Did Kleiner Really Already Raise $1.4 Billion?

A lot of news articles are commenting on how Kleiner raised $1.4 billion dollars in two new funds. This is a very believable event as they are a major VC firm who has had their share of success. However, the evidence the news stories point to make the claim of a completed fundraise seem a little bit premature.

The New York Times story, released on June 29, links to the SEC Form D filings of these two new funds as its main proof after stating the following:

On Wednesday, the venture firm Kleiner Perkins Caufield & Byers disclosed in a filing with the Securities and Exchange Commission that it had raised a total of $1.4 billion across two investment funds over the last couple of months.

But clicking through the links gives a different story. The Form D of the $1 billion dollar fund that was filed on 6/29.



The $400 million dollar fund filed on 6/29:



For reference, this is what the Form D of a fund that has definitely finished the process of raising over a billion dollars looks like:


The amount sold equals the offering amount, and there is nothing left to be sold.

The New York Times wasn't alone in their statement. Bloomberg covered the story the same way, Tech Crunch said "It's Official" and the WSJ called the funds closed. Basically everyone who covers tech has called the funds closed.

A few things could be going on here. One possibility is that some larger firms don't disclose their target size until they have a good idea that their limited partners will be willing to come on board with that amount of capital. While fundraising for a fund without filing Form D with the SEC is likely problematic, there are probably types of almost fundraising behaviors that are technically legal. So when a news organization sees this filing from a major VC firm it knows they have basically raised the capital.

Another possibility is that the news organizations got this story wrong and Kleiner is not able to correct the press during their quiet period. Also, because making LPs think that they are missing out on the fund isn't necessarily a bad thing they have no incentive to risk breaking the law to correct the story. This seems more likely.

Maybe media is right because the person in charge of filling out Kleiner's Form D's never likes to admit that the total amount is sold, even when it is. I looked at a 2014 filing of a fund that definitely closed at some point and could not find an updated Form D to indicate that fact (That's also possibly due to my inability to search through Edgar effectively). Still, when news leaked of the 2014 fund closing after those filings it was at least backed up by leaks from limited partner investors and not by a form in which they admit that $0 of the fund is sold.

If there is a better explanation, please let me know. Because right now it seems like the media has followed each other in a herd like behavior and declared two funds closed which are not really closed.

Thanks to my brother, Jonathan Lonsdale, for initially showing me something weird was going on and talking me through what filing a Form D meant. Any errors are my own.

Uber and Lyft's Missed Austin Opportunity

The taxi-driver lobby has been unsuccessful in their fight against ridesharing companies across the country. People have come to be dependant on low cost, reliable and convenient transportation provided by ride sharing companies.

But when the Austin City Council passed an ordinance requiring fingerprinting for their drivers, Uber and Lyft stumbled. They fought it tooth and nail when they could have tried to show how they could make government work better.

They initiated an $8 million dollar campaign against this ordinance where they tried to replace fingerprinting with background checks. On top of this, their proposition wanted to disregard a requirement for Uber and Lyft cars to be identified by markets and legalize the practice picking up passengers in travel lanes and bus stops.

Citizens of Austin felt like they were being bullied by rich outside companies. People pointed out that Houston required fingerprinting from 2014 and Uber and Lyft still operate there. Others felt that the companies were asking too much of the city. Uber and Lyft's attempt to overturn the city council at the ballot box failed with 56% of the people voting against it.

Since then, Uber and Lyft called the voter's bluff and are no longer operating in the city. Some makeshift websites that operate under the table have popped up to provide drivers with income and passengers with rides, but it is less convenient and less safe. And since hailing a ride has gotten less accessible, more people are making bad decisions about drinking and driving.

So the ridesharing companies have made Austin a warning to other cities: Interfere with our business at your own risk. But this didn't have to be the message. Uber often calls itself a logistics company. Fingerprinting new drivers is a simple logistics problem. If their biggest problem with Austin's ordinance was actually being banned from stopping in travel lanes, then they could have made the proposition about that and campaigned accordingly. If electronic fingerprint readers are more efficient and easier to apply to their drivers, they could have lobbied to let them help modernize Austin's government while giving new drivers a grace period before they had to be officially fingerprinted.

