The easiest places in which to start a business, according to a new World Bank report (WSJ):
- 1. New Zealand
- 2. Canada
- 3. Singapore
- 4. Australia
- 5. Hong Kong
The easiest places in which to start a business, according to a new World Bank report (WSJ):
From what I've seen, the formality of marriage isn't as important as the private rituals in China. I've been told a few times that someone isn't considered "married" until they have the banquet irrespective of the legal papers. This is, however, probably not good policy. via WSJ:
In March, China’s State Council, or cabinet, said it would strictly enforce a 20% tax on profits from the sale of the seller’s second or subsequent home. Typically, most sales are taxed at only 1% to 3% of the home’s value. In days following the announcement, staff at marriage registration centers in Shanghai and Nanjing said that there was a rush of divorces and had to extend their opening times. So far, however, only Beijing city has implemented this capital gains tax.
A rush to divorce isn’t new in China. In 2010, when cities rolled out restrictions limiting families to only one additional home purchase, many couples sought a divorce to bypass the rules. Some marriage registration centers have also put up signs — “There are risks in the property market, take heed in a divorce” is one example — to warn people about the risks of divorcing for property gains.
This is how it works:
If a couple owns two or more homes jointly and wants to sell one, they would have to fork out the capital gains tax. If the couple divorces, each party would have one home registered in his or her name. When that home is sold, no capital gains tax would be levied.
Sweden had the fastest economic and social development that its people had ever experienced, and one of the fastest the world had ever seen. Between 1850 and 1950 the average Swedish income multiplied eightfold, while population doubled. Infant mortality fell from 15 to 2 per cent, and average life expectancy rose an incredible 28 years. A poor peasant nation had become one of the world’s richest countries. Many people abroad think that this was the triumph of the Swedish Social Democratic Party, which somehow found the perfect middle way, managing to tax, spend, and regulate Sweden into a more equitable distribution of wealth—without hurting its productive capacity. And so Sweden—a small country of nine million inhabitants in the north of Europe—became a source of inspiration for people around the world who believe in government-led development and distribution.
But there is something wrong with this interpretation. In 1950, when Sweden was known worldwide as the great success story, taxes in Sweden were lower and the public sector smaller than in the rest of Europe and the United States. It was not until then that Swedish politicians started levying taxes and disbursing handouts on a large scale, that is, redistributing the wealth that businesses and workers had already created. Sweden’s biggest social and economic successes took place when Sweden had a laissez-faire economy, and widely distributed wealth preceded the welfare state.
This is the story about how that happened. It is a story that must be learned by countries that want to be where Sweden is today, because if they are to accomplish that feat, they must do what Sweden did back then, not what an already-rich Sweden does now.
So why are more Americans moving to Texas than to any other state? Texas is America’s fastest-growing large state, with three of the top five fastest-growing cities in the country: Austin, Dallas and Houston. In 2012 alone, total migration to Texas from the other 49 states in the Union was 106,000, according to the U.S. Census Bureau. Since 2000, 1 million more people have moved to Texas from other states than have left.Summary here (Time).
As an economist and a libertarian, I have become convinced that whether they know it or not, these migrants are being pushed (and pulled) by the major economic forces that are reshaping the American economy as a whole: the hollowing out of the middle class, the increased costs of living in the U.S.’s established population centers and the resulting search by many Americans for a radically cheaper way to live and do business.
The hedge fund article also points out something I’ve been hammering on for years now: perversely, since compliance costs have a huge fixed cost element, the regulatory onslaught creates scale economies that favor concentration and consolidation, and which can potentially reduce competition. You are seeing it in hedge funds. You are seeing it in banking. You are seeing it in FCMs. And I do mean perverse, because among the ostensible purposes of these regulations were mitigating the too big to fail problem, and promoting competition. The dramatic increase in regulatory overhead that favors the big over the small is completely at odds with these purposes.
Turns out they were guided more by influence than need (Fortune). Which makes this cartoon particularly apt - with more from ASI (ASI):
A number of friends have posted a link to Russell Brand's rant on Facebook. The simplest response would be something the lines of: 'Been there, done that. Tried it in France. Didn't work out so well.' Follow up here (both from Telegraph.co.uk).
