Thursday, April 30, 2009
For the sake of the future of the US economy, I hope this is only because of that massive sucking vacuum of economic resources that is economically inefficient clean tech - from Jeff Busang, a partner at a VC firm writing at peHUB:
Don't get me wrong on clean tech - market innovation has always meant more efficient less polluting technologies, but I sincerely hope that the primary determinant for getting there isn't based on getting money from the US government.
In truth, it makes me very nervous that we are entering an era where public opinion and public officials are against what has made this country so great and unique in the world - the aggressive pursuit of open markets, free trade and a strong distate for regulation and government intervention in business affairs. Governments have never been good at picking winners and losers in the free market (see: Japan, collapse of). But, the reality is that this administration’s ambitions are breathtaking and transformative. Business leaders have never had a stronger reason to care more about following what’s going on in the halls of Washington.
One of our portfolio company CEOs is amazing at spending all his time running around with clients and chasing new business. Lately, we find ourselves coaching him to spend more time in Washington DC. Last night, I was at a dinner with the founder of one of the most promising cleantech companies in the country and he observed that in 2008, he visited China and NYC ten times each. In 2009, he has already been to Washington DC ten times. It’s a sign of the new reality, like it or not.
There's good reason to think that this is ridiculously bad for clean tech itself if true - as Bussang notes, governments are notoriously bad for picking winners and losers. Substituting firms with political connections over substance means a protracted battle of those who don't get government assistance with essentially zombies who are now in a position to underprice them because of those subsidies.
"Orders of magnitude easier to start a business today." (Inc.) If you do decide to start a business, don't forget to check out some of the web resources that are out there to help you.
As if worrying about the economy wasn't bad enough, there's the apocalypse that will follow the solar storms in 2012 (a scenario that seems frighteningly plausible given our centralized electrical grid, Wired), and that's of course if swine flu (now a pandemic) doesn't get us first.
With tomorrow being full of Communist festivities around the world (May 1 / Labour Day), being in China, with the high amounts of mobility into and out of Guangdong, one hopes that when swine flu does arrive, it hits AFTER next week (China News Wrap) or I'm afraid the death tolls will start to really soar. While I've taken care of buying 3M N95 surgical masks (Amazon) about a year ago for home back in Canada, I'm wondering whether there's any point in trying to get them out in Guangzhou anymore. I imagine there's about to be a shortage if there isn't one already.
Wednesday, April 29, 2009
Those, including Starbucks, who haven't been forced to provide much accountability in the past generally aren't happy to do so especially when it gets in the way of marketing (William Easterly). Courtesy of AfricaApp, here's a piece of politically incorrect investigative reporting / documentary I hope to watch:
Tuesday, April 28, 2009
What a difference a year can make. As they point out at Freakonomics, the speed at which events can turn media themes around is enough to give people whiplash. There were those who were nearly hysterical pushing this Peak Oil meme. Notes Stephen Dubner:
Of course, while technology is changing what the supply side of the equation might look like, let's not forget about the coming changes in demand - like that 100 mpg car. Of the many things to worry about in the world, thanks to innovation, it's nice to be reminded that limited resources including oil isn't one of them.
With oil prices falling by more than two-thirds last year before a slight rebound, the “peak oil” frenzy seems to have abated for now. Even its proponents must admit that high oil prices were driven in large part by a huge spike in demand (which has now fallen) and not just scarcity (whether real or sinisterly implied by those who hold oil reserves).
But even though the hysteria has died down, new technologies march on, quietly changing the rules of the debate (if, that is, there still were a debate).
Surprisingly (at least it was a surprise to me) according to Austan Goolsbee, an economist on President Obama's Council of Economic Advisers, the answer is no as subsidies just increase the wages of scientists and engineers (via Greg Mankiw):
Conventional wisdom holds that the social rate of return to R&D significantly exceeds the private rate of return and, therefore, R&D should be subsidized. In the U.S., the government has directly funded a large fraction of total R&D spending. This paper shows that there is a serious problem with such government efforts to increase inventive activity. The majority of R&D spending is actually just salary payments for R&D workers. Their labor supply, however, is quite inelastic so when the government funds R&D, a significant fraction of the increased spending goes directly into higher wages. Using CPS data on wages of scientific personnel, this paper shows that government R&D spending raises wages significantly, particularly for scientists related to defense such as physicists and aeronautical engineers. Because of the higher wages, conventional estimates of the effectiveness of R&D policy may be 30 to 50% too high. The results also imply that by altering the wages of scientists and engineers even for firms not receiving federal support, government funding directly crowds out private inventive activity.
