Friday, November 5, 2010

The People Have Spoken, the Bastards!

After being totally absorbed in the last election cycle (this time it was personal for me), it’s time for me to disconnect a bit and focus on other areas that need attention.

But not before a parting shot.

I’ll start with Peggy Noonan’s excellent article from which I stole this headline. Noonan’s posits that American voters are adults, they rejected the Democratic party’s liberal agenda, but also the more extreme Republicans candidates. A good message needs a good messenger. Good for us.

I laugh as the losing party starts to talk about our ‘broken system’ where nothing ever gets done. You know what: we adult voters like the system the way it is. Since everyone agrees that, by and large, politicians are crooks. So why do we want to give them more power over our lives?

<sidebar2> Similarly, I always wondered why liberals who think that cops are all fascist pigs, insist that they should be the only ones allowed to have guns. Someone ‘splain it to me please. </sidebar2>

But what was proven this year, yet again, is the amazing political system that was put in place by our founding fathers. A unique system that has no equal anywhere else in the world. A system that diffuse power greatly and puts the individual in charge.

Nothing illustrates this more that the primary system. Pundits complain that it polarizes the dialogue since only diehard partisans vote in primaries. But the flip side is that in every other place on this planet, party bosses pick the slate of candidate and voters are permitted to pick from one or more piles of feces. No other country in the world would have produced a Marco Rubio, Rand Paul, or even a Christine O’Donnell.

Even when we’re scared and cannot think straight, the wisdom of the crowd reasserts itself.

Thursday, October 14, 2010

Waiting for Superman? Don’t hold your breath

I often refrain from blogging about the education space because the business I run is education related and there is such a uniform, embedded, world-view it’s hard to have reasoned dialogue. “Waiting for Superman”, because it’s produced by a liberal, seem to, at last, lift the taboo on this subject. So here goes.

This industry seems to have a singular focus on money as the prime lever for good education. The graph below shows the results of this policy.

In the last 40 years the cost of education has gone up 375%, that’s almost 100% per decade, with no improvement in student achievement whatever. Is there any stronger repudiation of the spending argument?

Yet the teacher’s unions have convinced this country that any attempts at controlling cost will have a disastrous effect on the education of children and the future of this country.

Over the same period, student population grew by 10% the teacher population grew by 100%. Class size did not change much, for all of these resources are now deployed as ‘layers of experts’ adding overhead and reducing accountability. Who’s at fault if a student fails? The classroom teacher? The reading specialist? The curriculum coordinator? Special Ed? Lunch lady? Overlay of responsibility equals plausible deniability.

Here’s a simple mind experiment: If the growth in teacher population kept pace with the growth of student population, the average teacher would be making $150K per year. That would attract a completely different type of individual to the teaching profession, and we wouldn’t be arguing about class size.

The only way to fix this system is to bring accountability back. I say this as Michelle Rhee exits her position of Chancellor of the DC school district, her attempts at reform thwarted by an uncooperative Democratic congress, an unsympathetic populace that voted the reformist mayor Adrian Fenty out, and overly powerful teacher’s union.

You can wait for Superman; just don’t hold your breath

Wednesday, September 22, 2010

The 21st Century: Libertarianism and the rise of the individual

For a measly $1, I was lured into buying a collection of old science fiction books for my Kindle (I guess the Long Tail really works). A collection that spans more than a century and half of popular SciFi and fantasy fiction.

As I read through the 22 books, a curious pattern emerged: Prior to 1920, the heroes, movers and shakers that the worlds turned to in times of crisis were inevitably strong individuals and entrepreneurs. These industry scions harnessed and focused capital and resources in the defense of earth from evil invaders.

Then, somehow, in the popular psyche government was handed that job: they became our protectors, the fountainhead of power and resources. The individual faded into the background to become a small part of a larger machine. This world view persisted throughout the 20th century: Big government and big business took center stage as the need for scale drove the concentration of capital and power.

More recently, in curious way, the pendulum shifted. Government and institution formed the first line of defense. The protagonist/hero, however, almost always was an individual that bucked the system and, singlehandedly achieved what a whole country couldn’t.