Updated (October 28): Francois Hollande is officially France’s least liked President
Updated (November 8): "S&P Cuts France's Credit Rating by One Notch to Double-A" (WSJ via Instapundit who observes that these are "the wages of socialism".)
I love my books - hence the overflowing bookshelves of which I seem to need to get another. I'm a bit of a snoop in that I also enjoy checking out what other people are reading - Tim Ferris has a nice collection of images here.
"...it obviously makes sense that share prices reflect all available information.... But they also clearly reflect rumours, supposition, herd-instinct, prejudice, hubris, pessimism and a myriad of other immeasurable qualitative factors, including occasional madness...." That's humanity for you. Good luck trying to model that.
They're not who you'd think - "they're not lone geniuses, risk-takers, or college dropouts". Interesting article from HBR's blog - their characteristics:
- An opportunistic mindset that helps them identify gaps in the market. Opportunities are at the heart of entrepreneurship and innovation, and some people are much more alert to them than others. In addition, opportunists are genetically pre-wired for novelty: they crave new and complex experiences and seek variety in all aspects of life. This is consistent with the higher rates of attention deficit hyperactivity disorder among business founders.
- Formal education or training, which are essential for noticing new opportunities or interpreting events as promising opportunities. Contrary to popular belief, most successful innovators are not dropout geniuses, but well-trained experts in their field. Without expertise, it is hard to distinguish between relevant and irrelevant information; between noise and signals. This is consistent with research showing that entrepreneurship training does pay off.
- Proactivity and a high degree of persistence, which enable them to exploit the opportunities they identify. Above all, they effective innovators are more driven, resilient, and energetic than their counterparts.
- A healthy dose of prudence. Contrary to what many people think, successful innovators are more organized, cautious, and risk-averse than the general population. (Although higher risk-taking is linked to business formation, it is not actually linked to business success).
- Social capital, which they rely on throughout the entrepreneurial process. Serial innovators tend to use their connections and networks to mobilize resources and build strong alliances, both internally and externally. Popular accounts of entrepreneurship tend to glorify innovators as independent spirits and individualistic geniuses, but innovation is always the product of teams. In line, entrepreneurial people tend to have higher EQ, which enables them to sell their ideas and strategy to others, and communicate the core mission to the team.
Things that can't go on forever won't. While this makes the assumption that the borrowed funds weren't invested in things that will generate even more income in the future, not sure how this can end well... From the Economist:
High private debt is more detrimental to growth than high public debt, according to recent research by the IMF. Indeed the IMF study finds that excessive sovereign debt reduces growth only when household and corporate sectors are heavily indebted too.
Something to watch (WSJ):
China’s National Audit Office last estimated in 2010 that local-government debt stood at 10.72 trillion yuan ($1.75 trillion), or 27% of GDP. But, by all accounts, it has exploded since then, with some estimates suggesting that the load now accounts for 60% of the economy, much of it generated by special investment vehicles that were able to bypass nationally imposed borrowing limits. (For those familiar with Wall Street’s pre-crisis borrowing tactics, the acronym SIV will sound ominous.)
Beijing is not innocent in this buildup. For years, the central strategy was to set a national annual growth target–in previous years, it was repeatedly set at 8% or higher–and make it clear to provincial and municipal authorities that they were expected to meet that. For local officials the solution was simple: procure (or seize) land and then borrow money to develop it, often with little regard for how much future demand there would be for the new houses and office building.
These entities created what Kynikos Associates hedge fund manager Jim Chanos calls the “treadmill to hell.” At some point, they had to get off. And when they did, they’d be left with an unsustainable debt. That moment is looking more and more as if it has arrived.
No wonder the government is preparing both the lenders and borrowers for the pain to come.
The main problem is that conventional geothermal plants rely on a rare combination of geological features. Hot rock has to be accompanied by large amounts of hot water or steam that can easily be pumped to the surface, where it would drive steam turbines to generate electricity. The rock formation needs to be porous enough that the water can be continuously recirculated and reheated to keep a power plant running. (Geothermal pumps are sometimes used to heat and cool homes, but these are inadequate for generating electricity because they work at much lower temperatures.)
