Rules are for Suckers?

David Dayton at Silk Road makes a few observations about China:

This isn’t a slam on China—this is just what really happens here. Rules are considered to be for people that are being watched. Rules are for people that don’t have the ability to get around them.

His observations very much mirror my experience. While often comical, this lackadaisical enforcement and attitude towards the law will be one of the key impediments to China's development. Selective enforcement quite easily fuels corruption. Further, without the rule of law, there is uncertainty for business making it a more hostile environment for investment and expansion by businesses. People start spending more resources currying political favor than they do creating value. This isn't only a threat however to China.

Back in the US, Greg Mankiw quotes a WSJ article:

"Like many others I made the mistake of buying what I believed was 'value,'" Mr. Gwin says, adding that investors who bought at the time believed the loans were worth more than their market price. "We did not contemplate having our first liens invalidated by a sitting president," he adds.

It should be of extreme to all that, as Mankiw notes, "politics may start to trump rule of law." Yesterday, we even saw US President Obama state that he would choose a replacement for Supreme Court Justice Souter that would be more "empathy and understanding" (AP). Times are a changing, but I'm afraid that they may not be for the better.

Before you start panicking about the Aporkalypse...

via Freakonomics:

You may be relieved to know that the last time a great swine flu epidemic was predicted it didn’t materialize. In 1976, the U.S. government predicted that 1 million Americans would die from a swine flu epidemic — but only one did.

What I figure is that it never hurts to have that emergency kit at home. Then again I was a Boy Scout - Always be prepared! (That might have been cub scouts - I forget, and it's too late to go look it up on the net).

PS Something I didn't know... from Instapundit: "Hand sanitizers work but they need to be at least 60% alcohol, and you need to use a substantial amount. “If your hands are dry within 10 or 15 seconds, according to the C.D.C. guidelines for health care workers, you haven’t used enough.” And washing (thoroughly) is still better if you can; sanitizers are for when you can’t."

The "War" Against Capitalism

Even the words "financial crisis" ignore the structural issues (created by regulations) prior to the financial markets collapsing. Politics and power being what they are, it should be no surprise that governments around the world are seeking to reclaim economic power they relinquished over the past several decades.

To characterize it as a "war" doesn't seem historically accurate. Governments have ceded economic power not willingly, but because of their sheer incompetence. In this, the "war" of ideas has been won. Free markets and economic liberty are the proven paths to greater wealth for everyone - rich and poor. While opponents of economic liberty might not be as candid, democratic societies choose between (1) free(er) markets - with greater inequality but wealth for all - rich and poor, or (2) building a society that's poor(er) - in some cases significantly more so, but more equal.

While their institutional memories may be short and conveniently so (not to mention the fact this crisis is affecting more regulated markets in many cases worse than the US in places like Europe), the rest of us should be asking whether or not it's a crisis of capitalism or a crisis of regulation (AEI):

In these circumstances, [government-backed Fannie Mae and Freddie Mac] hoped to curry favor with their supporters in Congress by showing that they could boost homeownership rates, especially in low income communities. The strategy worked; there was no new regulation of Fannie and Freddie until September 2008. But by then it was too late.

Accordingly, this is a story about how a well-intended government policy caused a substantial decline in the quality of US mortgages and ultimately the financial crisis we are living with today.

Demagogues have created a strawman in "Wall Street" - helped in no small part by the excesses of Wall Street and Republican administrations that followed Reagan who greatly expanded government. Proponents for bigger government are claiming that it needs to get even bigger. Thankfully, the response of the American public has not been acquiescence. Nearly half a million people turned out (people who don't normally protest) for almost impromptu, disorganized but apparently massive "tea party" protests on April 15th. Arthur Brooks, from AEI, also sees hope (WSJ):

This is an exhilarating time for proponents of freedom and individual opportunity. The last several years have brought malaise, in which the "conservative" politicians in power paid little more than lip service to free enterprise. Today, as in the late 1970s, we have an administration, Congress and media-academic complex openly working to change American culture in ways that most mainstream Americans will not like. Like the Carter era, this adversity offers the first opportunity in years for true cultural renewal.

