Saturday, May 31, 2008

(Cynical) Quote of the Day

Mark Twain (via Classical Values):

If you pick up a starving dog and make him prosperous, he will not bite you. This is the principal difference between a dog and a man.

HDR Photography

For a bit of a rant break, I've recently discovered HDR photography stumbling across Stuck in Customs. HDR is basically a way to use digital photography to make colors pop in an image by combining a series of photos taken in rapid succession at various settings (called "bracketing" as I'm learning) - and Trey Ratcliff has some fantastic shots.

Lately I've been thinking I should find a somewhat different hobby. My biggest problem is that I can't commit to being in any one place for any long period of time so photography could work... except for the part where I'm pretty clumsy, have no hand eye coordination and already pack more than a pack mule can handle when I travel. Here's a sampling:



Thursday, May 29, 2008

More on Trade's Shifting Winds

Robert Driskill, an economics professor at Vanderbilt University asks "why do economists make such dismal arguments about trade?" in Foreign Policy arguing:

Any time a change in economic circumstances creates both winners and losers, the judgment of whether such change was good or bad for the group as a whole is problematic. It becomes a matter of moral philosophy, not number crunching. Economists, as a result of their training, have no more claim to know what is “good for the country” than Joe Sixpack. It’s really that simple.
No, I don't think it is. Greg Mankiw is skeptical (rightfully I think). The Economist also weighs in pointing out the additional relationships between technology and commerce. I don't buy Driskill's view that when economists describe the macro effects of trade they in effect are making a moral proclamation when they point out that there is a net gain in wealth. Further, I think the unease relative to trade is not so much about trade itself but that constant fear of change. Trade becomes an easy bogeyman that politicians can point fingers to of why companies are unable to compete and why they close when it's also empirically easy to point to the plethora of evidence of rising incomes and greater purchasing powers as a result of that same trade - particularly for the most vulnerable.

Sichuan's Political Earthquake

I've been abroad and away from China during the earthquake in Sichuan so I've felt fairly removed from the situation. This has felt particularly true given that the quake happened so soon after Myanmar's devastating cyclone which seems to have taken significantly more lives, though the death tolls of each disaster are still climbing. In context, this recent disaster is far from the worst in China's history, though it has been one of the worst since China's market reforms in the 1980s and has almost certainly been the most publicized.

What is different this time around, is state media's focus and coverage of the event and its openness in allowing foreign news media to report on the events. Some like Mike from Shenzhen Undercover make the claim that the events will be remembered like September 11th in that it is changing the way people think about what they had previously taken for granted. While I've been skeptical, I've also noticed that the death toll continues to rise. The WSJ has an opinion piece that talks in similar lines that this event is changing the way people think about government. While I think both may overstretch given that at least in the case of WSJ's piece, I'm skeptical about how much of China's citizens have believed they could trust in government, in the very least, people are questioning its role. In the long term, that may not be such a bad thing:

The earthquake in Sichuan has transformed China in many ways. Abroad, China has switched from victimizer to victim. At home, Olympic excitement has been replaced by the sadness of death and destruction, and xenophobic anger has been exchanged for a new spirit of volunteerism.

This last change presents the most difficult test for China's leadership, which sees an old and fearsome dragon of civil society raising its head. [...]
Over the past two years, [China's government] has tightened restrictions on NGOs considerably; obtaining the permissions to register a new NGO has become all but impossible. More likely the state will try to co-opt this civic energy. This is already happening. Five government ministries issued a joint set of guidelines for managing donations last week.

In freer countries, philanthropic organizations fill a vital role, and not just in times of disaster. In the wake of the Sichuan earthquake, Chinese citizens are increasingly aware that government can't solve all problems, all the time. Civil society can help. Beijing is right to be worried.

Wednesday, May 28, 2008

The Costs and Benefits of Housing Regulations

Following the earthquake and subsequent aftershocks in China (the latest of which destroyed 420,000 homes), the libertarian in me here is torn. Are higher building standards are worth it? (Adam Smith Institute) On the other hand, if the cost is so much that people are priced out of owning their own homes what's the point? Like I said, I'm torn (then again China, being China, I wonder how "optional" those regulations will end up being). Maybe there's a happy medium - disclosure allowing people to make the choice for themselves. The Manhattan Institute, for instance, estimates that zoning restrictions have an effective cost of up to 50% of the cost of a condo in Manhattan.

Tuesday, May 27, 2008

Copenhagen Consensus

For those who are concerned about global development, the Copenhagen Consensus should be of interest. The conference is teeming with Nobel Laureates in economics. The idea is this: with specified limited resources, what should the priorities be to best improve human life? A refreshing alternative view to the trillions that get wasted in development and the media portrayal of issues that ignore resource constraints forgetting the unfortunate tradeoffs that must be made. Ron Bailey is covering the event for Reason Magazine. (h/t Instapundit)

Minimum Wage as Tax on Teens

From the Economist. Not exactly surprising. It's one of those "be careful what you wish for". I've never really understood this idea that wages can be increased without any costs - as this will have no impact to employers. While I think from an employer perspective, it hurts smaller businesses the most, you get more people stuck in that cycle of "how do you get experience if no one will hire you"?

Sex Abuse by UN Peacekeepers

This stuff still pisses me off. While I sympathize with Reynolds' view that the coverage on these stories would be wildly different if it involved Americans, as if their lives aren't miserable enough, the UN sends 'peacekeepers' to screw 'em over - literally. One would hope that these incidents are isolated but the infuriating thing is that they're not (Google Search: United Nations+Sex Abuse).

The bottom line is this: we can't trust them with money (Google), we can't trust them with kids (BBC) but we expect them to provide us with some type of moral authority? Worse still, we criticize the Americans for withholding dues as they push for greater accountability?

"The Spirit of the Game"

A noteworthy post by Seth Godin. I get the sense that the majority of us rarely pause to consider the origins of wealth and even those of us who do, don't communicate those ideas particularly well given the complexity of the ideas (ok fine, that's just my excuse). Unfortunately this leaves the majority amongst us (and in this case abroad) susceptible to stupid ideas like this:


(from Guy Kawasaki's Blog)

It's one of the reasons why I am highly reluctant to succumb to realpolitik. Winning the battles can ultimately mean losing the war if others see Western politics as corrupt and self serving as those in their own countries. To quote "Tigerhawk" - on the subject of wealth and energy:

If you believe -- as I do -- that wealth is the surest expression of human creativity, then you also believe that America's great inventions spring from our system, not the natural resources with which we have been endowed or the winnings of imperialism. But most peoples of the world (including American leftists) do not understand this -- which is why they do not invent anything important -- and instead view American wealth as if it were looted, rather than created. Hey, if I thought America was rich from theft rather than creativity, I'd feel guilty too.
I therefore view it as encouraging that Seth Godin (who isn't shy of promoting the Democratic Party in the US) recognizes that it's generally far easier to create wealth working through "the system" rather than looting and gaming your neighbours and customers. This is a lesson that too many in China (and many other places in the world where any given transaction is viewed as the the last with any given client) still need to learn - and this above all other "cultural" traits differentiates doing business in China versus in the West.

