An open letter to Bill Gates

Dear Mr. Gates:

You recently sat for an interview with Andrew Ross Sorkin at an event sponsored by the New York Times.  In it you made some remarks about taxing the rich, especially yourself.  I have seen enough of the clip to know that you did not intend your remarks to be taken completely seriously.  But I seriously invite you to address how wealthy people like yourself and large corporations like Microsoft should be taxed.

The thrust of the commentary on your remarks is that you are feuding with Elizabeth Warren and her "wealth tax" proposal.  Supposedly you are shocked and appalled by what she is proposing.  I think that is far from the truth.  You are a thoughtful and public spirited person.  You are known for taking a deep dive into what interests you.

Senator Warren is running for President.  As such, she needs to construct her proposals with an eye to how they will be perceived by voters and the press.  This is not necessarily bad.  I do not know if, absent these considerations, she would or would not be proposing something different.  But her current circumstances prohibit even the possibility of doing that.  You don't operate under that constraint.  You are much more free to say what you mean and mean what you say.

And, based on your words and actions, I think you and the Senator are actually in close agreement as to the overall goals and objectives a tax system should support.  You (and your close friend and fellow mega-billionaire Warren Buffet) have frequently stated publicly that the wealthy should be taxed more heavily than they currently are, for instance.

And your past remarks on increasing taxes have usually been in the context of tax rates on current income.  But that is not at all the same thing as a "wealth tax" that goes after your assets.  So one might think that when it comes to assets, your agenda and that of the Senator might diverge.  But you have repeatedly and forcefully advocated for the "giving pledge".  Subscribers promise to donate half their net worth to charity upon their death.  That takes a far bigger bite out of a person's wealth than what the Senator is proposing.

Now there is a difference.  You have contributed a substantial portion of your wealth to the Bill and Melinda Gates Foundation.  But you and your wife control how and on what the Foundation spends the money.  If you were to instead give the same amount of money to the government you would not control how it was spent.

Your foundation appears to be well run and has an excellent track record when it comes to spending money efficiently and effectively.  And this track record applies both to the amount of money that goes to performing the actual work but also to what work the Foundation funds.  You look for situations where the Foundation can be effective and can advance important goals.

But the same is not always true when it comes to the "charity" vehicles other wealthy people employ.  In many cases their "charitable operation" is just a tax dodge or a public relations effort designed to burnish the reputation of the sponsor.

A classic example of this is the Donald J. Trump Foundation.  Mr. Trump was recently forced to permanently shut his Foundation down, admit guilt to a long and shocking list of illegal behavior, and pay a $2 million fine.  This is perhaps the most egregious example of this sort of thing.  But less egregious examples of "charitable organizations" that perform little or no charitable or educational activities are two a penny.

A frequently advanced argument is that giant rewards must be available in order to simulate risky innovative activity which, we are told, eventually will greatly benefit society as a whole.  But the life history of you and many others does not support this.  Every case is a little different.  But your case serves to illustrate this and it is one I am familiar with.

You were raised in an upper middle class family that valued hard work and encouraged excellence and competition.  Although your home situation was more than comfortable it was definitely not "lifestyles of the rich and famous".

Your parents were, however, able to afford to send you to a private high school and then on to Harvard, one of the most expensive schools in the country.  There, the level of financial support they provided, was not sufficient to enable you to keep up with the smart set.  But it was sufficient to fund your frequent participation in poker games.

And, of course, you dropped out of Harvard and moved to New Mexico where your lifestyle was more "starving student" than it was "jet set".  But your low rent existence was not a problem you felt needed fixing.  You were completely focused on the goal of making Microsoft a success.  Nothing else was important.  And this singular focus on making Microsoft a success continued for many years afterwards.

But it was not until years later when Microsoft's association with IBM began paying off to an extent that no doubt surprised even you, that your financial situation improved substantially.  During the period leading up to Microsoft's super-success you worked extremely hard, probably harder than you have worked at any time since.

But during this long period your expectation was not that Microsoft would eventually become the most valuable company in the world.  Oh, you always hoped and expected that eventually Microsoft would become a success.  But the degree of financial success you envisioned for Microsoft was several orders of magnitude smaller than what actually transpired.  Yet that much more modest goal was enough to motivate you to go "all in" for a long time.

