Does Inequality Matter?

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

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

According to a recent survey, a majority of Russians believes that acquiring wealth requires criminal activity and political connections. Only 20% believe that talent matters.

Sadly, it often seems reporters can't tell the difference either. Little wonder then that some politicians perpetually view taxing the rich as an inexhaustible source of money or simply a matter of "fairness".

Happy Mother's Day

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

Remembering a Generation

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

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

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

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

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

Why Brands Matter

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

Rapid Prototyping has been Growing Up

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

The Secret of Success?

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

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

Shiny and Noteworthy Link Dumping

Clearing out the tabs in Firefox:

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

Microfinance & a Shameless Plug

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

> As Muhammad Yunus says, the purpose of microcredit was to get rid of
> loan sharks not to create more of them
>
> who cares- its the number 1 agenda of the 2000 people who meet at
> http://www.inamicrocreditsummit.org/
>
> why do I care - well my main profession is communications - I have
> noticed there is more than one way to takeover a market - one way is
> to take over the company that is making the world a better place; the
> other main way is to pollute the market with so much noise from big
> powers (in this case traditional banks, and do what the market
> (microcredit) was ororiginally designed to do
>
> the way to counter this is to treat every pariah of microcredit as you
> would any other criminal or abuser of humanity

If you're interested, you can find my response here (I didn't realize until just now that the postings are available publicly). It amounts to a long summary of my views on the commercialization of microfinance are and the successful IPO of Compartamos. Please excuse the length and lack of editing.

Why Business can Triumph where Politics Fail

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

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

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

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

Shiny Link Dumping

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

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

Optimistic about Global Trade, but not that Optimistic

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

The central process driving this is not globalisation. It's the skills revolution. We’re moving into a more demanding cognitive age. In order to thrive, people are compelled to become better at absorbing, processing and combining information. This is happening in localized and globalised sectors, and it would be happening even if you tore up every free trade deal ever inked.

While they make some excellent points about both why protectionism empirically destroys wealth and jobs in the long run, I think they vastly underestimate the demagoguery of politicians who seek first to get elected and then they focus on staying elected. As someone who believes strongly in democracy, I also believe that poor choices are also made by the people - but progress is almost never unidirectional often taking a two steps forward one step back type approach as the pendulum in public opinion swings erratically. Brink Lindsey in Against the Dead Hand makes this point forcefully, that the forces of globalization while seen by some as inevitable because of the power of those ideas, it is hardly the case (e.g. Zimbabwe, Venezuela, Cuba, Myanmar, Iran, etc.). Name for instance a government that advocates free trade and liberalization without reservations. Sadly, there are none.

Should Everyone be an Entrepreneur?

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

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

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

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

Consumption was determined both by the choices consumers actively make - such as repairing rather than replacing items, using cold water to wash laundry, choosing green products rather than environmentally unfriendly ones - and choices that are controlled more by their circumstances - such as the climate they live in or the availability of green products or public transport.

Nevermind that the US has experienced a drop in greenhouse gases, the clear target of the study was consumption - so little wonder that poor countries have performed better. Is it really any surprise that poor people consume less? Well apparently to the media and a segment I just saw in CTV, apparently it is. The solution seems to be simple - let's make everyone poor. The problem of course, is that the people who are often making the prescriptions are making them for others and don't think the rules apply to themselves. Suddenly the fact that Earth Day just happens to fall on Lenin's (that would be Vlad's - not John's) birthday doesn't seem like so much of a coincidence after all.

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

Is Oil's Bubble about to Pop?

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


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

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

Myanmar's Devastation

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

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

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

View Larger Map


NASA, h/t Paul Kedrosky

Oil as the "Devil's Excrement"

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

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

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

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

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

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

New $100 million X-Prizes in Clean Energy

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

A Biofuels X-Prize has already been created to inspire breakthroughs in next generation sustainable liquid fuels. The biofuels prize competition will officially launch later this year with a prize of at least $10 million. Other categories that will be attacked in the next couple of years include solar power, water, sustainable housing and carbon capture. In total the energy and environment prizes are will give away up to $100 million.

The people who solve the little problem of clean sustainable energy have a multibillion dollar if not trillion dollar energy market beckoning... But hey, I guess a cool instant $10M+ wouldn't hurt (and if the money is going to be spent anyway, doing it this way is definitely better than wasting that it by betting on any one company over others).

The "Indiana Jones" of Economics

The Freakonomics Blog profiles Robert Jensen:

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