experience : https://stevenkoltai.substack.com/p/usaid-and-government-inefficiency puts a finger on it - the archaic outdated rule sets (similarly Reason on archaicism of Paperwork Reduc. Act generating inefficiency: https://reason.com/2025/04/16/the-paperwork-reduction-act-created-a-paperwork-explosion/)

Insofar as USGov is about the same total employee base size as in the 60s, asking the question in a reduction of force mode starts from the wrong idea. change the number of people but make them work under internally incoherent byzantime rules & regs deseigned in a 1940s-1970s mindset is going to default back to paralysis and ineffciencies, esp. economic ineffeciencies.

As anyone who has encountered directly USGov contracting - it's willfully perverse and as Koltai says - I agree with him - the baroque and byzantime rule sets make efficiency impossible (well maybe to be reasonable and not ideological, very difficult).

Myself as a small l classic liberal pragmatist (classic liberal as in for general freedom, free markets, freedom of assoc. etc but not inverted bolshevik ideological hostility to any regulation) - I think the Abunduance Agenda put forth by the folks like KLein and Yglesias has a great common ground with Libertarian and free markets if there is a focus on Red Tape cutting.

I've gotten enthusiastic about this as it just may have the right traction.

forget abolishing all regulation and pie-in-sky - a good streamlining,modernisation to the computer age of operational, procurement regs (and of course removal of anti-market NIMBY levers to max extent possible) could do wonders.

ETA worth quoting Koltai

---

"I had spent most of my life in the private sector (as both an investor, corporate executive and a tech entrepreneur). I met so many really smart, dedicated people in Government, I just couldn’t understand how they could be so clever and the fruits of their labor so often wide of the mark. The problem I eventually realized was not that the staff were making capricious or even just poor decisions, but rather, that they were stymied by legal (Congressionally mandated) rules that would hamstring any more efficient actions. The lack of understanding the difference between how Government and private business operate is precisely what happens when anyone from the private sector first enters government. We are seeing this play out in spades today – it’s what has led to the chain saw approach to improving Government efficiency currently underway.

....

When auditing a course at a major DC law school on Federal Contracting and Procurement, our professor began by telling the class, about half of whom were experienced, mid-career procurement practitioners, “the key to success in this course and this subject is to forget everything you ever knew about how contracting, procurement and purchasing work in the private sector.” I quickly realized this was the most important lesson in government contracting. The Government doesn’t work according to the same rules as the private sector.

“Essentially,” a long-time colleague of mine that USAID explained, the FAR has become a morass of “barnacles growing on barnacles.” Every member of Congress for decades has inserted what are often very narrowly defined rules designed to favor a specific local industry (or often, one company), so that by the time you could issue a request for proposal, it is so constrained by these requirements as to make the order virtually impossible to fill. The vast majority of these rules come from Congress, not the agencies in question. The agencies just follow the rules. What’s more, many of the largest contractors (aka “beltway bandits) have muscular legal departments whose sole purpose is to contest unsuccessful bids.

-----

He references USAID world but nothing observed there can't be extrapolated to Defense (much bigger budget) etc. including how established Contractors use byzantine Gov rules to squeeze out competition....

I can see a decent zone of compromise between the center-lefty liberals and classic-liberal to libertarian on reforming - red tape cutting.

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Falous's avatar

Yes.... it is very much intellectual mistake to see intellectual real roots here.

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Sean O.'s avatar

https://x.com/DKThomp/status/1953797071275765802

Young Americans are becoming less agreeable, less conscientious, and more neurotic. Yay........

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Kirby's avatar

Legends speak of a distant past when people had sex and were chill and stuff. I think it was five or ten years ago. I’d ask ChatGPT, but I don’t want the country to run out of groundwater, and I’m too busy watching TikTok.

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Kenny Easwaran's avatar

I assume you're joking about the groundwater thing, but it actually probably takes a similar amount of water to watch a few minutes of video as to run an AI system - it's just that it was decades before people thought to attack online video on the energy and water grounds, while the anti-AI people came up with it in a paper whose title contains an emoji.

https://s10251.pcdn.co/pdf/2021-bender-parrots.pdf

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disinterested's avatar

There's something to this criticism though when facebook/meta is talking about building a data center that's literally the size of Manhattan

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Kenny Easwaran's avatar

There are farms much bigger than Central Park that use far more water. Why does being the size of Central Park make it relevant?