If they had turned the Austin situation into one in which Uber and Lyft took an inefficient government regulation and made it more convenient for everyone, we would be talking about why Uber doesn't replace or supplement the provision of other quasi-government services. More people would be talking about how Uber is going to take over the world. 

Instead they are attempting to maximize profits and status in the short term as they attempt to scare governments into compliance. Maybe the people of Austin will realize their mistake and try to welcome Uber and Lyft back into the city in one of the next few elections. It will be a short term victory, preserving their status quo as the incumbent transportation providers. But with self driving cars around the corner, Uber and Lyft are not necessarily the companies who will own that technology. Disruption will come for current transportation company incumbents sooner than it came for the taxi cartels. Austin could have been an opportunity to show that they will succeed in areas outside of ridesharing, but they made it a problem instead. 

The Implications of a Full English Brexit

Britain's decision to leave the Eurozone has already sent waves through the markets. It taught traders too young to remember the 2004 US presidential election that the first few election night polls are not always accurate. (In 2004, markets relying on faulty exit polls gave Kerry a 70% chance to win at one point.) But traders predicting another vote incorrectly is not the story. The story is about an upcoming massive institutional change that no one is quite sure how to interpret.

In order to leave, the UK has to actually petition to leave the Eurozone. This won't happen until a new prime minister replaces David Cameron in three months time. Intraparty battles will occur over this time period as politicians position themselves in the aftermath of a referendum. If there is an attempt to ignore the referendum and keep the UK in the EU it will occur during this time period. Supporters of Remain recognize that after the European Council is notified by the UK under article 50 there is no way to reverse the process short of jumping through all of the hoops required of countries wishing to join the European Union. 

One way supporters of Remain might go about ignoring the referendum if they get into power is by indefinitely delaying any notification under article 50. This would extend the period of uncertainty indefinitely and would not be helpful to the UK or world economy.

After the UK issues their petition, the rest of the EU will have to come to an agreement with the UK about the terms of their exit within two years.

If during this turmoil the UK voters and EU members decide that they don't want the UK to leave the EU quite yet, there is a way to kick the can down the road for more than two years. They can indefinitely extend exit talks as long as the UK and European Council unanimously agree to extend withdrawal negotiations. However, any pro-Leave UK party or anti-UK EU member from that point onwards could cause even worse disruption as any dissenter would have the power to force an immediate exit. The UK would have either too little or too much leverage for this scenario to be stable. So any news about definite plans to initiate article 50 makes an exit more likely and might cause another mini-panic.

If the UK and EU keep it simple and retain relatively open trade and freedom of movement both sides will benefit. This seems to be Merkel's preferred approach.

"The negotiations must take place in a businesslike, good climate," she said. "Britain will remain a close partner, with which we are linked economically."

She has no separatist movement within Germany to worry about scaring away from EU exit. However, other members of the EU realize that there is a risk that the UK will not be the only one to leave, so signaling that leaving does not come without consequences will be a very tempting idea. And some will be tempted to punish the UK for choosing to leave them, as is the case of the Mayor of Calais. Fortunately for all of those in favor of prosperity, that particular mayor does not hold much sway in international negotiations.

The more EU officials sound like Merkel, the better the economic outcome. If they start sounding like the Mayor of Calais, the short and medium term economic damage will likely be significant.

But there will be economic impacts either way. There will be a hit to business confidence. Jamie Dimon, CEO of JPMorgan, seems to expect that they will have to change the location of some roles to comply with European laws. Other companies expecting to move may be reluctant to increase headcount and investment in the near term and when this happens on a large scale a recession is almost inevitable. 

Then there will be capital flight as the volatility of the British pound and uncertainty of the political situation scares away certain classes of slow moving investors. Foreign direct investment inflows for the United Kingdom have fluctuated between one and two percent of GDP in recent years. It is likely to be much lower over the next couple years. The large fall in the GBP after the results of the referendum occurred was in anticipation of these flows and economic weakness in the UK.

Weak economic growth is widely expected to be countered by central banks to the best of their ability. The Bank of England's base rate is already close to zero at 0.5%.  And sometimes the best thing a central bank can do to stimulate the economy is weaken a country's currency to boost exports. In this case, the GBP has already weakened considerably and further weakness may be interpreted as a further loss of confidence.

