Responding to External Reality

52 thoughts on “Responding to External Reality”

  1. I live in Boston where every aspect of your post exists or could have taken place. I’m a renter, and I know what it’s like to have a place sold from under you, to have to pick up and move with great difficulty to a home that’s more expensive, less spacious, and more inconvenient than the place you had to leave. All around town, the conversation is about how the city can leverage its current development boom to reduce displacement and spread the benefits among a more diverse socioeconomic slice of the citizenry. Meanwhile, I at 61 make do and struggle to assemble a Plan B. I definitely have a sence of being at the mercy of great macroeconomic forces of which we as a society are not yet entirely aware.

    “And yes, the vibe of my comments here implies a larger set of structural shifts underway that make issues like rent control and displacement seem quaint. Time will tell…”

    No kidding, I’m living it.

  2. I sit in California under 9 layers of Democrat and one layer of Republican rule. When a party rules an area for a long period of time you get policies that are Utopian in nature but truly bad policies.

  3. Ah yes, “…external realities”.
    Just under ten years ago we were able (at a reduced price just a few days prior to the Great Collapse of ’07) to sell our newish-but-poorly-constructed townhome in a Portland, OR suburb. Then, after a brief hiatus near New Orleans to care for a sick relative, we relocated to the Rogue Valley in southwestern Oregon with some down-payment cash in hand and the idea that we could probably find a reasonably-priced domicile to purchase in this mostly non-urban area. It was not to be – investors and others, many from the Bay Area, had beat us to the punch, had more cash in hand than we did and were better loan-qualified than we were.

    So, what to do? Couldn’t seem to get into a house. Rents were rising rapidly (rentals have almost disappeared entirely now) and, being elderly and retired, our incomes weren’t going to increase.

    It was then that we realized that the area supported a plethora of ‘Manufactured Home Communities’ (read, ‘Mobile Home Park’ or MHP). So we looked around and purchased an older double-wide in a ‘community’ within a few blocks of the center of one of the area’s smaller towns where we can easily walk to a large grocery, a library, a coffeeshop, a few pretty-good restaurants and even a barbershop and a bakery.

    Was this a wise decision? Maybe – maybe not. On the plus side: we paid cash and own the unit so we have no mortgage; taxes are extremely low; the ground rent is nominal (though it does go up a little each year), compared to renting a house, condo or apartment; and we have enough yard area for a garden plus a few other outdoor amenities, including a couple of good-sized trees that shade the house in the summer (but the leaves, alas!). Also, we lucked out on the initial price since the former owners had both died and the family was anxious to get rid of the place.

    On the con side: it’s an older unit so it’s not well made and had other flaws which we are gradually rectifying even though we’re unlikely to ever recoup the expenditure; it definitely is less than energy efficient – there is insulation in the walls and overhead, but nowhere near current standards (we live a bit chill in the winter and a bit warm in the summer, but that’s how we both grew up anyway); living in an MHP is pretty tight – your neighbors are RIGHT next door; and finally, we don’t own the land – the owners (who inherited the place) are getting elderly and live out of state, so there’s always the possibility that the place will be sold to new owners who inevitably will raise the ground rent, or worse, vacate the property and redevelop it, in which case we’d be faced with the expense of moving the unit to another location off-site (yeah, it’s in the rental contract).

    Anyway, we’re content with the decision we made, even though it was done in the face of “…external realities.” One does what one must….

      1. Relocation of the unit is moot. There are few MHPs in the area with available space that would allow entry of a unit this old and in any case we’d likely incur a very large increase in groundrent. The cost of moving and resetting the unit would likely be around $10k to $15k, depending on distance, and is outside our financial capability. Also there’s the likelihood that the unit itself would not hold together well during such a move even though it’s in o.k. shape as a static unit. Because of its age we’d most likely offer it for sale or have it torn down and removed for scrap. Anyway, sale and/or redevelopment of the MHP doesn’t appear to be imminent and the owners have adult kids who may be interested in continuing to operate the place since it appears to provide a good income – I was just noting the possibility of experiencing a radical change in circumstance in my prior post.

        Plan B? Most likely a smaller RV and semi-mobile living, or life in the kid’s basement, but who knows – at 82 and near 70 years of age, anything could happen….