Although such formations are rare, the amount of heat underground is actually huge (see “Abundant Power from Universal Geothermal Energy”). There’s enough heat trapped under the United States within drilling distance (as deep as 10 kilometers) to supply its energy needs for thousands of years. AltaRock is one of several companies trying to figure out how to access more of that heat (see “Cracking Rock to Get More from Geothermal Fields” and “Using CO2 to Extract Geothermal Energy”).
The basic idea is to modify the rock to allow water to flow through it (researchers call the resulting reservoirs enhanced geothermal systems, or EGS). This involves pumping cold water into rock in just the right way to trigger existing fractures in the rock to expand and allow water to flow through. It’s been tried many times in the past—with efforts stretching back for decades. But it’s been hard to get enough hot water flowing to justify the expense of drilling a well and building a power plant.
Greg Glassman, Founder and CEO of CrossFit (Bloomberg via FB):
Those people that find higher purpose to business than earning money are the ones making all the damn money.It's a great video, worth watching.
This is cool. The one thing that truly amazed me in Uganda was how developed the supply chains of companies like P&G, Coke and Pepsi were, even over 10 years ago. Even in the depths of the countryside of Uganda, you might not have proper refrigeration, but you could almost always buy a Coke. Coke is trying to take its approach to quenching the thirst of the world one step further in the developing world (Core77):
Segway inventor Kamen's Slingshot is amazing. Taking up as much space as a small refrigerator, the thing can run on cow poop and uses no filters, yet can turn any water source into potable water--cranking out up to 1,000 liters a day. And it can run for five years without even requiring any maintenance!
The Slingshot was more than a decade in the making, and with Coca-Cola's backing and global distribution network, is well-positioned to make a significant impact on global health through the EKOCENTER. And in addition to the Slingshot functionality, each container contains solar cells that can be used to power charging points or refrigeration for medicine. Following the South African launch, Coke plans to get the containers into 20 countries in need by 2015, getting safe drinking water into the mouths of millions.
We exploit a policy discontinuity at U.S. state borders to identify the effects of unemployment insurance policies on unemployment. Our estimates imply that most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility. In contrast to the existing recent literature that mainly focused on estimating the effects of benefit duration on job search and acceptance strategies of the unemployed -- the micro effect -- we focus on measuring the general equilibrium macro effect that operates primarily through the response of job creation to unemployment benefit extensions. We find that it is the latter effect that is very important quantitatively.Belmont Club argues that these entitlements will be difficult to reverse (though I suppose that's why they call them entitlements).
All Power Labs makes machines that use an ancient process called gasification to turn out not only carbon-neutral energy, but also a carbon-rich charcoal by-product that just happens to be a fertilizer so efficient that Tom Price, the company's director of strategic initiatives, calls it "plant crack."
Gasification, in which dense biomass smoldering -- but not combusting -- in a low-oxygen environment is converted to hydrogen gas, is nothing new. Price said that ancient cultures used it to enrich their soils, and during World War II, a million vehicles utilized the technology. But after the war, it more or less vanished from the planet, for reasons unknown. Until Mason needed a way to power his flamethrowers, that is.
All Power Labs has taken gasification and combined it with two of the Bay Area's most valuable commodities -- a rich maker culture and cutting-edge programming skills -- to produce what are called PowerPallets. Feed a bunch of walnut shells or wood chips into these $27,000 machines and you get fully clean energy at less than 10 cents a kilowatt hour, a fraction of what other green power sources can cost.
The argument for change given that current expectations of retirees amounts to what money manager Druckenmiller describes as "intergenerational theft" (WSJ):
When the former money manager visited Stanford University, the audience included older folks as well as students. Some of the oldsters questioned why many of his dire forecasts assume that federal tax collections will stay at their traditional 18.5% of GDP. They asked why taxes should not rise to fulfill the promises already made.
Mr. Druckenmiller's response: "Oh, so you've paid 18.5% for your 40 years and now you want the next generation of workers to pay 30% to finance your largess?" He added that if 18.5% was "so immoral, why don't you give back some of your ill-gotten gains of the last 40 years?"