Clearing out the Tabs

Another link roundup:

  • [Operations] A tour of NewEgg's facilities - which between its two warehousing facilities handle $1B of revenues. As someone else termed it - operations porn. (Anandtech)
  • [Logistics] Buy insurance or in the very least be disciplined enough to self insure. Stuff happens. Reminds of the time when our goods were delayed because the ship collided with another vessel on open waters (no joke) and we were billed for some of the losses. (Freight Dawg, 3PL Wire)
  • [Negotiating] 5 tips for negotiating as taught by the Harvard Negotiation Project. (Gigaom)
  • [China] Summary notes the increased difficulties in getting a China Visa and how the rules have changed. (China Law Blog)

Monday, May 26, 2008

Jetlag Blues Solved?

This is excellent news (Globe & Mail, h/t Parenting Squad):

U.S. researchers have come up with a new way for travellers to recover quickly from jet lag - don't eat for 16 hours.
The math is easy for a trip from HK where I have the most problems - just don't eat anything once you step on the plane. While that could be rough - I figure the jetlag is worse.

Sunday, May 25, 2008

"It's China's Party and You're not Invited"

Thoughts on the Olympics here (Bill Dodson). I also worry that China's pride over hosting the Olympics will turn negative - but I had hoped that the global response to the Chengdu earthquake would have moderated this.

PR Tips for Startups

@ TechCrunch. It's a long article and a bit more focused on tech startups but definitely worth a read for the entrepreneurs amongst us.

Update (May 26): a rebuttal (Loic Le Meur)
More: from Scoble

Why do Startups Fail?

Divergent opinions (David Feinleib @ Mohr Davidow Ventures, 37signals). Also speaks to the tension between vc's and the entrepreneurs that they invest in. I'd tend to agree more with the latter view from 37signals - particularly this point: "'It’s not just how fast you run the race that matters. It’s how fast the race is run. When it comes to startups, speed wins.' That’s just ridiculous." The comments in 37signals' post are also pretty interesting.

Saturday, May 24, 2008

Transformational Technologies

This is pretty cool (MIT, h/t Instapundit). Technologies "right around the corner" MIT researchers are working on that have the potential to change the economy (though I guess they've been saying that about fusion for quite some time).

Heh. Japanese Statism Slapdown

Here's a letter in response (Going Private) to protectionist ravings from someone who is apparently "abhors dishonesty, dogmatists, ideologues, mean-spiritedness, Ayn Rand and people who cheat" including the obligatory helping of anti-Americanism. Oh, and claims to be an investment banker in Japan [she/he does point out in the comments she is neither Japanese nor an i-banker]. The struggle against change and for liberal markets is not one that will come naturally nor inevitably but in the process it is the best solution that will and is lifting billions out of poverty. Read it all, but here's an excerpt:

In the end, what is important to remember is this: The perpetuation of a corporation for sentimental purposes is not, of itself, utilitarian.

I am sorry that your firm has responded poorly to the new exposure to global trade. I am sorry that its encounter with the realities of a market economy, which Japan has thankfully, and finally embraced to- at long last- bolster Gross Domestic Product growth into the 2% range, has been difficult. But it is entirely possible that yours is a firm that should not survive once required to provide shareholders with competitive returns. The problem with protectionism is that, in the absence of a sure competitive advantage or unique product, its benefits always come due- with interest.

Indeed, you may not thank me for your firm's present fate. You may, however, thank me for Japan's.

Friday, May 23, 2008

Breaking OPEC?

Robert Zubrin from the Washington Times proposes legislating flex-fuel to break OPEC's oligopoly over oil (h/t Instapundit). Cato's Jerry Taylor disagrees about 4 months ago but he makes a few interesting and broader points about policy making in general:

The conceit that government can create jobs by creating industries out of whole cloth glosses over the fact that the money needed to create those industries and those jobs starves other industries of cash that will, in turn, eliminate other jobs. While it’s not inconceivable that government could on balance create more jobs than it destroys in this manner (that is, that the industry created is more labor-intensive than the industries harmed), that’s still not a good reason to go forward. After all, one might on balance increase employment in the United States by banning modern farm machinery and food imports, which would put a lot of people into the fields. But no sane person would endorse such a thing on economic grounds.
That said, I think that most people would agree that this is a horrible idea by any standard (NYT, h/t Greg Mankiw, who oddly, isn't usually sarcastic). Others blame US Congress (IBD).

Management Notes

Something I've suspected, that's difficult to quantify and even harder to implement. Sometimes, financial incentives cheapen and are demotivating relative to the perceived value of the work that's done. From Incentive Intelligence who pulls quotes from the book Predictably Irrational:

Money, as it turns out, is very often the most expensive way to motivate people. Social norms are not only cheaper, but often more effective as well."

In a market where employee's loyalty to their employers if often wilting, social norms are one of the best ways to make workers loyal, as well as motivated."

Although some companies have been successful in creating social norms with their workers, the current obsession with short-term profits, outsourcing, and draconian cost-cutting threatens to undermine it all. In a social exchange, after all people believe that if something goes awry the other party will be there for them, to protect and help them.
In my limited experience, I think most people believe their work is undervalued. So while social norms can be useful, people ultimately still want to know that they are being paid fairly though there are the instances that I think we can all cite of friends who are underpaid but happily so because of the positive work environments they're in or the experience they're getting. I think part of the solution is to at least try to quantify bonuses and financial incentives as a reflection of the value each person creates.

Woe to be a Libertarian?

I'm a libertarian. I'm an ideologue when it comes to believing in free markets and free people though I do hold some fairly conservative personal convictions - broadly speaking, I do believe that it's ultimately a matter of personal choice what people believe so long as they do not harm others. It's unfortunate that the Libertarian Party in the US gets known as the party of whack jobs, hippies and pot smokers. For those who know me, I'm probably only ever confused with the first. But here's a response to a column in the WSJ over a few of the other popular misconceptions of libertarians.

Protectionism Kills Jobs

I would imagine there are some aluminum extruders who wish I weren't in business, but politicians who think that by eliminating more cost competitive foreign suppliers like us tend to be somewhat shortsighted. This is particularly when you realize that our clients are able to use the savings to reinvest in their businesses. In what must be a plethora of examples, Marginal Revolution points to an analyses that quantifies the costs of tariffs on hangers and the effects on dry cleaners and those who use dry cleaning services:

There are roughly 30,000 dry cleaners in the U.S., and on average, each pays an additional $4,000 per year due to the hanger tariff. This indicates an average annual cost of 30,000 firms x $4,000 per firm = $120 million. According to the U.S. International Trade Commission's report, U.S. employment in wire hanger manufacturing was 564 workers in 2004 and fell to 236 workers by 2006. Let's assume that employment in this sector would have fallen to zero in the absence of the tariff, and that with the tariff, employment will recover to 2004 levels. In other words, assume the tariff "saves" 564 jobs. Dividing the cost of the tariff to U.S. dry cleaners ($120 million year) by the number of jobs saved (564 jobs) indicates that each job saved costs about $212,765 per year. Keep in mind that the typical full-time worker in this sector earns about $30,000 per year. Even if we assume that industry employment doubles, the cost of the tariff is still roughly $120,000 per job.
More from the Economist. Given the way the US seems to be headed politically, I'm worried that Carl Icahn may be right (Club for Growth).

