Sunday, June 28, 2009

The Problem with Regulations that Rely on "Smart" Regulators

I'm worried about the new interventions being placed on markets in the US. The genius of American growth has been its ability to match innovation with markets - but the growth of government means that barriers are rising - barriers similar to those of chronically stagnant Europe.

What makes it more irritating is the demagoguery blaming the crash on supposed "laissez-faire" and to top it all off, these new regulatory and tax interventions may end up making the situation worse (or create yet new bubbles that will burst even more spectacularly). It's almost inevitable at this point that there will be higher taxes necessary to pay for the plethora of spending and on top of that, politicians are starting to roll out "smart" regulations that will supposedly moderate the excesses of the market (ignoring the bad regulation and interventions that got us into this mess in the first place).

In centralizing power, for the current batch of new regulations to work relies on the discretion of regulators who are hardly infallible. As pulled by the WSJ's Deal Journal:

We regulate because financial systems are fragile, prone to booms and busts that can have harmful effects on the real economy. But regulators aren’t immune to the boom-bust cycle. They have an understandable habit of easing up when times are good and cracking down when they’re not. In doing so, they often amplify the ups and downs of markets rather than modulate them.

Saturday, June 27, 2009

Instapundit: "Like Alien vs Predator, Only Different"

Why should the Transformers get all the fun? ( via Instapundit):

Ever wonder what would happen if Care Bears and My Little Ponies clashed? If the Smurfs rose up and fought Gargamel? If Teddy Ruxpin had his own Wes Anderson movie?

Friday, June 26, 2009

Airport Olympics

My return to Canada has been more frazzling than usual. I suppose someone who travels as many miles as I do should have things figured out by now but my past travels have typically been more prolonged versus the quick day trips from one venue to another. My current trip back has been so short that I have barely recovered from jetlag as I'm about to return to China again. Anyway, this is to say that I'm sorry I haven't had a chance to post more lately.

My sister says that I need to make my blog more personal, fun and readable and I'm sure I'll take that under advisement - but realistically, she's my sister and won't be unsubscribing to me anytime soon either.

One of the brief trips while I've been back has reminded me of my resigned dislike of both United and O'Hare but also the benefits of having priority boarding given the lack of on-board compartment space on regional aircraft, and the benefits that intense interval training provides particularly when you realize you only have 15 minutes to make a connection before they close a gate that's two terminals over. I've been fairly productive and having finally landed a large, rather hard fought client, I'm going back to monitor production progress which is on a fairly tight schedule so I'm not exactly sure how much I'll be posting over the next week.

Tuesday, June 16, 2009

A Lesson Oft Forgotten

Politicians and pundits often like to target profitable firms but the reality is this - as an article on airline pilot pay notes (WSJ):

A profitable company, whether FedEx or Southwest, can pay its workers more.

Friday, June 12, 2009

Differentiating between Aid and Development

Easterly's blog is quickly becoming a favorite of mine because of the excellent back and forth debates but also because of his views that challenge development orthodoxy. Whether or not one differentiates between aid and development marks is a basic acid test for me in terms of how someone would approach development. Easterly considers the blurring distinctions at USAID - which to be frank, I found to be one of the better agencies while I was in Uganda (but this was a number of years ago).

Tuesday, June 09, 2009

WWF: Accountability vs Sustainability

As a matter of disclosure - it's been quite a while since I've been a fan of organizations like World Wildlife Fund (WWF). When it comes to priorities, I believe human life and development takes precedence over some mythical idea of what the world was like / should be like - a preference that often involves doing away with humans. One of the hazards of following design and trend blogs is that you run into drivel like this from Trendhunter:

Step by step we (the world) continue to slowly but surely jump onto the eco-train. As much as it’s a personal change that members of society need to think about, it is always a good sign when a major contributor makes a statement.

Since 2006, the WWF (World Wildlife Fund) has been operating in the Netherlands out of their own personal statement.

