Why Paul Ehrlich's Unsustainable Bet Still Matters

John P Holdren, the lesser known participant in the Julian Simon-Paul Ehrlich bet, has been appointed Science Advisor to Obama's Administration. As John Tierney points out on what the bet matters (NYT):

[The bet] was about a fundamental view of how adaptable and innovative humans are, and whether a rich modern society is “sustainable.” Dr. Holdren and his collaborator, Paul Ehrlich, were the pessimists.

The world's problems will be dealt with in two ways:

1. With a raft of regulations to restrain behaviour, by so doing, doubting the the ability of humanity to adapt and assuming humanity to be limited to the imaginations of regulators or,
   
2. Ensuring incentives exist that allow society to adapt and innovate as they have since the dawn of time.
   

Dr. Holdren's past choices and published views leave little doubt of how he views the world. Despite Obama's his otherwise moderate appointments in key areas of Defense and Treasury thus far, appointments like these make me think that Holman Jenkins' predictions will hold true: Get ready for a Lost Decade (WSJ).

Best Description I've Seen for What's Happening in the Capital Markets

From Rich Karlgaard at Forbes:

Capital is on strike now. It is one of the causes of the crash of 2008 and the fourth-quarter mini-depression. [...] It goes on strike when it is attacked or when the rules are unclear.

The solution? Make it more worthwhile to invest money by cutting capital gains. Heritage Institute excerpts from Clive Crook in the FT, Michael Malone in the WSJ and Frederick Smith from FedEx writing in the FT:

• From Clive Crook:
  

  It also requires an investment of political capital and a willingness to advocate open domestic markets as the best way to secure long-term US prosperity. The new president has plenty of capital, and if anybody can persuade the public of the virtues of liberal trade, it is Mr Obama. But this is a message that much of the country and most of his political allies are in no mood to hear.

• From Michael Malone:
  

  From the beginning of this decade, the process of new company creation has been under assault by legislators and regulators [...] The new laws and regulations have neither prevented frauds nor instituted fairness. But they have managed to kill the creation of new public companies in the U.S., cripple the venture capital business, and damage entrepreneurship. [...] If Mr. Obama is serious about getting the country out of this recession using something more than public make-work projects, he should restore the integrity of the new company creation cycle: rewrite full disclosure, throw out options expensing, make compliance with Sarbanes-Oxley rules voluntary, and if he won't cut it, then at least leave the capital gains tax rate alone.

• From Frederick Smith:
  

  Our tax system is particularly onerous for asset-intensive, industrial businesses such as manufacturers and transport companies. For example, Caterpillar, Boeing, FedEx, commercial airlines and carmakers produce goods and services and provide jobs for millions. But to maintain or increase jobs and compete globally, these companies must be able earn an acceptable return on capital expenditure.

  How can we make US companies more competitive and increase their ability to offer good jobs? Two things: accelerate the expensing of capital investment; and reduce the corporate income tax rate.

Of course, not to be outdone, the New York Times has (to put it charitably), misquoted an academic on why capital gains should be taxed (Donald Luskin). Perhaps sadly, the coming administration appears to have little interest in ensuring that dissenting views on a massive spending package for stimulus are heard (Greg Mankiw) though the empirical data suggests that in the very least tax cuts should be considered (Marginal Revolution). In the very least, a more considered approach rather than what appears (at least from a distance) to be absolute panic spending hundreds of billions of dollars in hopes that the carnage will stop, would appear to be too much to hope for. I just hope Americans are prepared for the risk of massive inflation and higher taxes in years to come.

What China Fears Most

The reason democracies are considered one of the most stable forms of government is that people have an outlet for discontent beyond a violent overthrow. As the economy was rising people in China ignored the technocrats and their suspect gains because everyone was getting wealthier (or at least the opportunities were abundant to do so). With the economy collapsing, people won't nearly be as forgiving.

While there has always been sporadic labour unrest at any number of private factories, strikes have become increasingly frequent and it would appear the legions of cabbies going on strike is just the beginning (WSJ). My guess is that the government will become increasingly desperate to respond - and if their fiscal stimulus proves to be insufficient (given their inability to change the structure of their economy fast enough), they will increasingly rely on scapegoating foreigners (China Law Blog) and seek populist measures (too bad they can't blame Canada (Metacafe)). More inconveniently, I worry they'll blame Japan and Taiwan (and unlike South Park, they may actually mean it). It's just beginning.