The Cat's Meow

Sometimes I wonder if I'm approaching burnout. I'm generally most reminded of this possibility on any given statutory holiday in the particular country I'm in simply because I can't just power down with at least 1/4 of the other areas of the world fully operational though I am planning for the possibility that I can step back having made some key hiring decisions in the last year. I even worked Christmas one year (which as a Canadian, I consider more important than Thanksgiving). Yes, the river of tears floweth :). On the other hand, what I would consider to be a vacation would probably differ than most other people but I digress.

Of course, a good beat and chord progression can pull me out of a funk which brings me to some recent discoveries:

  • For a Big Band type feel, Baz Luhrman's Happy Feet (High Heel Remix) (YouTube), though I should point out that despite the imagery in YouTube it wasn't actually in the movie "Happy Feet"
  • Gavin Rossdale's Love Remains the Same (YouTube) which is a mellow but passionate rock tune
  • Another retro type sound by a guy who is described as being the "male Amy Winehouse" (which frankly, I don't think does him justice) that's going to be released in June and was on the season finale of Grey's Anatomy: Bryn Christopher's The Quest (YouTube)
  • And for the teenage girl in all of us... or maybe it's just me... Sugarbabes' About You Now appropriately posted on imeem by someone who appears to be a teenage girl

Wednesday, May 21, 2008

Sad... Know the Causes you Support

I don't generally get the sense that most environmentalists seek to be cruel and evil but then data like this is hard to reconcile (Tierney Labs, h/t Instapundit):

Farmers and consumers in poor countries are now paying the price now for decisions made by well-fed Westerners, as reported by my colleagues Keith Bradsher and Andrew Martin in their front-page article on cutbacks in financing for agricultural research. They explain how the Green Revolution faltered after Western governments and agencies slashed funds for agricultural research, partly to shift money to other areas, like environmental projects, and partly because of opposition to high-yield agriculture from advocacy groups.
Having had the opportunity to travel to a few developing countries, you really begin to wonder what donors would think if they knew what was being done in their names. But like I've said, it would seem that environmentalism taken to its logical conclusions would have most of us either poor or dead.

Tuesday, May 20, 2008

If you don't believe in the Laffer Curve...

While I think a lot of people don't buy the idea of supply side economics, this study is pretty remarkable (the idea that lowering taxes will be offset by higher tax revenues because the economy grows). If you track US government revenues as a percentage of GDP over time, while marginal tax rates vary widely, revenues stay remarkably constant. From the WSJ:

This is remarkable when you consider the rapid rise in GDP over time - and even more remarkable when you hear politicians suggest that they can pay for all their billions of dollars of new projects by taxing the rich. Accordingly, "The data show that the tax yield has been independent of marginal tax rates over this period, but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP."

Monday, May 19, 2008

Link Roundup

Not sure that I really want to break each of these down into their own individual posts but I think they are of interest, so here they are:

  • [Markets] Greg Mankiw points to a graph of historical market p/e's and an article in the WSJ. I'm not sure that I accept the idea that because today's p/e's are higher than they have been historically, that it means the markets are overvalued. Here's a reason why (Investopedia): p/e's tend to be higher during low interest rate environments - something I'm surprised the WSJ missed. Further, higher p/e's are indicative of anticipated higher earnings which is one reason why stock markets tend to outperform (or at least recover) prior to the end and during a recession (Fool.com) and why some people say you should buy now.
  • [Entrepreneurship] Some contrarian notes from Inc. and a book called "The Breakthrough Company" though unsurprisingly, some are are pretty obvious. Here's a taster: Entrepreneurs don't have a larger appetite for risk than the general population, identifying the best market opportunities is more important than focusing on what you do best, making the your existing employees more productive is just as if not more important than finding and hiring the best and brightest.
  • [Finance] For those who still don't understand why and how the subprime crisis happened (Asia Times, h/t Instapundit): "Derivatives are like sausages. You take the low-quality parts of the pig that you don't want to look at while you are eating them, and grind them up into a package that seems more appetizing. [Global investors] wanted to consume low-quality American assets, but did not want to look on what it was eating."
  • [Commodities/Finance] Despite the lack of rising inventories, here's yet another view with the Economist pointing to an argument by James Hamilton (an economics prof in California) who in turn points to the massive investments into supply as oil has made its dramatic runup (Wikipedia). So on one hand we have the speculators and incrementally rising demand racing against permanent destruction of demand and rising supply. Hmmm - if I were to bet, I'd bet on the latter. It's also why I'm not as concerned about hysterical analytics like this (China Economic Review).
  • [Marketing] Oops (CrunchGear). While I don't think that this is so much of a big deal for the smaller (and generally industrial) firms we serve, when using stock photography sites (like iStockphoto that I'm particularly fond of), you've got to recognize this is a risk. But then again, I've never really tried to use a generic, publicly available photo to pass it off as my own.

Free Trade, Inequality and Poverty

With what appears to be rather unfavorable trade winds coming from the Americans, it would be useful to consider the impact of trade on American poverty (the impact of trade on poverty in developing countries not generally being in dispute). From Freakonomics:

When people talk about inequality, they tend to focus exclusively on the income part of the equation. According to all our measures, the gap in income between the rich and the poor has been growing. What Broda and Romalis quite convincingly demonstrate, however, is that the prices of goods that poor people tend to consume have fallen sharply relative to the prices of goods that rich people consume. Consequently, when you measure the true buying power of the rich and the poor, inequality grew only one-third as fast as economists previously thought it did — or maybe didn’t grow at all.
And that's thanks to free trade and globalization (New Yorker, h/t Economist):
The very people who suffer most from free trade are often, paradoxically, among its biggest beneficiaries. The reason for this is simple: free trade with poorer countries has a huge positive impact on the buying power of middle- and lower-income consumers—a much bigger impact than it does on the buying power of wealthier consumers. The less you make, the bigger the percentage of your spending that goes to manufactured goods—clothes, shoes, and the like—whose prices are often directly affected by free trade. The wealthier you are, the more you tend to spend on services—education, leisure, and so on—that are less subject to competition from abroad.
Of course the key reasons that the Economist suggests for the fears over trade don't much have to do with liberalization at all: "One source of trade-related angst is that America's educational system has done a poor job shifting workers toward industries that have done best at capturing the gains from liberalisation." Unfortunately, as the Wall Street Journal suggests, this time may be different if Obama becomes President. Unlike previous Democrats he may not be able to rely on an ability to say one thing and do another - in this case, promote free trade to the benefit of the poor both abroad and at home.

Sunday, May 18, 2008

A Random Skype Exchange

It's amazing how much Skype gets used in China now. I'd tend to agree with the author: random Skype invites from porn sites are annoying. But this is funny in a fairly warped sort of way (CrunchGear):

Go Forth and Multiply Guilt Free

While I'd say this is a message for my sister Beata (and brother in law), I think my parents' friends are more interested in her procreation than my parents are. There's also a return to Malthusian rumblings with the recent rise in commodity prices as a result of demand from China and India and concerns about the environmental impact as a result.

As the the middle child of 3, I'm not sure my parents really worried too much given my father was the eldest son of 7 kids. It's interesting to watch the transition though - back then as it is in China today, kids were a net economic benefit - today most kids are net financial expenses (with the exceptions including myself given that I have graced my parents with my brilliance and endless hours of entertainment though this obviously is not so much the case with my brother and sister). One of my key employees in China at age 26 sends most of his paycheck home to his parents despite the fact they really don't need it.