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disinterested's avatar

I know you know that water usage of massive farms gets a lot of criticism

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David Olson's avatar

It's a dumb criticism for dumb hippies. I'm not even an AI hype guy, but data centers are basically the single most energy and water efficient industry that exists. It's basic thermodynamics. The key unit of work is done by microscopic transistors each of which only require a countable number of electrons to produce a value. Flashing an LED light--a comparable binary state machine--bright enough to be visible to the naked eye consumes more energy by orders of magnitude.

The reason these data centers consume water and energy at a scale appreciable by human measure speaks only to the sheer volume of work being done by an inconceivable number of these tiny state machines. It's why tech revenues/valuations dwarf every other industry. They're THAT much more efficient than everything else. The existence of this "data centers consume too much water/electricity" complaint when it's literally the most efficient industry that exists betrays an understanding of the world informed by The Matrix and chobani commercials and an inability to apply lessons taught in high school physics to real world intuition.

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Thomas L. Hutcheson's avatar

Why is this a groundwater issue for AI in a way it is not for nuclear power? [Question, not snark]

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disinterested's avatar

Being gregarious and conscientious in the tech industry in 2025 is a superpower.

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Sean O.'s avatar

Is that why people still trust Sam Altman?

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disinterested's avatar

I wouldn't really say he's either. He comes off as a classic salesman.

I was referring more to my own experience. I'm....fine at my job, but I'm friendly and can talk to most people, so I've excelled in the actual workplace.

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Jay from NY's avatar

My most boomer thing is being super annoyed when checking out at the grocery and the kids checking me out act wildly unprofessionally. (I did my time in the aughts)

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Eliza Rodriguez's avatar

My millennial thing is that now that I have a small dog, I get mad at people for driving too fast in my neighborhood.

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Wigan's avatar

"Values are expressed as percentiles of the full population distribution as it stood in in 2014" is a weird y-axis

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Nikuruga's avatar

Yeah here’s the raw data: https://uasvis.usc.edu/corevisualization.php

Looks like conscientiousness has declined by 1.25 points from 36.48 to 35.13 on a scale of 9-45, which is still bad but a much smaller effect than the original graphs suggest, and notably people are still a lot closer to the top end of the scale.

Also interestingly if you look at the graphs in the raw data it looks like most of the decline in good stuff happened in the late 2010s before COVID and actually leveled out and started declining slower after COVID.

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Nikuruga's avatar

Raw data is interesting: https://uasvis.usc.edu/corevisualization.php.

Interestingly if you sort by race almost all their personality measures consistently put Asians at the bottom (lower conscientiousness, openness, agreeableness, and extroversion, and higher neuroticism) and blacks at the top (vice versa). What are they, Harvard? lol…

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Wigan's avatar

From what I understand, all these traits are based on self-description, which is obviously not the most perfectly reliable indicator of oneself's actual description

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FlyingPerson's avatar

I would just again like to make the case that as a Blue City Dem, the organized labor cartel is a significant force making my life worse, and we’re going to have to confront this tricky electoral opponent to abundance sooner or later: https://www.understandingai.org/p/unions-want-to-ban-driverless-taxiswill

——

“When a Waymo representative mentioned the Waymo Driver—the company’s name for its self-driving software, Mejia objected. “Waymo is not a driver. Waymo is a robot,” she said. Mejia considered it “very triggering” for Waymo to use the term “driver” to describe a technology rather than a person.

The next day, Murphy announced legislation requiring that a “human safety operator is physically present” in all autonomous vehicles—effectively a ban on driverless vehicles. Given the near-unanimous hostility Waymo faced at the hearing, I wouldn’t be surprised if Murphy’s proposal became law in Boston.

And while Boston seems likely to be the first Democratic-leaning jurisdiction to pass legislation like this, it may not be the last. A number of other Democratic-leaning states are considering proposals to restrict or ban the deployment of driverless vehicles.