As we close the first decade of the 21st century, recent events, and there are so many, have shown how impotent government is at dealing with systemic problems. After a century of placing our full trust in them, we are now reevaluating our options.

The rise of the Tea Party in America, the lurch to the right in Europe are all signs that the populace understand the choice at hand: double down on Big and move towards a more centralized, command and control government, or we can go the other way and allow the individual to flourish again.

As Gen-X start to replace baby boomers in positions of power and influence, they bring with them a different, more individualistic world-view. I won’t be around to see it, but I’m betting historians will label 21st as the Libertarian Century.

Tuesday, June 22, 2010

Public Libraries: the lasting dinosaur

Even if you’re not involved in the publishing industry you cannot help but notice seismic changes the industry is experiencing: Business models are being reinvented, new entrants are redefining the value chain, and technology is changing how information is created, distributed and consumed. Mighty scions are quaking in their boots as they face aggressive barbarians at their gates.

Yet in the midst of this pitches battle is an island of serenity, and oasis of calmness, a Shangri-La of stability: the public library.

Unfazed by the realities, local governments continue to spend on public libraries stuck in the 18th century model of how knowledge is transferred: books are so scarce that they need to be housed in a central location and shared amongst readers.

My small town of Monroe, Connecticut, recently rebuilt the public library at a cost of $6 million dollars, and spends annually about $750 thousand dollars on the operation of our public library; only $73 thousand of which goes towards the purchase of books. For the same money Monroe could have bought its 19000 residents a Kindle DX and 10 books a year.

Amazon, B&N and others have made books cheap, accessible and ubiquitous. It will take Government a century before it catches up with this fact. In the interim, they spend gobs of money and get no discernable outcome.

I guess nostalgia has a price.

Thursday, June 10, 2010

Revenge of the Mainframe, Part Deux

The biggest news of the week is Apple’s market cap surpassing Microsoft’s. I’m not impressed.

It’s “Big News” only in how it signals the ebb and flow of companies. A while back, accused of monopolistic practices, AT&T sought a consent decree from the FTC by jettisoning the 5 baby-bells. AT&T kept the long distance business, and got rid of the messy ‘last-mile’. The thinking at the time was that all action was going to be in the long distance business; after all it was the only profitable part of Ma-Bell’s.

Long distance is now a commodity, and the last mile of cabling, a conduit for broadband, is where all the action is (for now). If only those smart AT&T executives can call a mulligan…

Cloud computing is changing the value of assets and brands in the technology space, its creating new winners, new losers and many opportunities for new entrant to occupy new niches in the ecosystem. And it surely is changing what matters:

  • Intel’s competitive advantage is no longer the IA-32/64 architecture; it’s their manufacturing capabilities that count.
  • Windows is no longer Microsoft’s competitive advantage, it fact it’s now irrelevant. Servers migrating to the cloud as services, Office morphing into Office Live, and Xbox Live will drive future growth. More than any other player, Microsoft needs to reinvent itself. And quick.
  • Apple is no longer a technology company, it’s a design shop. Think Gucci with restrictive EULA (hey lady you cannot take this bag to Walmart! And no, you cannot keep your pink LCP in it either).
  • Google is now the leading force in Cloud Computer. But is poised to become the most hated company on earth. Replacing Microsoft, which replaced IBM, which replaced…. Ironic that Google’s motto is “do no evil”.
  • Most blood will be spilled in the mobile market where competition will drive innovation, while eroding margins. It will be fun to watch.
The good news is that new landscape will be more forgiving: No more zero-sum games played in a Thunderdome-like environment. And that is a good thing for the industry.

Monday, June 7, 2010

The Failed Fourth Estate

Helen Thomas retired today, having outlived many of the news organizations she worked for, Helen’s career was cut short by a slip of the tongue that revealed a bias she’s held for many decades. Maybe, at 90, one stops caring about what people think, maybe senility finally got the upper hand.

Either way, one can be sure of two things: Helen’s views of the Israeli-Palestinian conflict have long inspired her reporting, and that she’s not the only one that carries a deep bias, nay, an unshakable world-view.

