How opponents of the "public option" view the world

Good: A large, faceless, bureaucratic institution that has no competition called an "insurance company."

Bad: A large, faceless, bureaucratic institution that has no competition called a "government."

Good: Paying an annual sum of $12,000 a year per person in a transfer called an "insurance preium."

Bad: Paying an annual sum of $12,000 a year per person (or, whisper it softly, less) in a transfer called a "tax."

Good: Aggregating the total cost to the nation and employers if paid in "taxes."

Bad: Aggregating the total cost to the nation and employers if paid as "insurance premiums."

Good: Rationing health care using dollars.

Bad: Rationing health care using medical advice.

Good: Not being able to "choose your own doctor" through price constraints and insurance company policies.

Bad: Not being able to "choose your own doctor" through resource constraints and government policies.

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Good: Having a substantial percentage of the population uninsured.

Bad: Having the overwhelming majority of the population insured.

Good: Having high absenteeism and lost productivity due to poor employee health.

Bad: Having low absenteeism and optimal productivity due to good employee health.

Good: Having only private companies who have themslves grown to be large, faceless, bureaucratic institutions that have no competition be able to afford insurance premiums for their employees.

Bad: Having private companies who have themslves grown to be large, faceless, bureaucratic institutions receive competition from smaller, more nible, more agile companies who are now able to afford insurance premiums for their employees.

Good: Having US employers at a competitive disadvantage to employers in countries that insure their citizens.

Bad: Giving US employers a level playing field in the global marketplace.

Good: Having citizens, employees, and small business owners who are lucky enough to be covered in the first place, live in constant fear of losing that coverage, either for themselves or their employees.

Bad: Having citizens, employees, and small business owners covered, and unafraid of losing that coverage, either for themselves or their employees.

Google gets a bit more frantic

James Fallows was kind enough to quote me at length back in May. The topic was the continuing "death of newspapers." Among the things I said then is:

The real problem is, advertising is dying. It's just pulling down newspapers along the way. Next up: TV, radio, and Google.

This is why I was warning anyone who would listen that traditional media's schadenfreude when the internet bubble popped in 2001 was probably misplaced. Because the reason it popped was one finally had the metrics to show Advertising Doesn't Work. Google has forestalled the inevitable by doing the Net equivalent of the "tiny little ads" schtick of a decade or two back, but I think they see the writing on the wall, which is why they keep trying so desperately to find something, anything, other than search that'll make money...

On Tuesday, Google announced plans for "Google Chrome OS".

Almost all the coverage (this roundup at Techmeme is a good example) focuses on the technical challenges, and on Google's positioning vs. Microsoft.

That's not the real story here, though.

The real story is -- How can an OS be advertising supported? Specifically, how can an OS be advertising supported using Google's "tiny little ads" model?

I don't think it can be. Which implies Chrome OS will be paid for by someone other than advertisers. Whether that's the OEMs (the manufacturers of computers), or ISPs, or the users themselves -- somebody is going to be forking over license fees to Google.

Which would appear to confirm my earlier statement above: "(Google keeps) trying so desperately to find something, anything, other than search that'll make money..."

This is a canary in a coal mine moment. This is Warren Buffett shopping for companies in Europe, or his saying he was "shorting the dollar" by buying non-US currencies. It's a massive vote of no confidence by Google on the future of advertising.

Alan Mulally gets it

Fortune magazine did an in-depth profile of Alan Mulally, the CEO of Ford Motors, back on May 25th. Here's a passage that stood out for me:

"Mulally instituted color coding for reports: green for good, yellow for caution, red for problems. Managers coded their operations green at the first couple of meetings to show how well they were doing, but Mulally called them on it. “You guys, you know we lost a few billion dollars last year,” he told the group. “Is there anything that’s not going well?” After that the process loosened up. Americas boss Mark Fields went first. He admitted that the Ford Edge, due to arrive at dealers, had some technical problems with the rear lift gate and wasn’t ready for the start of production. “The whole place was deathly silent,” says Mulally. “Then I clapped, and I said, ‘Mark, I really appreciate that clear visibility.’ And the next week the entire set of charts were all rainbows.”" (emphasis added)

Mulally headed up the team at Boeing that developed the 777, which I think is the best jetliner in the sky today. I've long held him in respect.

But the real point of story, in some ways, isn't that Mulally was able to get the executives at Ford into shape. The real point is, until Mulally came along, Ford executives had a culture of lying to the CEO to make themselves look good.