For now, the opponents of free markets may have won a few battles so what is old is apparently new again. A delightful little subnote as some in the world celebrate "May 1" (WSJ):

It may shock these self-declared antifascists to learn that it was Hitler who introduced the first of May as a public holiday in Germany. What started as a movement to advance workers' rights was quickly usurped by both the Nazis and the Soviet Union.

Of course, what I've never figured out is why those like Hitler are considered right wing at all. They weren't. They were socialists.

Aid, Subsidies & Wedding Gowns

via Dambisa Moyo's Twitter and William Easterly's Aid Watch - mosquito nets distributed free are being used to make wedding gowns and fishing nets (Kenya's Daily Nation):

Mosquito net manufactures are teaming up with the provincial administration and village elders in several parts of Kenya in an effort to apprehend and prosecute people who use the products for purposes other than covering beds.

According to Dr Elizabeth Juma, who is the head of malaria control under the Ministry of Public Health and Sanitation, there has been evidence of people turning the nets into fishing gear especially in Nyanza Province. Now a different group has discovered another lucrative business venture, and are using the nets to make wedding dresses.

While Easterly makes the argument that education would solve the issue of misuse - unfortunately amongst charities and aid organizations the "lack of education" issue often translates into "we need more money to teach people". I think the more fundamental issue is that people do not recognize that they have any real value (which also suggests that this form of distribution is also anything but sustainable). This is further reinforced by the fact that these nets are underpriced or given away for free.

The alternative? Sell the nets give distributors an incentive to educate their customers. The poor will and do pay for goods that they see as having real value.

The Rich Get Poorer and How they Deal according to Psychologists

Oh to have the problems of (some) others (peHUB):

Author and investor coach Richard Peterson meanwhile tells the AP, “I have a client whose net worth was about $400 million and now it’s about $200 million and you would think he’s about to be put out on the street by the way he reacts.”

Adds Peterson: “So you have to fly first class, what’s the big deal? [But this person] is really is going through devastation.”

Quote of the Day

Heh. While I'm fairly agnostic on the subject of whether or not it's happening, I am of the view that it would be better for us to deal with it rather than attempt to prevent it which seems an extraordinarily costly fool's errand, this is James Taranto's comment on a German polar expedition that found ice over the North Pole is thicker than anticipated (WSJ's BestoftheWeb):

Is it possible that global warming is neither a catastrophe waiting to happen nor a fraud but merely the result of confusion induced by the metric system?

Food for the Coming "Aporkalypse"

Though I'd have to wonder - with canned goods like this (Cakeheadlovesevil via Trendhunter) would you want to survive the coming "Aporkalypse" (Instapundit)?

Has Washington Replaced NYC as the Power Center for Startups?

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:

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.

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.

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.

On a Positive Note: Another Reminder that it's Never Been Easier to Start a Business

"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.

More Things to Worry About

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.

"The Multi-Billion Dollar Relief Industry"

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:

Peak Oil Peaks

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:

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).

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.

Should Governments subsidize Research & Development?

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.

Quote of the Day

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.

Even the IMF/World Bank Responds to Incentives

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.

Tit for Tat: Another Reason Protectionism Doesn't Work

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.

Reminder that Unions prioritize Teachers over Students

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.

China: "Another Nation with Structural Problems"

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.

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.

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).

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.

China Visas more difficult to get?

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).

Leaping over the Great Firewall

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.

Overheard: 'Why we have this Financial Crisis'

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.

"Conservative" Fears

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.

Capitalism vs Free Markets

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:

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.

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.

Expert "refutes" Dead Aid but can't do Math

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.

'We're the Government and We're Here to Help'

Jennifer Rubin on the fickleness of politicians (and their pollsters) - via Instapundit:

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.

Bernie Marcus, Founder of Home Depot: on "Stifling Entrepreneurs"

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):

How Anticipated Spending & Regulation Kills Growth

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?

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.

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?"

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).

Earth Day Notes

Somewhat late in the day and not even Lenin's birthday Earth Day anymore where I am, but nevertheless... Jim Glass (via Chronicle of the Conspiracy):

1965 to 2005:

* 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)...

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.

Lies, Damn Lies and CTV

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.

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.

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.

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!

How to Kill Innovation

Take away the incentive to innovate. Some believe that taxes may need to double in the US (TaxProf).

Because you don't want your kid to grow up to be a pansy...

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:

Schools, Choice and Unions

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:

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.

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?

There may actually be such a thing as Too Much Information...