The concept that the press, the fourth estate, is the selfless, neutral, self-anointed watchdog that keeps the powerful in check on behalf the little guy is as fictional as a cost-cutting, budget-balancing, pay-go congress.

Each of them is, after all, an individual. All of them followed the same track, studied in the same schools, listened to the same professors, worked in the same newsrooms. They know less than most about what’s going on and so weave a story consistent with how they perceive the world. Even more than politicians, they live in a bubble insulated from the consequences of their decisions, secure in their holier-than-thou mission to inform the universe of a singularly uniform view of how said universe is supposed to act and what it’s supposed to know.

Not for long sister: as the monolithic news organizations decline, an army of citizen journalists are filling the void. Providing a spectrum of views on every issue – not one truth, but all truths are told. You decide.

Sure the burden is now on you. You must care enough about something to pay attention to it. To listen to the many voices and make up your own mind.

Mark Twain (or is it Oscar Wilde?) once said: “never pick a fight with someone that buys ink by the barrel”, luckily ink is now free.

Thursday, May 27, 2010

Revenge of the Mainframe

My first exposure to computers (aptly named at the time) was to a Dec PDP-10 36-bit machine with punch card. Processors were so expensive than my university owned 2 of them, everyone had to share. Storage was expensive, so you kept your programs on punch cards, your data on mag-tapes.

A few years later, timesharing was allowed, and all your programs and data was stored on the mainframe accessed remotely by dumb terminals some terminals were converted printed, others displayed 80x25 characters on a black and white screen (I remember lusting after a Heathkit H-19 with an external 300 baud modem), other had built in graphics capabilities such as the RamTek terminals.

Still all connected over slow RS232 serial links, limiting what can be done. That was 1979.

Then in 1981 IBM introduced the IBM PC 5150 and things changed for a couple of decades. The personal computer ushered in the era of disconnected computing, data & programs resided in a little beige box in your den.

By 1999, the internet had connected most of these machines into a global network usurping the then dominant client-server metaphor.

So here we are a decade later and a new model is about to take hold, a model quite similar to my original PDP-10 experience: Cloud Computing.

Data (now called “content”) and programs (now called “Services) reside in the Internet “Cloud” accessible via a broadband connection from anywhere in the world using a multitude of devices. Granted these devices are smarter, more colorful, and easier to use than their predecessor, but the fact remains: the Cloud, is the biggest mainframe ever made, it’s just happens to be made of a number of smaller components called servers.

The cloud is the ultimate virtualization of computing: it, in effect, commoditizes not only processor, programming languages, storage, but content as well.

In the next installment I will examine the impact this will have on the existing technology landscape and how it’s changing corporate value propositions.

Thursday, May 13, 2010

Where is Greece?

A lot has transpired since my February demographics blog. A few readers have asked: Where does Greece fall on the chart? Well... Right there.

I also said that the move away from the welfare state is not a question of "if", but of "when".

I think we have our answer. Nuff said.

Wednesday, May 12, 2010

Three Ways Out

In a great article entitled “The Case for Economic Doom and Gloom”, John B. Judis argues that the reason for the present malaise in the world economic order is due to, as he puts it, the “global overcapacity in tradable goods production”. In making his argument Mr. Judis focuses on the production side of the equation: as more countries develop, they put on the market additional production capacity that must compete with existing capacity. Driving down prices, lowering profits and hence investments. Capital in search of good returns then flows to real estate or government bonds and feed an unsustainable Keynesian cycle.

Though I’m in overall agreement with this model and its underlying dynamics, I think he is a ignoring the second part of the equation: Demographics. As Western populations age, their consumption patterns slows, further aggravating the overcapacity problem.

There are only three ways outs (in decreasing rosiness) that I can see:

  1. Technological breakthrough: As the microprocessor drove the Reagan recovery and the Internet Clinton’s, a new technological breakthrough will drive productivity and consumption and restore growth.
  2. Rise of Asian Consumerism: Aging Western consumers are replaced by younger Asian and African ones driving up the demand curve and restoring growth
  3. World War III: a major world war manages to destroy significant production capacity all around the world. (This is not an unlikely scenario: as the Great Depression gave rise to Fascism and Communism, a prolonged economic downturn coupled with Islamic Jihadist can yield the same result)

None of these scenarios bode well for environmentalist: it is clear that, as a race, we need to expand or wither. We Simply cannot stand still.