Part of the problem is that central banks influence demand more than supply. To the extent that Brexit is a hit to confidence, demand matters and central bank actions are important. But if there are permanent business relocations from regulatory change or economic damage from trade barriers going up, Brexit becomes a supply shock. This means that there is not much that the Bank of England can do even if it was in a position to do something. If a central bank tries to fight a supply shock, stagflation is a likely outcome. In light of this, it is heartening that Mark Carney's statement on Brexit focused on the stability of the financial system and not on what the bank might do to support growth.

For Europe, the uncertainty is not going to be helpful, though the impact will be lighter than in the UK. A larger worry is what might happen as other EU members push for the right to hold their own referendums on leaving the EU. Gary Kasparov makes the interesting argument that Brexit will not only help Putin face a divided Europe, but the absence of the UK will lead to far worse policy being made in Brussels. Long term, this could be worse for Europe than the UK.

In the US, many people see the election of Donald Trump as analogous to a Brexit. Both are decision that were been deemed to be very unlikely well before voting day in part because elites regard Trump or Brexit as very destructive. The referendum resulting in a Brexit doesn't mean Trump's victory is any more likely than it was before the vote, but it does suggest that some forecasters might not be able to accurately forecast populist movements like Trump's.

Gold rose significantly on the day of the Brexit. The general theory is that uncertainty causes people to flee to gold. Gold is also helped by the general hit to economic growth expectations. Central banks who shift towards easing to counter the hit to global confidence should also benefit the irrationally valuable metal while also keeping government benchmark interest rates lower longer than previously expected.

The full implications of Brexit really are too many to cover in a short space. This is even more the case when some of the things people pretend are implications of Brexit are really just one of the many political impacts of long term trends like the stagnation of real income growth for many people in developed countries. A fuller picture would also look at Scotland and other parts of the UK who might favor leaving to try to stay in the EU. What it would take for London to remain a global financial center and whether any European city is likely to emerge as the obvious alternative is another interesting question. 

And there is still more to write about other countries. China's enigma of an economy will take a hit when Europe economic weakness reduces their Chinese imports. The Japanese yen is now just above 100 after the panic over Brexit and this yen strength puts extra pressure on Kuroda and Shinzo Abe.

But the biggest thing to track will be whether the world starts turning protectionist. Nasty exit negotiations would be a bad sign. Many people are tempted to constantly make bad analogies between our economic circumstances and the Great Depression. But the Brexit negotiations have the potential to create the closest thing to a modern Smoot-Hawley Tariff bill. And that's why it has the potential to be very scary.


Disturbing Future Tech

The expected future is economic growth. Humanity invents and improves many things and people will live better lives. But even in upside scenarios not everything will be getting better. There is a subset of future use cases for technology out there that are both practically inevitable and at the very least disquieting to imagine. 

Also, it will be fun to write about them before they become too mainstream.

First, we have the inevitable results of improving drone technology combined with parental paranoia. The combination leads to children tracking drones. The ability to watch children 24/7 without actually having to follow them wherever they go will be a luxury at first only claimed by the upper middle class. They are too poor for full time nannies but rich enough to afford the latest gadget. A drone that follows their kids can let parents watch them from afar, notify the parents when the kids interact with strangers or even give automatic verbal warnings to children who are playing too close to traffic.

Now, given that we already have children on leashes this might not seem like such a big step. Infact, a drone following a child from a safe distance is probably preferable to a leash in every single way. But beyond desensitizing a generation to the surveillance state, these drones are only going to make helicopter parents more paranoid. This is because everything happening will be videotaped, and this will include the inevitable tragedies. In 15 years, if an alligator gets a toddler it won't just be national news, there will be video of the attack itself. The unecessary culture of paranoia that surrounds child rearing in our society is only going to get worse. And drone cameras stalking kids will have a part in that.

Next, we have personal bots. Right now, bots are being automated to do all sorts of customer relationship management. It is only a matter of time until bots are available that are designed to mimic your writing patterns and interact with your friends for when you don't have time. Maybe it will only be to keep social media profiles active - wishing people happy birthday or commenting on life events to help those who find themselves with less time for social media. But its use will eventually spread.