        1. The most likely scenario for aging mobile home parks is the requirement for upgraded utilities. At a certain point the owner will be forced to spend a lot of money on underground pipes and overhead wires whether he/she likes it or not. That will translate to higher rents or a sale and redevelopment of the property. If that should occur you need a Plan B.

          1. Any such upgrade in our MHP would require removal of all the units since the original developers were allowed to run all piping directly beneath the units (go figure!) rather than in the street. Electrical and phone wiring are underground and run along the rear of the individual lots so they’re less of a problem. The property is under county jurisdiction which, in this area at least, means there’s less emphasis on service upgrades, so I reckon we’ve got awhile before that scenario may kick in.

            In any case, I appreciate and to some extent share your concerns relative to our situation and I thank you for your input – ‘Plan B’ remains as stated above and will surely be refined toward a more logical conclusion failing departure from the planet in the meantime.

            1. A delayed P.S. or addendum: I reread our dialogue above and (bright light overhead!) realized that what I have described as our current situation IS ‘Plan B’. Plans C,D,E,F (ad infinitum) are at best hazy and it has occurred to me to wonder just how far the human capacity for the artful dodge can carry one – especially when each step likely entails a step down economically….

              1. I like the term “voluntary simplicity.” There are times when we don’t have a choice about accepting “less.” Less is happening like it or not. We can embrace it or fight it. Fighting it sometimes makes us feel noble. But it’s exhausting in a context where “more” isn’t going to happen. Choosing your preferred “less” is the more effective option.

            2. I wouldn’t assume infrastructure has to run exactly where before. In my area, the buried electrical lines and transformers went bad, so the utility rerouted new ones and left the old ones in place, which greatly reduced the amount of tear up needed.

          2. I’ve often wondered why MHP rents seem so high. Is that because the infrastructure is private, i.e. not subsidized? That could prove Johnny’s points about hidden subsidies.

  4. That flat your Maine friend lived in looked pretty good as is. Seems a shame to demolish a more than adequate interior to make it “better”. I get the impression the home improvement craze has gone way overboard, to the point that perfectly adequate homes are being improved well beyond any reasonable necessity.

    1. The foundation of the 1880s era building was failing and needed a very expensive retrofit to meet the new earthquake standard. The electrical, plumbing, HVAC, and insulation all needed to be brought up to the current code. So… may as well gut everything all at once. Some of these things are mandated by government when a property changes hands. Others simply add value and maximize profit for resale or future rents.

  5. Turned 60 a few months ago. Pretty darn good health. Some dough saved, no debts. Most importantly, not many huge needs or desires. Do not want or need a Rolex. Do not want or need to stay one step ahead of the latest Foodie Craze, which will inevitably soon change anyhow.

    Native Californian, in Orange County now, but the place is much different than what I grew up in. Obviously. 2018 population running on 1970s infrastructure. The Cost/Benefit just isn’t there anymore. Too expensive for what you get.

    Texas? I tire of the binary choice. Either California or…….Texas? Seriously? Someone mentioned in the previous comments that there are plenty of decent places out there. Trade-offs for sure, but it’s not ALL sucky once you get past Needles.

    If you absolutely, positively MUST live in San Francisco – well, knock yourself out. If I was half my age, maybe. Now? I just would rather not deal with the aggravation that goes with any Alpha-Class city.

    Right now? Plan is to get a decent pick-up and a +/-20-foot trailer. That’s all you really need when you think about it…..a comfortable place to sleep, eat, and clean-up. With the internet, the decision becomes much more of a no-brainer than even 20 or 30 years ago. North America is a big place. I’ve seen a fair amount – time to see the rest, while I can. Maybe scoot off to see a few places off the continent as well.

    1. “North America is a big place.”

      “That’s all you really need when you think about it…..a comfortable place to sleep, eat, and clean-up. ”


  6. While I understand what you are saying, and there is wisdom to it, it perfectly encapsulates my view of the trend in society. Generation Greed was followed by Generation Apathy — late Boomer and Gen Xers.

    “We’re screwed anyway, so let’s just worry about ourselves and not the situation at large. Can’t do anything about it anyway.”

    I suspect that view may be regretted after Generation Greed bankrupts the government, and we end up facing poverty, ill health and early death in old age.