Glenn Reynolds in response to the government takeover of GM favoring unions over bondholders (NationalReview):
I think I’ll invest in China, where they respect private property . . . .While I do enjoy irony, I'm not sure it's apt with the issues surrounding Asia Aluminum (where foreign bondholders look like they're going to get screwed over the domestic shareholders), the government push on its largely government controlled banks to lend and eminent domain issues (but they have those frighteningly enough in the US as well). But maybe it's apt after all - though with the recent bailouts, one thing's clear, China looks like it's headed in the right direction where property rights are concerned and the US is headed the other way. This should be of severe concern to anyone who acknowledges that it's markets, not governments, that create wealth.
Monday, April 27, 2009
Bad news means more money for development agencies. Therefore, as William Easterly notes, "we can make bad news look worse…and for Africa, we can make even good news look bad". They can, and they do.
Remember this (NYT)? Closer to home, there are those who think that Canadians should do something similar (Toronto Star/CAW). It's sort of rich that when we complain when those like China do the same thing to us (WSJ).
This being said, I'm not entirely certain I agree that this is "protectionism" (though I'm pretty undecided). If a country wants to be as shortsighted as to overpay for domestic goods (the crazy part is believing that this works - after all, what happens after the unsustainable spending stops?), then so be it. The protectionism I'd be most concerned about are more permanent trade barriers like tariffs/duties which is a coerced form of discrimination.
Not that I ever had any doubt this was the case. From a WSJ editorial on Teach for America:
Teach for America -- the privately funded program that sends college grads into America's poorest school districts for two years -- received 35,000 applications this year, up 42% from 2008. More than 11% of Ivy League seniors applied, including 35% of African-American seniors at Harvard. Teach for America has been gaining applicants since it was founded in 1990, but its popularity has exploded this year amid a tight job market.
So poor urban and rural school districts must be rejoicing, right? Hardly. Union and bureaucratic opposition is so strong that Teach for America is allotted a mere 3,800 teaching slots nationwide, or a little more than one in 10 of this year's applicants. Districts place a cap on the number of Teach for America teachers they will accept, typically between 10% and 30% of new hires. In the Washington area, that number is about 25% to 30%, but in Chicago, former home of Secretary of Education Arne Duncan, it is an embarrassing 10%.This is a tragic lost opportunity. Teach for America picks up the $20,000 tab for the recruitment and training of each teacher, which saves public money. More important, the program feeds high-energy, high-IQ talent into a teaching profession that desperately needs it.
An interesting counterintuitive take on China's recent numbers that have been touted as better than expectations at BusinessInsider. An excerpt:
The Chinese have learned the value of bogus statistics from the masters of deception in the U.S. government, which routinely misprepresents inflation, unemployment and other key statistics as a matter of policy, lest the "bad news" spark some demands for change in the status quo. As a consequence, we should view all "official" statistics issued by China with the same skepticism that we view bogus U.S. government statistics.It's a point that can be understated how opacity in information can complicate business - in my primary business we're seeing Aluminum ingots trading significantly (40-50%) higher than international markets (which is bizarre in and of itself - given that this has been the case since the beginning of the year). The significant issue that I have with the article is the push towards a gold standard - to which China is already seemingly championing given its concern over the US dollar (CommodityOnline).
But unlike the U.S. government, China's central government directly controls all the important levers of economic and financial activity. Copper being stockpiled? Only the government knows. Interest rates mandated lower? The government ordered the banks to do so, end of story.
With the recent massive increases in lending, Victor Shih, a professor at Northwestern echoes some of these concerns that the good news is temporary:
What does this mean? The central government cannot stop or even significantly slow this pace of lending until export picks up in a significant way, else the bubble will burst. This is a race against time. At some point, this pace of lending will lead to a serious NPL problem or inflation, or both. If by that point, export and domestic household consumption remain anemic, I am not sure what options the central government will have.
Sunday, April 26, 2009
That's according to China Law Blog. Personally, I didn't have any issues about a month ago. My parents who are out in Asia and got their visas about 2 weeks ago, just before flying over didn't either (we all got one year multiples). In fact, the requirements seemed considerably more lax than the period prior to the Olympics (I had even forgotten to bring the appropriate letters).
As "William" in their comments notes, "I find these visa games more than a little distasteful. Getting a US visa is no picnic but at least the US doesn't secretly change the rules while pretending that the policy is the same." Agreed (it's also why the first rule in cutting down corruption in developing countries is to cut down the red tape so officials don't have the option to play favorites).
Saturday, April 25, 2009
This is my plug for Witopia for anyone who travels a lot and in particular, travels to China. I bought the personalVPN - SSL since it's supposed to be faster than the other one. Basically running the VPN, I find the internet is faster and more enjoyable experience since I can now do things like watch YouTube which is, of course, a critical part of
my anyone's productivity. The one downside is that I find that torrents are way slower (tv shows) - but now I can download the torrent file using the VPN (ironically, ThePirateBay is blocked), and then run my downloads with the VPN turned off.