I've also heard people I know talk about their concern about the increasing wealth of the poor elsewhere in the world. There's something almost racist in this world view and while it's consistent with my suspicion that environmentalism taken to its logical conclusions would have most of us poor or dead, humanitarians need not fear. Greg Mankiw points to a review by the NYT on Jeffrey Sachs' new book:

Sachs argues that it’s both economically rational — and crucial for a future of sustainable growth — for people to reproduce at a rate close to 2.1 children per family. In his acknowledgments, Sachs thanks his three children.
Even more interestingly, he points to a previous argument (Fortune) he has made as he was about to have his third kid:

Those who fear overpopulation share a simple insight: People use resources. They eat food, drive cars, and take up space. Because resources are scarce, the only way to improve living standards, Malthusians argue, is to limit the number of people with whom we have to share these resources.

The rebuttal to this argument is equally simple: People create resources. They bring into the world their time, effort, and ingenuity. Before deciding whether world population growth is a curse or a blessing, we have to ask ourselves whether an extra person added to the planet uses more or less resources than he or she creates.

Of course, interestingly, it is a wonder that those who worry most about overpopulation often also don't really think it applies to themselves and their families.

Weekend Reading Roundup

Clearing Firefox tabs since they're annoyingly soaking up over 530 MB of memory at the moment (I hope Mozilla plugs that memory leak soon). A few more shiny links:

  • [Marketing] Signaling you're brilliant on a resume / university application (Study Hacks). Less is more. Great applicants don't list everything and the kitchen sink because they don't need to. I agree; and this applies as much to businesses as individuals.
  • [Entrepreneurship] Entrepreneurs value ideas over wealth (Physorg.com). "The research found the greatest motivator for entrepreneurs is passion about new ideas with 41.4 per cent of those surveyed citing this as their prime motivation for starting a business. 39.7 per cent were primarily driven by ‘wanting to be their own boss’." Interesting data point - but I've always thought it was about pursuing the idea first which leads to the wealth.
  • [Trends] Top 10 trends (Flikr). Worth a brief read. Not sure I agree with them and at least a few are blindingly obvious.
  • [Humor] What Icahn said to Yahoo's Board and what he really meant (Portfolio.com). The funniest part is based on what's publicly available on Icahn, it's probably true.
  • [Economics/Commodities] Not a bubble? (Businomics) A different view on oil - arguing that because inventories haven't been building up, this is a demand driven rise in oil sustainable in the short run. I don't think this takes away from the other arguments that there's a long term bubble in oil given the development of alternatives and additional supply.

Saturday, May 17, 2008

Ugh... It's all downhill from here (and an underpriced resource for employers)

From Psychology Today:

Other long-standing data show that teens are at least as competent as adults. IQ is a quotient that indicates where you stand relative to other people your age; that stays stable. But raw scores of intelligence peak around age 14-15 and shrink thereafter. Scores on virtually all tests of memory peak between ages 13 and 15. Perceptual abilities all peak at that age. Brain size peaks at 14. Incidental memory—what you remember by accident, and not due to mnemonics—is remarkably good in early to mid teens and practically nonexistent by the '50s and '60s.
Apparently if you're over the age of 15, all you have to look forward to is death. Of course, your mental acuity may have depreciated to the point that you're too er, stupid to realize it. Which reminds me, I'd better write it down: buy key man insurance (of course, not that there's really such a thing as being a "key man" if you're a founder either - ugh, that makes two pieces of excellent news this week to shred my self worth). On the other hand, this means that we should be hiring a lot more child labour.

Receivables Financing, "Usury" and "Loan Sharking"

I've taken a decidedly libertarian bent over time - particularly in my approach to microfinance. This has been sorely tested (ok maybe not that sorely) as I've been seeking non-recourse receivables financing from banks so that we have a "scalable" operational model. Some clients are rather (and understandably) shy about forking out cash upfront for goods before they have an opportunity to examine them in their own facilities.

Further, and even more importantly, clients are conditioned to paying for goods 30 days or more after delivery. In the case of buying overseas, buyers are often asked to pay an initial deposit before production starts + payment upon shipment - which is often 30-40 days prior to even receiving the goods. Financing is a cost that often gets forgotten when pricing product but that's a post for another day. But these days I've been finding that clients are increasingly demanding credit terms.

One problem is that we're really not a bank and the other is that our cost of capital isn't unlimited nor cheap. This is to say that if we lend based on our own capital, comprised mostly of equity, it means that we have to get returns of at least 30%, and secondly, we don't have an ever increasing abundance of it - which means if we can't keep lending, we can't grow.

We also don't have the tools to assess and manage financial risk and enforce terms (many a company have followed their clients into bankruptcy) - and in this, I'm a big fan of the idea of "selling" our receivables to a party that both has capital and is in a position to manage risk - ie using financial institutions then bridge that gap buy "buying" our receivables at a small discount/cost so that we continue to have the funds to grow. We thought we had a solution with a hedge fund backed financial services guarantor in China but based in the US, but the hedge fund partners backed out. This has left us scrambling for alternatives. Because of the relatively short notice, we were forced to raise money and finance some shipments ourselves.

The problem with receivables financing for banks is that there is "performance risk" and risk related to the geographic differences. Performance risk is related to the concern that rocks/substandard products are shipped versus in our case, generally aluminum extrusions. And so the costs of financing are high - and then some. Generally speaking, the costs are broken up into three parts - insurance against default, fees related to collecting funds from the client, and the cost of borrowing itself. In one case, the effective cost was 5%/month (I emphasize this as I know most of our clients are not exactly high risk)! There is however some glimmer of hope in that it would appear that we are about to be able to get financing from an established bank with a cost more in line with an effective 15-17% APR that I would expect. We should know soon - this would of course go a long ways to alleviating stress levels.

In the meantime, I've made the case for "loan sharking" and "usury" on the "backs of the poor" here (Nabble/MicrofinancePractice). A point to emphasize is that there is empirical evidence borrowers still benefit if voluntarily entering into loans that carry massive levels of interest rate as evidenced by a study in South Africa (Volokh): "Applicants who were randomly approved for a loan had higher incomes, less hunger, better credit scores and more positive outlooks than their control group counterparts -- even after paying the high interest rate. Though they had higher than normal default rates, the borderline loans were also profitable for the lender." I should note further that I neglected to give credit for the two Fed studies cited in my posting which I found at Division of Labour.

Agriculture Subsidies that work (better)

Given the massive amounts of profits farmers are reaping as a result, the US government of course can't stop itself from passing another series of massive subsidies for farmers (Flash Report). Some have even made the remarkable statements that subsidies force down food prices and therefore help the poor (Portfolio.com).

The reality is that farm subsidies have been keeping farmers in the third world poor. Because developing countries seem to often be in tropical climates, farming offers an opportunity out of poverty. Dumping food "aid" into these countries destroys local capacity for growing food (why would anyone want to grow crops if those same crops get distributed free?). There are those however who would push for a more sensible policy - buy food and feed people from local markets directly subsidizing those who need it. Titled "Africa does not have to starve", Norman Borlaug (Nobel Peace Prize winner for kicking off the Green Revolution) makes the argument in the WSJ (h/t Thomas Barnett).