    1. So… Let’s say you were living in the Soviet Union back in 1989-ish just before all of Russia’s institutions dissolved and the economy collapsed. Would it have been a good use of people’s time and energy to go to city council meetings to try and bring about structural change?

      Bosnians in 1992 before the war broke out?

      How about Venezuelans circa 2010 before that country melted down?

      Syria in 2011?

      The more effective plan for individuals is to understand the large scale nature of a situation and get ahead of the curve.

      And yes, the vibe of my comments here implies a larger set of structural shifts underway that make issues like rent control and displacement seem quaint. Time will tell…

      1. When I complain about the economic, fiscal, family and political consequences of decisions by Generation Greed, one response I get is don’t worry about it. Global warming will make the things I’m concerned about seem insignificant.

        1. I’ll have to blog about this to give a proper response. Stay tuned.

          I have no idea what exactly is coming. But I have a sense of the broad outlines. There’s entirely too much debt and structural fragility built in to all our institutions: household, enterprise, and government. Things are too precariously leveraged against other things that are also precariously leveraged. People assume that America is different. We were. We’re not anymore.

          I don’t anticipate the End-of-the-World. But when the dollar loses its status as the global reserve currency it might feel like the Zombie Apocalypse for a lot of people.

          Who manages to ride out these structural shifts better than most? People with minimal debt, people with skills (doctors, nurses, engineers) people who are young, healthy, mobile, beautiful, the stoic, the well connected, the ruthless. And mostly… the lucky.

          1. I wonder if Britain’s loss of empire could serve as a model here. My impression is that things got tough at times, but it was hardly apocalypse.

            1. I was a scholarship student in the UK many years ago. I enjoyed talking to the old people I encountered – often the grandparents of my friends – who had endured the Great Depression, WWII, and the loss of Empire. Life went on. People managed. They found work as best they could. They fell in love. Got married. Had children. There were lean years to be sure. And not everyone came home, or in one piece. It was a matter of readjusting to a new reality.

              We just had a house guest from Istanbul here in San Francisco. She was describing the economic situation in Turkey as the Lira rapidly lost value relative to other currencies. Imports are now too expensive and often physically unavailable. International trade is hampered by uncertainty. Foreign suppliers don’t trust Turkish buyers to pay. Transporters don’t want to deliver goods without cash up front. Turkey’s situation is a tiny hint at what the US might experience if the dollar lost its world reserve status. At the moment people laugh at the suggestion. It’s unthinkable. Until it happens…

              Just-in-time inventory and relentless outsourcing has made us exceptionally vulnerable to disruptions. Why do you think the current (and all previous) administrations are so agreeable to whatever the Saudis are up to? If oil were to be priced in anything other than dollars it would spell the beginning of the end of our financial security. And the US is hardly in a position to declare war on the Saudis (as is our custom) given the larger context in the region. We don’t have many friends left in the neighborhood at this point.

          2. We have spent decades underinvesting in maintaining our infrastructure: physical, economic and cultural. If nothing changes, the bridges will start falling down about the same time the economy collapses and we will look around and discover we don’t know or trust our neighbors to help fix any of it…

            I do see some indications though that we are beginning to re-invest in culture. Slowly, with pain, almost certainly a day later and a dollar shorter than what we will wish we’d done, but steps in the right direction.

  7. I think ownership of any housing without a mortgage bestows a greater degree of freedom and security. Yes, maintenance. Yes, taxes. Yes, natural disasters. But it’s a tremendous hedge against rising or falling property values, or loss of retirement assets. My wife and I have accelerated our mortgage considerably, and while that flies in the face of “conventional wisdom”, it is a form of “housing insurance”…we won’t lose it when our income and/or retirement assets drop.

    (I am writing this from a Midwestern point of view, where there is adequate fresh water, no measurable earthquake risk, small tornado risk, and no flood risk. Sure, we’re vulnerable in a SHTF total breakdown of social and utility systems, but so is everyone except you and the survivalists.)