PS for anyone who does decide to get it, you can get a 10% discount entering in the "shxpt" coupon code which worked for me.
I caught the tail end of a conversation by what appeared to be a sophisticated middle aged businessman [yes, rimless glasses does that to a person] with what appeared to be French accent and likely his Chinese translator:
"Right now china things are cheap because cost of labor is low. One day even Chinese people will demand one month holiday [yep - almost certainly French?] and labor costs will rise and things will be more expensive and exports will fall moving elsewhere... the reason we have this crisis was because it was made by artificial money ... because China can make the cheapest, all our jobs are now gone because we have no factories"I almost wanted to interrupt and point out that amongst the many silly simplifications he made, his most glaring error was to confuse "making things" with creating wealth and jobs. Wealth and jobs are created by solving problems people are willing to pay to have solved.
I'm not exactly sure it's right to say that it's just conservatives concerned about the direction of US national economic policy. From Tigerhawk:
And, of course, there is the point that troubles most conservatives: Are the government's programs to revive the economy and engineer hope and change now condemning us and our progeny to a permanently lower standard of living? That is my great fear as my own children embark on the journey of life.
This news is a bit stale now but I do think it interesting. Those who know me well, know that I'm an unabashed, unapologetic (albeit generally pragmatic) capitalist - and though Greg Mankiw points to a Rasmussen poll a few weeks ago with the lead quote "Only 53% of American adults believe capitalism is better than socialism," and even Club for Growth calls it a "depressing poll of the day," if you read on, Americans seem to differentiate between capitalism and free markets.
While some socialists (or socialist-lite individuals) might herald the poll as a success, as Rasmussen's own report notes:
This provides context for the recent tea parties (not to mention the absurd vitriol from dead tree media) - that Americans haven't abandoned basic and historically the only principles that result in wealth - individual liberty. While far from ideal, the only thing that opponents have been successful at is smearing capitalism with the idea that crony capitalism is its natural state.
It is interesting to compare the new results to an earlier survey in which 70% of Americans prefer a free-market economy. The fact that a “free-market economy” attracts substantially more support than “capitalism” may suggest some skepticism about whether capitalism in the United States today relies on free markets.
Other survey data supports that notion. Rather than seeing large corporations as committed to free markets, two-out-of-three Americans believe that big government and big business often work together in ways that hurt consumers and investors.
Friday, April 24, 2009
From William Easterly:
A mass email went out to journalists yesterday from The Centre for Development and Population Activities: “Expert Refutes Bestselling "Dead Aid"; Available for Background and Interviews”. The available expert was Carol Peasley, President & CEO, The Centre for Development and Population Activities. Among the expert arguments refuting “Dead Aid” (from Peasley's piece in the Huffington Post) was that “Child deaths [in Malawi] have been reduced by nearly 100 percent (from 221 per thousand in 1990 to 120 in 2007).” I guess the expertise being made available did not include math.
Thursday, April 23, 2009
Really, at this point any CEO who agrees to do business with the government should be fired. If he signs up with the government, he in essence is turning over control of his company to political operatives who bounce from position to position like ping pong balls. Public opinion squawks, they jump and the rules are different. This is the worst form of statist intervention — lawless and unpredictable. It operates outside any published regulatory regime or statute and without regard even for a gentleman’s promise. No business can operate successfully this way; the entire financial sector of our economy certainly cannot.
Truer words: "[By stifling entrepreneurs, we're] losing our place in the world" ... "they think throwing money at the problem solves it, that's not the case" on CNBC (via smalldeadanimals):
Wednesday, April 22, 2009
The political leaders that be, particularly in the US are creating their own self fulfilling policies using the current economic realities to justify greater regulation and massive unaccountable spending (via Rich Karlgaard):
Let me say this again. The yield curve predicts growth. Check. Consumer sentiment is ticking up. Check. But CEO confidence is lousy, and CEOs are (not) spending accordingly. Whoops. This begs the question: Why are CEOs in such a low mood?Consider what's happened to GM. As Glenn Reynolds asks in response to comments following GM's intention to default on debt speaking to the questionable lobbying and allegations of corruption: "And a good question: “Why couldn’t we have done this in December? What did taxpayers get for the $13.4 billion we invested in the company?” A better question: What did the people who approved the investment get?"
Answer: If you are a CEO in financial services, manufacturing, energy production and health care, you are going to be more regulated. Period, end of story. Your response to forthcoming regulation of yet-to-be-determined complexity will be to hunker down. Keep your name out of the news, improve the balance sheet and hold tight.
This is why the U.S. economy, which wants to turn the corner, is still stuck in the intersection as it decides which way to go.