He has a similar argument for those on the left who say entitlements can be fixed with an eventual increase in payroll taxes. "Oh, I see," he says. "So I get to pay a 12% payroll tax now until I'm 65 and then I don't pay. But the next generation—instead of me paying 15% or having my benefits slightly reduced—they're going to pay 17% in 2033. That's why we're waiting—so we can shift even more to the future than to now?"
Gone (will be) the days of cheap industrial coffee machines - meet the Briggo coffee kiosk and a threat to Starbucks (qz via Instapundit):
“What we’ve created is in essence a small food factory that absolutely replicates what a champion barista does,” says Nater. Briggo roasts its own beans—sourced by a pair of coffee supply veterans who between them spent a combined 40 years at Starbucks. “We have calibrated this machine to pull espresso shots to the same specification as an Illy or a Stumptown or an Intelligentsia. We’ve just done it without the human element.”
I wish I could say the youthful "idealism" were harmless and it's sad that often these are the same people who consider themselves to be "intellectuals" (Tabletmag):
So, they’re hungry for a theory that offers a thoroughgoing critique of the system, not just a way to ameliorate its excesses. “[F]or at least a generation now, not only the broad public but many radical themselves have felt uncertain that the left possessed a basic analysis of contemporary capitalism, let alone a program for its replacement,” Kunkel writes in the introduction to Utopia or Bust. Reaching back into the canon, he and others have found, at least, the former.
As for the latter? In the absence of a clear programmatic goal, never mind a party or organization, the new Marxism has a certain weightlessness. No one seems to have even a wisp of an answer to the perennial question: What is to be done? That very openness, though, gives new energy to the work of young thinkers and writers who feel themselves on yet another hinge of history. For intellectuals, this has always been a consolation of crisis: It frees one from the sort of existential lassitude Kunkel described in Indecision, making ideas feel urgent and important.
A great article on how Sugata Mitra's approach to "teaching" is gaining traction (Wired via HN):
Access to a world of infinite information has changed how we communicate, process information, and think. Decentralized systems have proven to be more productive and agile than rigid, top-down ones. Innovation, creativity, and independent thinking are increasingly crucial to the global economy.
And yet the dominant model of public education is still fundamentally rooted in the industrial revolution that spawned it, when workplaces valued punctuality, regularity, attention, and silence above all else. (In 1899, William T. Harris, the US commissioner of education, celebrated the fact that US schools had developed the “appearance of a machine,” one that teaches the student “to behave in an orderly manner, to stay in his own place, and not get in the way of others.”) We don’t openly profess those values nowadays, but our educational system—which routinely tests kids on their ability to recall information and demonstrate mastery of a narrow set of skills—doubles down on the view that students are material to be processed, programmed, and quality-tested. School administrators prepare curriculum standards and “pacing guides” that tell teachers what to teach each day. Legions of managers supervise everything that happens in the classroom; in 2010 only 50 percent of public school staff members in the US were teachers.
The results speak for themselves: Hundreds of thousands of kids drop out of public high school every year. Of those who do graduate from high school, almost a third are “not prepared academically for first-year college courses,” according to a 2013 report from the testing service ACT. The World Economic Forum ranks the US just 49th out of 148 developed and developing nations in quality of math and science instruction. “The fundamental basis of the system is fatally flawed,” says Linda Darling-Hammond, a professor of education at Stanford and founding director of the National Commission on Teaching and America’s Future. “In 1970 the top three skills required by the Fortune 500 were the three Rs: reading, writing, and arithmetic. In 1999 the top three skills in demand were teamwork, problem-solving, and interpersonal skills. We need schools that are developing these skills.”
While I'm not a fan of some of their more recent tactics that some might even call "evil", this is a good ad (via OhGizmo):
This is brilliant (Forbes):
Acton inspires this sort of loyalty because of its relentless focus on a single goal: educating aspiring entrepreneurs. The curriculum discards the traditional M.B.A. silos of finance, accounting and marketing to revolve around the entrepreneurial cycle of creating, growing and selling a business. Courses actually sport names like “Opportunity, ” “ Raising Money, ” “ Customers” and “Harvest,” and they are taught exclusively by highly successful entrepreneurs rather than by traditional academics (according to one oft-trumpeted fact, Acton professors have built businesses with $4.5 billion in assets “and counting”).