The WWF Netherlands Headquarters is a carbon neutral office. Designed by AUR Architects, the old headquarters were used as a starting point (instead of demolishing it) in order to create the fully sustainable structure.
Of course, what they don't want to tell you is the cost. For all the fawning, what they don't mention is that it was at a cost of 4M Euros (2006) - for a renovation (MIMOA) - not a new building no less. Well, at least the employees have a nice building to work in and at least WWF can claim they're "carbon neutral". For the money they spent, at least someone's happy even if it's not the wildlife I'm assuming the funds were supposed to be directed towards.

Raising Money for Charity & Selling T-Mobile

The common variable for success? Hot women (this important PSA brought to you from Freakonomics Blog). Here's T-Mobile's take on it:

Here's the academic literature (MIT Quarterly Journal of Economics):
in terms of both maximizing current contributions and inducing participation, we find that a one-standard deviation increase in female solicitor physical attractiveness is similar to that of the lottery incentive.

China's "China’s brutally long" standardized college entrance exam questions

I've never really understood the level of importance placed by some schools on standardized tests - particularly on kids. I think college entrance exams might be a bit different as you do need some type of standard measure but I can only imagine how unbearable the pressure is on some of these people. If you thought that writing the SATs was rough, think of something about 10x worse given the importance Chinese universities place on them. Check out some of the essay questions here (ChinaGeeks).

Quote of the Day: On Working in China

I agree wholeheartedly. It's amazing what you learn to brush off as being normal/acceptable/uncontrollable before long. From Silk Road China:

"... almost as difficult as dealing with all the unknowns and changes in China is convincing Americans that have not been to China in his company that China really is that irrational and difficult to deal with."

Saturday, June 06, 2009

Productivity Bit: Finding the Hooray! in your Life and Business

This Venn diagram seems to not only a great diagnostic tool but a great prescriptive one as well (Lifehacker):

This will end well... Government Motors

... because politicians are renowned for their business acumen. From the Boston Globe, via Greg Mankiw:

Frank intervention extends life of GM's Norton center

General Motors Corp. will delay the closing of a Norton parts distribution center it planned to shutter by the end of the year, according to US Representative Barney Frank. The extension will temporarily preserve about 80 jobs....

The plant manager received word yesterday that Frank had successfully lobbied GM chief executive Fritz Henderson to delay the closing, according to Ridenour....

Frank, whose district includes Norton, said he told Henderson, "Look, I understand that these things have to happen but they don't have to happen in the midst of the worst recession in years."

Friday, June 05, 2009

Is Poverty a Human Rights Violation?

Another interesting point and counterpoint over at William Easterly's Aid Watch. Easterly points to Amnesty International's recent report that calls for getting people out of poverty, people apparently put there because of "entrenched interests", but saying the distinctions should not be blurred, poverty itself is not a human rights violation:

Poverty does not fit this definition of rights. Who is depriving the poor of their right to an adequate income? There are many theories of poverty, but few of them lead to a clear identification of the Violator of this right. Moreover, human rights are a clear dichotomy – someone violates your rights or they do not. But the line between poor and not-poor is arbitrary – it is different in different countries, and on a global scale, many still argue what is the right dividing line that constitutes poverty. So calling poverty a “human rights violation” does not point to any concrete actions that the “violator” must stop in order to restore rights to the “violated.”
Amnesty International counters, also clarifying that what they're talking about is absolute poverty (not relative poverty that amn:

It’s true that lack of income, in and of itself, isn’t a human rights violation. But poverty is about a lot more than just income. As Easterly knows, those who live on less than a dollar a day are poor not just because they lack income; the lack of income implies lack of access to services, clean drinking water, adequate education, housing, employment and so on. All of these are violations of the Universal Declaration of Human Rights and the International Covenant on Economic, Social and Cultural rights. To give just one of many possible examples, estimates indicate that as many as 8,000 children die daily in Africa alone from preventable diseases such as cholera and dysentery. It’s certainly true to say that these are diseases of poverty – the rich can ensure that their water is not contaminated and can seek treatment at private hospitals as opposed to understaffed government clinics – but they are more than that. They are violations of the right to health and the right to clean water.