If these ideas become law, we could wind up in a future where driverless cars are widely deployed in red states and illegal or heavily restricted in many blue states. Not only would this be inconvenient for blue state passengers and bad for blue state economies, it would be a powerful symbol of how dysfunctional—even reactionary—blue state governance has become.

If this isn’t the future Democrats want, they’re going to have to say no to the Teamsters.”

———

Luckily, there is also a bill in the statehouse, H.3634 / S.2379, that would pre-empt this nonsense statewide. Hopefully sanity prevails any it passes!

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DJ's avatar

I was never a big union guy but tolerate them in the coalition. I wish Democrats could throw them under the bus, but teachers are a very reliable voting block.

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evan bear's avatar

Some unions are better/worse than others.

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Thomas L. Hutcheson's avatar

The purpose of unions is to compel firms enjoying rents to share them with workers. No rents, no role for unions. And negative value when the union is the source of the rent as with the longshoremen and whole-coast bargaining.

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Mediocre White Man's avatar

Not obvious to me what any of this has to do with organized labor.

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srynerson's avatar

In the underlying Substack article, there are several instances referenced of the Teamsters supporting anti-driverless vehicle legislation.

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Mediocre White Man's avatar

Fair enough, and the Teamsters should be absolutely the last people Democrats should listen to. But presumably their concerns have more to do with trucking than taxis.

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srynerson's avatar

No, that's part of the article's point -- the Teamsters aren't just specifically attacking driverless trucking, but also driverless vehicles in general:

"The Teamsters-backed bill [in Massachusetts], S.2393, is less than a page long and simply requires that all self-driving vehicles have a safety driver—effectively banning driverless technology."

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Kenny Easwaran's avatar

But I think they're only doing it because they think that's the seemingly-intellectually-consistent way to ensure that there are no driverless trucks. Taxis are just collateral damage for them.

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The NLRG's avatar

reducing investment in all driverless vehicles is probably in their interests

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FlyingPerson's avatar

I would hope, but the Teamsters have long been active in the fights over ride share. The ride share drivers in Boston are also unionizing (under the SEIU and Machinists, however).

I suspect they’ll try and get a cut somehow.

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mathew's avatar

It's not just taxis though right?

It would also ban personal use i assume.

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Bennie's avatar

I heard the Teamsters have a great dental plan. Pay your dues and you get to keep your teeth.

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disinterested's avatar

I got an email from Peacock telling me they were increasing their prices, which is how I found out I still had a Peacock subscription, which I promptly cancelled. Great job, guys.

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Tom Hitchner's avatar

Thanks for the reminder!

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Tran Hung Dao's avatar

Hardly unique but I was struck by the subtle NIMBY propagandizing in this news story here in Australia in the ABC (the public news, comparable to NPR or BBC).

"Unley's historic cottages could be lost to make way for Adelaide's newest high rise"

https://www.abc.net.au/listen/programs/adelaide-breakfast/cottage-development/105615092

Notice the framing about "historic cottages" vs "high rise". It could have led with "9 millionaires's homes[1] to be cleared to build 254 homes for non-millionaires, including 15% reserved for 'affordable housing'".

All while bleating about the housing crisis being driven by lip service and hypocrisy (in others, not their own editorial choices).

https://www.abc.net.au/news/2025-02-10/housing-crisis-hypocrisy-lip-service/104915610

[1] I can't immediately find estimated values for the properties being cleared but one across the street sold for $2.6 million in 2021, just to give an idea of real estate prices in the area

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Lisa C's avatar

Any time I think about the Texas floods I feel ill at the thought in particular of all those teenagers at camp getting washed away. For whatever reason, that's a natural disaster that just depresses me viscerally. The idea that it could have been prevented makes me sick, and part of me hopes that we can prove it was preventable to push back against ideologies like DOGE, and part of me hopes it was just random freak luck with no villains.

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Lapsed Pacifist's avatar

I read up as best I could a few weeks ago, and I believe that the warning systems and procedures were actually activated and deployed as they should, that NOAA did in fact issue the correct warnings will in advance, and that most of the blame lies with people ignoring warnings on their phones or not being in range of warning systems.