For the sake of everyone, I'm rooting for #1.

Tuesday, April 6, 2010

The iPad's titillating promise

Titillating promises of what can be are often more interesting than the real experience.

Like all Apple products, the lovable iPad turns heads. Just because. The guy next to me on the plane felt compelled to open a conversation when he spotted me using it. In fact, you take it into public place to elicit just such a response.

Conspicuous consumption of the 60s and 70s turned to conspicuous morality of the ‘90 and ’00 and now we have graduated to conspicuous coolness, brought on not by a 350hp all wheel drive red coupe, but by a small 8x10 piece of electronics.

The problem is that the iPad’s hipness is not backed by its utility: it simply does not know what it wants to be: Too big for a phone, too small for a computer, too heavy for a book, too fragile for casual handling.

The screen is brilliant except outdoors where thumbprints overpower the content.

It’s too heavy to hold with one hand without your thumb wandering into the active matrix area and causing presses you did not intend. I keep swishing for 3 finger holes in the back (like a bowling ball), so I can hold it with one hand and operate it with the other.

It will not charge from most USB ports, and the battery life is so-so. Wifi reception is mediocre, unable to connect where other devices can.

Love seeing the NYT, WSJ and Bloomberg on that brilliant screen. Kindle app, iBook look great, but the device is simply too heavy to sustained reading. I found myself too preoccupied with how to hold the device that with reading.

Google Map is just the bomb! Intuitive, speedy, accurate, just brilliant!

Where the iPad really shines is web browsing. I miss flash, but the web experience is good and intuitive.

But the iPad’s biggest problem is that it simply cannot be used standing up or lying down. It cannot be used on a desk and it cannot be used on a recliner. It’s just too heavy and fragile for that.

So here’s my recommendation: if you’re the kind of person that sits up straight 80% of the time, buy an iPad, otherwise a combo laptop/smartphone is still the best way to go.

Unless you want to look cool. They hurry up and buy one before the charm fades.

As for me, I will continue to use this darned thing for the next couple of weeks and a few business trips. Maybe I’ll finally learn to sit up straight.

Tuesday, March 9, 2010

Give Iraq a Chance

Despite recent success, many seem determined to see the half empty glass in the Iraq.

Jeff Miron writes:

In addition, merely holding elections is not the ultimate goal; many countries have held elections that were meaningless in practice. We have yet to see whether Iraq’s “democracy” will become a de facto religous dictatorship.

I understand that elections are not the ultimate goal. However, they are a mean to an end are they not?

Would anyone looking in on the United States in the lase 18th Century have predicted anything but the collapse of this aberration/experiment?

Was the goal, in the end, not worth all the struggles?

I understand that we want to disincentivize American military adventurism. I’m all for that.

I understand that the cost in treasure and blood is high. But that cost is sunk at this point.

It’s time to stop beating the doom and gloom drums for Iraq. Give them half a chance will ya?

They deserve it as much as we did in 1776.

BTW - you should buy Jeff's new book Libertarianism, from A to Z

Monday, March 8, 2010

Maslow’s impact on global financial boom and bust cycles

I love simple explanations. Not because they are accurate, because they are not. Not because they are comprehensive, they are not. I love them because they explain things in way that is easy to grasp, and therefore easy to action. As long we keep an eye out for black swans, and are ready to revise our models, simple explanations trump complex ones in sheer utility.

What’s been top of mind lately is the apparent acceleration of the global financial boom and bust cycles. These cycles seem to be not only more frequent but of higher amplitude as well.

Take the current bust cycle: you can argue whether the Fed’s easy money policy led to unsustainable inflation in housing prices, facilitated by government policies implemented by Freddie and Fannie which purchased questionable notes turned them into mortgage-backed securities, and sold them to investment banks which purchased credit default swaps from AIG as a hedge....