As I've been called a "Friedmanite"...

Though it was intended as a snide insult, and as I was pretty pleased as a result, I thought this is good news: The University of Chicago is seeding a $200 m Milton Friedman Institute (Chicago Tribune). Hmmm... I wonder if anyone from the city or state will be there for the groundbreaking.

PSA: Think Before you Send

I suspect most people have sent out less than flattering emails. Laugh knowing that others have made bigger email mistakes @ Thinkbeforeyousend.com. (h/t Freakonomics)

Update on the Automotive X-Prize

After building the 78 mpg $2500 Nano, Tata Motors has entered the race to build the first commercial vehicle to achieve 100 mpg (Popular Mechanics, h/t Instapundit).

Related: The Economist wonders which will peak first - the supply or demand for oil? Quoting from a blog: "Lost in the bullish talk of $200 oil was Goldman’s notes about demand destruction. The same report which predicted the super-spike also said that by 2012 the price of crude oil would fall to $75 normalized. Goldman expects the current euphoria to lead to a spike in crude oil prices, which will spur new supply development and also lead to permanent demand destruction."

Importantly, "I wouldn't short oil; as the saying goes, the market can stay irrational longer than you can stay solvent." Agreed. I would however bet that oil prices will be substantially below $100 USD/barrel within 10 years.

Friday, May 16, 2008

Does Immigration Import Poverty?

I've got to do something about my blogreader. I got back from a series of meetings and there were 421 posts unread, ugh. I'm a bit torn about this topic though (National Review):

A couple of weeks back, Statistics Canada reported that, after adjustment for inflation, Canadian wage-earners are earning less than in 1980. For example, in British Columbia the median wage-earner earns 11.3% less than a quarter-century ago.
So a columnist came out pretty aggressively for the idea that it's because of immigration - and immigration specifically from unskilled workers in Asia. My parents were immigrants from Hong Kong and yet I find myself sympathetic to this view that without integration there are some immigrants who "settle into ethnic ghettos where they are vulnerable to exploitation, including lousy under-the-table wages." As I've noted, my parents and my family in general came over, and became one of the relatively few Chinese families in the area at the time (vs the now possibly even large majorities of ethnic minorities in both the faculties and student populations at both universities within certain disciplines).

Not all of them came over being educated but I think all our relatives (with the exception of my grandmothers) came over as students. At the time I think they were forced to integrate as a matter of survival. I don't think that's the case now. There are vast swaths of areas in Toronto and Vancouver where you can get by without speaking any English at all and with minimal incentives (or ability) to pursue similar opportunities as others. The problem isn't immigration but rather how immigrants integrate. There was after all a reason immigrants came over in the first place.

How much do Founders Matter?

A surprising data point, from Paul Kedrosky:

Most investors skew toward believing that founders of successful companies matter a great deal. A new paper, however, makes the argument that founders are largely expendable. By looking at what happens when founders die, the author concludes that founders are good for ideas, but dispensable for managing the company -- even early in its life
I guess this is good news for investors. All I need to do now is get some decent key man insurance and then I'll be all ready to get hit by that bus :).

Thursday, May 15, 2008

Ways to Give - Chengdu Quake

Great roundup of what you can do to help in the aftermath of the earthquake near Chengdu. From CNReviews, h/t China Law Blog. I'm not in a position to really recommend any of them myself I would agree that the Red Cross generally isn't a bad bet. While I'm typically pretty cynical about the administration and effectiveness of charities (particularly ones that focus on "poverty alleviation"), relief in the aftermath of war or natural disasters is one of those things that are best addressed through contributions to those affected with no strings attached. While the situation appears far worse in Myanmar, there appears to be at least an opportunity for foreign donors to make a difference in China.

Procrastinating

Yesterday was a rough day that ended up being a write off. I woke up normally enough, but went to a breakfast meeting and started seeing in blurry technicolor with a complete loss of focus except for tight areas I was looking directly at. It was annoying making it difficult to focus on the meeting (and must have looked a bit tweaked out at the time). I finally figured out that it was a coming migraine after realizing the weather was rapidly changing though it also made it somewhat difficult to drive home. In any event, I'm playing catch up now after sleeping through the day.

In the meantime, I found this both funny and true - Last minute advice from a Veteran Slacker (Slate):

Well, you've no doubt heard all manner of theories regarding the root cause of procrastination. Fear of failure. Crippling perfectionism. Abnormally low type-2 phloxiplaxitus levels.

I'm here to tell you that it was none of these things. The root cause of my procrastination, in technical terms, is this: I'm lazy. Extremely lazy. [...] The trick to overcoming procrastination is even simpler. Ready? Here it is:

Get off your fat badonk and stop procrastinating. Right now. No, not after the Gilmore Girls rerun ends. Now now.

Wednesday, May 14, 2008

On Corporate Culture

Culture is one of those things that can lead to real sustainable competitive advantage. It's also one of the more difficult things to build (if it were easy, it wouldn't be much of an advantage). It gets built over time, it starts with values and can be destroyed in an instant. From 37signals, with thoughts on corporate culture that transcend geography:

You don't create culture... Real cultures are built over time. They’re the result of action, reaction, and truth [...] Don’t think about how to create a culture, just do the right things for you, your customers, and your team and it’ll happen.

More on those Stingy Americans

From the Australian:

The resentment that comes from needing the military and economic might of the US translated into the most absurd criticism. Jan Egeland, the former UN boss of humanitarian affairs, cavilled about the stinginess of certain Western nations. His eye was on the US. Former British minister Claire Short was equally miffed, describing the initiative by the US and other countries as "yet another attempt to undermine the UN", which was, according to her, the "only body that has the moral authority" to help.

I love moral authority as much as the next guy, but the UN's moral authority is a mighty hard sell given that the UN club includes the most odious regimes in the world, such as Burma. And notice how the UN's moral authority did not quickly translate into helicopters laden with food and water?

h/t Instapundit who notes: "It never does. More like briefcases full of untraceable cash, in the wrong hands." It does as well bear noting that the massive contributions by the US government through its military following the Tsunami doesn't get covered by these statistics. It is the US military that is consistently one of the world's first responders following natural disasters (I can only imagine the genteel debate if the US government pushed to include some of those numbers in official statistics). There's also some discussion on what some called the Economists' misleading graph that showed private contributions by Americans far outweighing any other country. Turns out that measured on a per capita basis or as a percentage of GDP or as a percentage of national income, Americans still contribute more - significantly more than elsewhere in the world. This is even ignoring remittances (which are expected to reach 100b in the next 5 years). Given what I've seen, I would also suspect that we'd find US aid to be far more effective as a result of how it's delivered.

That being said, I'm not clear why it's even necessary to go through this per capita or percentage of national income analysis. Countries who seek aid - seek relief, not moral indignation. To suggest that looking at actual private contribution numbers in aggregate are irrelevant because the US is a far wealthier country than most, is suggesting its massive wealth creation engine is the result of circumstance (or thievery, in the eyes of some - usually by those who thrive under the largesse of the public teet) rather than design.

Tuesday, May 13, 2008

The Charity of Questionable Motives

Freakonomics examines why people give: "It may be that the only kind of altruism that truly exists is what economists like to call 'impure altruism.'"