Fear is indeed the Mind Killer...

Not to mention a killer of businesses. Good albeit somewhat rambling post on TechCrunch with advice on how to prepare both yourself and your business to grow. Also, on a somewhat related note, I like Seth Godin's blog posts for his ability to distill ideas into action - a case in point is his latest post, which for some, works out into being an effective kick in the pants to do what you already know should be done to move yourself and/your business forward.

Be Prepared for Long Chinese New Year Factory Closures

Well it would seem that the economic slowdown has finally hit our vendors. What had turned from a steady flow of orders has turned into a trickle and threatens to turn into a full stop.

I've just been advised that a number of our vendors are going to begin the CNY shut down up to 2 weeks early and possibly not reopen until March 1st - and this of course doesn't include the estimated thousands of factories that some believe won't even reopen. While some recommend checking your factories now for closure dates (Quality Wars), I suggest checking weekly until they do as these things are sometimes fluid and often dependent on the order book (having a few mobile phone numbers don't hurt either). Sentiment appears to be quickly shifting to the negative and I'm sure doesn't help that China's only monoline credit insurer Sinosure has also been downgrading US credit risks (via Paul Kedrosky, along with European ones, and everywhere else it would seem).

"Everything's Amazing, Nobody's Happy"

For some of you who get stuck during what the Weather Channel is calling "snowmageddon" this year (and incidentally, anyone who talks about their concern over global warming during this time should rightfully be smacked), here's a pretty funny vid from Louis CK on Conan O'Brien (via CrunchGear). I think while impatience drives progress, it is pretty amazing to sit back and realize how far we've come:

For those Charitably Inclined

I'm not against charity - far from it, I think we should all give freely and hopefully abundantly. However, after a certain level of experience most people come to recognize that not all charities are created equal and further, some charities end up doing more harm towards the people they claim they help. Greg Mankiw has a post where he passes on worthy (US) recommendations from a colleague, a development economist (read the whole thing):

• Tam Tam Africa (distributing free mosquito nets)
• Deworm the World and Innovations for Poverty Action (deworming kids can end up costing as little as $0.25 per kid)

To which I'd add three:

• TheWaterSchool.org (ensuring sustainable access to clean water and run by two good friends I first met in Nairobi, Kenya)
• Acumen Fund ("building transformative businesses to solve the problems of poverty" - they have an excellent blog I follow here)
• and Accion (supporting microfinance - from what I've seen this organization is the least of all evils and pushes for sustainability more than the others)

And as another reminder, though I think we want to believe that we're doing good in charitable giving, it's probably not a bad thing to think of your charitable giving like a financial portfolio and target your giving appropriately. For those who don't agree with my views or picks, good places to investigate whether your charity is a good steward of its mission are here:

• Guidestar, BBB's Give.org, and Charity Navigator. For Canadian charities, you can access tax returns at Revenue Canada.
  

Gao Xiqing, CIC and Scary "Derivatives"

There's a soft interview in The Atlantic Monthly that provides a (nearly) unfiltered soapbox for Gao Xiqing, the president of the $200b China Investment Corporation. It's disappointing, given Fallows' unique position that he doesn't seem to ask Xiqing about the backroom rivalry between CIC and China's SAFE Fund but instead focuses on what's become fairly standard and elitist foreign schadenfreude over the collapse of US financial markets.

Xiqing appears to put the blame squarely on American profligacy - particularly in his criticism of financial innovation to the point it harkens the days of communist rhetoric over 'western decadence'. Xiqing however is hardly alone. Even Warren Buffett in 2003 began calling complex financial derivatives "weapons of mass financial destruction" (BBC). After regulators stepped in and formed a central clearinghouse following the collapse of Lehman Brothers, it has become quickly apparent this view is wrong.

The reality is that despite the initial hysteria over credit default swaps, it turns out that the exposure ended up being limited. According to Bank of America, because of compound counting (double counting, multi-fold), the real exposure to the entire collapse of CDS is really only around 3.2 trillion dolllars (and in FT Alphaville's terms, this would require absolute and total financial armageddon far worse than the Great Depression and require practically every major company with any debt to go bankrupt). While 3.2 trillion is not a small number by any means, it's hardly the 576 trillion-1.14 Quadrilliion the Bank of International Settlements (BIS) had ridiculously and previously estimated (Jutia Group). Indeed, it makes them more "weapons of mass innocuousness" (Over the Counter).