Some conversations might end up feeling like fake voicemail hoaxes, or at the very least there will be some people who use bots to an extent where we won't we won't know for sure if we've gotten through to the real person. But perhaps worse than either of those will be the friends who use their bots to spam their network far too frequently. Today we get spam email from there people, but tomorrow we'll get personalized spam that if treated as spam will desensitize us to text conversation that we would consider to be very real today. (Hat tip to @garvinandrew)

Finally, we have virtual reality and augmented reality. Just like Brazil has been the country of the future, virtual reality has been the entertainment technology of the future. Unlike Brazil, many people are starting to think that virtual reality's time is near.  If not with this generation, then we are only a few generations away. This brings us a step closer to Nozick's thought experiment of the Experience Machine. Infact, good virtual reality would be more addictive than Nozick's machine since it would not have to be preprogrammed. People already choose to shut themselves off from the physical world, and as the "Shut out reality" option gets more advanced more and more people will choose this option.

Augmented reality holds a lot of promise. The ability to overlay information will make many jobs much easier. Skilled workers will save time and make fewer mistakes while inexperienced workers who know how to interface with augmented reality will be able to replicate the work of the highly skilled. 

Once the technology to discreetly utilize augmented reality in social settings is available then improving facial recognition technology means forgetting names or the context by which you know someone will be a thing of the past. But that's not the only thing that you will know about other strangers in the room. Not only might it be possible to know someone's employment history, but those interested in filtering people based on which political candidates they've donated to or whether they have made comments that are deemed not acceptable can avoid undesirables  without having to talk to them. 

Our society is getting more and more partisan. There aren't many Trump supporters trying to make friends with Clinton supporters in today's world, and Clinton supporters are more likely to boycott the Trump fan's business than try to befriend a stranger who is a known fan. If this pattern doesn't change before ubiquitous augmented reality combines with facial recognition software then our social lives will get far more tribal.

In the midst of all of these bleak predictions, I can only be sure of one thing: There is something worse that I left out.

The Ethics of Self Driving Cars Aren't That Confusing

One of the things that it has become popular for the commentariat to wring their hands over is the ethics of self driving cars. What if there is a trolley problem* where the car can save the lives of many by sacrificing or risking the life of its driver?

The solution isn't simple, in the sense that our modern system of rules and regulations and common practices for an automobile based society aren't simple. But given that this infrastructure will remain in place, the ethical questions of self driving cars are not hard.

Cars should be programmed to follow the rules of the road, and change their behavior in light of people violating the rules only to the extent as it is currently expected.

These rules were made for a reason. If a car was known to react selflessly they will be taken advantage of. Google found this out first hand when they had to adjust their cars to make them more aggressive. This was in part to avoid scenarios in which cars were cutting off Google's cars consistently in heavy traffic. If people knew that they could take advantage of a car, some proportion of the population will react to those incentives.

So if a person jumps out in front of a car on the bridge and the car has an option of trying to brake while hitting the person or driving off the bridge, the person who jumped out in front of the car is going to suffer.

The ethics of traffic laws make for interest conversation. But adding self driving cars to the mix doesn't change the basic behaviors. 

The legality of self driving cars, such as who gets sued if there is an accident where the self driven car is at fault, is still an unsolved problem and is more productive topic of discussion and debate.


While on the topic:

*The Trolley Problem is confusing. My main issue with it is that it doesn't analogize very well onto relevant real world situations where estimated costs and benefits are uncertain and may be incorrect**. The situation is also muddied when various actors have different levels of culpability. What if the crowd of people are willingly on an track with a big sign that says "Trains coming" and the single person is standing on a track with a "Track closed" sign? It should change things.

**This is also one of the biggest problems with "The ends justify the means" thinking. People are bad at probability and more often than not are wrong about the beneficial ends, while the horrible means they utilized to attain those ends still happened.

The Video Blog Ghetto

One of the more disturbing trends on the internet is the ghettoization of extreme cultures. People don't have to interact with each other if they don't want to. Liberals can read the Huffington Post, conservatives check Drudge Report. More extreme people all have their websites, each equipped with specific ideological blinders.

Sometimes there is some cross pollination, but people are usually only exposed to members of other groups through quotes provided by their preferred sources. This happens when there is a debate around a current partisan issue, or more often when an author is trying to make a point that people on the other side sure are stupid/racist/sexist/etc.

Either way, the statements from the other side are at least quoted and links to their original location are generally provided. A reader can browse through the respective articles and come away with a conclusion as to how the evidence seems to stack up. People are still biased and will likely stick with their own ideological champions, but at least it is feasible to get a fuller picture of the debate in a relatively short amount of time.