Jim Lindgren points out the relationship between high taxes, high unionization and high unemployment and not surprisingly finds a positive correlation. Fortunately the world hasn't gone insane and according to Rasmussen, 60% of Americans believe government to have too much power with too much money (via Club for Growth).
Somewhat late in the day and not even * US per capita GDP, up 126%. *US per capita consumption of 32 most-consumed minerals, down 40% * US total gross consumption of 32 most-consumed minerals, down 9% -- that's a 9% decline in absolute terms even as GDP rose 244% and the population increased by 53%. Full details about all this and more (including how the amount of trash NYC produces per capita has declined by more than 50% since 1940)...
Lenin's birthday Earth Day anymore where I am, but nevertheless... Jim Glass (via Chronicle of the Conspiracy):
1965 to 2005:Reality doesn't stack up well with the slogans that call for a reduction in your environmental footprint (Lifehacker) populating the web and news today. Of course, post-Bush who supposedly was anti-science, some environmentalists are proving the point that their dislike for the former Bush Administration wasn't about the science at all (Reason via Instapundit).
On the other hand, fortunately there's ample evidence that most consumers just don't care irrespective of what they might say (Amazon via Instapundit) - which ironically, may be good for both the environment and the economy.
* US per capita GDP, up 126%.
*US per capita consumption of 32 most-consumed minerals, down 40%
* US total gross consumption of 32 most-consumed minerals, down 9% -- that's a 9% decline in absolute terms even as GDP rose 244% and the population increased by 53%.
Full details about all this and more (including how the amount of trash NYC produces per capita has declined by more than 50% since 1940)...
Sunday, April 19, 2009
A highschool friend posted this CTV "news" report on facebook (yes I caved, and joined a couple of months ago). If CTV had bothered to read beyond the conclusions of the "study" that concludes Canadian public services are a "bargain", they'd have reached this little gem (emphasis mine):
It should be emphasized at the outset that by virtue of our use of Statistics Canada’s government expenditure data as the basis for the analysis, we are following the convention in public accounting of valuing public services at their cost. To the extent that public programs are supported by a cost-benefit analysis, our implicit assumption is that the net benefit from public services is zero — an extremely conservative assumption.So to paraphrase - every dollar spent by government is a dollar well spent on services worth at least a dollar - and this is an "extremely conservative assumption"! As lies goes, they don't get much more baldfaced than this. Turn it around, and you would call this, more appropriately, a study of the overwhelming size of government spending and the encroachment of government services thrust on people that they may not want, need or see as valuable enough to pay for it themselves.
The report also includes all government spending including sewage, quasi-public utilities and the public pension system and attempts to boil it down into average spending per capita by economic group. Never mind for instance, that nearly a third of federal spending, is in the form of provincial transfer payments (taking money from supposedly rich provinces to poor ones).
Words like value and worth are bandied about ad nauseum but you would think that people who supposedly studied economics (or even those with IQs higher than room temperature) would realize that value and worth are not established in a vacuum. If you replaced every instance of the words "worth" and "value" with "expense" and "costs" the report might only be marginally more accurate. Governments aren't creators of value - they are destroyers of it. While Canadians are often warm and fuzzy types who like to defer to government, but ask them specifically as to services that they have received and it's a different matter. A better (and more amusing) analogy on the role of government in value creation comes [via] Sissy Willis (via Instapundit):
Zombies are dead creatures that don't produce anything and must devour the lives of others, even though once everyone becomes a zombie, there'll be nothing left for anyone to eat. Government is exactly the same. It doesn't start businesses, it doesn't create wealth, it doesn't invent anything. It devours all the stuff that you make.Of course don't tell CTV's newsdesk that even quotes the authors of the report as saying "for the vast majority of Canada's population, public services are, to put it bluntly, the best deal they are ever going to get". For the sake of all Canadians, I certainly hope that's not the case. I can also only assume this means the authors accept all prices at face value and never consider alternatives.
You bar the door against property tax, they come in through a sales tax. You board the windows against income tax, they reach in through an energy tax.
Now, there are some differences between the movie zombies and the government kind. In the movie the zombies didn't try to tell their victims that being devoured was good for them … or, my favorite, let me devour your flesh because I know how to use it better than you do.
I'm not sure if this is a greater indictment of a public union funded organization that plays fast and loose with the facts, or CTV for reporting it bereft of any form of critical thought/analysis. Should CTV ultimately fail, may this report serve reminder that despite whatever CTV's newsdesk's fantasies may be, they forgot Canadians have choice and they went in search for quality and accurate news elsewhere.
Update: As Sissy notes in the comments, the quote is from Andrew Klavan, but I'm glad she picked up on it!