These volunteers–none takes a meaningful salary–are entirely devoted to teaching. The current roster of ten professors boasts an alphabet soup of advanced degrees from elite institutions (Harvard, Chicago, Texas M.B.A.s; a Stanford Ph.D.; Rice, Purdue M.S.s; a Columbia J.D.), but they publish no research, and Acton grants no tenure. Instead, borrowing a page from Jack Welch’s famous “rank-and-yank” system, the lowest–rated teacher (as judged by student evaluations) is asked not to return the following year. (About 8 % of the students also fail to complete their degree, a much higher percentage than most top M.B.A. programs).
There has been incredible progress in reducing extreme poverty but there's a lot of work that must still be done. A useful question to ask is to how and where that progress was achieved... (WSJ):
Roughly 721 million people were lifted out of extreme poverty — defined internationally as living on less than $1.25 a day — between 1981 and 2010, according to a new report by the World Bank released Thursday. The United Nations’ Millennium Development Goal of halving the share of people in extreme poverty between 1990 and 2015—an aim set at a summit in 2000—was reached in 2010, five years early.
But, as the World Bank points out, that still leaves roughly 1.2 billion people completely destitute, including about 400 million children. One of every three extremely poor people is a child under the age of 13. (To put all this in perspective, America’s own poverty line amounts to about $60 a day for a family of four — as the Economist noted in June. People around the world in “extreme poverty” tend to lack enough food to meet basic physical and mental needs.)
That's how Scott Adams, of Dilbert fame (and libertarian), argues he did it (WSJ). It's an interesting read, hopefully helpful for at least one cynical friend, and Scott Adams is a good writer... but dang... it means another book to add to the "to read" pile in a seemingly endless and growing list.
At the bottom of the page is the array of vegetable photos, which make up th data. Premise isn't just an inflation report, Soloff says again. It's map that tells you where prices are going up—“city by city, neighborhood by neighborhood, store by store”—to help governments and agencies track the tremor of inflation from its epicenter. Each vegetable observation comes with a price and a drop-pin on a map, to show Premise exactly where prices are moving and where they're not moving.Given how inefficient many local markets can be, off the top of my head I can think of a number of commercial applications - the least of it is tracking inflation and other economic data far more efficiently.
I've seen a number of memes on Facebook lately that go something along the lines of "we have the resources to eliminate poverty, so let's stop it." This is the unfortunate reality of absolute poverty - it's bad policies, corruption and governments (Time):
The North Korean regime under Kim Jong Un may not be able to feed its citizens, but it successfully feeds a booming market for luxury goods imports, a new South Korean government report shows. Citing the report on Monday, lawmaker Yoon Sang-hyun said that the imports of products like furs, pets and mid-sized sedans reached $645.8 million last year, compared to an average of around $300 million under the previous leader, Kim Jong Il.
The "foundation’s award is meant to go to an African leader who excels in office and steps down on schedule." Disappointing, though in context: "The Mo Ibrahim prize has been awarded three times in its seven year history — to Cape Verde President Pedro Verona Pires in 2011, Festus Mogae of Botswana in 2008, and Joaquim Chissano of Mozambique in 2007." (Time)
School choice in India and how parents choose private schools in Pakistan (via Chris Blattman). Both are fascinating reads particularly for their conclusions - from the study on the impact of vouchers:
On the other hand, private schools have a longer school day, a longer school year, smaller class sizes, lower teacher absence, higher teaching activity, and better school hygiene. After two and four years of the program, we find no difference between the test scores of lottery winners and losers on math and Telugu (native language). However, private schools spend significantly less instructional time on these subjects, and use the extra time to teach more English, Science, Social Studies, and Hindi. Averaged across all subjects, lottery winners score 0.13σ higher, and students who attend private schools score 0.23σ higher. We find no evidence of spillovers on public-school students who do not apply for the voucher, or on students who start out in private schools to begin with, suggesting that the program had no adverse effects on these groups. Finally, the mean cost per student in the private schools in our sample is less than a third of the cost in public schools. Our results suggest that private schools in this setting deliver (slightly) better test score gains than their public counterparts, and do so at substantially lower costs per student.