But a new trend has been emerging. We don't see many new blogs, but there are now a lot of video bloggers on all parts of the spectrum. Though more often than not the political vloggers are on one of the more extreme sides or they would not have started a political video blog. In some sense, arguments in video format should be more persuasive. Videos can more fully utilize sarcasm, humor, body language and can utilize graphics in ways a blogger writing an article cannot. But while they may be very convincing to a subset of people, they are also isolating themselves from the general debate.

Part of this is because watching a video is a bigger commitment than reading an article. A two minute read becomes an eight minute video. Skimming a video is much less effective than skimming a post. Hoping someone takes the time to watch a video is a bigger ask.

Vloggers are also isolated from mainstream debate because citing and responding to inaccurate parts of the video is more difficult. You can't just copy and paste the questionable arguments into a paragraph in order to expose where the vlogger is mistaken. You either have to type out the relevant transcript, describe the vlogger's arguments in your own words (increasing the chance of misstatements), link to the point in time of the most egregious part of the video, or have the people observing the discussion watch the whole video themselves and potentially waste the time of their readers.

Given the most ideological video bloggers have relatively niche audiences, this is a lot of work to have a dispute. And it's already work when a person who disagrees with you has a very different ideological perspective. And since vloggers are generally not yet high status people, there is even less reason to engage. (We will see more critiques of documentaries or of people who appear on television). Most people would reasonably choose not to start or follow up on an argument with someone who communicates primarily through video (or for that matter, a podcast without a transcript). The most likely person to respond would be another vlogger (or podcaster).

This creates a dynamic where vloggers start dialogue with people who are on the other side, but never receive feedback from anyone outside their ecosystem. They end up shouting into the wind. 

But it's not just the wind, they have some followers. And these followers see how their relatively articulate vlogger is rarely countered by people with opposing ideas. These viewers and the vlogger themselves are at high risk of thinking they don't get responses because the videos make incontrovertible arguments, and not because it's too much trouble to call bullshit on long winded videos.

And that's why we can expect video bloggers to be relatively extreme, they are engaging people in a medium where debate is far more inconvenient. This format is far more popular among younger internet users, so it is somewhat scary to think about how political discourse will evolve under these dynamics.

Note: Maybe a simpler hypothesis is that most video blogs are the new long winded disorganized blog or forum posts. Generally, no one with the relevant knowledge would take the time to counter them. Yes, I appreciate the irony. This is post getting a bit long winded. 

Ted Cruz's Game of Chicken

It looks more and more like Trump is going to run away with enough delegates to become the GOP candidate. There aren't many polls where Trump doesn't have a plurality of GOP voters in upcoming states.

And yet, Trump rarely has the support of a majority of GOP primary voters. If this were a one on one competition Trump's position would be considerably weaker. Fortunately for Trump, GOP candidates have a coordination problem. 

Kasich and Rubio are staying in the race because they hope that between them and Cruz they get enough votes to force a brokered convention in which they might emerge victorious. Recently Cruz came out against the idea of a brokered convention.

"Any time you hear someone talking about a brokered convention, it is the Washington establishment in a fevered frenzy, they are really frustrated because all their chosen candidates, their golden children, the voters keep rejecting," Cruz said Friday at the Conservative Political Action Conference (CPAC).
 
"So they seize on this plan of a brokered convention, and the D.C. power brokers will drop someone in who is exactly to the liking of the Washington establishment. If that would happen, we would have a manifest revolt on our hands all across this country."

This is a message to the establishment and to Rubio and Kasich. He will not play their game. If they want to stop Trump the only way is through him. If they stay in the race, they will all lose. He's shown his intransigence in the Senate. He's hoping that they know that he will not back down.

He's followed up his words with actions. The path to a brokered convention where Cruz might still come out on top is easier if Rubio beats Trump in the winner take all state of Florida. But Cruz has recently started campaigning in Florida, potentially splitting the Trump vote and reducing Rubio's chances of winning.

It will be interesting to see if the establishment and their candidates back down before Trump's victory is ultimately assured. So far it looks like they will refuse to budge and both sides will lose this game of chicken.