Introducing the RSS Feed Toilet (Apartment Therapy):

the first toilet that sends RSS feeds of the sensitive "information" from each of your bathroom visits.

Technology and that Libertarian Moment Thing

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.

Developing Markets: Change Comes from Within

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.

Developing Markets

Apt advice for those who seek to revive the economy or develop new ones: let loose the entrepreneurs (FT) from William Easterly's book review of Alan Beattie's False Economy (Amazon, via AntiDismal):

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.

Not Letting the Man Keep them Down

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.

Productivity Bits: Juice up your Marketing, Startup Blogs, and be a More Effective Manager

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: Not Ready to Lead

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.

Top Talent Leaving Banks "Helped" by Government

An update on the Madness. As Instapundit says, "Surprise":

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.

Eat McDonald's, Lose 70 lbs

via Instapundit, eat your heart out Morgan Spurlock (MSN, or perhaps maybe not (Reason)).

Surviving Bad Economic Policy

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).

The 2009 Index of Economic Freedom is Out

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.

Immigration Policy as Stimulus

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 startup founders." It's better than costing "nothing" these entrepreneurs would come to the US to spend money and also potentially bring with them additional investors. This is obviously not an idea that is specific to the US - I'd love to see Canada make it even easier for startup founders.

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, "Skilled persons would generally be more willing to pay high entrance fees since they would increase their earnings more than unskilled immigrants would. More ambitious and hard working individuals would also be more eager to pay since the U.S. provides better opportunities than most other countries for these types."

Unfortunately the idea of making it easier for immigrants to come into any country in the midst of a recession is counterintuitive and often politically unfeasible. Though with countries like the US and Canada being countries made up of immigrants to begin with, one might think that it would be easier here.

The Great Reboot

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"]

When there Aren't enough "Rich" People to Tax

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.

Protectionism Makes Things Worse

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.

The Real Threat to China's Development

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."

The Underground Economy and Developing Markets

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.

Morality and Capitalism

The two ideas are not as incompatible as some might have us believe (Ken Blackwell @ Townhall)

Intrepid Blogging: Mmmm Emu Claw

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:

Wanting to Shop at Walgreens

This is a pretty cool story, enough to warm the cockles of my capitalist heart (ChainStoreAge). But as I've always believed, it's a lot more fun to do good and to make money at the same time.

An Update on the Automotive X-Prize

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.

Making Taxes Less Fair

The US Congressional Budget Office (CBO), via TaxProf: the "top 1% earned 19% of income, paid 28% of all federal taxes, in 2006". Apparently, for some people, this is "progressive".

Does the Bladder Rule of Finance apply to Governments as well?

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).

A Reminder that Stimulus doesn't have to come from Spending Money

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?

"Freedom of speech is an American concept, so I don’t give it any value"

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.

More on the Madness...

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?

The Man isn't only keeping Africa Down

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?"

Notable Quote: Stability and Capitalism

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.

Hah - The DMV Autorepair Center

via Instapundit - ReasonTV:

"Creating" Jobs

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?

Irony: US Equal Employment Opportunity Commission violates Fair Labor Act

via Instapundit, at OpenMarket.org:

The Equal Employment Opportunity Commission, responsible for ensuring that the nation’s workers are treated fairly, has itself willfully violated the Fair Labor Standards Act on a nationwide basis with its own employees, an arbitrator has ruled. . . . The EEOC has a much worse record of labor and civil-rights violations than most corporations and agencies with a similar-size workforce.

As Reynolds notes - "Fair employment practices, like taxes, are for the little people." On one hand, it's sort of frightening that Americans have a leadership that believes in imposing greater amounts of regulation and taxes but don't believe those same regulations and taxes apply to themselves. Arnold Kling sees an additional quite troubling pattern (also via Instapundit):

For quite a while, but especially over the last nine months, the best way to predict developments in politics and finance has been to ask: what will do the most to increase the concentration of power? Every headline, from the Geithner regulatory plan to the proposed cap on the charitable deduction, to the resignation of the General Motors CEO, should be viewed in that light.

Because Bono doesn't recognize that "Aid to the Poor is not just Celebrity Fund-Raising"

Bono's ONE (David Grundy) organization attacks and outright lies (William Easterly) about Dambisa Moyo's book Dead Aid (Amazon). This is of course especially ironic considering Bono explicitly avoids paying the very taxes (Slate) he believes should be spent on his pet causes.

