Misdirection

Is a truncated y-axis misleading?

% (n=100)

Truncated y axis on graph


What’s the answer?

1 and 0 puzzle

And for that reason, my mum’s out

I recently looked at contributing to a bridging loan to a company to complete a residential care home for the elderly. I’ll keep the numbers round for confidentiality reasons.

The key financials seem fine, with the facility sited in a demographic sweet spot and forecast to command above-market fees of £600/resident/week due to positioning as a high end option.

But the low operational costs – 90% of which are wages and food – startled me.

Food and drink is budgeted at under £4/person/day. I swapped a few messages with a relative who manages food operations for a budget restaurant chain. Choice quotes:

“Three meals a day? They don’t eat that much I suppose”

“Drinks too? Haha. You’d struggle with that big time”

Back-calculating on staffing costs gives 3 hours of work by a minimum wage employee per resident per 24 hrs. Well, I guess they won’t be spending much time cooking food.

With the loan paying at 10% and secured with a first charge against the property itself at 50% LTV, I’m not sure I’m out. But I definitely wouldn’t want my mum to be in.

When the wind blows

I looked today at investing into a company setting up a small wind turbine. I’ll keep the numbers round for confidentiality reasons.

£700k start-up costs, with a 75% chance in any year of generating enough energy to sell at 5p / kwhr to the grid for £30k.

10% of revenues go to the site’s landlord, and a flat £15k per year to the manufacturer for a full maintenance contract.

This is clearly not viable. Fortunately there is an additional subsidy of 18p / kwhr (rising annually) due to the Government’s Feed-in-Tariff.

Nothing about this site will get cheaper over time. Assuming a life span of 25 yrs and a 10% discount rate, the turbine and other start-up costs would have to drop from £700k to £100k for future such ventures to start to look interesting sans subsidy.

In the UK the total subsidies needed for all such schemes are added up, and then divided out amongst all consumers’ bills, so it’s not clear to the general public just how much more expensive (it appears 4x as much) some alternative energy sources are costing.

Future Governments change their minds about policies. And for that reason, I’m out.

London’s protected views

This diagram in the Economist captures 10 of the 13 protected views in London:

London Protected Views Economist

 

The London Plan protects views of St Paul’s Cathedral and the Palace of Westminster, as seen from London’s larger parks. You must, for example, be able to see both buildings from a specific oak tree on Hampstead Heath. Erecting tall buildings behind them is discouraged, too. These protected views help to explain why tall buildings are rising in such a dispersed pattern. The Shard will not get neighbours anytime soon, as it is wedged between two viewing corridors. In the City, towers are scattered instead of crowding around transport hubs, as economic theory might predict. Their odd designs—described by nicknames such as the Gherkin, the Walkie Talkie and the Cheesegrater—are in some cases a means of avoiding imposing on St Paul’s. Only at Canary Wharf, which is too far east to spoil many views, do cuboid skyscrapers rub together in the way they do in other big cities.

How big a problem is HIV

If you collected all of the HIV from the world’s 30 million sufferers, it would fit onto a spoon. [source]

 

Being poor in a rich country

The FT has an article today with ‘the one chart that explains the world’.

Global income distribution by ventile

 

The vertical axis refers to the distribution of global incomes. The horizontal axis segments citizens of different countries by 20 income groups. As you can see, even the poorest people in Germany are very much richer than those in the Ivory Coast, for example. The person compiling the data, Prof Milanovic, finds that about half of one’s income depends on the average income of the country in which that person was born.

It reminds me of a post on global income distribution I made previously, basically that the poorest 5% of Americans earn more than the richest 5% of Indians. Source .

India led the world in GDP before the industrial revolution, when population meant productivity, and India had the largest population. Following the industrial revolution, India entered a long period of economic stagnation. India used to account for 33% of the world’s GDP, then fell to 3%. Source.

 

 

Don’t mention the solar panels

On a flight this morning I began to think that the Bjorn Lomborg quote I heard yesterday couldn’t be plausible:

Germany once prided itself on being the “photovoltaic world champion”, doling out generous subsidies – totaling more than $130 billion to citizens to invest in solar energy…by the end of the century, this will have postponed climate change temperature increases by 23 hours.

So I tried a quick back of the envelope calculation:

German population = 70m

Global population = 7bn

Ratio = 1/100

Number of years solar panels last for = 20

Years over which CO2 emissions have and will accumulate before the bad temperature rise (say 2100 – 1900) = 200

Ratio = 1/10

Reduction in CO2 emissions of Germany = 1/100 (the article gives a less than 1% current total supply by solar)

Germany’s level of emissions during these 20 periods relative to global average over 200 years = x2

Total portion of CO2 from global total that will be avoided =(1/100) x (1/10) x (1/100) x 2 = 2/100,000

Number of days over which CO2 emissions occur = 365 * 200 = 70,000ish

Over 1m Germans have solar panels installed. Number of days of CO2 emissions avoided from these, i.e., how much extra time is bought before a catastrophic temperature increase  = 70,000 x 2 / 100,000 = 1.4 days

Wow. Well done. I definitely feel less bad about my flight now. Not that I was.

I came across Without Hot Air several years ago and found it to be very credible – same approach, back of the envelope physics…I seem to have just complimented myself on being very credible. I’d best stop myself here. It’s not impossible I’ve missed something obvious out of the above…

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