Regulators appear to be positioning themselves to respond to the previously held and hysterical view - my guess is because they for some reason believe the markets are truly beyond reason and it was in theory a credible disaster and in response to public pressure (or more cynically, out of ideological convenience). We fear what we don't understand and in these remarkable times, if there's anything that journalists have proven, it is that they seem to understand very little. As Paul Kedrosky points out, even common publicly traded shares fit the definition of the "scary derivatives" that are supposed to keep us awake at night. It may be useful to remember, as regulators rush to protect the markets from themselves, that innovation is the golden goose from which the US draws its economic power.

Xiqing points out that there are many betting against the US, and if regulators move to crowd out private investment and make it costlier to raise and find capital, regulators will make those like Xiqing right.

Development Bytes

If you missed these tidbits in the news, I'd recommend having a read:

• A malaria vaccine shows significant promise (WSJ). Developed by GlaxoSmithKline in partnership with the Bill and Melinda Foundation, it deals with a disease that kills up to a million kids in Africa a year not to mention an incredibly obstacle to productivity for everyone else. This in my mind is fantastic news though the sad thing is that many of those annual deaths could have been prevented through DDT that has been blocked for decades by overzealous environmentalists (NPR) who do not view human life to be paramount.
  
  
• via Instapundit: Iain Murray (National Review) - "Not only would successful completion of the Doha round bring great benefit to the US, it would be the single best thing Obama could do for international development."
  
  
• An inspiring story on efforts to build a baby incubator for the developing world for $1k USD (3% of cost of top of the line incubators currently) using locally available parts (NYT via Core77). While I suspect regulation plays a role, my question would be if these things are so cheap and so great, why can't we use them directly in the developed world?

Pictures - Year In Review

A compendium of pretty amazing pictures from Boston.com' s Big Picture (via Paul Kedrosky) - Divided into 3 sets:

• First Set, Second Set, Third Set
  

Why Chinese People Save?

Apparently it's cuz they're scared and don't have reliable alternatives (NYT Economix). I think it explains only part of it - as the Economist points out that this isn't consistent with data after Chinese people emigrate to the West, but it helps to think in first principle terms - that is, all finance is directly related - insurance, savings, lending, investing.

It's a singular continuum - having a wide breadth of finance products available means that you manage risk appropriate to you and your situation. Beyond the things that we plan for, we all have to deal with unanticipated events - if you don't have insurance, you use cash and if not that, loans and credit cards and if you don't have that, well, you're just out of luck. From what I've seen, usually the availability of these products happens with the increased sophistication of a given country's financial services sector: savings/lending, insurance then investments.

While Hung Huang at Economix attributes savings for dealing with unanticipated events to a "dilapidated social welfare system" and therefore a need for self reliance, I suspect that the lack of regulatory stability has something to do with it otherwise there would be more and better private sector options (though given the continuum, time may also have something to do with it as well). This being said, if you look at China's history particularly over the last say 50 years, with massive political unrest, economic uncertainties, is it little wonder that Chinese people often horde gold and are so focused on education (which is not as depreciable and cannot be taken away)?

Of course the question as to why some Chinese people (not just managers) turn into degenerate gamblers is a different one altogether. As for managers, after a massive oversight on myself that's led to a fairly significant fraud (possibly more on this later), I am thinking it's at least in small part a lack of sophistication/experience and not understanding the risks/returns.

Pursuing Ideology with the Government Purse

The problem with a new "New Deal" is that the old "New Deal" was an abject failure. From Reason.tv:

via Samizdata, Climate Change is another "priority" the new US Administration intends to spend billions on but why when dealing with its effects would be far cheaper than spending ridiculous multiples on barely moving the scale? A highly worthwhile video also from Reason.tv:

A Great Leap Backwards?

Victor Shih, a prof at Northwestern in Chinese Politics, is worried about the new Chinese stimulus plan. His basic concern is this: over the past decade there have been substantial regulatory reforms that have divorced bank lending decisions from political influence resulting in a drop in non-performing loans (though I wonder if the stats he quotes are 'real'). With the massive new injections of capital and political pressure on banks to lend, and authoritarian governments being the way they are, Shih worries that this will be a return to the past - in both practice and culture erasing a decade of hard fought gains.