Perhaps this is a case the Bono's organization doth protest too much and the reason they resist calls for accountability is that they can't live up to the scrutiny.

Predictions of how this recession will change China

A number of interesting points at ChinaSolved and what China will look like after the recession:

A redefined top-end.
Fewer big-spending Westerners, tighter MNC expense budgets and a general de-rating of Western standards will change the way China defines luxury and status. High End Asian has existed for a while, but it’s always been in the shadow of European standards. As that shifts, international managers are going to have to make sure that their offering stays competitive.

A more middle-class middle-class China
I recently had lunch with Bill Dodson, publisher of This Is China - and he made the distinction between ‘middle-class Chinese’ and ‘entrepreneurial Chinese’. The folks that westerners call ‘middle-class’, most Chinese call ‘rich’. The real Chinese middle-class is huge, value-oriented and very local. The entrepreneurs and returnees, whom we have all been CALLING the middle class, were very international, status-conscious and tended to have jobs that linked them to China’s ‘external economy’. The real middle is on the rise.

More opaque B2B transactions.
As western capitalism gets de-rated in China, so will the annoying trappings of western commerce — like open bidding for contracts, RFPs and transparent procurement. Look for a re-guanxified buying process – even in MNCs.

Larger, more assertive SOE & State actors
The stimulus package shows the direction of China. Private commerce is going to finally and definitively be given a back seat to the SOE/State actors in China business. As some of us have always suspected – market-oriented commerce was just a phase in China. Now that there are plenty of well trained, commercially sophisticated managers in the system, we’ll see China rapidly back away from ‘market socialism’ and towards ‘Statist capitalism’.

Laxer QC, compliance and regulation.
China will be throwing the baby out with the bathwater, and many hard-won gains in the areas of quality control, consumer protection and anti-graft policies are going to fall by the wayside.

I'm not alone in thinking that China's domestic economy will bear the brunt of the global downturn - but I'm also not sure ChinaSolved's prediction isn't wrong that the US will not have emerged by the end of 2010. If the lessons China learns are the above, this will ultimately handicap their future growth as it will reduce the efficiency of their economy. It will also suggest China's apparatchiks have been successful at reclaiming some of the power they have lost.

Madness

So the government encourages, businesses to take money even when they don't necessarily need it in the guise that because everyone's getting it, it'll hide the weaker players (ABC News). Then they change the rules handicapping anyone stupid enough to have taken the money (Washington Post). But when those same businesses say they want to give the money back?

The US government says no (CNN). While the media hasn't exactly been reporting the multitude of protests from unlikely places - ie people who actually contribute in some meaningful way to society (IBD via Instapundit), much of the electorate is clearly unhappy with the bailout packages (not to mention the treat of higher taxes and bigger government well into the future). So why won't the government take the money back? So much for the silly people who say that capitalists deceive to seize power during crises (Reason). They must have had "capitalists" confused with "government".

When the Cost of Publishing is no Longer a Barrier: Print on Demand

Services like this make the traditional gatekeepers of information increasingly irrelevant. What matters now more than ever are the ideas/content rather than distribution - from Wil Wheaton (via Instapundit):

As creators, the barriers between us and our audience are falling faster and more easily than ever before, the time between creation and release is shrinking, and thanks to the Internet we can reach more people with less effort than we could as recently as a decade ago.

This is excellent news and it furthers the irony that capitalism may soon no longer require capital. It also does not bode well for the mainstream media who have been suffering through a depression for quite some time (ReadWriteWeb). It's going to get worse.

World Bank: Give us Money, Just Don't Make Us Accountable

From the WSJ:

World Bank President Robert Zoellick has recently taken to calling on rich countries to pony up 0.7% of their respective stimulus packages, including $6 billion from the United States, for a bank "vulnerability fund" for the world's poorer countries. It's all part of what he calls, echoing President Obama, "the Age of Responsibility."

Apparently "responsibility" doesn't apply to the World Bank:

The bank has publicly stated that the debarments mean only that these companies will be prevented "from bidding on future World Bank-financed contracts." Does that mean that the companies continue to get money from the bank for the contracts that were signed before the debarments? Interesting question. Our sources say they do, and the bank's sanctions procedures are ambiguous on the point. We contacted the debarred companies that still have contracts with the bank, but they either hung up on us or never returned our calls.