Ted Cruz's only hope is that the signal of a few unexpected victories will be enough to convince others of his strength, determination and ability to win. The establishment is not going to blink in a game of chicken if they think giving in to another extremist doesn't even have a chance of working. But when you involve the egos of people who think they should be the president, it's likely that everyone will lose in a game of chicken.

Today's Negative Nominal Interest Rates Won't Work

A lot of central banks have moved towards negative interest rates. Some people think it is essential that central banks ease below the zero boundary. This includes central bankers at the ECB, in Denmark, Sweden, Switzerland and Japan who have all implemented negative rates.

Some critics believe that negative rates will have all sorts of unintended consequences. Even proponents of negative rates sometimes lobby for a move towards a cashless society where negative rates can be implemented with potentially fewer unintended consequences.

Regardless of whether side is correct, negative nominal rates are a sign that central bankers will fail to accomplish their goals. 

In the case of critics of negative nominal rates being correct, the reasons are relatively straightforward. Something will go wrong. Maybe attempts to avoid negative rates by changing deposits to cash mean negative rates merely incentivize unproductive behavior. Perhaps negative interest income of banks drive deleveraging, or the uncertainty of negative nominal rates negatively impact the markets. There are many possible unintended consequences that could cause negative nominal interest rates to be counterproductive.

What is interesting is that even if negative nominal rates are necessary and proper, things will still turn out badly in our current environment. Central banks are naturally cautious, and negative interest rates a new territory that they will not dive into. When central banks think an interest rate cut is necessary in positive nominal rate regimes, they usually move in increments in 25 or 50 basis points. However, many central banks are being very reticent about moving interest rates negative around or past the zero-bound - the Bank of Japan is a good example. They only moved the rate to negative 0.1%, and only apply it to specific accounts held by financial institutions held at the BOJ. To the extent that negative rates are necessary and proper, central bankers are too scared to move the rates sufficiently negative.

So either they are messing things up by implementing negative rates, or their negative rates won't be sufficient to accomplish their goals. This helps explain why the Japanese yen has actually strengthened since the implementation of negative rates by the Bank of Japan. Either they aren't doing enough, or what they are doing is counterproductive. Even if it is difficult to parse what negative nominal rates will do, it is safe to say that central banks resorting to the implementation negative nominal rates are unlikely to accomplish their goals.

The GOP Establishment's Primary Problem

It's been a long time since I've posted. And I've been following the primaries much more closely than is probably healthy. Following primaries is unhealthy for a few reasons. First, it's paying attention to things that are hard to benefit from or change. Second, believing that the future of our country is changing on a day to day basis with the polls ascribes a bit too much explanatory power to politics when the default is for the major parties to trade nominal control without usually making drastic changes. Finally, no one thinks reality TV is good for you, and this season politics and reality TV are inter-lapping more than ever before. Also, closely following the GOP primary is counter productive when demographics suggest that any moderate Democrat should be able to win in the general election in today's status quo. That said, I have some thoughts that I am going to in-advisably share with the internet.

The GOP primary is a coordinated action problem for the Republican establishment. They really don't want Trump to win. They don't like Cruz. Unfortunately for them, voters do not like them. Between Trump, Cruz and Carson, the anti-establishment Republican candidates are polling at over 50%. To have any hope of beating either, they need to unite behind one candidate. Scott Walker saw this early on, along with his relatively low poll numbers. But what is driving the establishment candidates still in the race?

The establishment money and votes are currently spread between Jeb and Rubio and with a little bit of money and more votes going towards the more moderate Kasich. Given how they are currently polling nationally, the first order solution is to throw support behind Rubio. There are currently a three issues preventing that.

First, Rubio's robotic performance in the pre-New Hampshire debate made him look stupid. He's already relatively inexperienced, so any signals that he'll help Democrats accentuate this weakness in the general election is extra worrisome.

Secondly, there is a perception that Rubio is a disloyal former Jeb Bush lieutenant. George W. Bush's book on his father, 41, made loyalty a central theme. Jonathan Haidt's research tells that loyalty is even more important to conservatives, so a sizable group of Bush loyalists will resist rewarding disloyalty. 

The third issue is immigration. On this issue Rubio is not only out of step with a significant amount of conservatives, but he has demonstrated his ability to at least partially change his position when he comes into power. So the GOP establishment has someone who is disloyal and changes positions. 