I welcome correction if this is not the case.

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mathew's avatar

This is my understanding as well

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Lapsed Pacifist's avatar

Air gets colder

Days get shorter

Tune on in to that NOAA radio

-Clutch

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City Of Trees's avatar

I'll be curious to see how much every day people get annoyed with less accurate forecasts. On the one hand, weather is something that people care about more than some of the high level takesters think; on the other hand, people have long grumbled about weather not being completely accurate, and may just build in this grumpiness to whatever comes next.

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Lisa J's avatar

Yes but that classic complaint long ago stopped being true. I’ve certainly noticed how accurate forecasts have become compared to when I was a kid.

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City Of Trees's avatar

True, but plenty of people remember things that are no longer true.

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srynerson's avatar

I agree with you about the substantially increased accuracy of weather forecasts over the decades, but most people whom I've ever have occasion to speak with about weather forecasting overwhelmingly act as though there's been zero improvement in accuracy.

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Lisa J's avatar

Yeah. It’s still a popular joke, those weather forecasts, amirite?? Like, update your priors, people.

*this comment fully SB jargon compliant*

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Helikitty's avatar

Weather forecasts have gotten a lot better, though there’s still room for improvement. We look at wind forecasts to go sailing and there are apps that tell you what various models say from the data and more often than not those models completely oppose each other. But yeah, it usually gets sunny/cloudy/rainy right

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KateLE's avatar

I think that's a result of the 'X% chance of rain', which sounds like 'we think it will rain, but if it does not, then we will still have gotten it right'.

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Steve Mudge's avatar

As a landscape contractor doing lots of construction, weather forecasts have been quite important (pouring concrete, deliveries, whether to have your workers bother to drive to the job site, etc.). Over the last 40 years they've definitely been on a more accurate upward trend, especially the 7-10 day outlook which I find amazing. Trump wanted to gut NOAA and all climatological departments because of the politics of climate change, just continuing the divisive ping pong insanity of sequential administrations undoing the policies of the last one. Goddamn where's a JFK or a Truman or Eisenhower with some fucking guts to have some sober leadership?

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evan bear's avatar

Worth noting that it isn't just Trump. I don't know if I'd say there's a consensus in the GOP around gutting NOAA, but the majority of the most influential Republican thought leaders support it. Like the Heritage folks, which is why it was discussed in Project 2025.

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Ken in MIA's avatar

“…the politics of climate change…”

Is anyone doing any serious climate forecasts yet?

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Kenny Easwaran's avatar

I don't think most people will notice. People just grumble about the weather constantly, the same way they grumble about traffic constantly. When I moved from Los Angeles to College Station, TX a decade ago, I noticed that there was no less complaining about the traffic and no more complaining about the weather, despite the extremely noticeable differences between the two places on both fronts.

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Helikitty's avatar

Crazy that anyone would bitch about the weather in Southern California! (Unless its dryness causing wildfires, that’s pretty legit) People really do have a baseline level of happiness and some percentage of folks will always find something to bitch about.

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Sean O.'s avatar

Farmers and frequent fliers might be the most upset about less accurate weather forecasting. But that won't be enough move the political needle. There are aren't that many farmers and the median American hasn't flown in the past year.

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California Josh's avatar

Skiiers/snowboarders, hikers, and many others care a lot about how much precipation, and what kind, is coming

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Sean O.'s avatar

Again, not enough affected people to make a political impact.

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California Josh's avatar

I don't think it will either but it could have minor localized impacts in places that survive on the outdoor economy. Those places are quite blue already though

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Ken in MIA's avatar

Yeah, God help us if the federal government is unable to accurately forecast skiing conditions. How can the nation hold together?

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Jay from NY's avatar

Yup, skier here, and I’m a complete nut job with weather models in the winter

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Calvin P's avatar

People will notice the degradation. It might not affect their votes directly. But it will contribute to a sense of things getting worse. The build up of many similar small degradations might be enough to affect their votes.

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Sean O.'s avatar

I'm not sure that the swing voters necessary to win elections will connect all those dots.

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Bill Lovotti's avatar

Weather forecasts can be life or death for boaters

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Ken in MIA's avatar

“…less accurate weather forecasting”

Which may never come to pass, notwithstanding this one-sided essay.