If Ford has ended up becoming the Last Man Standing among American car manufacturers, I suspect a lot of it has to do with basing the culture around telling the truth, rather than the flattering lie.

Yoram Bauman -- Stand-Up Economist

Mr. Bauman bills himself as "The world's first and only stand-up economist." He as an asterisk to that claim now, as others have been mentioned to him, and he graciously links to them. I would say all economists are stand-up comedians, but I'm impolite.

Here's Mr. Bauman's site as a stand-up economist. This is his more straightforward economics site.

The first video is Bauman taking on Mankiw's book, and translating Mr. Mankiw's 10 Principles into simpler language.

The second video is Bauman more recently at, "the first-ever American Economic Association humor session," explaining a bit about the financial crisis.

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The Paradox Is Why People Think There's a Paradox

I was reading this post by James Howard Kunstler, and was intrigued by what he calls "Jevon's Paradox"

"the more efficient you make a means for using a resource, the more of that resource you will use"

Having been reading The Economist's Pocket World In Figures recently as well, that stuck me as very odd. Because if the premise is true, one would expect the countries most efficient at using energy per unit of GDP to be the same as the countries that consume the most energy per capita.

Here's the efficiency ranking for 2003, efficiency defined as GDP per unit of energy use:

1 - Peru
2 - Hong Kong
3 - Uruguay
4 - Bangladesh
5 - Morocco

Here's the consumption ranking for 2003, defined as Kg of oil equivalent per capita:

1 - United Arab Emirates
2 - Kuwait
3 - Trinidad & Tobago
4 - Canada
5 - United States of America

The obvious thing to notice here: Not only do the rankings not match -- there are no countries that overlap the two lists at all. If one adds in the countries ranked 6-10 for each category, there still aren't any countries that show up on both. That would be 20 countries, or roughly 10% of the world's total, and the relationship between efficiency and consumption is random among them.

That made me curious who Jevon was, and why anyone was taking him seriously.

Turns out it's not Jevon but Jevons -- William Stanley Jevons -- and Kunstler has made the same mistake that people who say "kudo" as a singular for "kudos" do. (The word is "kudos" in all cases.) Leaving illiteracy aside, though, it comes from an observation Jevons made in 1865 (quoting Wikipedia here), "...that England's consumption of coal soared after James Watt introduced his coal-fired steam engine, which greatly improved the efficiency of Thomas Newcomen's earlier design."

I suspect saying the driving force behind the increased coal use was the efficiency of Watt's design, and not the novelty of its usefulness is not unlike the error Jakob Nielsen makes regarding web usability and "chunking" web pages. Nielsen writes in his book Designing Web Usability, "In the usability studies I did of early web users in 1994 and 1995, few users ever scrolled. Maybe 10 percent or so of the users would scroll beyond the information that was visible in the window when the page came up. The only exception from this finding was users who had arrived at a destination page with an article that they found interesting or important to their work."

Fiction writer Theodore Sturgeon had a maxim: "90% of everything is crud." Rather than the obvious conclusion one could take from these data -- that 90% of Web writing is neither interesting nor important, and therefore one should recommend to Web writers to make their writing better -- Nielsen decided the culprit is scrolling. Yes, if only Aunt Ethel would "chunk" her 30,000 word treatise on the antics of her cat Fluffy, it would suddenly become useful and important, and users would read more of it.

Jevons is clearly making a similar kind of mistake when it comes to thinking it was the efficiency of Watt's design, and not its usefulness. Now, in a way probably frightening to object-oriented programmers, we see Jevons's bug being replicated among everyone quoting him, a century-and-a-quarter later.

Deep Thought

Doesn't "too big to fail" mean, "The Dept. of Justice Antitrust Division should break these guys up -- stat."?



{and isn't it cute they've decided to use the typeface from Law & Order?}

Krugman finds a doozy

From a post on Krugman's blog:

"Opponents of (climate change as a factor in policy) generally believe that market economies are wonderful things, able to adapt to just about anything — anything, that is, except a government policy that puts a price on greenhouse gas emissions. Limits on the world supply of oil, land, water — no problem. Limits on the amount of CO2 we can emit — total disaster.

The similar thing is to what I'll call the odder beliefs of the Ron Paulistas: Going back to the gold standard would be good, as would dumping the Federal Reserve.