As soon as Microsoft hit it big you could have substantially changed your lifestyle.  But you didn't.  Oh, you bought a very expensive car and some other toys.  You eventually built a $50 million house.  But the sum total of all of these expenditures represented only a small portion of your income at the time.

And for several years after you hit it big you maintained a remarkably ordinary lifestyle.  You were seen standing in line to watch a movie in a regular movie theater, just like everybody else, on several occasions during this period.

You did eventually go inside the bubble.  But was not a choice you made because you found it appealing.  Instead it was a direct response to a credible kidnaping threat involving one of your children.  Given your net worth at the time, going inside the bubble was the appropriate response of a loving father concerned for the safety of his family.

And to this day you make a concerted effort to get outside the bubble.  You can't do it in the first world due to security concerns, if for no other reason.  But you can and do get out of the bubble during your frequent sojourns into the third world.

I think you enjoy the interactions you are able to have with regular people in poor countries.  There the rules of engagement are different.  These people don't really know who you are.  They know you are some kind of foreigner.  But for them you fall into the "stranger from a couple of villages over" category.  They know how to deal with that category of people.  And it does not require them to completely change their behavior.

I many places you fall into the category of people who are so famous and powerful that people you meet have inevitably developed preconceived notions about you.  Such preconceived notions inevitably color an interaction.  They feel they can't behave as they normally would.

So you can have normal conversations about normal things with the people you encounter when you are far off the beaten path in a way that is often no longer possible in the "civilized world".  Being poor doesn't make people dumb or uninteresting.  So these people have something to say that is worth hearing and I bet you routinely learn from them.

My point is that it was not necessary to dangle the real possibility that if you worked hard, took some risks, and were lucky, you would end up the richest man in the world.  The reward of success was, no doubt, part of what motivated you to do what you did.  But the possibility of a much more modest reward would have been more than sufficient to elicit your best effort.  And you are very aware that, while you have gained much, you have also had to leave behind some things you value.

You mentioned in the Sorkin interview that you have paid $10 billion in taxes.  That's a lot of money.  And, by one account your net worth is a little more than $100 billion.  Accepting that figure for the sake of argument, that means you have paid out about 10% of your net worth in taxes.

But consider a person earning $50,000 per year, or perhaps a family earning $100,000 per year.  (These figures are at or above "median" income for American families.)  They likely pay more than 10% of their earnings in taxes, a point your friend Mr. Buffet often makes.  So your tax rate is actually on the low side.

But that's not the whole story.  The income figures I just cited were "gross" income figures.  They represented every dollar these people earned.  But in your case, we are talking about "net", what's left of gross income after all expenses are paid.

For an average person, having a net income of 10% would be considered quite good.  So they are paying more than 100% of their net income in taxes.  One of the things that distinguishes the rich from the poor is that for rich people the percentage of their income that ends up as net income is fairly high (often well over 10%).  For poor people the amount of net income they end up with varies from a small percentage (likely less than 10%) to none at all.

Now consider a large corporation like Microsoft.  Microsoft employs a wide range of tactics to reduce its tax burden.  And they are quite successful.  A significant number of the Fortune 100 corporations pay no Federal Income tax at all.  Many other Fortune 100 companies pay only a small percentage of their reported profit in Income Taxes.  The combined Income Tax paid by the Fortune 100 is a very small percentage of their combined profit.

Now I freely admit that Microsoft and other companies pay large amounts of other taxes.  But then so do ordinary people.  We both live in Washington State which has a high Sales tax.  Our state also has Business and Occupation taxes that apply to corporations, property taxes that apply to both corporations and citizens, and a variety of other taxes.  The Federal government also engages in many forms of taxation.  It doesn't limit itself to just the Income Tax.

But again, these other taxes apply to both average people and rich people.  And these other taxes tend to burden the poor more than the rich.  But you already know all this.  And if you don't, you have access to very smart and skilled people who do.  You also have access to smart and skilled people who know all about corporate taxes, an area I suspect you have generally had little interest in, in all their myriad forms.