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evan bear's avatar

In general, people aren't going to notice (at least not in any specific way) *most* of the bad outcomes that will be generated by the GOP's gutting of so many government offices. On the other hand, people will sort of subconsciously notice if life is getting worse and society doesn't seem to be functioning as well as it used to, even if they can't consciously attribute it to bad weather forecasts or what not.

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Thomas L. Hutcheson's avatar

Whihc with good marketing can be sold as the fault of Democrats.

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SD's avatar

Years ago, a beloved local TV meteorologist (Janet Pyeatt in Madison, Wisconsin for any other older SB readers who happened to live in the viewing area) said that meteorologists can predict trends, but they can't predict weather in a specific locale with any accuracy more than three days in advance. They only do it because the public insists that they do so. I still keep that in mind when looking at forecasts.

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Ken in MIA's avatar

That all depends on what you mean by “specific locale.”

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Thomas L. Hutcheson's avatar

But the real value is in preparation for extreme events and that's were the challenges of further improvement (and dangers of backsliding) lie

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dysphemistic treadmill's avatar

“… will be sharing a short piece with readers on weekday evenings.….”

Whoa, a double-dip, two-scoop serving of content on weekdays?

More helado from Halina!

(Reminds me of the old days of hand-cranking ice-cream that was chilled by a Saline solution.)

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mathew's avatar

Fond memories of doing that as a kid.

It made the best ice cream

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Kirby's avatar

Got nerd sniped for a solid five minutes figuring out what I would name my weather-themed substack. So many good puns…

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Lapsed Pacifist's avatar

NOAAPinion

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The NLRG's avatar

Chance of Glowers, for a really grumpy weather substack

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lindamc's avatar

Love the short form but can we get our regular comment threads back on days without them (including Saturdays)? Thanks!

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Lisa J's avatar
1dEdited

I know, what's happening? ! How can I kill time??

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Mariana Trench's avatar

Yes please!

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lindamc's avatar

I'm exhausted today (owing to overindulgence* in wine at last night's dinner, resulting terrible night's sleep, and extreme heat) and without the Saturday thread, I was forced to waste time on Zillow 😱

* ie, more than one glass of anything other than my low-ABV vinho verde or pet nat. I'm a lightweight...

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Lisa J's avatar
1dEdited

What did you find on Zillow?

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lindamc's avatar

I wasn't seriously looking for anything! But kind of want a slightly bigger place in DC at some nebulous point in the future.

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Mediocre White Man's avatar

So, what does Trump want to do that's too corrupt even for Billy Long?

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Jason S.'s avatar

State incapacity illibertarianism?

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City Of Trees's avatar

https://x.com/benmarrow/status/1953485931970765022

So...airlines finally became profitable by making us all pay a little more in retail prices via increased credit card use, and churn that back into tokenized mile programs. About what I expected once it's laid out to me in that manner...

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Matthew Yglesias's avatar

I don't totally understand this accounting

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City Of Trees's avatar

Yes, your retweet* of this is how I saw this, and I agree that they are very much related. It just seems absurd to me that we have to gain airline profitability in this roundabout matter.

*For those who didn't see what Matt's response was: https://x.com/mattyglesias/status/1953805296595259823

"This is fascinating but I don't really understand the logic of splitting the accounting out this way, it's not like the value of the loyalty program is unrelated to the existence of the airline — people want Delta miles because Delta has planes that will take you places."

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Sean O.'s avatar

Does revenue from credit cards fees/transactions have a different tax treatment than revenue from sales?

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Ken in MIA's avatar

Is airline revenue taxed at all?

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David_in_Chicago's avatar

No. But the future CC cashflows are (or should be) discounted at a lower risk premium. They're all just now helping the investors model off actuals vs. estimates.

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Sean O.'s avatar

Even though the CC cashflows are directly linked to the fact that airlines fly planes?

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David_in_Chicago's avatar

Even more so because historically airlines trade at book value and the stable CC cash lows are miss priced. This change in disclosures and the associated change in investor narrative has been the major driver of the UA multiple expansion (for example).