Saturday, April 18, 2009
With parents who I can only imagine are sadists (or who practice a very special form of tough love), imagine the effect during lightening storms or the proper ambient night light. Picture from a house listing courtesy of the LovelyIllTakeIt blog:
Friday, April 17, 2009
If you accept that wealth comes from market innovation, and that there's a direct relationship between innovation and education then there's probably no singular better incremental investment that the developed world can make than in better education. The idea however that governments are best able and most efficient at providing education has little empirical support. That said, heck, my own mother has reservations about the idea of charter schools that introduce choice and competition into the system.
Is the education system meant to support teachers or students? The answer to date seems to be teachers. How better to explain the attempts at fixing broken schools with more money in plans that can take years, over giving students the ability to immediately move to better schools? Where's the compassion in failing to provide students with the educations to be productive and succeed while administrators add more unmotivated subpar teachers with ever increasing salaries in hopes that smaller class sizes or money will solve the problem when the evidence that this works is weak at best (NPRI)?
From the WSJ, where unions are fighting to shut down charter schools:
Why is it that the people who find corporate monopolies most offensive are often the same people who are most willing to submit to government imposed monopolies and unions? There's clearly an ideological battle being waged but surely the stakes are high enough that policymakers should be open to alternatives?
The highest quality studies have consistently shown that students learn more in charter schools. In New York City, Stanford economist Caroline Hoxby found that students accepted by lottery to charter schools were significantly outpacing the academic progress of their peers who lost the lottery and were forced to return to district schools.
Florida State economist Tim Sass and colleagues found that middle-school students at charters in Florida and Chicago who continued into charter high schools were significantly more likely to graduate and go on to college than their peers who returned to district high schools because charter high schools were not available.
The most telling study is by Harvard economist Tom Kane about charter schools in Boston. It found that students accepted by lottery at independently operated charter schools significantly outperformed students who lost the lottery and returned to district schools. But students accepted by lottery at charters run by the school district with unionized teachers experienced no benefit.
Thursday, April 16, 2009
Introducing the RSS Feed Toilet (Apartment Therapy):
the first toilet that sends RSS feeds of the sensitive "information" from each of your bathroom visits.
Is Web 2.0 dead? Will the next generation of web technologies be about building communities or individualism? From an interview with Andrew Keen on TechCrunch, Keen makes the argument that it's not about building community today, that instead it's already a rabid meritocracy with all the "riches" and power (or in the case of twitter, "followers") accruing to the best and only a few. While few people agree with Keen, he makes a relevant point that many Web 2.0 technologies (YouTube and Facebook for starters) have difficulty monetizing their networks.
Maybe he's operating on a different definition of what Web 2.0 is, versus some of his critics. Perhaps instead it's more accurate to describe the move of audiences to publishers increasingly on merit and content and away from traditional forms of authority like government and legacy media. If their response (or rather, lack thereto [Michael Graham via SmallDeadAnimals]) to the recent Tea Party protests is any measure, this is undoubtedly a good thing.
Yes, even those who purport to be men of God, are fallible. From a Episcopalian priest (via William Easterly):
At some point in the not too distant future benign neglect and callous disregard for the world’s extremely poor (living on under $1 a day) will become a crime against humanity and a sin against the Creator. This is the time to pray, advocate, and to take action. Promises have been made, and the time for debate is over because solutions now exist.Poverty isn't caused by a lack of resources anymore than hunger is caused by a lack of food in the world. The problem is governments. The first step in the fight against poverty is for countries to follow the only proven route: capitalism, property rights, free trade and opening borders to foreign investment. Unless the man is suggesting that we overthrow despotic governments a la Iraq, the idea that "the time for debate is over" suggests a deference to faith in corrupt governments who keep their people mired in poverty. Someone should perhaps remind him that as a priest, at a bare minimum faith in men is no substitute for faith in God.
The best response is not to have increasingly convoluted advice by experts, but to let individuals with local knowledge roam free by trial and error to find their own successes.
For all the economic misery out there, I remain optimistic over the resilience of entrepreneurs - though I waver over how big a threat the response of government will be.
Despite the statist power grabs, maybe we are approaching a Libertarian Moment (Reason). I'd like to believe that just like programs like QuickTax/TurboTax help navigate arcane and complex tax legislation (though it may not have helped US Treasury Secretary Geithner via Megan McArdle), and that technology allows us to more rapidly keep ahead of and navigate the barriers that government erect.
Despite minimal coverage of "Tea Party Protests" by traditional media (that includes Fox News), the turnouts for protests over the encroachment of government and government spending grow (Instapundit); spending that seems more about rewarding political friends and undeclared ideological pursuits (Reason) than 'saving the economy'. The powers that be, ignore the anger at their peril (Club for Growth). The simple response to the mock outrage at the Capitol over "Wall Street Greed" is to point out it was far preferable to greed for power (theAtlantic) that enabled and created the incentives that resulted in this crisis.