And people living in poverty are vulnerable to violations of their civil and political rights as well. In the Favelas (shanty towns) of Sao Paolo in Brazil, police and gangs are in daily conflict. There are allegations of human rights abuse on all sides, and the government feels little pressure to respect due process in large part because this violence is taking place in an extremely poor part of the city. Ordinary people are in danger from gangs on the one hand and from a state takes their rights less seriously because they live in a poor community.

I'm sympathetic to the Amnesty International argument. Absolute poverty/hunger is generally not a question of a lack of resources - it's a question of government policies - which can range from crony capitalism (not to be confused with capitalism) to straight despotism. But on the other hand, surely there are enough violations there to attack the violations themselves instead of seeing an effect and concluding a violation must have taken place. I wonder if this also means that if countries aren't developed they're automatically violating their citizens' rights? Amnesty International has been increasingly political in the last few decades and I think lost its moral legitimacy particularly when it came to Iraq and I wonder if that like this - expanding human rights to include economic welfare - is merely another effort in their search for relevance or just more simply a question of mission overreach?

More Cause and Effect

What I don't get is that obviously President Obama isn't stupid. He also has some bright lights advising him on the economics front. So the question is doesn't he think that the trillions of spending will have longer term consequences? Or does he believe his priorities in changing how government work supercede what those might might be? Or perhaps most arrogantly he believes he knows better than the markets and that what he is doing will in fact strengthen them?

I don't know - what I do know is this: the further this drags on, the more obvious it becomes the stimulus wasn't about stimulus at all. Further, evidence mounts that the stimulus will end up weighing down the economy in the long run with permanently higher interest rates as the US dollar loses its relevance as a reserve currency. From Glenn Reynolds:

TREASURIES: Exit The Safe Haven. “The 10-year Treasury bond paid a 3.83% yield Friday afternoon, up from 3.6% in the last week of May and a 52-week low of 2.07%. One worry is that higher yields on benchmark government bonds will translate into steeper borrowing costs for home buyers and businesses, besides making the U.S. government’s deficit spending more expensive.”

Related: Interest rates soar on jobs data, putting housing at risk. “The Treasury bond market is in cardiac arrest today over the May employment report: Yields are soaring, dealing another blow to investors who’ve been hiding out in government bonds — and threatening another big jump in mortgage rates.”

Thursday, June 04, 2009

Remembering that Thing That Happened 20 Years Ago

From Radley Balko (via Megan McArdle):

It was 20 years ago today that the Chinese government killed 2,000 to 3,000 of its own citizens for the crime of demanding their own liberty. This iconic photo is about all that’s left of them.

George Orwell said, “If you want a vision of the future, imagine a boot stamping on a human face—forever.” He’s all too right. Last century, an estimated 262 million people were murdered by their own government . That doesn’t include the hundreds of millions more killed by opposing governments during war.

Today ought to be a day to celebrate and promote human liberty, and to remember the abuses governments have heaped upon their subjects over the centuries.

So go find your own metaphor for the government tank pictured above.

Then put yourself in front of it.

Tuesday, June 02, 2009

China "Not the Next Silicon Valley"... It's Much, Much More?

That's according to Sarah Lacy who just got back from a trip profiling startups in China for TechCrunch:

What makes China so staggering is that everything that happened to corporate America over decades—think the television and media studios build out of the 1950s, the greed of the 1980s, the dot com bubble, the build out of physical and IT infrastructure, current Web 2.0 and CleanTech innovation—is all happening to China at once. [...]

And while China gets a rap for ripping off U.S. Web start-ups now, I think we’re going to start seeing U.S. start-ups copying a lot of elements of Chinese entrepreneurs’ business plans, whether it’s unlocking the value in virtual goods, experimenting with alternative online payment methods or developing more social forms of e-commerce, where like-minded friends shop together.

You always find the best ideas within atmospheres of constraints. It’s why some of the best companies are started during recessions. It’s why Israel was such a surprising hot-bed for Nasdaq IPOs in the late 1990s. And it’s why Chinese Web companies have come up with other ways of making money than just slapping ads on a site, because they had to.
While I think her optimism might be a bit overdone, I'd agree with her that the development of China is pretty amazing to see - and it is developing "all at once" which creates a great deal of opportunity but also spectacular collapses. Read the whole thing. Some of the comments are pretty interest as well.