See, there's this thing called comparative advantage. Not all countries left the gold standard at the same time; not all countries developed central banks at the same time. If gold helped a country, and "fiat currency" hurt it, then one should have been able to see that, and no other countries would be foolish enough to follow suit. Same with central banking.

Economic history went exactly the other way, though. Hell, even the Swiss finally gave up on the gold standard.

Combine this with Krugman's example, and you get the following principle: Republicans are all in favor of the free market -- right up until the market disagrees with them.

Tear down this wall!

I've long thought the best approach to the Cuba problem was to throw open the commercial floodgates, and essentially kill them with kindness.

But this piece in Newsweek by Patrick Symmes goes one better by leveraging an asset we already have on the island: Guantánamo.

Hey, if it worked for Hong Kong vis-à-vis China...

"The way to bring radical change to Cuba is to return Guantánamo Bay to the Cubans—but not to the Castros. The Miami-based diaspora of some 1.6 million Cuban-born people and their offspring could turn the base into something many of them love dearly: a business opportunity. As a tax-free, duty-free, open-trade zone run by Cuban-Americans for the benefit of their brethren on the island, Guantánamo Bay could become a model for a new Cuba, a place where fair dealing, the rule of law and free speech are the norm. By starting businesses catering to Cubans, and later opening factories to employ them, Cuban-Americans would bring normal rights onto Cuban soil. Open the border at Gitmo, initiate trade and the Castro regime's stranglehold would start to crumble."

Banging on the table

Jerry Pournelle, a once-famous writer in the tech world, made an interesting claim the other day:

"...China has invested $2 trillion in new coal plants..."

China's GDP is estimated most generously at $7.8 trillion for 2008 according to the CIA's World Factbook. So he's claiming that China is spending over 25% of GDP on "new coal plants."

That raised my eyebrows a bit. To give an idea for comparison, the Chicago branch of the US Federal Reserve estimates energy expenditure at 8.5% in the US in 2005. If China is spending triple what the US is for energy on coal alone... Well, it's an interesting idea, but not really persuasive on the face of it.

In short, it looked like Mr. Pournelle (I can already hear him saying, "That's Doctor Pournelle!" He would be right if I was addressing him in an academic context. Speaking as one citizen to another, though, Article I, Section 9, Paragraph 8 of the US Constitution applies.) had credulously picked up a factoid somewhere, and quoted it either out of context, without citation, or both.

Doing a bit of googling, I suspect Mr. Pournelle is quoting this op-ed piece in the Wall Street Journal, which is an interview with J. Wayne Leonard, the CEO of Entergy, which appeared on March 28, 2009.

The problem is, I can't find any other source to match Mr. Leonard's claim. It is literally hearsay.

Mr. Pournelle has long believed that global warming caused by human generated CO₂ is speculative at best. What he doesn't seem willing to acknowledge is that, from a business perspective, that doesn't matter. If the market demands goods and services in a more carbon neutral manner, than that's where the money is. As a wise man once said, "Whenever the locals rub blue mud in their navels, I rub blue mud in mine just as solemnly."

Much of our portfolio of exportable goods -- planes from Boeing, cars from the Big Three, etc. -- is dependent on whether they're attractive to overseas buyers. If those overseas buyers want to rub the blue mud of climate change, then complying with them isn't a burden but a business opportunity. No, more than that -- a market necessity.

Instead of adjusting to the sometimes fitful whims of the marketplace, though, Mr. Pournelle appears to believe American companies should have the right to fail on ideological, non-business reasons alone. And that the government should actively support the childish pique of ideology over the marketplace.

With such an attitude, it's hard to see why some believe Republicans hopelessly naive at business.

YHOO -- JYPT

Just to show I'm not picking only on Amazon this week...

We're coming up on the one-year anniversary of Microsoft's $33.00/share offer for Yahoo! At the time, the Yahoo! board, led by co-founder and then CEO Jerry Yang, turned down the offer for not valuing Yahoo! highly enough.

shares:        1.38B
price today: $14.02
MSFT offer:  $33.00
difference: -$18.98
JYPT:        $26.19B

"JYPT" is the "Jerry Yang Pride Tax" assessed on the shareholders of Yahoo, and is pronounced, "gypped."

$26 billion to give Microsoft a Golden Shower. And to think Eliot Spitzer was considered a spendthrift.

Zig when they zag

James Surowiecki at The New Yorker has a piece where he points out something I've long contended: When everyone zigs, you should zag.