Of course, elsewhere in the world, people outsource their charity (Economist Blog), though in my experience, that doesn't make them unafraid of taking full credit along with the sanctimony that comes with it.

Who knew 'shrooms could save the world?

Cool vid from TED. There's a bit of an "ick" factor, but if it shows anything it shows that it's nearly impossible if not outright impossible to predict where and how the solutions for the world's problems will come about. Who knew that 'shrooms could save the world? From breaking down toxic waste, creating new and effective antibiotics for such things as small pox, the "perfect" pesticide, to the holy grail of biofuels: cellulostic ethanol. (Stamets seems a bit overtop in some of the framing of both the problems and solutions but all he needs is one idea to commercialize and he will have more than earned the right).


Governments should stop trying to back who they think the winner will be (funding usually being achieved through "lobbying" and for entrenched interests - see corn ethanol lobby). Backing the wrong technology means making it more difficult if not even outright stifling for better technologies. It's why I like the elegance of the X-prizes.

Monday, May 12, 2008

Exchange Risk

The Euro is under pressure (Dani Rodrik, h/t Adam Smith Institute). The USD relative to the Chinese Yuan has been down 8.97% in the last 12 months. Some colleagues (and competitors) have thought that tying contracts to the Euro is the answer. It's not.

The Value of Ethics and "Social Responsibility"

There's apparently value there. But there's a limit (WSJ). I'm not sure about the methodology of the study where they asked people what type of premium (or discount) people would pay for various goods based on subjective attributes. Given what people say about Walmart and where they shop (or even how many people say they would buy "fair trade coffee" versus those who actually do on a regular basis), I think there's a disconnect between words and action. So maybe the takeaway is to figure out an angle where you can say you're doing the right thing, and in the very least, don't tell people you do the "wrong thing".

With the subjectivity over what's ethical or socially responsible, Seth Godin probably has a point on what's coming.

Lost in Translation?

An article in the WSJ makes the case that without understanding culture and perspective ventures between Chinese firms and western counterparts risk failure. The gist of the article is bland enough that it's difficult not to disagree:

The problem is that each side comes to the partnership with very different cultural and economic perspectives. Americans tend to view a business relationship as a win/win proposition -- a contract between two corporate entities designed for their mutual benefit in long-term profitability and growth.

In China, personal relationships among business partners are far more important, and the benefits foreseen in entering a partnership often are broader and focused more on the near term -- and not necessarily evenly balanced.
Where I think they go wrong is in ascribing the near failure of a relationship whereby a buyer removes their local representative (after 5 years of good product) in the vendor's factory and 6 months later, they start getting quality issues and learn that the vendor has substituted more expensive and specified Japanese engines for domestically sourced engines for their motorcycles:
From the American perspective, this is where the relationship went bad -- when the Chinese began using inferior parts. From the Chinese perspective, however, the removal of the observer was where the problems started, because it signaled a major change in the relationship between the two companies. While the Americans had viewed this person simply as a quality-control monitor in an overseas factory, the Chinese looked upon him as the personal representative of the U.S. company within the Chinese operation. The disappearance of this person, with no explanation and no replacement, was seen as a breach in the relationship.
While I think there's some of that, I don't suppose the fact the supplier thought they could pick up the extra margin on the engines that might have been up to 30-50% cheaper sourced in China and the fact that without the "watchful eye" they thought they could get away with it, had anything to do it. The bottom-line is this: there's no substitute to having your eyes on the ground - trust but verify.

Sichuan Quake

I'm currently in Canada but I'm told the quake was felt as far south as Guangzhou and as far east as Shanghai and Beijing. The center of the quake was near Chengdu, Sichuan (pretty much the geographic center of China). From Time magazine's China Blog here and here:

Remember that the Kobe earthquake in 1995 registered 7.2, and killed 5100 people. The urban infrastructure there, I'd wager, even in 1995, was vastly more "earthquake proof" than the buildings, highways etc. in Chengdu. US geological survey, according to its website, saying this was a 7.8 But the epicenter is about 90 to 100 kilometers northwest of Chengdu ...

The overall death toll, according to the Chinese government, is now at least 8600 and headed higher, possibly much higher. Remember that Chengdu, a provincial capital that not many foreigners have even heard of, has a population of 10.5 million. The population of New York, America’s largest city, is 8.2 million.

Does Inequality Matter?

I think the answer depends on one's view of free markets. In free markets, income, broadly speaking, is the result of value creation through innovation and arbitrage. If not all people create value equally (and take the same risks in their careers and investments), why should it be expected that they share equally? The focus then of policy makers ought to instead be on ensuring equality of opportunity and reducing barriers to new ideas instead of creating new ones and reducing incentives. That's what makes a recent study on inequality interesting (Economist's View Blog) - studying why some of the numbers have been changing compared to other countries globally.

In autocracies and plutocracies wealth often becomes a zero sum game, where in order to achieve wealth, it must be taken from another. The problem is that they're often described as free markets. That's why, at least when it comes to places like Russia, you get generalized views like this (h/t Greg Mankiw):

According to a recent survey, a majority of Russians believes that acquiring wealth requires criminal activity and political connections. Only 20% believe that talent matters.
Sadly, it often seems reporters can't tell the difference either. Little wonder then that some politicians perpetually view taxing the rich as an inexhaustible source of money or simply a matter of "fairness".

Sunday, May 11, 2008

Happy Mother's Day

Being the middle child in our family, I thought this was funny:

Remembering a Generation

I was at the funeral of the grandfather of family friends yesterday. It's unfortunate that it takes events like this to bring everyone back together but the funeral did bring back a number of memories of my own grandmother who was part of the "old age fellowship" at my church a number of years ago.

My parents were part of a group of tight knit families - brought together more because of common language and goals rather than backgrounds that seemed to vary significantly. At least when it came to growing up in my hometown. This used to be a small (and very "white") university town when they first came over, they were one of the few Chinese families and Christians at that eventually helping to start a local church.

Funerals are when the stories come out about people you thought you knew well. If there's been a constant in the stories told of my grandmother's generation it's been the stories of perseverence through wars and famine, poverty and self sacrifice. It's difficult to imagine the risk they would have been willing to take in order to bring their families across to a land that has been both inhospitable and welcoming, while barely being able to communicate to start all over in the middle of life from zero. It's all the more remarkable how they spent everything they had to put the generation that came after them through school. The focus on education from the beginning made sense as it was one of the few assets any of them could accumulate that didn't depreciate and couldn't be taken away by hostile governments.

They gave up their working lives in a gamble that the lives of their kids would be better. And in this, it's ever more remarkable how my parents' generation flourished - and how that experience has been repeated nationally and internationally within the Western hemisphere with regard to Chinese immigrants and in many cases, immigrants in general (stereotypes do, after all, come from somewhere).

It's probably one of the reasons why I'm passionate about international development and relatively dismissive over the importance of culture. The one thing that gets shared amongst almost all generations and economic backgrounds is the interest that the generation that comes after does better than the generation before. It's pretty sad to watch those like my grandmother and the grandfather whose funeral I was at yesterday pass on, but I can't help but imagine they are anything less than pleased at how things ultimately turned out.