Even with all of those problems, Rubio has plenty of money and is polling moderately nationally. With full establishment support he'd have a plurality of voters against Cruz and Trump. Absent a new self inflicted wound, he has no incentive to bow out at this point.

The other establishment hope has been Jeb! Jeb's problems are simpler than Rubio's. Jeb just isn't a good enough candidate to make up for the fact that he is a Bush. Not enough people support him. In a recent poll, 24% of Republicans claim that they would not support him in the general election even if he became the Republican nominee. The only candidate who has more Republicans refusing to support them in the general election is Trump, at 30%. The massive amount of money that he and his super PACs have raised will keep him in the race. My prediction is that he will stay in the race as long as it looks like he has a chance and/or if he believes that staying in the race will harm Rubio.

That leaves Kasich. He's more moderate, which works against him in primary season. He doesn't have the name recognition that McCain had, and without funds he is well behind on setting up his political organization outside of the time he spent in New Hampshire. When his second place finish in New Hampshire coincided with Rubio's debate implosion he seemed like the perfect compromise candidate. But he might not be able to stay in the race long enough to garner the establishment support, he entered the year with a lot less cash on hand than either Bush or Rubio. If he does stick around the establishment might default towards him, if it isn't too late by that point. Being more experienced and less ideologically conservative than Rubio, Kasich has little incentive to step aside for Rubio.

South Carolina and Super Tuesday might encourage establishment GOP members to get their collective houses in order, but the longer this disorder goes on the better it is for both Cruz and Trump. The way things are going, we may even see a brokered convention. That would be fun, at least for those of us who like a certain type of reality TV.

Good policy held hostage

There are a lot of silly laws out there. People on all sides of the aisle would agree on that. And many would agree that some form of the solution is relatively obvious. But even when a most reasonable people on all sides would agree that a policy is bad the work to change it is just beginning. 

That's because fixing broken policy still creates winners and losers. And sometimes those winners are more on one side of the spectrum than others. Unfortunately, giving away a free win to the other side in the name of good policy is bad politics. 

This is a broken part of our system that is under discussed today. The current debate around oil exports in congress is a prime example of how hard it is to fix. Policy implemented in the 1973 oil crisis banned exports in most circumstances. So this is a forty year old nationalistic policy implemented in the midst of a crisis around a good whose supply and demand dynamics have flipped on its head in recent years. It obviously should change, and the White House's primary argument against it is that they would like to keep control of their ability to allow or disallow oil exports.

So unfortunately, if this policy is going to pass it needs to be included as part of a broad deal on spending and taxation. And tax credits to solar and wind companies need to be extended (corporate welfare in action), so each side gets a win. Refineries who have benefited from captive domestic oil producers and earned out sized profits for years may or may not be handed a tax credit as a consolation prize for losing their captive oil suppliers.

It is true that there is some real opposition to changing the inane law preventing oil exports from people who seem to think that our carbon energy based society needs to be made as inefficient as possible if they are going to reduce emissions in the long run. Politicians that count on support from these confused constituents could use a small victory to show them. But holding back a fix on bad policy to implement something for their special interests should be mocked the same way as Republicans who threaten a debt crisis to get their way on minor spending matters.

And outside of the debt ceiling hostage shenanigans, many within the GOP have acknowledged that they will fix the carried interest tax loophole only as part of an overall bargain around reforming the tax code. They are holding back an obvious policy change favored by almost everyone not currently utilizing the loophole as a bargaining chip.

A very similar dynamic is occurring within immigration policy, this time with Democrats holding back some obvious fixes unless the GOP agrees to a comprehensive deal. People on both sides know many of the things that need to be done with high skilled immigration. They don't quite understand that high skilled immigrants should never be placed in the position of indentured servants, but they generally recognize that educating students at world class colleges and then making it difficult to stay and live in the United States is bad policy. 

However, there is no chance of this being fixed unless the more difficult problem of low skilled immigrants is addressed. Each year this policy isn't fixed, too many promising college graduates decide to head back home where they can get jobs or start companies without worrying about legal issues. Even if the preferred solution to the thorny political problem would be good policy, holding acknowledged good policy hostage as a bargaining chip is an action that needs to be understood as a destructive tactic.

Our government is dysfunctional enough. Whenever there is general consensus on what would constitute good policy the politicians holding policy fixes hostage should not be given a free pass.