I'm just ranting at this point, but my latest cause for optimism comes indirectly, buried in a WSJ article about the changing face of venture capital:
New technologies make it easier for small tech companies to get off the ground with relatively little investment, broadening the pool of potential companies that could become big businesses. The trend is forcing venture capitalists -- which stand to reap bigger rewards if they invest at an early stage -- to come up with new ways to cast a wider net.Barriers to entry continue to drop. The irony is that it's capitalism and markets that are making ideas more important than the capital that enables them.
Tuesday, April 14, 2009
It's been a while since I've posted the productivity bits I've found useful trolling the net in between the ranting. There were quite a number so I've picked out a few highlights:
- From B2BRainmaker - questions you should be asking about your marketing before you publish. I found the ideas to be highly useful. At their core, the questions will force you to distill clearly what you're trying to say and whether you're saying it clearly.
- A compilation of useful startup blogs can be found over at Venture Hacks.
- Improve interactivity and take the blah out of conference calls by simultaneously having an
online chat room among other ideas as suggested by Seth Godin.
- The evolution of how we work, as told by office floor plans from Wired.
- Useful search engine optimization tips pulled from Gabriel Weinberg.
- Tips from LifeHacker for working through common productivity problems including procrastination, distraction, information overload, backlog, interruptions and being generally overwhelmed.
- A compensation structure for managing people in unstructured environments from Joel Spolsky @ Inc.com. A follow up on a variant of his system with mixed results from apenwarr. I'm a strong believer in compensating for productivity. I used to think that there existed a general structure that would apply to all businesses, but I'm beginning to believe tthat's not that's the case given that 'productivity' differs between different types of businesses. For instance, motivating frontline manufacturing employees will differ from engineers or creatives. Nevertheless, I thought these articles were interesting starting points but also warnings of how easily compensation plans that aren't well thought through can lead to unintended consequences.
- Finally, something more managers should do: treat employees like volunteers for better performance from Incentive Intelligence. There's a school of thought that to be a capitalist you have to be rabbid, autocratic micro manager. My thinking is that while you might get short term productivity gains, they're generally sustainable.
China's about to acquire its way into more power at the IMF. Here's the basic objection (DailyException):
China is using its influence at multilateral institutions as a means of furthering its strategic and military goals.It'd be a bit naive to believe any country doesn't use its influence at multilateral institutions to further strategic/military objectives but China's strategic and military goals (or that of any despotic/autocratic power) should be of concern to us all.
Monday, April 13, 2009
According to the banks and executive recruiters, hundreds of bankers have been jumping to Deutsche Bank and Credit Suisse, neither of which took a government bailout. They see a rare chance to upgrade talent and standing on Wall Street — and globally — by luring top minds who would not have considered moving from a Goldman Sachs or a Morgan Stanley in flush times. Now that their rivals must accept compensation limits and other restrictions that come with the use of taxpayer support, the foreign banks are finding more eager takers.Yep, this will end well (Bnet). People responding to incentives. Imagine that.
Sunday, April 12, 2009
Happy Easter! From Bill Conerly - on why he's not gloomy, via his blog. Though I worry that it's a bit of thin gruel - in that yes, the world and the US has gone through worse, recovery has also been dependent on leadership that I'm not sure currently exists in any prominent form in the Republican party. That being said, while Reagan erased the legacy of Jimmy Carter, and in so doing unleashed 2 decades of prosperity for the US, he campaigned and was elected as one of the most ideological US Presidents.
The same cannot be said for President Obama - who campaigned as a moderate and has unleashed possibly one of the most ideological policies and budget agendas in recent memory. Additional entitlement spending being implemented by both Obama and previously Bush, will handicap the US well into the future. In what amounts to a rotten easter egg, for those who say he was elected to do something - his record and words on spending do not bear this out (Instapundit).
Saturday, April 11, 2009
Put out by the Wall Street Journal and the Heritage Institute, the Economic Freedom Index is similar to the World Bank's Doing Business benchmarking and both correlates well to economic growth. In essence both provide blueprints for what countries can and should do to make their people wealthier and more meaningful work.
Paul Graham, founder of YCombinator, has a brilliant idea for growing the startup talent in the US: "a policy that would cost nothing: establish a new class of visa for
Canada already has a policy that encourages investors - you can basically buy your way into citizenship by investing 400K (Citzenship and Immigration Canada). In fact, that's similar to what Gary Becker proposes for the US - selling the right to immigrate. As Becker notes, "
The Economist highlights a few amazing stats of what has made the US the economic engine of the world - "Between 1996 and 2004 it created an average of 550,000 small businesses every month." That's nearly 7M new businesses a year! The Economist also seems to believe that the powers that be have taken things for granted and are making the lives of entrepreneurs more difficult: making it more difficult to innovate, navigating tax laws and reducing the pool of other entrepreneurs and talent from around the world (immigrants).