Why Brands Matter

No, it's not brainwashing. It's about the value of trust (Adam Smith Institute Blog). A useful reminder for marketers and rabble rousers alike. Both would do well to remember that brands can work both for and against you.

Saturday, May 10, 2008

Rapid Prototyping has been Growing Up

And it's not just for prototyping anymore (Modern Plastics)... One of the key problems with making anything out of plastic has been the cost. The tooling can be cost prohibitive even if you have it made in China (about 1/3 the cost of making it in the US and it's not uncommon to spend north of 20K+, even 100K+ for a mold). I started following a small company called Stratasys a few years ago which has significantly brought down the cost and improved the speed of the machines required for RP. It's only a matter of time before it becomes affordable to have a desktop 3D printer.

Friday, May 09, 2008

The Secret of Success?

Apparently it's having no social or sex life. Somewhat sadly, this applies. According to John Doerr of Kleiner Perkins (WSJ):

That correlates more with any other success factor that I’ve seen in the world’s greatest entrepreneurs. If you look at Bezos, or [Netscape Communications Corp. founder Marc] Andreessen, [Yahoo Inc. co-founder] David Filo, the founders of Google, they all seem to be white, male, nerds who’ve dropped out of Harvard or Stanford and they absolutely have no social life. So when I see that pattern coming in — which was true of Google — it was very easy to decide to invest.

Shiny and Noteworthy Link Dumping

Clearing out the tabs in Firefox:

  • [China/Manufacturing] Confessions of a Sweatshop Inspector (Washington Monthly, h/t All Roads Lead to China). Interesting observations on factories, but from what I've seen, the environment has improved considerably in many of the newer factories we visit.
  • [China] Private Equity & Venture Capital in China (Seeking Alpha, h/t China Law Blog). Discussion of growth of industry including how investment focus has been changing because of a variety of macro economic influences including VAT rebates and currency appreciation.
  • [China] China vs Mother Nature - links from Freakonomics to China's coming fight against both rain and pollution. They've employed 54,000 people in the fight against Nature.
  • [Politics] Quote of the Day: "What the government gives, it must first take away" John S Coleman. People should remember this whenever they find themselves starting to say the words "the government should..."
  • [Entrepreneurship] Presentation by the guy who developed the Ruby on Rails framework about what it takes to create a profitable online startup (Presentation Zen).
  • [HR] Fire the workaholics? (37signals) Disclosure: I'm a workaholic - or at least I aspire to be. But I think the article picks up a few important points - workaholics don't necessarily get more done because they don't necessarily focus on the details that matter (just because you spend more hours at work doesn't necessarily mean you're a workaholic either - at least that would be my experience in i-banking where there was value to us sitting around and waiting for work to be passed down. [Aha! On the other hand... read this - In praise of Workaholics (MartyNemko.com)]
  • [Insanity/Technology/Politics] Apparently slowing down the internet would reduce its carbon footprint (New Scientist). It's like they want me to be apoplectic but I guess it goes along with my poor or dead theory. I'm wondering how well that will go over with the gaming crowd.
  • [Marketing/Sales] Closing the deal (Redeye VC). "The way that you ask can either increase or decrease the odds of a successful outcome." As per usual, blame the lawyers when buyers shy away.
  • [Entrepreneurship] 13 Tips for creating a successful new online product (Inter-sections.net).
  • [HR/Innovation] Becoming a Creature of New Habits (NYT). Keep learning. If you stop, you might not be able to start again.
  • [Innovation] TechShop (Core77): "public, subscription-based machine shop and fabrication studio that actively encourages the mechanically curious to get their hands dirty and start making things". I'm glad to see that it's a concept that is catching on. It's about the idea after all. I'm just glad I'm not the one that's paying the liability insurance.
  • [Innovation/Manufacturing] The open secret of success (MSNBC). Basically makes the argument that Toyota's success is the result of sustained incremental process innovation.

Thursday, May 08, 2008

Microfinance & a Shameless Plug

I'm fairly satisfied directionally with my response to a particularly incendiary comment on microfinance by Chris MacRae who addresses the profits achieved in microfinance - it's also a great example of the ideological struggle currently taking place within microfinance:

> As Muhammad Yunus says, the purpose of microcredit was to get rid of
> loan sharks not to create more of them
>
> who cares- its the number 1 agenda of the 2000 people who meet at
> http://www.inamicrocreditsummit.org/
>
> why do I care - well my main profession is communications - I have
> noticed there is more than one way to takeover a market - one way is
> to take over the company that is making the world a better place; the
> other main way is to pollute the market with so much noise from big
> powers (in this case traditional banks, and do what the market
> (microcredit) was ororiginally designed to do
>
> the way to counter this is to treat every pariah of microcredit as you
> would any other criminal or abuser of humanity
If you're interested, you can find my response here (I didn't realize until just now that the postings are available publicly). It amounts to a long summary of my views on the commercialization of microfinance are and the successful IPO of Compartamos. Please excuse the length and lack of editing.

Why Business can Triumph where Politics Fail

Sifting through my RSS reader, I thought these two quotes were noteworthy and related despite being about completely different things:

  • From China Law Blog: "knowing business is more important to success in China than knowing China"
  • From Thomas Barnett: "Only greed trumps tradition."

It's not the US that's been in decline

Almost shocking. Quote pulled from Instapundit: "U.S. share of global economic output (on a purchasing power parity basis) has declined very slightly over the past twenty years – from about 21% to about 20%. But what has really happened over this period has been the rise of China and the rest of non-Japan Asia at the relative expense of Western Europe and Japan."

Shiny Link Dumping

Too tired to actually thoroughly categorize all these links but I did find them interesting for one reason or another:

  • [Trends] Moving from "real time" to "event driven" era (ZDnet). It's not enough to be able to collect and be able to access information in real time, but the next generation of information technology is going to be about being able to use and have it processed to develop customized user experiences.
  • [Humor/Human Behaviour] 5 Psychological Experiments that prove humanity is doomed - doomed! (Cracked.com). Yes we humans are a self serving, easily manipulated bunch. Of course, being optimistic, I wonder whether or not the data has actually improved over time - that we're becoming a little less "doomed" with time.
  • [Innovation] Using contests as a way to develop software (Dr. Dobbs Portal). Just like the idea of 'crowdsourcing' - using markets to solve problems.
  • [Managing/HR] Your employees are dying to be heard (Businessweek). Takeaway: "Finally, instead of trying to guess whether you're communicating enough with your staff, Reilly recommends you ask employees: 'Are you getting enough information to do your jobs effectively?' Then be sure to pay attention to the answers."
  • [Negotiating] "It pays to get inside your opponents' heads rather than their hearts" (Economist). This one has always been sort of a no brainer for me for a number of reasons but the takeaway is this: forget about trying to connect with people emotionally, focus on their point of view and existing constraints.
  • [Innovation] "Who says big ideas are rare?" (The New Yorker). Malcolm Gladwell author of the Tipping Point, points out that 'the history of science is full of [big/revolutionary] ideas that several people had at the same time.'