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Kenny Easwaran's avatar

Wendover had a good video about this a few years ago: https://www.youtube.com/watch?v=ggUduBmvQ_4

The mileage programs of the major airlines were worth $20-25 billion at a time when the airlines themselves had market cap of $6 or $10 billion, suggesting something very similar to what that chart shows. The ordinary cash business of the airline is a loss leader for the ability to sell seats to credit card companies. Just like Facebook loses money on serving news feeds to readers, but makes it up by selling ads to advertisers on top of that.

Obviously you can't separate the real revenue stream from the loss leaders in these cases, but there's something meaningful in this division.

EDIT: Re-watching the video, I see that he's pointing out one big part of it is that airline points are non-taxed benefits that corporations are able to give to their employees by sending them on work travel.

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Ethics Gradient's avatar

This is extremely new to me and rather worrisome. Low fares are convenient but running at an operating loss with respect to unit costs seems nuts.

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Ken in MIA's avatar

“…one big part of it is that airline points are non-taxed benefits that corporations are able to give to their employees by sending them on work travel”

That’s dumb. It would be far less expensive to do a one time bonus, grossed up to cover taxes.

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David_in_Chicago's avatar

They want investors to value their revenue streams based on the predictability of a financial services firm. United's P/E ratio is 9 vs. Visa's at 30.

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Ken in MIA's avatar

“…the predictability of a financial services firm…”

I recall reading an interview with the former CFO of Continental Airlines explaining how, for several years, they made more income for the company from fuel derivatives than from selling seats.

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David_in_Chicago's avatar

Yeap. I’m close with one of the majors CFOs and airlines ops. are probably one of the few markets that reach perfect competition. The insane fixed costs crate so much pricing pressure to fill the plane.

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Ken in MIA's avatar

I was on a full plane today. What a slice of Americana.

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David_in_Chicago's avatar

It's more than that (and I have pretty good access to this story). They also raised their CC fees and annual fee for lounge access which drops directly to net margin. They've unlocked a ton of net margin by charging for class upgrades vs. giving them away based on status (i.e., nearly all 1st class seat is now sold through kindof auction process). They've also all gotten way leaner (i.e., it's really hard to net new headcount approved at any of these places).

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City Of Trees's avatar

Yes, I agree--I was making an observation on the foundation to how they're getting more than that.

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avalancheGenesis's avatar

Five bonus mini-posts a week? Off to a good start with the new hires (at SB)!

I think there's a bit of a generational turnover thing where lots of us grew up treating meteorology as a bit of a joke-butt, that the forecast wasn't much better than oracular pronouncements. It's an important plot device in many movies, for example. But over time, like most things, weather forecasting actually got quite good! So I guess this, too, is part of the nostalgic RETVRN to the 1950s. (Admittedly, the weather *was* better back then...)

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GoodGovernanceMatters's avatar

Wow. I'm first? I'm not sure what to say!

I'll start with the question I had when I clicked: Are these original pieces by Halina (also, welcome!)? If not, some attribution would be useful.

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Halina Bennet's avatar

Hi! Yes, these are original pieces unless otherwise noted.

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BK's avatar

Welcome! If this is the new evening format, it's really great!

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City Of Trees's avatar

I know that off topic discussion will still be part of these threads, but I'll feel a little guilty quickly rattling off whatever crossed my mind through the day with Halina delivering some high quality writing in the article body.

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Halina Bennet's avatar

Rattle away! I promise I won't take offense.

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SD's avatar

I totally missed that there even were evening threads before this!

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KetamineCal's avatar

Ambitious but very cool! Look forward to seeing more!

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Matthew Yglesias's avatar

That's what the byline is for!

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GoodGovernanceMatters's avatar

Touché. In my defense: 1) Ben always had the "byline" on the daily thread, so I didn't necessarily expect it to have the usual meaning, 2) A short piece per day is a lot for one person, so I wasn't sure if that was really the case. SB has prolific writers!

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Corb's avatar

I like having some short form mixed in. Some days I just don't have the bandwidth...

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Lisa J's avatar

I’m with you - actually prefer less sometimes.

There are dozens of us!

(There probably are not)

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