      1. Okay… Generation Greed is a bit too pejorative. Yes, Boomers were born into an economy that was… booming. And they were given all manner of benefits curtesy of the GI Generation’s investments in public infrastructure, universities, etc. And the post war era was an unusually fertile time to be an American since the rest of the industrialized world had been bombed into dust. So yes, Boomers were lucky and pissed away that wealth decade after decade and are leaving a pile of debt behind for the rest of us to absorb. And by-the-way, the current reverse mortgage trend is one last way Boomers are borrowing from the future to keep themselves living comfortably until they drop – making sure their heirs will receive no inheritance. But on a day-to-day basis Boomers did what seemed like a good idea at the time rather than any coordinated effort to dismantle the national economy – although that was an unfortunate side effect.

        I see our current situation as part of a larger historical cycle. The Boomers behaved in a rational manner based on their place in the cycle – just as people back in the early part of the 20th century did. But decades of excesses and too much debt lead to the crash of 1929 and WWII. We’re about to experience the same kind of shift. The debt will be washed away along with old regulations (or lack thereof) as a new generation takes hold of the levers of power and reworks all our institutions.

        1. Perhaps. But when I was forced to come around to your point of view a decade ago, it was a sad day for me, and I’m still pissed off.

          Meanwhile, when will “a new generation take and hold the levers of power and rework all our institutions?” Have you noticed the ages of the leadership of the two major parties?

          At least it appears one prediction will come true — we will in fact get medical marijuana followed by legal assisted suicide in place of Social Security and Medicare, instead of nothing. But they’ll probably tax the hell out it.

          1. The “new generation” is not yet 40; 10 more years. GenXers (37-53) will get elected in the meantime as the older Boomers (now 72) leave the scene, but I’d wager for now it’ll mostly be later Boomers (those now 54-63) just because there are so many of us.

            One thing I’m a bit optimistic about: It may in fact be a late Boomer/GenX coalition that tries another generational fix of the big entitlements (Social Security and Medicare) but they will have to do immigration reform/path to citizenship for DREAMers/exclusion of formerly “illegal” non-citizens to pay for it. And maybe cannabis legalization/taxes as part of the deal too. But this would require the present Congressional fossilized leadership and hyper partisans to depart the scene, maybe a 50/50 bet?

            1. You nailed the demographic transition perfectly. The Don and Hillary Show will come to an end via the actuarial tables. Millennials will assume positions of power in earnest in twenty years. In between it will be younger Boomers and older GenX – although Millennials will be entering public life earlier and stronger than expected.

              The project for the next generation of American leaders will be managing involuntary contraction. There’s simply no pleasant way to do that. Big fun.

              One of the assumptions in your scenario is that immigrants will want to stay in the US and that more will continue to be attracted to our country. You have to at least entertain the possibility that an economic and political meltdown will make going elsewhere or staying home more attractive. More than a few of my friends – some foreign born, some native – are considering having one foot out the door. Just in case. You never know.

              1. Thanks…demographics aren’t always destiny but they are often the simplest explanation of mass phenomena.

                Yes, I’m a bit rosy on immigration, but I’m really just talking about dealing with the immigrants (mostly “illegal”) who are already here and pretty thoroughly Americanized. If we want them to pull with citizens through the inevitable meltdown, we have to legalize them now.

                I think the political compromise will be “legal status” (but never citizenship) for the folks who voluntarily came, and thus they will probably only have limited benefits from Social Security and Medicare based on their legalization date…but they’ll pay in. For those brought here as kids, the balance will tip in their favor for full legal residency and a path to citizenship, just as it did in the Reagan-Bush era. (I think the break in the US demographics in favor of legalizing DREAMers is with late Boomer/GenXers tipping slightly in favor, and the Millennials who grew up with them overwhelmingly in favor.)

                I understand the country will eventually face a “Detroit Writ Large” scenario, and some will flee. I am betting it won’t be in full bloom in the remaining 30 or so years I have on this earth (or that I’ll be in the throes of dementia and totally living in the glorious past by then).

          2. The policies you decry weren’t set up by Boomers. Boomers didn’t start having substantial influence in politics until 1992. The current housing and retirement policies were all set up before then. *Even now* two of the top Congressional leaders (McConnell and Pelosi) are Silents. The only major reforms on the Boomer’s watch are Medicare Part D and Obamacare.

            Also, the major divides in American society are class, not generation. Many, many Boomers have been crushed by the same soaring house prices and fading opportunity that face many Millennials, and there are quite a few Millennials making out like bandits in assorted professional and business fields. Yes, the proportions keep shifting for the worse as time goes on but the split is have and have-not rather than age.