William Easterly calls it the arrogance of good intentions in his review of the Idealist, which chronicles Jeffrey Sachs and the Millenium Villages (Barron's). In these chronicles, in at least a few cases, it appears the people Sachs "helped" ended up worse off than where they began.
A look at a few of the innovations behind a few of the hottest startups (WSJ):
One persistent critique of the Andy Rooney model of innovation is that it is overly concerned with bourgeois annoyances. As a tech-obsessive who lives in Silicon Valley, most of the problems I want fixed can seem shallow: I'd like retail stores to offer same-day shipping to my house; I'd like restaurants to let me pay for meals from my phone; and I desperately want my phone to direct me to nearby open parking spots. In the same way, Nest, Uber, Square and many other hot start-ups do seem to be offering high-class solutions for rich-people's problems.
But that's myopic. Mr. Fadell points out that Nest's thermostat could save people up to hundreds of dollars a year in energy costs. By minimizing the scourge of false alarms, the Nest Protect could help save lives—so it isn't just a high-end bauble. And remember that over time, the price of digital innovations tends to fall. Today's $129 smoke alarm will cost half as much tomorrow, and then it will cost even less. At that point, it won't seem trivial that a bunch of rich start-up guys looked at the modern world and asked: Why is everything so unbearable?
It makes really fear for those who don't given this list of purported complaints to Travel Cook Vacations. (BlogDramedy)
The key difference between foot voting and ballot box voting is that foot voters don't have the same incentive to be rationally ignorant as ballot box voters do. To the contrary, they have strong incentives to seek out useful information. They also have much better incentives to objectively evaluate what they do learn. Unlike "political fans" who can afford to be "rationally irrational" about political information, foot voters know they will pay a real price if they do a poor job of evaluating the information they get.
Height-for-age among children is lower in India than in Sub-Saharan Africa. This presents a puzzle since India is richer than the average African country and fares better on most other development indicators including infant mortality. Using data from African and Indian Demographic and Health Surveys, we document three facts. First, among rstborns, Indians are actually taller than Africans; the Indian height disadvantage appears with the second child and increases with birth order. Second, investments in successive pregnancies and higher birth order children decline faster in India than Africa. Third, the India-Africa birth order gradient in child height appears to vary with sibling gender. These three facts suggest that parental preferences regarding higher birth order children, driven in part by cultural norms of eldest son preference, underlie much of India's child stunting.
Google's real innovation was to tunnel under the regulatory morass that inhibits physical broadband deployment. Why is Google introducing Google Fiber in Kansas City and not its native California? Google's own Milo Medin has explained repeatedly that regulatory brambles make California "prohibitively expensive."
Kansas City not only is more business friendly, it slashed the taxes and mandates that municipalities inflict on cable and telco operators. Most crucial was allowing Google selectively to extend its network into neighborhoods where customers would make it worth Google's while.
This is a regulatory revolution in a world where, to build out their cable systems, cable operators for decades have not only been dunned for economically unjustified franchise fees (read gratuitous taxes to plump up local government) but shakedowns for everything from youth centers to studios and equipment for government-run public access channels. In one case, a former Queens Borough president in New York City in the 1980s killed himself amid an investigation that would eventually include charges that a go-between had sought a million-dollar bribe from a local cable company.
Monday is the 100th anniversary of Henry Ford's assembly line for the Model T - an idea that hasn't gotten as much respect in recent times as it should (WSJ):
In fact, many of the supposed negative costs of cars are purely imaginary, while others are rapidly declining. Each year's crop of new cars is safer, more fuel-efficient and less polluting than before. Department of Energy data show that in 1970 cars used twice as much energy per passenger mile as did mass transit. Today, they are practically tied, and in a few years driving will use less energy and emit less pollution than public transit.