Optimistic about Global Trade, but not that Optimistic

The Adam Smith Institute Blog pulls from a column in the NYT:

The central process driving this is not globalisation. It's the skills revolution. We’re moving into a more demanding cognitive age. In order to thrive, people are compelled to become better at absorbing, processing and combining information. This is happening in localized and globalised sectors, and it would be happening even if you tore up every free trade deal ever inked.
While they make some excellent points about both why protectionism empirically destroys wealth and jobs in the long run, I think they vastly underestimate the demagoguery of politicians who seek first to get elected and then they focus on staying elected. As someone who believes strongly in democracy, I also believe that poor choices are also made by the people - but progress is almost never unidirectional often taking a two steps forward one step back type approach as the pendulum in public opinion swings erratically. Brink Lindsey in Against the Dead Hand makes this point forcefully, that the forces of globalization while seen by some as inevitable because of the power of those ideas, it is hardly the case (e.g. Zimbabwe, Venezuela, Cuba, Myanmar, Iran, etc.). Name for instance a government that advocates free trade and liberalization without reservations. Sadly, there are none.

Wednesday, May 07, 2008

Should Everyone be an Entrepreneur?

10 reasons why you should be here (h/t Instapundit). I tend to agree - the costs of setting up a business is falling. Telecommunications firms and any number of web utilities have services targeting small firms (one of these days I have to do a roundup of some of the more interesting ones out there and the ones I use). That same technology now means you don't have to do it yourself nor do you have to quit your job. The tax breaks don't hurt either. But like I've been saying - it's all about the idea.

Ugh... Well the Solution is Simple - Make Everyone Poorer

The National Geographic Society has done a survey on which countries "care more about the environment" based on the behavior of consumers - and of course the US is at the bottom of the list with Canada not far behind:

A panel of 27 international experts in global sustainability helped identify the crucial issues. Each person was given a score that reflected the environmental impact of their lifestyle which included the size and energy-efficiency of their home, commuting habits and use of fresh water, among dozens of other measures.

Consumption was determined both by the choices consumers actively make - such as repairing rather than replacing items, using cold water to wash laundry, choosing green products rather than environmentally unfriendly ones - and choices that are controlled more by their circumstances - such as the climate they live in or the availability of green products or public transport.
Nevermind that the US has experienced a drop in greenhouse gases, the clear target of the study was consumption - so little wonder that poor countries have performed better. Is it really any surprise that poor people consume less? Well apparently to the media and a segment I just saw in CTV, apparently it is. The solution seems to be simple - let's make everyone poor. The problem of course, is that the people who are often making the prescriptions are making them for others and don't think the rules apply to themselves. Suddenly the fact that Earth Day just happens to fall on Lenin's (that would be Vlad's - not John's) birthday doesn't seem like so much of a coincidence after all.

Update: As a new initiative has been pointing out: "malaria kills more than Hitler, Stalin, Tanks and Bombs". It bears useful reminder that the powers that be have banned DDT in the interest of "the environment". Meanwhile, ever since the bans, malaria infection has skyrocketed. I sometimes do wonder if the the logic as taken by the environmental movement today, taken to its limits, would rather us either poor or dead.

Is Oil's Bubble about to Pop?

Oil prices have surged past the tech bubble and well on its way to surpassing the homebuilders. From Paul Kedrosky:


Of course, in itself the graph doesn't prove much (as oil could really 'be different'), but I don't think there are very many people who consider these prices to be sustainable. So the more interesting questions are what will cause oil to collapse and how far will oil fall when the bubble does burst. Before I had an ability to remember, following the energy crisis of the 70s, by 1986, oil prices fell below $10.

A general rule of thumb is that commodity prices eventually revert to the marginal cost of production - which is the highest price it costs to produce the last bit of oil being consumed. Now as to where this is given higher levels of global demand is a source of debate. Oil companies are using a "working assumption of $15-30" a barrel (versus today's close of close to $120). Others aren't so sure (with Goldman Sachs weighing in at $70). Of course, I suspect these prices discount the possibility of both more efficient usage and alternatives.

Myanmar's Devastation

Formerly known as Burma, Myanmar is currently ruled by a military junta who have tightened their grip and become increasingly insular.

The satellite images of the before and after of a cyclone are just stunning and indicative of what must be the human devastation on the southern coast. Surprisingly, to their credit, the international community have pledged only small fractions of the funds pledged during the tsunami for the simple reason that the military is restricting who and what is allowed in. Predictably, the news last night showed some "activist" saying that "we should put aside our politics and contribute."

Given that the junta hasn't shown any indication that they care about the people in the past, how realistic is the expectation that they care now beyond seeing this as another opportunity to exploit the suffering of the people? It's also a sad reminder that too often poverty isn't about the lack of resources, it's because of corrupt and/or inept governments.


View Larger Map



NASA, h/t Paul Kedrosky

Tuesday, May 06, 2008

Oil as the "Devil's Excrement"

I think that term applies quite aptly when it comes to development at least - and more broadly to most resources (and for the same reason that some diamonds have the moniker of "blood diamonds").

Substantial wealth put into the hands of already corrupt governments who do not have the legal tradition or stability to handle it, is a recipe for disaster. Here from Instapundit. I agree with Reynolds that the best and arguably most elegant way to handle royalties from resources are direct dividends to all citizens - something they should have done in Iraq, and something they already do in Alaska instead of leaving a far too attractive incentive to politicians and bureaucrats.

It's not always going to be Posies and Sunshine...

Far from it really... I think for the vast majority of small business owners share similar emotional roller coaster rides. Like I think most managers/business owners, I get the most fun out of my business when working at the big picture type projects but realistically, I think it's the grunt work and basic execution that really separates good companies and great companies. A friend and fellow entrepreneur asked me the other day how I keep up the energy, and the reality is that it's tough. I think I've noted here that it's quite easy to become manic depressive - you can have really high highs one minute and then the next feeling like the rug has been pulled out from under you. I've come to believe that just to be eligible for success, you've got to have enough emotional fortitude to figure out how to plough through it.

So that's my introduction to two potentially useful links:

  • Getting over procrastination for that large project you've been putting off. (Web Worker Daily) with tips like breaking the project up into multiple milestones and doing it in small chunks over time or sprint and finish it in 24 hours, and promising yourself a big reward after you do finish.
  • The best way to break unhealthy habits (Forbes) with strategies like finding new friends (they call it changing your social norms), attack a bunch of bad habits at once since many are related, and go for the big bath effect - make a large number of changes at the same time of some other major life event.

Monday, May 05, 2008

New $100 million X-Prizes in Clean Energy

I'm a big fan of the X-Prizes - but I'm not sure if these ones are necessary (h/t Instapundit):

A Biofuels X-Prize has already been created to inspire breakthroughs in next generation sustainable liquid fuels. The biofuels prize competition will officially launch later this year with a prize of at least $10 million. Other categories that will be attacked in the next couple of years include solar power, water, sustainable housing and carbon capture. In total the energy and environment prizes are will give away up to $100 million.
The people who solve the little problem of clean sustainable energy have a multibillion dollar if not trillion dollar energy market beckoning... But hey, I guess a cool instant $10M+ wouldn't hurt (and if the money is going to be spent anyway, doing it this way is definitely better than wasting that it by betting on any one company over others).

The "Indiana Jones" of Economics

The Freakonomics Blog profiles Robert Jensen:

Jensen has documented how cell phones revolutionized fish markets in India, how simply telling students in the Dominican Republic once about the high value of an additional year of school can impact their choices years later, and how introducing T.V. into rural India affects the position of women.