So you agree with Presidential candidate Warren that taxes on rich people should be increased.  Based on your giving pledge and your Foundation I would say you also agree that wealth should be taxed.  I don't know what your thinking is on what is right and wrong on the Corporate tax front.  But I suspect you think they too should pay more.  So I am just going to assume you think that way.  If you don't, go along with me anyhow, at least for the sake of argument.  And I am absolutely positive you think the way corporations are taxed could be improved, a lot.

So I hope I have convinced you that your thinking and Ms. Warren's thinking is not all that different, at least at the conceptual level.  But, as they say, "God is in the details".  And when it comes to the details, I would be surprised if you didn't have some major disagreements with her proposals.  After all, that was the thrust of the remarks you made that I started this letter off with.  And it is in those very details that your skills and access to resources positions you to make a real contribution.

I invite you to propose changes to how personal income and wealth should be taxed.  I invite you to propose changes to how corporations should be taxed.

You know a lot about these subjects but likely not enough.  But in the past you have characterized yourself as having a "high bandwidth".  By this you meant that you had the capability to quickly absorb large quantities of complex technical information and to be able to organize it so that you can make sense of it and act intelligently on it.  Taxation is noting if not a large and complex subject.

Right now you probably don't know enough about it.  I think you still have that high bandwidth capability.  You also have access to the very best experts in these areas.  Should you choose to do so, I think you can become a skilled expert in this subject area in a relatively short period of time.  Once you have done so I sincerely want to know what you recommend.

To be fair to the Senator I would suggest you put together proposals that would raise roughly the same amounts candidate Warren proposes to raise.   That would allow an "apples to apples" comparison to what Ms. Warren has proposed.  But you will most likely find that you disagree with the revenue goals she has proposed.  This is a contentious area and reasonable people can honestly come to substantially different conclusions.

I would like to see your recommendations (and the thinking that underlies them) as to what revenue goals you think are most appropriate.  Revenue goals that differ significantly from hers lead naturally to different tax proposals.  But there should be a lot of commonality.  So putting  out two sets of proposals, one that matches the Warren's revenue goals, and one that matches yours should not require much additional effort.

These issues are contentious.  As a result most of what is said about them is heavily influenced by the position a particular commentator occupies on the political spectrum.  As a result most people have little or no access to nonpartisan, fact based information.  But you have been very successful in staying out of the partisan fray.  Theoretically, you belong in the %$#@* billionaire pigeon hole.  But that does you a disservice.

This is something you can do perhaps better than anybody else.  Most people don't have the expertise and lack the means to acquire it.  Many of those who do have the expertise have been captured by partisans of one flavor or another.

On the other hand, it takes a considerable amount of political skill to operate in the areas the Gates Foundation operates in.  But you have managed to position yourself and the Foundation in such a way that you can and do work with everybody.  That skill allows you to make a real contribution, a contribution that requires avoiding being seen as the pawn of one group or another.

When coupled with the abilities you possess and the resources you have access to it is easy to see that you are unique in your ability to perform this very valuable service.  I think I have made a compelling argument for why it is important that the service be performed.  You are able.  The only question is: are you willing?

So out of a sense of patriotism and in a belief that you can actually do some good here, I invite and request you to undertake this project.  You will have my deepest and most profound thanks if you do.

Respectfully,

Malicious phone calls - November 2019 update

The last time I reported on this subject there was a different man in the White House.  On April 27, 2015 I put up the following post:  http://sigma5.blogspot.com/2015/04/mallicious-phone-calls-good-news.html.  The subject, then and now, was malicious phone calls.  And the title of that post included the phrase "good news".  I would like to report that things have gotten even better since then.  Unfortunately, honesty forbids me from saying that.  To review:

Malicious phone calls consist of spam calls, robo-calls, requests that you answer a survey, unwanted solicitations on behalf of a political candidate or issue, etc.  I got, and unfortunately still get, a lot of them.  It became particularly annoying when I retired.  Most, but far from all, of these kinds of calls come in during the day.  Retirement meant that I was now home so I could be annoyed by all of them, not just a few of them.