As for the bank, it has declined to respond to our multiple queries. A February 4 bank press release promised to make a redacted report of its Philippines investigation available on its Web site "in the coming weeks," but so far we haven't seen it.

We suppose the bank might say that it owed these companies "due process" before cutting them off. But that doesn't mean the bank had to do more than a half-billion dollars of business with companies it suspected of corruption. If this is the "responsibility" that the bank proposes to exercise over the new taxpayer billions Mr. Zoellick is requesting, his donors should look for worthier recipients.

Things that go Bump in the Night

Just as one threat was being shot down as being bogus... Sometimes there really are monsters under the bed. First - if you were ever worried about the Bird Flu or SARS (I still am somewhat and I bought two boxes of N95 masks (Google) for my family), Bird Flu could be nothing compared to some of the other viruses lurking out there (think HIV). Fortunately at least we have people hunting for these things. From TED (via BoingBoing):

The second is the potential of a solar space storm - here's how the New Scientist - which isn't exactly a fringe magazine, paints the worst case scenario:

IT IS midnight on 22 September 2012 and the skies above Manhattan are filled with a flickering curtain of colourful light. Few New Yorkers have seen the aurora this far south but their fascination is short-lived. Within a few seconds, electric bulbs dim and flicker, then become unusually bright for a fleeting moment. Then all the lights in the state go out. Within 90 seconds, the entire eastern half of the US is without power.

A year later and millions of Americans are dead and the nation's infrastructure lies in tatters. The World Bank declares America a developing nation. Europe, Scandinavia, China and Japan are also struggling to recover from the same fateful event - a violent storm, 150 million kilometres away on the surface of the sun.

It's not like this kind of thing hasn't happened before - it has! Just not in major population zones:

The incursion of the plasma into our atmosphere causes rapid changes in the configuration of Earth's magnetic field which, in turn, induce currents in the long wires of the power grids. The grids were not built to handle this sort of direct current electricity. The greatest danger is at the step-up and step-down transformers used to convert power from its transport voltage to domestically useful voltage. The increased DC current creates strong magnetic fields that saturate a transformer's magnetic core. The result is runaway current in the transformer's copper wiring, which rapidly heats up and melts. This is exactly what happened in the Canadian province of Quebec in March 1989, and six million people spent 9 hours without electricity. But things could get much, much worse than that.

(via China Confidential, more here and here)

The big issue is how reliant we are on an outdated electrical grid and an excellent case for decentralizing the grid. I figure though if we can get through the next 10 years without a disaster, some of the amazing technical innovations in energy will provide us with sufficient alternatives but until then... I'm not sure that relying on government is ever ideal.

Something to think about tonight when I'm sure some of you will turn off your lights in observance of "Earth Hour". Me? I think I'll keep the lights on to celebrate human civilization and hope those lights continue burning brightly.

Update: And as if we didn't already have enough things to worry about (RTE News): "A highly radioactive lead ball has gone missing in China, prompting authorities to launch an urgent search."

The "Collapse of Capitalism"?

Not according to Phillip Greenspun who makes the argument that our systems of governance and regulations encouraged excess risk at the expense of shareholders:

Given our country’s rules regarding public company governance and the fact that Wall Street is dominated by public companies, is there a realistic hope for stability? What would any of us do if we had the chance to make $100 million per year by taking a 10 percent risk that our employer and its shareholders would be wiped out?

A free market in which participants risked their own money might work quite well, but that’s not what we tried. We had a market in which participants risked other peoples’ money and pocketed much of the upside but suffered no downside risk, all made possible by the government’s regulating away public company shareholder power.

Freedom, Greed and Self Interest

Along with the pols out in force to decry the "greed" of Wall Street (nevermind their central role in the crisis), all sorts of people are coming out of the woodwork to capitalize on the resentment people have over the financial crisis making claims that capitalism has to be made "moral". Of course most of these people never understood capitalism (or economics for that matter) to begin with.

