Tag Archives: IBM

Dan Viets on search warrants and violence in Columbia, Missouri

Dan Viets Attorney and Counselor

15 NORTH TENTH STREET COLUMBIA, MISSOURI  65201 (573) 443-6866/FAX (573) 443-1413

Dear Friends:

As most of you are probably aware, the Columbia Citizens Police Review Board has agreed to take up the appeal of our complaints regarding the Kinloch Court incident this Wednesday evening, August 11 at 7:00 p.m. in the City Council Chambers in the new addition to the Daniel Boone Building.

Last week, the complainants were not allowed to speak before the commission.  The Chairwoman had told me that this may or may not change at this meeting.  It is likely there will be an opportunity for us to speak, but it may be after the Board has made its decision.

I know of no reason to expect that the Board will change its position.  The Board voted four to three last week to accept the decision and report of the police chief.  However, if the Human Rights Commission has replaced the member who recently resigned from the CPRB, that could change the outcome.

At any rate, it is my recommendation that we ask the CPRB to agree to investigate the question of whether search warrants should ever be used in the investigation of non-violent crime.  The CPRB is focused on the technical question of whether the complaint against the individual police officers has been properly handled.  I recommend that we ask them instead to look at the broader policy question and consider making recommendations for a change in the policy.

The execution of search warrants is an inherently potentially violent process.  The execution of a search warrant involves a home invasion.  Whenever a home is invaded, there is a real risk that the occupants of the home may respond with violence before they even realize that it is police officers who are invading their home.  The occupants of the home invariably are truly terrorized by people battering their door open, pointing firearms at them and screaming at the top of their lungs.  Frequently concussion grenades, referred to by police as “flash bangs”, are thrown near or inside of the home for the purpose of further disorienting the occupants.

There are alternative means for investigating such matters.  There is almost always a claim of an anonymous or confidential informer in the application for such search warrants.  That individual should be required to make a controlled buy of marijuana, either under surveillance or with recording or transmitting equipment.  This is commonly done and involves far less risk to the police and the occupants of the home.

I look forward to seeing you this evening.

Sincerely,

Dan Viets

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The winner’s curse: would more a more competitive bidding process ‘undermine Columbia’?

The Columbia City Council held a special council meeting last night over the proposed deal with IBM which would bring an IBM datacenter + jobs to Columbia. Christine Harbin at the Show-Me Daily has a good cost-benefit analysis on the state and local incentives IBM is receiving to bring their datacenter here; she notes that each job IBM brings to Columbia is subsidized to the tune of about $51,000.

Abby Rogers in the Columbia Missourian today covers last night’s City Council meeting. She notes:

If REDI or other city officials had shared news on the deal with IBM, competing cities might have been able to sweeten their offers and undermine Columbia. In addition, the confidentiality of the proceedings allowed Columbia and IBM to talk business, Brooks said.

It seems obvious to me that letting another city “undermine Columbia” is not necessarily a bad thing. Think of the bidding process as an auction: cities submit “bids” in the form of incentive packages, and the highest bid gets IBM and the datacenter. But consider this: the city with the highest “bid” is also the city that is most likely to have overvalued IBM’s datacenter.

Auction theorists call this the winner’s curse (“you bid, you win, you lose, you curse”). The concept was first introduced by Capen et al in the Journal of Petroleum Technology in 1971 in an analysis of oil and gas leases in the Gulf of Mexico. I was unable to find a copy of the article I could link to but here is are a couple excerpts from their abstract:

If it is true, as common sense tells us, that a lease winner tends to be the bidder who most overestimates reserves potential, it follows that the “successful” bidders may not have been so successful after all. Studies of the industry’s rate of return support that conclusion. By simulating the bidding game we can increase our understanding and thus decrease our chance for investment error.

In recent years, several major companies have taken a rather careful look at their records and those of the industry in areas where sealed competitive bidding is the method of acquiring leases. The most notable of these areas, and perhaps the most interesting, is the Gulf of Mexico. Most analysts turn up with the rather shocking result that, while there seems to be a lot of oil and gas in the region, the industry probably is not making as much return on its investment there as it intended. In fact, if one ignores the era before 1950, when land was a good deal cheaper, he finds that the Gulf has paid off at something less than the local credit union. Why? Have we been poor estimators of hydrocarbon potential? Have our original cost estimates been too potential? Have our original cost estimates been too conservative? Have we not predicted allowables well? Was our timing off? Or have we just been unlucky?

Even though Columbia “won” the auction for IBM, we could still “lose” in one of two ways. First, if what Columbia “paid” for IBM to come here is far in excess of what IBM’s datacenter is worth to the local economy. The second way is just a weaker version of the first; we “lose” if the value of IBM’s datacenter is less than what we estimated, even if there is a net gain to be had. This scenario is viable in common value auctions with incomplete information, ie, when lots of cities are bidding for IBM but all of their negotiations are private, which means that the localized information available to policymakers in specific cities is confidential. IBM gets to negotiate from a position of strength and there is no incentive for them to not share confidential information amongst bidders, though individual bidders have incentives to maintain confidentiality. Each individual city thus never gets access to the common pool of information that IBM has, meaning IBM can easily leverage city against city to obtain optimal conditions for itself.

As you might imagine, this isn’t a pleasant thought for anyone who fought to bring IBM to Columbia. Everyone who supports the idea will tell you that their valuation of what IBM is worth to Columbia is excellent and robust. It is not a pleasant thought to think that even rational actors err and err often, and it is counterintuitive that we might benefit from an open and transparent bidding process because it is easy to point to other cities that won a bid and say “we lost”. But it is much harder to win well than we think, and ultimately people are shortsighted.

Suggested further reading on the winner’s curse: Here is Richard Thaler’s excellent 1988 article in the Journal of Economic Perspectives, and here is a good short essay Sfrom Levin and Kagel from Ohio State.

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