At the time I didn't have caller ID.  It used to be an expensive additional feature.  Now it is ubiquitous and usually included "at no additional charge".  Eventually I caved and got it.  Initially I paid a small fortune for it.  But then I changed to a service that included it for free.  Caller ID helped but many calls still got through.

For those I tried all the tactics "experts" recommend.  I didn't answer them.  Or I answered but tried to keep the telemarketer on the line for as long as possible.  Or I hung up immediately.  Or I pressed "1" (or whatever number they specified) to be deleted from their list.  Finally, I tried hurling the most horrible obscenities I could think of at the telemarketer.  None of it worked.

And, across the several thousand malicious calls I have by now received, I never once forked over a single cent to any of them.  You'd think they would mark me down as a lost cause and stop harassing me but they never did.

As I reported in my 2015 post, I eventually signed up for a "blocker" service called "NoMoRobo".   At the time, it was the only service available but it has since been joined by many others.

NoMoRobo is what's called a "black list" service.  They maintain a list of "bad guy" phone numbers.  If one of them calls me they take the call over and answer on my behalf.  This required me to train myself to not answer until the phone had rung at least twice.  That is annoying but a side effect was that it allowed me to keep track of how many blocked calls I was getting.

Unfortunately, scammers and other bad operators have figured out how to at least partially get around black lists and the other tactics the blocker services use.  But, compliments of the Trump Administration, a new white knight has appeared in the form of Ajit Pai, the current FCC Chairman. To hear Pai tell it, he has taken several effective steps to actually fix the problem.  So what's he done?

In 2017 the FCC put in a rule change.  It made it legal for telephone companies to put technology in place that would block calls from "invalid, unallocated, and unused" phone numbers from going through.  The FCC, at least according to a press release they issued, has also made "significant progress toward caller ID authentication".

They did this "through adoption and implementation of STIR/SHAKEN standards by networks [telephone companies]".  They have also "proposed or imposed monetary forfeitures totaling $245,923,500".  In August of this year the FCC also announced new rules to let the FCC crack down on bogus calls and texts originating from overseas.

Sounds impressive, right?  It would be if any of this had resulted in actual progress.  The monetary forfeitures, for instance, would be impressive if that represented actual money actually collected.  But I suspect that "proposed" is the important word here.

The same press release indicated that the FCC had initiated 140 enforcement actions.  But there are far more than 140 bad actors out there.  And how many of these actions have resulted in operations actually being permanently shut down?  I suspect the number is far less than 140.

The STIR/SHAKEN (truly an awesome acronym) technology sounds like a good idea.  Back in the day, figuring out where a phone call came from ("originated") was technologically easy but often practically hard.

Telephone calls were then handled by dedicated custom equipment.  And the "network" was a simple affair.  The current standard for telephone numbers was put in place in the '60s.  Each ten digit "phone number" consisted of a three digit area code, a three digit exchange, and a four digit phone number.

Each exchange consisted of a separate and unique set of equipment.  The last "hop" of a phone call was always from your phone to your exchange.  Exchanges were connected by "trunk" lines.  If a call originated from a number in your area code then your exchange hopped the call over a trunk line directly to the exchange that owned the phone on the other end (or handled it internally, if the call originated from within your exchange).

If the call originated "out of area" then it was hopped over a trunk line to the "long distance" exchange for your area code.  It in turn hopped the call over a trunk line to the exchange handling the originating phone's area code.  From there the call was hopped over a trunk line to the right exchange machine, and finally from there to the originator's phone.  Lucky for us, all this happened almost instantaneously.

Back in the day it took minutes to trace all this out, if you wanted to know where a call originated from.  But, also starting in the '60s, specialized computers called ESSs were put in place in exchanges.  Eventually, all exchanges had one.  That permitted caller ID and the phone number of the originator's phone became instantly available.  And that solved the problem for a while.

Then VoIP made its appearance.  The ESS computerized telephone switches enabled phone signals to be converted from "Analog" (wavy lines) to "Digital" (bits and bytes).  It wasn't many years before all long distance calls used the digital option for the part of the call that covered long distances.