For more than 60 years, Americans have consistently spent around 9% of their personal incomes on driving, even though per-capita miles have tripled since 1950. According to data from the Bureau of Transportation Statistics—counting both user costs and subsidies—public transportation costs nearly four times as much per passenger mile as driving, while Amtrak costs well over twice as much.
The costs of driving are overwhelmed by the benefits of mass-produced automobiles, benefits largely ignored by the Obama administration and various anti-auto groups. Ford democratized mobility: Today, 91% of American households have at least one car, and 96% of commuters live in a household with at least one car. Curiously, Census Bureau statistics indicate that more than 20% of commuters who live in carless households still get to work by driving alone (apparently in borrowed cars).
A new set of guidelines by China National Tourism Administration, issued late last month ahead of the key Golden Week vacation period that kicked off on Oct. 1 National Day, aims to set such tourists right.
Among the admonitions contained in the 64-page illustrated handbook: Don’t sneeze in front of others. Ditto for picking noses and teeth.
While the booklet contains suggestions for Chinese when traveling at home, the main target is to improve the lamentably poor reputation of Chinese tourists abroad.
Yikes... this, according to state media (MSN). I don't think they realize how their attempts to monitor and clamp down on communications technology is inversely related it is to China's ability to innovate.
Tulipmania of the 1600s is often used to describe the excesses and dangers of markets, but as it turns out, recent studies suggest that the rise in tulip prices may not have been not only rational for market participants but driven by the unintended consequences of government regulations (Economist):
But on the whole, Mr Garber reckons that investors acted rationally. He suggests that the trend towards extremely high prices, followed by rapid declines, was typical for rare bulbs, due to their growing cycle. And according to Nicolaas Posthumus, a Dutch historian, serious tulip financiers generally did not participate in the speculative markets. Any “mania” was pretty self-contained, and was pushed forward by casual traders, drunk on jenever and moral hazard. Only in the month before the crash does Mr Garber find evidence of speculation from more serious traders.
Earl Thompson, formerly of UCLA, takes a different approach. He reckons that the market for tulips was an efficient response to changing financial regulation—in particular, the anticipated government conversion of futures contracts into options contracts. This ruse was dreamt up by government officials, who themselves were keen to make a quick buck from the tulip trade.
In plain English, investors who had bought the right to buy tulips in the future were no longer obliged to buy them. If the market price was not high enough for investors’ liking, they could pay a small fine and cancel the contract. The balance between risk and reward in the tulip market was skewed massively in investors’ favour. The inevitable result was a huge increase in tulip options prices (see below right). (The price of options collapsed when the government saw sense and cancelled the contracts.) Spot prices (the price that traders paid for immediate delivery of tulips) and futures prices (the prices that traders would be compelled to pay for future delivery of tulips) were not volatile. And any movement of the spot/futures price was determined by simple supply and demand—the fall-out from the Thirty Years’ War, one of the bloodiest in European history, was one important factor.
Thompson argued that popular interpretations of tulipmania have failed to distinguish between options and futures. Tulipmania was only a contractual artifact. There was no “mania” at all.
Their proposal is that everyone (yes, all individuals and all companies, those who first introduce a product onto the EU market) must be legally responsible for the entire supply chain of the ingredients in what they are selling. They seem not to get that no one at all knows how to make any particular product. They'd not even heard of I Pencil. No one person, no one company, knows how to make a pencil: or a smartphone, a computer, nor almost any piece of modern day gizmoidery. So how in heck can anyone track down the entire supply chain for doing this? Let alone agree to be legally responsible for the entirety of it?By way of reference, the SEC now estimates the cost of doing the paperwork to comply with the Dodd Frank regulations on conflict minerals, at $4 billion (ASI).
They are quite literally insisting that if I ship in a box of Chinese pencil sharpeners to sell on e-Bay (of the soon to be popular "Hello Rover!" brand) then I am legally responsible for ensuring that the steel making the blade was not made from conflict mineral tungsten. Which means tracking back through any number of Chinese companies not just to a steel mill but to the ferro-alloy producer before that and interrogating him as to where he got his ammonium paratungstate from. Which means going further back to the plant that made that from the original ore. And I've got to do that again with the screw that keeps the blade in place.