Monday, June 01, 2009

Standardized Testing, Education & Aid

William Easterly is no fan of standardized testing:

The US already has RBM [results based management] in the form of the No Child Left Behind Act, which rewards public schoolteachers when their students score high on standardized tests. Some of the pitfalls were revealed when I interviewed one of the customers --a 12 year old rising 8th grader in an average public school -- about how this was working out. She said “Teachers remind us everyday about the test, and they spend more time teaching us how to phrase answers to test questions than actually teaching us facts.” Finally, the nightmare was over: “And then after the tests were over and taken, they stopped teaching, and the rest of the year we watched stupid movies.” (Less anecdotally, academic evaluations find this Act to have had some payoffs for the worst schools, but note the idiocy of applying it universally to previously well-performing or even average schools.)
I get the issues, but I have to wonder if the problem is standardized testing, the tests or the management of the organizations being tested. I just don't see how having a baseline of information to compare can be a bad thing.

Granted, the question of whether or not we're measuring the right things is obviously a valid one - e.g. creativity and problem solving. But maybe such things can't be measured - which is an explanation that strikes me as a cop out by those who don't want to be compared/measured.

Perhaps I lean towards agreeing with standardized testing because education doesn't allow for choice - in a marketplace of ideas, bad schools are subjected to the harsh realities of not achieving a willing market. So at least given a public school's captive audience, there is baseline information on both good and bad schools with standardized testing. In private markets, there is value for useful information and private enterprises are often better at filtering out gaming in the system when their own reputations/livelihoods are on the line - e.g. Zagat's for restaurants. Where public schools are subject to private markets is in real estate markets. The rich (or even the better off) have the option of moving to a new school district. The rest get 'left behind'.

LA Times profiles the American Indian Public Charter schools (via Donald Luskin):
School administrators take pride in their record of frequently firing teachers they consider to be underperforming. Unions are embraced with the same warmth accorded "self-esteem experts, panhandlers, drug dealers and those snapping turtles who refuse to put forth their best effort," to quote the school's website. [...] Not surprisingly, many Bay Area liberals have a hard time embracing an educational philosophy that proudly proclaims that it "does not preach or subscribe to the demagoguery of tolerance."

It would be easy to dismiss American Indian as one of the nuttier offshoots of the fast-growing charter school movement, which allows schools to receive public funding but operate outside of day-to-day district oversight. But the schools command attention for one very simple reason: By standard measures, they are among the very best in California.
Most of the kids who go there are poor. But what are they doing that's so different?
The short answer is that American Indian attracts academically motivated students, relentlessly (and unapologetically) teaches to the test, wrings more seat time out of every school day, hires smart young teachers, demands near-perfect attendance, piles on the homework, refuses to promote struggling students to the next grade and keeps discipline so tight that there are no distractions or disruptions. Summer school is required.

Back to basics, squared.
Of course if you read on (and I would highly recommend that you do), you realize just how draconian some of their policies are but at the same time they clearly promote a culture of excellence. While I might personally think that they go too far, it's also hard not to see that they at least provide an excellent foundation with high expectations to students who would otherwise not get it. But are they preparing students with the creativity and problem solving skills to succeed? The article doesn't say. On the other hand, should we also be worried that such paternalism results in workforce workers who are governed like those at Canon (Danny Choo)?
According to his book, employees can concentrate on the meeting at hand without chairs and they have been able to half the number of meetings each year. [...]Also in the photo you can see a blue sign on the floor. When Nikkei went to interview the president, while walking in the corridor a siren and flashing lights went off. The corridor was designed to detect whether employees were walking at least 5 meters for every 3.6 seconds.
While Easterly notes how aid agencies can game the system to skew results to profit, I figure that it's much like markets and profitability. Companies may choose to pursue profitability for its own sake while offering a given service or seek to be an innovative service provider and profit by design and as a byproduct. While I might make the argument that the latter is more sustainable and productive, won't both organizations being governed and subject to the accountability of consumers create value to those consumers? In the same way, while (often) subjective measures might be useful to organizations who don't rely on their users for sustainability, isn't it at least a useful starting point?