And, if we have access to the call in digital form, why not ship the bits and bytes across the Internet.  VoIP stands for Voice (analog) over Internet Protocol (digital).  Soon it became much cheaper to ship bits and bytes long distances over the Internet than it was to ship them the same long distances over dedicated digital telephone circuits.

The problem is that VoIP is all smoke and mirrors.  If you fake things up well enough it looks just like the real thing.  And faking up the caller ID information to look any way you want it to look quickly became ridiculously easy to do.  You can now do it with a standard smart phone.  And it was definitely to the advantage of the bad guys to fake, which is commonly referred to as "spoof", caller ID information.

But the FCC is now all over this sort of thing like a wet blanket, right?  If only.  I got over twenty blocked calls yesterday and the count for today is rapidly approaching double digits.  And I still see the same bad behavior I have been seeing for years.

The telephone companies are now blocking "invalid, unallocated, and unused" phone numbers, right?  Wrong!  The "number" part of a caller ID is always supposed to be exactly ten digits long.  (When you dial a number the system will often fill the area code in for you.  Phone numbers are always exactly 10 digits long, even if it sometimes doesn't look that way.)

But I have gotten at least one call recently where the "number" part of the caller ID was short by a few digits.  (At the time NoMoRobo didn't have an entry for that number in their black list so I was able to see all the caller ID details.)

There are no valid area codes that start with zero.  If there were then dialing "0" to be connected to the operator wouldn't work right.  Is the "0" a request to be connected to the operator or a request for an area code starting with "0"?  The only way to eliminate ambiguity is to make sure that no valid area codes start with "0".  The same logic applies to exchanges.  None of them can have a number that starts with "0" either.  So the "invalid" part is missing in action.

I also get calls that NoMoRobo is letting through (until I report them and they update their list) where the "name" part is something like "CELLPHONE USER" or "NEW YORK  NY".  These are common defaults for cell phones.  Sometimes the user can change this.  Sometimes (common with pre-paid "burner" phones) the user can't.

But in all cases what these are is numbers assigned to accounts that used to be active aren't any more.  (And apparently it is possible to get lists of these "no longer in use" numbers, if you have the right connections.)  In other words they are "invalid" or "unused".  So that part isn't working either.

The STIR/SHAKEN standard is supposed to deal with VoIP and international call issues.  I am not going to go into the details.  They are complicated but, from what I have read, once it is implemented it should work.  But the fact that it is complicated means that it is hard to implement.  And "hard to implement" inevitably morphs into "slow to be implemented" in the real world.

And it must be implemented at every step along the way before it can work.  So my guess is that implementation has been "unaccountably delayed".  If the FCC pushes hard then it might be implemented extensively enough to do some good by, say, the end of 2020.  If the FCC doesn't push then God knows when it will get implemented.

And that leaves enforcement actions / penalties.  The FCC has routinely announced "successful" enforcement actions periodically going back more than a decade.  I have seen no indication that there has been enough successes in this area to make a noticeable difference.

One piece of good news is that they finally increased the penalties to the point where they are big enough, if assessed and collected, to represent real pain.  The old penalties were so small that they didn't even rise to the level of "business expense" let alone being painful enough to justify a change in behavior.

If anything, the situation since 2015 has gotten worse rather than better.  The tools necessary to bypass attempts to block malicious phone calls have gotten better and cheaper.  This has had the perverse effect of making the decision phone companies made a long time ago turn from a good idea, from a business point of view, to a bad one.

Back in the day they decided to come down on the side of protecting the bad actors, the purveyors of malicious phone calls.  Their calculus was that they would collect more money from the bad actors than they would lose as a result of the abuse their regular customers would suffer.  And for a long time they were right.

But what they have done has driven young people away from voice (spammy) and to text (not so much).  And that has reduced the market for voice services drastically.  And that has hurt their bottom line.  It just took a long time for this trend to become apparent.  Now, there is little they can do to reverse this trend.  Implementing STIR/SHAKEN might help.  Then again. it might not.

I'm an old fart so I prefer voice to text.  As such, I would love to be in a situation where it would be appropriate to heap praise on Mr. Pai and his FCC.  But I can't.  To date, he has been long on press releases and short (as in non-existent) on effective action.  When his efforts show actual results I'll let you know.