"You’d think that everyone would want to emulate Kellogg’s success (during the Great Depression), but, when hard times hit, most companies end up behaving more like Post. They hunker down, cut spending, and wait for good times to return. They make fewer acquisitions, even though prices are cheaper. They cut advertising budgets. And often they invest less in research and development. They do all this to preserve what they have. But there’s a trade-off: numerous studies have shown that companies that keep spending on acquisition, advertising, and R. & D. during recessions do significantly better than those which make big cuts.

The main thing is, during the good, flush times, companies tend to spend money like crazy, and take risks. When times get bad, they pull in their horns. But a moment's reflection shows this should be reversed: Save during the good times, and when the bad times come you can acquire your competitors on the cheap, and take risks no one else can afford.

AMZN dollar count

Here's the graph showing AMZN underperforming all indices today -- the S&P, the Dow 30, and the NASDAQ -- on no other corporate news.

This is only the first day.

Here we see that Jeffrey P Bezos holds 97,167,078 shares of AMZN. AMZN was down 0.83 today.

So Mr. Bezos lost roughly $80.6 million dollars today.

I suspect he's not the only shareholder to have comparable losses. IANAL, but sounds actionable to me as the result of somebody's solitary fuck-up.

Amazon manages to shoot itself in the foot, with both barrels.

First I saw Nicola Griffith post:

"Here's what I woke up to this morning: amazon.com have stripped my books of their sales rank because of their queer content. This means my books are invisible to amazon.com search.

This means amazon.com are literally taking away my livelihood because my books have lesbian characters. This means I might starve.

Amazon.com are starving me because I'm a lesbian and write about people like me."

As she says, you can read a longer explanation (with quotes from some Amazon flunky) here.

You can sign an online petition here. I did, and this was my "personalization":

I'm a straight heterosexual man. I tend to see the vast majority of objections to homosexuality as religious in nature. That Amazon should choose to favor the religious views of one group over those of all others is, to me, appalling.

In addition, it's difficult for me to see how you can justify this to your shareholders given both the raw decline in sales such a policy of excluding titles will bring, combined with the secondary loss of sales from the bad publicity this is sure to engender.

So... You won't please those to whom this is aimed; you've cut your own revenues; and you've opened yourself to a major shareholder lawsuit.

This is almost straight out of the recent movie Duplicity -- it's hard for me to understand how any employee of yours who wasn't secretly working for Barnes & Noble as a mole would approve such a thing.

Google bombing can be fun. Check the links below:

http://www.smartbitchestrashybooks.com/amazonrank/

Amazon rank

Explanations here.

The Bezzle Shrinks

Read all about it:

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“It was like riding a tiger, not knowing when to get off without being eaten.”

So said B. Ramalinga Raju, chairman and chief executive of Satyam Computer Services, who resigned after confessing to falsifying the company’s financial records in a $1 billion fraud. The Satyam fraud has been immediately dubbed “India’s Enron” by many.

The Bezzle

Jay Lake uses his link salad to point to this piece in the New York Times about our current fiscal insanity. Excerpt about the Bernie Madoff theft:

"What’s interesting about the Madoff scandal, in retrospect, is how little interest anyone inside the financial system had in exposing it. It wasn’t just Harry Markopolos who smelled a rat. As Mr. Markopolos explained in his letter, Goldman Sachs was refusing to do business with Mr. Madoff; many others doubted Mr. Madoff’s profits or assumed he was front-running his customers and steered clear of him. Between the lines, Mr. Markopolos hinted that even some of Mr. Madoff’s investors may have suspected that they were the beneficiaries of a scam. After all, it wasn’t all that hard to see that the profits were too good to be true. Some of Mr. Madoff’s investors may have reasoned that the worst that could happen to them, if the authorities put a stop to the front-running, was that a good thing would come to an end."

This all reminded me of a passage in John Kenneth Galbraith's The Great Crash, 1929 (pp. 132-134):

"In many ways the effect of the crash on embezzlement was more significant than on suicide. To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months, or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in -- or more precisely not in -- the country's businesses and banks. This inventory -- it should perhaps be called the bezzle -- amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all this is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks.

...

Just as the boom accelerated the rate of growth, so the crash enormously advanced the rate of discovery. Within a few days, something close to a universal trust turned into something akin to universal suspicion. Audits were ordered. Strained or preoccupied behavior was noticed. Most important, the collapse in stock values made irredeemable the position of the employee who had embezzled to play the market. He now confessed."