            You could try to pin the outrageous debt-to-income changes in Fannie and Freddie on Boomers but again it’s particular to class divisions not age. There aren’t large grass movement protests of retirement age people demanding DTI relaxations. The decisions are being made by a small number of appointees from the financial industry, and they are serving the interests of the financial industry.

            1. I guess the issue is the division of responsibility between the sellers of more for less and something for nothing, and the buyers.

              The sellers have piled up a whole bunch of pieces off paper that say they are entitled to the benefits of our children’s and grandchildren’s future work, in exchange for the national party of 1981 to 2008 (and shifting the national hangover from hell forward from 2008 to today). I guess we’ll find out what the pieces of paper turn out to be worth someday.

  8. My mother was like J.’s Maine Friend: she, too, found it hard dealing with the realities of life. I can recall one move I helped her make out of a small 2-bedroom unit in a duplex near beach-front. Her land-lady got tired of maintaining the building, and sold it to a young man who was going to renovate the duplex and re-sell it at the higher price point he was certain to get in that location. Mom knew she had to move, and yet I had to drag her out of her unit while the builders were literally working around her! Mother is with the ages now, and no longer presents “moving challenges” to her children. My own plan B details are vague at this point, but one thing’s for sure: I’m going to downsize. Therefore I’m not going to need – or be able to keep – quite as much stuff, and so I’ve become an active contributor to Goodwill, and the like. It’s easier to sift through stuff at moving time if you’ve been doing it all along.

  9. I feel like I’ve experienced all sides of the crazy California market:
    – Owner move-in evicted out of a place in the Mission in the 90s. I landed in a bad roommate situation that I felt I couldn’t escape because rents were rising.
    – Had the most amazing subsidized student housing on the Presidio for a few years (SFSU used to do this). Until I graduated.
    – Gave myself the scarlet letter C (Bad Credit) which landed me in a “gunshots at night” kind of neighborhood in LA (MacArthur Park), where I moved after graduation in 2001.
    – Moved back up here into an in-law. For selfish reasons, I broke the lease, but the new apartment fell through and I moved onto my brother’s couch. Thank god I have a brother with a couch.
    – Then into a residential hotel in the TenderNob for years. It was really gross but actually gave me some stability to get my financial house in order.
    – Finally got a “real job”, which, thanks to my wife’s superior accounting skills and years of saving, has led to home ownership and rental properties.

    So yeah, I made a lot of bad decisions and just a couple good ones. I was blessed with good timing and people that helped me. I think if I had replayed my job, rental and credit history today, I would’ve ended up homeless or out of state in a matter of months.

    1. Thankfully, I managed to avoid too many bad decisions, but I can’t shake the impression that falling thru the cracks is a lot easier today. Seems too many have forgotten the expression: “There but for the grace of God go I”.

  10. When Willie Brown was mayor I attended one of his January State of the City speeches. Someone asked him about housing and rent controls. He commented that you’d be surprised at the number of vacant buildings that were often owned outright by some widow who let them sit rather than contend with the city’s housing laws. Eventually, they’d be left to her heirs to deal with. He said that if some means could be derived to encourage these people to sell quite a bit would come on the market. Now, Willie exaggerates a lot, but there’s probably some truth to that.

    My big problem with affordable housing (affordable housing is defined as housing that is restricted as to what it can sell or rent for and occupants must qualify by income) is that in the Bay Area the planning community intends that most new housing be “affordable”. The Plan Bay Area, a coordinated housing plan among all Bay Area cities and counties, figures that over 50% of new housing should be restricted as affordable. Affordable housing is unprofitable to build, so it requires subsidies. Most local governments general plans acknowledge that the subsidy funds aren’t there, so only a small portion will be built no matter what the plan says. And a few are squeezed in here and there in developments where most units are market rate.

    But what are we telling younger people, especially Hispanics? It seems we are telling them that we envision a future for a limited number of them to live in deed restricted units that while they may rent or sell for below market rates, they will also never be permitted to garner the increase in equity that so many of us older homeowners have gained. Furthermore, only a lucky few will get to live in a cheap apartment. The rest can go to Texas.