And I haven’t mentioned the money supply issue yet.

But there is a simpler explanation: Maslow is at fault. You see, in the US consumer spending accounts for 70% of economic activities so it follows that consumer behavior becomes a significant driver in the economic equation. If we divide consumer spending into tranches following Maslow's hierarchy of needs an interesting pattern emerges.

Over the last 4 decades, consumer spending has steadily climbed the sides of this pyramid. For example, according to the USDA, in 1929, food consumed 29% of personal income, that measure went to 17% in 1960 and is now less than 9%. Similarly, expenditure on cars dropped from 8% of income in 1984 to 5% today, gasoline expenditures dropped by 10% while women’s apparel is up 25% since 1984. In fact many experts now look at discretionary spending as an early predictor of stock market activity (see this and this).

But what does this trend towards higher Maslow state mean? Well to put it simply: higher volatility and deeper boom and bust cycle. A simple assumption about the ease with which consumers can cut 20% of their spending yields a 50% more decrease in economic activity.

As our society trends richer expect deeper more frequent boom and bust cycles. It’s a fact of life, might as well get used to it.

Tuesday, March 2, 2010

2 vs. 14

As the Supreme Court considers the case of McDonald v. Chicago (summary) it’s likely the verdict will uphold Chicagoans’ right to bear arms.

The problem is that Supreme Court will most likely use the 14th amendment to uphold the people’s right to bear arms, as outlined by the 2nd amendment.

A win is a clear victory for gun rights, but it does establish a precedent of Federal intrusion into state matters.

Sometimes, I wish I could have it both ways.

Mommy-Daddy and Venus-Mars Metaphors

When I wrote my Venus & Mars piece last year, I tried very hard to avoid the male-female analogy. I just did not have the intestinal fortitude to deal with the fallout.

Well, in “The Enduring Mommy-Daddy Political Divide” David Paul Kuhn, with more courage and eloquence, applies this same principle to domestic policy and the R vs. D world view. Great read.

Monday, March 1, 2010

Vindication of the Bush Doctrine?

It would have been safer to wait after the March 7th election to post this, but caution has never been my strong suite. So here goes: It’s starting to become conceivable that all the blood and treasure we spent in Iraq hasn’t been in vain. That the Bush doctrine had some merit. That it is possible to create a multi-ethnic, multi-religions, multi-cultural democracy in the Arab world. Even Newsweek is starting to admit that.

I feel a “thrill going up my leg” when I watch Sunni and Shiite politicians jockey for positions, wheel and deal, and play hardball but with a commitment that a unified Iraq is that only way to go.

I’m not ready to concede that the cost-benefit analysis of the Iraq was has turned positive at this point. Nor should you take from this any encouragement to repeat this experiment in the future. It succeeded mostly because the Iraqis wanted it to succeed, full stop.

But the benefit side of the equation has clearly turned positive: Iraq and Lebanon, liberated by the Bush doctrine, might not turn the entire Arab world into western-style democracies overnight. But the seed has been planted and they now stand as a few small green shoot on a desert dune.

The Arab youth hasn’t the right to ask for anything more than to be given a chance to succeed.

America owes the Arab youth nothing more. It’s all paid up.

Sunday, February 28, 2010

Keynes vs. Hayek for Dummies

If you do not know who John Maynard Keynes or Friedrich von Hayek are, simply think of this video as 2 white rappers trying to impress white chicks.

if you do know, then listen to the lyrics.

Thursday, February 25, 2010

Demography is destiny: The inevitable decline of the welfare state.

The trend to ignore old age or even to fight it by chemical and surgical means permeates not only our modern society by our government policy as well.

But age, like gravity and rust, always wins in the end. Populations all over the world, with few exceptions, are getting older. Aging populations severely impacts western-style welfare states.

The ratio of payers to beneficiary has been more than cut in half over the last 50 years. Even the US, where population growth continues and the median age is a relatively young 38, social security went from 16:1 in 1950 to 3.3:1 today and is projected to reach 2:1 in 2050.