The blog at ASI differentiates between "greed" and "self interest": "even without their kind intervention, capitalism is very much more moral than most of the snotrags in Parliament, who seem to spend most of the time working out how to fiddle their expenses [...] People say that capitalism is based on greed, which must be restrained. No it isn't. It's built on self-interest – which is perfectly natural to us all, and beneficial to our community. Markets are about free people, voluntarily exchanging cash for goods or services."

A rejoinder by William Easterly makes the "moral" case for personal freedoms: "Individual liberty is a precise concept and a powerful ideal. It has an enormous moral appeal – “all men are created equal, and are endowed by their creator with certain inalienable rights, that among these are life, liberty, and the pursuit of happiness.” Jefferson wrote these words even though there was only liberty for propertied white males at the time in the US, but these words would serve as a beacon through American history, which Lincoln would invoke to motivate the Emancipation Proclamation, and which Martin Luther King would invoke to end Jim Crow and get de-facto voting rights for blacks."

The markets reflect who we are as individuals and as a society. So when we're told that capitalism needs to be more "moral", just remember it's none-too-subtle code that someone wants to impose their morality on us.

Mythbusters uses explosives to answer question: Can you knock someone's socks off?

A complete non-sequiter. The few times I've caught it on, I've enjoyed Discovery Channel's Mythbusters (imdb). In what can only be described as slightly insane, in order to answer the question of whether or not it's possible to knock someone's socks off (CrunchGear), "the Mythbusters crew ignited 500 pounds of ammonium nitrate about a mile outside of Esparto that resulted in an explosion that “was a lot bigger than they expected.”" With windows shattered as far as a mile away, my guess is that the answer is yes.

China Not Serious about Corruption

... And it's going to hurt them. According to the AsiaTimes, they know it's a problem that could prove critical to the survival of the party:

Fully aware that fighting graft is a matter of life and death for the party and its rule, Chinese President Hu Jintao has repeatedly pledged to step up crackdowns. In recent years, more anti-graft bodies have been set up and more channels opened for the public to report suspected corruption cases. Fearful that the global financial crisis may spark public discontent, which could threaten social stability, at the NPC session, Premier Wen Jiabao, Cao and the country's top judge all vowed to make new efforts, including enhancing public supervision, to fight corruption.

But if someone should have the audacity to squeal on graft?

"Nine of the top 10 anti-graft fighters in the past three decades have faced retaliation," He Zengke, director of the Institute of Contemporary Marxism under the CCP's Central Compilation and Translation Bureau, told China Youth Daily. He did not give details on who the top 10 anti-graft fighters were, or what retribution had been meted out to them, but there are plenty of cases of informants being killed, jailed or attacked after tipping off the authorities.

Government officials have a serious image problem both in encouraging offenses to be reported, creating the incentives to do so but also protecting whistleblowers. Sustained development requires rule of law and property rights that protect everyone. While China has clearly come a long ways - and its vibrant and burgeoning entrepreneurial class is evidence of this, it has a long ways to go.

Productivity Bits: Incentives in a Miserable Economy, Xobni comes out of Beta and Blogs for Franchisees

My way of justifying my time and yours in reading my rants, on this blog:

• Paul Hebert from Incentive Intelligence makes the case that incentive programs should change with the market - that the focus should be more on recognition and less on incentives. Noteworthy quote: "Recognition is an act - not an item." This may be the "optimum time to reinforce behavior that contribute to positive attitude, helping other departments, reassuring other employees and taking care of existing customers."
  
  
• Some thoughts from Inc.com on cutting prices in this environment. One cautionary note: when it comes to pricing, the best lesson I remember is the strategy of companies like Four Seasons and Abercrombie and Fitch who try to avoid discounts whereever possible - when the economy does rebound, they're the ones who benefit most from higher margins but also a clearer recognition by customers of their products/services as luxury items. Discounts can also cheapen the value customers see in a product.
  
  
• My only and favorite Outlook add-in is coming out of beta (and got additional funding). Xobni helps you to rethink the way you work with email (Cnet) by mapping out the relationships of the people who pass through your inbox. I reinstalled it last night and the recent updates like the re-index feature are most useful.
  
  
• Richard Gibson from the WSJ notes 6 blogs/web resources for franchisees: Franchise-Chat, The Franchise Pundit, Rush on Business, Unhappy Franchisee, and WikidFranchise. Given that building a business can be an intensely lonely endeavour, joining a community of peers who can understand what you're going through is highly recommended.