These people are of course mad. For the entire point and purpose of a market economy is that I cannot know all of that and it is the markets that ensure that I don't need to. I can just look at the prices to see where I'm going to get my gear from. I am entirely blind as to what happens two or four steps down the line from me: the point being that the system simply cannot work any other way. Full supply chain analysis, of the sort they are insisting that everyone should do, entirely negates that value of a market economy for us. We're back to being GOSPLAN and look how well that system worked.
Interesting post on how the development of electronic markets have differed in China (ChinaLawBlog):
At one point the moderator (a Chinese-American whose name I have forgotten) noted how “chaotic” Chinese websites look as compared to the clean-line minimalist approach of American websites. The participants all laughed, agreed, and then explained. ”Look at Chinese brick and mortar stores” one participant said. ”They are colorful and chaotic.” Another talked of how when he first set up his company’s Chinese website, he modeled it on a US one and made it clean and simple. The Chinese consumers complained. They wanted chaos.
One participant said that he set up his site to be the opposite of Ebay. Ebay was clean. This site was chaotic. Ebay made communicating with sellers difficult. This site put its chat feature central. Ebay charged for listings. This site made listings free. Ebay had slow delivery. This site delivered that day by moped. Ebay would show listings that were about to end first. This site would show the newest listings first.
All participants talked about how incredibly price sensitive Chinese consumers are. One talked of how “time isn’t money” for most Chinese. They also agreed on the importance of having a flagship physical store in China as an adjunct to online selling. They said China’s consumers want to be able to trust their sellers and a physical store helps achieve that trust.
How it starts (Mises):
Woodrow Wilson signed the Income Tax into law one hundred years ago today. As direct taxation of Americans was prohibited by the Constitution, a constitutional amendment was necessary before what would become the Revenue Act of 1913 could be legally imposed. The income tax, and the enabling amendment, were sold to the voters as necessary for a tax on rich people that would mean lower taxes and cheaper goods (due to lowered tariffs) for everyone else. Only one percent of the population were subject to the tax then, and the tax rate was one percent. The voters need not worry, they were told, because regular people would never ever pay the income tax.
Free markets aren't free of regulation. Good regulation matters. According to the WorldBank's Doing Business (Facebook page):
Data show that on average, a difference of 1 percentage point in regulatory quality as measured by Doing Business distance to frontier scores is associated with a difference of $250–500 million in annual FDI inflows.
Payday loans are indeed an expensive way of getting small amounts of money very quickly. But they're also the only way of getting small amounts of money quickly. It's that second which is the point that has to be kept in mind.
Think through the alternative possible sources of money. You're out of cash for whatever reason and you've got to feed yourself and the family tonight. You're out of luck with friends and family and who else is there? The government of course: you could try applying for some benefit or other. Perhaps you wouldn't have starved to death in the six weeks it will take them to process a claim. The banks won't even think of lending someone £50 to tide them over. And even if they would it costs more to arrange an overdraft with a bank that it does to try Wonga.
So, we now find that we've got entirely private sector and profit seeking companies setting up to meet a real social need. For there really are people who need to be able to feed the kids on money borrowed for a few days or a week or two. And we find that those who do indeed borrow money from these companies do so to feed the kids, not to blow it on a holiday.
Believing that it is in their national interest (TechFlash). It reminds me of McDonald's in France - which at least as of 2006 (NYT): "For all the attacks on the company, McDonald's operating profit in France last year was second only to that of McDonald's in the United States."
Institutions (or lack thereof), according to one study (the Economist) - though to also be fair, descriptions of Africa like this are unnecessarily crude (we-magazine). But the good news, is that this can be changed - and quickly (ASI):
We also have good evidence that it doesn't have to take 300 years. China in 1978 had GDP per capita around and about the same as England in 1600. 35 years later China's GDP is about what GB's was in 1950. It is possible to do this, for places to run through the industrial revolution at warp speed and make, by any rational historical or current world standard, people rich in just one generation.
blogging my (mis)adventures in China between and during bouts of jetlag peppered with random thoughts on investing, strategy and development