I'd go further and add finding funding to the additional list of barriers being created. The impending legislation on the financial services sector that will make it more difficult to find lenders who must meet ever rising hurdles to even exist and higher taxes will make it more difficult to find angel investors who are willing to invest. Recessions should be cleansing events - the US government's response may end up handicapping any recovery well into the future. Instead of a simple, clean reinstall, it's like replacing Windows XP with Vista (nevermind the increasing government involvement - read death of innovation - in such industries as healthcare and education).
That said, for a more positive article - and even more unconventional source (at least for me), Time has a somewhat inspirational article on the startup Motormouths.com. [Side note - an interesting footnote on terminology of startup/small business: "The difference between a start-up and a small business, by the way, is that a "start-up is designed to grow — it's scalable"]
Lower the bar of what "rich" means (WSJ). Splendid. I can't imagine how this can possibly end well. I get the feeling that much of what's being done today will provide case studies of what not to do.
From Elaine Chao, former US Secretary of Labor, another reminder that while protectionism can protect jobs in the short term, the economic inefficiency results in greater costs, destroys jobs in other industries, and worse, prevents new industries from growing to replace old ones.
Though there's much that I've disagreed with on his blog in the last year, I think Thomas Barnett nails it in his read of what hinders China's development and leadership in the world:
The main reason why China can't lead the world for now is that it hasn't established any sort of real leadership yet in Asia and because maintaining its own regime legitimacy remains job #1 of the Communist Party. Neither reality allows China enough risk-toleration to become a serious leader. If you can't suffer losses, you can't handle risk, and if you can't handle serious risk, you can't be a global leader.Along with a useful analogy: "Imagine a U.S. that couldn't replace its party in power: it never would have recovered from Vietnam and it wouldn't be able to recover now." I would add that as is true for markets, competition in politics results in accountability and, somewhat counter intuitively, long term stability.
Update: More from Thomas Barnett's blog - "China is not ready to lead."
Thursday, April 09, 2009
Tom Barnett points a Wall Street Journal piece on developing markets and the underground economy. The article suggests that the poor in developing countries turn to the underground during economic downturns and that economists now believe this can be a positive response despite the fact informal businesses don't pay taxes and can't easily raise capital to grow.
While the article is a great reminder that entrepreneurialism thrives amongst the poor in the developing world, that it thrives in the underground should also serve as a warning to bureaucrats. Given that much of the entrepreneurship is out of desperation rather than aspiration, it should be of particular concern that entrepreneurs believe the costs of formalizing outweigh the benefits.
Wednesday, April 08, 2009
If at all possible, I try to avoid visiting vendors around lunch or dinner. There's one vendor in particular (I'm in constant amazement that he isn't the size of a zeppelin) who can often be found hosting 2 or 3 lunches at the same time at the same restaurant with various clients.
It was unavoidable yesterday. Vendors love to treat guests to any number of "delicious delicacies" that generally also come with relatively large bills (which is sometimes literal in the monetary and aviary sense of the word) - and when it comes to those with western palates, this often goes somewhat underappreciated. One strategy for "beneficiaries", lest the options become too exotic is to blame food allergies (particularly for some clients and squeamish employees). With this particular vendor I think I've pretty much had an entire safari cross my plate and regretted my commitment (lest I offend) to try everything at least once. I think I've gotten quite good at ensuring the gagging stays on the inside.
The great thing in this culture (which may also be one of the worst things) is that I'm not out of place with my blackberry obsession since people will happily interrupt conversations midway with loud cell phone conversations. I snapped a few pics discreetly in an attempt not to offend:
Emu claw/leg as it first appeared (to give you some perspective, the claw was just a bit smaller than double the size of my fist).
Emu claw post-dissection (by my employee) - who apparently thought it really was delicious (you can't quite see the cleaned off bones in the background:
In the race to build a super fuel efficient car (100 mpg), participants of the Automotive X-Prize were announced this week at the New York Auto Show (WSJ). The interesting thing is that none of the major auto manufacturers participated. TechCrunch notes that they may be involved indirectly but I'd say it's also a reminder that while our need for cars/vehicles will survive the long haul, our need for the current batch of automakers may not. Further, what will "save" the auto industry is new ideas.
The bladder rule of finance, generally applied to public companies, goes something like this: the greater the cash, the greater the pressure to piss it away. Governments are taking it one step further to include access to cash in the form of borrowing and ability to tax "rich people" to having cash itself. How else to explain the audacity of spending practically everywhere?