  11. I’ve been reading this blog for a while and this post exemplifies why. This sort of clear-headed analysis is exactly the sort of thing that you don’t find many places. Our journalist class is full of very bright, very earnest people who will absolutely tell you why something is wrong or how they think things ought to be or what overarching political ideology we need to get there, but with a diminished capacity to simple look at things the way they are and see the small pragmatic steps that will actually carry us forward.

    Your friend in Maine is an archetype. There are a lot of Americans who just take large parts of their lifestyles for granted, who don’t understand the extent to which those lifestyles have been explicitly and implicitly subsidized by policies that simply cannot and won’t continue in perpetuity. Some people are going to see the changes coming and take action in one direction of another, but a lot are simply going to pretend like this can all go on forever and end up having some manner of breakdown when they finally digest the reality that it won’t.

    1. There’s a part of me that suspects my friend in Maine may end up in a better position than the wealthy people who will be living in her old luxury flat – about five minutes after 1) the next market crash 2) earthquake.

  12. I have a client in SF who owns some apartment buildings and I learned that because the rents are so astronomical, there’s little incentive to minimize vacancy. It’s ok to leave units off the market so they can be renovated slowly for less expense (price, quality, time; choose two), because not only is the increased rent from the renovation going to be a windfall, but the rent of the other units is already so out of whack from the actual maintenance and operation of the building that full occupancy isn’t required to still make bank. There’s going to be renters lining up for those units when they do come online anyway, so there’s very little risk. What’s a little more artificial scarcity among friends eh?

  13. The fact that rent control exists at all in a place like the United States blows my mind. It seems go against all of the commerce-driven, individual choice, anti-welfare values that seem to predominate over there. Yet people live that way for years, like on the edge of a volcano.

    1. And sometimes the volcano erupts…

      Rent control is a local thing in a small number of municipalities. New York City, San Francisco, Santa Monica… Basically, older more liberal, highly desirable places with a history of union organizing and such. The rest of the continent? Not so much…

      There are pros and cons. I can’t honestly say if rent control is a good or an evil. My friend got a great deal for years while others struggled to find a one bedroom apartment they had to shared with three room mates for infinitely more money. Is that fair? And my friend’s land lady could have gotten so much more cash out of the place… Winners and losers…

      1. Rent control seems like a poor substitute for what’s actually needed: public housing. Housing is so clearly an essential requirement, that where the market fails to provide it, it must be provided by the state. Rent control, affordable housing, etc. are fudges.

        1. Housing is essential, sure, but nobody “deserves” to live in a specific place. There are plenty of incredibly affordable places to live in America. Furthermore, as Johnny pointed out in this very post, The SF/Californian government has already fucked up the housing market in SF, nobody should be arguing for them to become more involved.

          1. I wouldn’t immediately blame “The Government” for f-ing up the housing market without looking at all the voter approved – and voter demanded – rules and procedures that constitute official policies. It’s a long list of restrictions imposed by existing property owners to prevent other people building things and shifting costs off of current residents on to people who don’t yet live here. The government is…. us.

            California is simply experiencing the long term consequences of decades of accumulated constraints on the market. At a certain point the market will push back in unexpected ways and kill the golden goose.

            Don’t be so quick to praise other places like Texas for being pro growth. Texas will have its own unintended consequences to deal with in due time…

            1. Thanks for this thought-provoking post. In the comment above you write, “Texas will have it’s own unintended consequences to deal with in due time…” I’ll be especially interested in what you have to say about Texas.

              1. People forget that California was a magnet that drew people from all over the US and the world for decades. Land was abundant and cheap. State and federal investment in everything from highways to aqueducts to university campuses exploded. Construction of homes, factories, and offices boomed in every direction. The population doubled. Then it doubled again. Then again.

                Today California is experiencing the unintended consequences of that growth. The infrastructure is aging. The desirable land is mostly paved over or protected. Long term obligations for infrastructure maintenance, pensions, and salaries is outstripping revenue. And the population is unwilling to agree on a rational plan for addressing these challenges.

                Texas is simply a couple of decades behind the curve. At a certain point it too will hit a wall and hard choices will need to be made. I’m not convinced that Texans will do much better, although the language and posturing will have a different flavor.

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