The problem is more severe in Western Europe and Japan where population growth is often negative and median age is now above 40. It is no coincidence that the biggest budget deficits are now being experienced by countries (Portugal, Italy, Greece, and Spain collectively known as Eurozone PIGS) with highest median age and lowest population growth.

For welfare states costs are rising and fewer workers are paying to support more retirees. This imbalance, temporarily aggravated by depressed economies, is simply not sustainable. Something has to give and this something is the welfare state.

Welfare state will not go quietly into the night. It will fight all the way to the end, this after all is an existentialist threat.

The outcome, I believe, is not in doubt. And strangely, Europe will lead America on that journey. The question is not of if, but of when.

Thursday, February 18, 2010

Hank, Hank, Hank...

I just finished reading Hank Paulson’s “On the Brink”, and though the book was a boring, blow-by-blow recount of the events, it shed some light on the near collapse of the global financial system in the fall of 2008.

It did help me answer the question of whether TARP was necessary: it wasn’t.

TARP in of itself was pretty harmless; most of the funds have or will be paid back, with interest, to taxpayers. Toxic assets turned out not to be a real problem: it was a good-old-fashioned run on the bank; a global run on all the banks.

TARP never lived up to its name: It never purchased any “Troubled Assets”. It simply played the role of “lender of last resort”. A role typically reserved for the Federal Reserve, and as such avoided some short term pain. We will never know what could have happened.

But the story does not end here.

TARP opened Pandora’s box and enabled the US Government to do or attempt to do things that a few months prior would have been unthinkable.

TARP changed the American psyche so talk of “hundreds of billions” became acceptable in polite company.

TARP led to the Stimulus, GM bailout, $13T budget deficit, red ink as far as the eye can see.

TARP forced us to cross the Rubicon. Led by the unwavering self-confident, never-doubt-myself-for-a-minute but willing-to-change-my-mind-at-my-convenience Paulson, we moved into virgin territory. And the damage caused will take decades to undo.

Moral hazard on a slippery slope! We could and should have done without TARP. Libertarians and House Republicans were right after all.

By the way, Hank portrayed John McCain as a bumbling idiot, unable to grasp the situation let alone formulate a cohesive plan. Maybe my faute-de-mieux theory was right?

Thursday, January 28, 2010

I Opine on the iPad

It has been quite a long time since I was excited about an Apple product announcement. Their tack to being a media company took them out of my sphere of interest for a decade now. Apple technology had become a fashion statement, rhetoric notwithstanding.

The tablet was another story; I always thought it to be the natural evolution of the laptop. I was involved in early attempts at creating a tablet computer by Grid Systems, stood in line for hours at MacWorld in Boston to buy a Newton, plunked over 1G last year on UMPC, bought an OLPC (you can rotate the screen and turn it into a tablet) and have been a Kindle fan from day one.

The main problem with the early attempts was CPU and storage. That was solved by about 2003, leaving two main problems: software and screen technology.

In today’s world software is no longer an issue: there is a number of options out there from Win7, to Chrome OS, to iPhone OS. The thornier problem of screen technology remain unsolved.
You see a tablet needs to be lightweight, rugged, viewable in any lighting condition and run un-tethered for a long time. Present screen technology is just not up to snuff.

  • e-Ink comes closest but suffers from lack of color and inability to address individual pixels which makes it unsuitable for media applications. Besides, it’s as unsexy and an IBM PS/2.

  • Backlit LCD displays are power hogs and not daylight readable. Fragile as a champagne flute, these displays are just not meant to be dropped.

  • OLED technology is promising, but suffers from shorter life (display dims and looses color over time), and higher costs.

Power consumption in non e-Ink devices necessitate larger batteries and therefore tend to weight 1-3 lbs. It is simply not comfortable to hold that kind to device for an extended period of time.

My prediction is that the iPad (after the fanboys buy two each) will not garner enough of an audience to be counted a success. It’s too much of a compromise: too heavy for a book reader, too large to be an iPod (imagine going to the gym), too limited to replace my laptop (VPN anyone?), not enough connectivity for TV viewing.

Unlike Microsoft, Apple does not have a history of investing heavily in non-homerun products. 50% chance, iPad will die on the vine.