The response to this recession which might otherwise be a way for the markets to cleanse and reset itself, may either provide the springboard or hand cuffs for future growth. Bizarrely, China is believed to be on target to be one of the first countries to emerge from the recession despite reintroducing politics to the lending process and massive levels of unsustainable lending (ChinaStakes). The Wall Street Journal has even gone as far as pointing out that the advantage that China's acquirors have is massive amounts of cheap capital. While China has been able to use leapfrog technologies in its attempt to catch up to the West, they just committed to spending 124b to build a public universal healthcare system (WSJ) just as the idea is proving unsustainable and on the way to collapse elsewhere (CMAJ).
Apparently the Obama Administration is preparing for tax reform - Bruce Bartlett notes why it's important (Forbes):
Two recent announcements from the Obama administration have started the ball rolling on tax reform. This is a long overdue and welcome development. It’s critically important that Congress enact some sort of major tax reform every 10 years or so because the tax code becomes unbelievably cluttered very quickly with special tax provisions. It’s essential to clear away this underbrush from time to time and look at the tax system in its totality. Unfortunately, the last major tax reform effort took place in 1986.via Glenn Reynolds who also points out: "I’m skeptical that we’ve got anyone in a position of influence in Washington who really wants to produce a less corrupt system." Given the regulation the Administration is about to unleash and the trillions being spent making life more difficult for entrepreneurs - who will be critical to the rebirth of the economy, who wouldn't be skeptical?
Sad. That's according to Dean Steacy, a Canadian Human Rights Commissioner (National Review). As Instapundit points out, "Funny how those who are always lecturing on “human rights” are so quick to ignore Article 19 of the Universal Declaration of Human Rights. It’s as if they’re really more concerned with power than with rights . . . ." Well, duh.
Monday, April 06, 2009
Theory on why the Obama administration doesn't want the bank bailout money back: it's about power (WSJ). It worries me how much sense this makes. If true, it will be along and hard four years for the US economy. On the other hand, I don't think TARP started out with this intent as it was intended to provide liquidity into the system - but what else to make of the fact the administration doesn't want the money back from healthy banks especially after Congress has been trying to distort both the intent of the funds and how they are used?
While I'm not naive enough (or maybe it's too cynical) to believe that the recent calls to significantly reconsider aid will make as much of a difference, Mary O'Grady makes the point in the WSJ that poverty isn't a trap nor will money 'solve the problem.'
With US Treasury Secretary Timothy Geithner calling for a trebling of resources for the Inter American Development Bank, it's clear the message hasn't gotten through. From a paper written in 1987:
This is what the late, great development economist Peter Lord Bauer called "the disregard of reality" ... the claim that poverty is a trap that cannot be escaped without external aid an "obvious conflict with simple reality." "All developed countries began as underdeveloped," Bauer wrote. "If the notion of the vicious circle were valid, mankind would still be in the Stone Age at best."Further, she points to a study published in 2006:
A 2006 paper titled "Foreign Aid, Income Inequality and Poverty," from the research department of the IDB itself, looked at the period 1971-2002 and found "some weak evidence that foreign aid is conducive to the improvement of the distribution of income [sic]. When the quality of institutions is taken into account, however, this result is not robust. This finding is consistent with recent empirical research on aid ineffectiveness in achieving economic growth or promoting democratic institutions."Elsewhere, there's an interesting Q&A with Dambisa Moyo in FastCompany and her calls to end (most) aid to Africa (via Appfrica) it disappointingly didn't have as much depth as I would have liked. A related, pragmatic and somewhat moderating Q&A at the Freakonomics blog with Paul Collier who notes of Moyo's call to end aid: "Dambisa was my student, and I am delighted that young Africans are no longer prepared to have their continent defined by victimhood. They recognize that Africans can shape their own future. However, I don’t agree with her that aid is useless. Especially with the drying up of private finance, now is the hour for public international money; it is needed. It is, however, often badly used." And finally, William Easterly asks: "do you have to be pro-aid to be an Authentic African?"
Thursday, April 02, 2009
I'm travelling for most of today through to next week so blogging should be very light (though hopefully not non-existent if I can blog from China which is a crapshoot for blogspot). From Paul Kedrosky:
Stable capitalism is a contradiction in terms.
Wednesday, April 01, 2009
It occurs to me frequently that I'm well on my way to becoming a curmudgeon. There are a lot of things that grate on me - like the term job "creation" used beside the word "government". Governments, being notoriously poor at innovation, don't create jobs - they simply transfer and destroy value but they are also critical for creating an environment for economic growth. As governments are in full throttle over structuring bail out packages, this is a useful reminder as to what economics bloggers believe affect job creation the most (growthology.org; more here - RealClearMarkets):
Consider then how governments are now spending the money. The Economist blog also surprisingly comes out with a post citing the negative relationship between high marginal taxes and entrepreneurship - making the argument that "empirical evidence suggests that lower tax rates increase sole proprietors’ income, investment, and propensity to hire workers." New York State intends to raise taxes for the "rich". Any guesses as to who will end up being right?