With the West in the midst of the wholesale restructuring of their own financial services sectors, any criticsm is bound to fall on deaf ears. Of course one hopes the rest of the world isn't in the process of following China's lead.

What Turns (some) Chinese Managers into Degenerate Gamblers?

As if trying to do business focusing on your core isn't difficult enough. Maybe that's the problem? It's too boring? It turns out that COSCO, the shipping giant, may have lost 4B RMB by betting wrong on an obscure shipping derivative (ChinaStakes). Not so long ago there was Citic Pacific gambling on the Australian dollar (China Daily), I can count no less than three direct competitors in our aluminum extrusions business that are now undergoing liquidation or are under bank control.

Putting corporate assets into any number unrelated commodities and investments like real estate (China Law Blog) seems to be a bit of a pervasive practice and it seems sometimes unique to China. Maybe it's something in the (bottled) water?

The Momentum Builds for Walmart

Will the Nobel Prize heed the people's pleas (Britannica)? (Magic 8 ball says... "my sources say no." Shoot.)

Why I Don't Read the Economist Anymore

They're no longer the reliable champions of free markets and individual liberty they used to be to the point that their some of their articles stoop to a level that would barely pass as commentary in the New York Times. Their recent snotty post "Americans are shoddy Keynesians" is a case in point. While being a shoddy Keynesian (in favor of significant deficit spending in economic recessions in attempts to smooth out business cycles) might otherwise be something to be proud of (if not disavowing the dubious practice (Realclearmarkets.com) altogether), the Economist goes on to say "And why are Americans so concerned about government borrowing? In their own households they love debt."

Does the Economist seriously not differentiate between private sector debt and spending and that of government? So because it's a feature in the private sector, we should have no problems whatsoever with government doing the same? The US government looks like it's going to expand faster than at any point since the New Deal into goodness knows what and they're going to do it with massive amounts of debt. Does anyone remember (and does the Economist care) what happened the last time (New York Times)? Sheesh.

Update. Further Proof. Remarkably, the Economist criticizes Greg Mankiw for ignoring context when that is precisely what they do when they ignore his larger underlying argument that there's no more rare or mythical a beast than a temporary government program.

Cruel and Unusual Punishment?

via TechCrunch - First Round Capital's holiday card - the words that come to mind are cruel but also nutty, fun and in Michael Arrington's words, "awesome" (and for people who care about such things, the music is "Praan" available on Amazon):

Another cute-ish card via swissmiss from the folks at AKQA (a bit slow to start, but worth watching to the end):

The Banana Republic of Newfoundland

Newfoundland expropriates/steals assets from AbitibiBowater (Globe and Mail) after Abitibi decides to shut down a paper mill. Perhaps equally shocking is that it seems that the Globe and Mail gets it - "If the government rips up duly negotiated agreements just when it feels like it, what's the point in signing them in the first place?" Unsurprisingly, markets require first and foremost, rule of law and property rights and for now, Newfoundland appears to have little of either.

It hasn't been easy for smaller, sparsely (by comparison) populated provinces to get the attention of businesses (if only be sheer virtue of geography) - now Newfoundland's made it a quantum leap harder for themselves. The federal government should tell them to shove it the next time Newfoundland asks for help or attempts to negotiate. Canadians should not pay for the stupendous stupidity and disaster that was of Newfoundland's own making.

Is Capitalism Dying?

The author of Dilbert, Scott Adams', predicts the "End of Capitalism". I don't agree, but I was surprised because he believes the debacle in the housing and credit markets are the result of a crime by "suits" and crooks enabled by technology. I hesitate to use the words "losing faith" in markets, because I don't think it's historically accurate or even true as it implies some religious inference to a singular beast.

Markets exist in the vacuum - we have seen ever greater freedom in markets not because governments have allowed them to exist but because governments have retreated. This has been a direct result of their own incompetence and inability to meet the needs of their constituents. 'Unintended consequences' are the words that habitually follow new government regulations and programs. While Adams labels socialism as too costly, he predicts greater regulations and controls - as if that won't be too expensive? This also requires a massive leap to believe that regulation and government policy didn't play a major role in the best case and was in fact the cause, in the worst case scenario of this market mayhem.

Scott Adams' mistake is in misdiagnosing the cause of this mess. And little wonder, with the current US administration flailing to maintain some semblance of control, throwing money anywhere and everywhere with the most vocal pundits cheering them on if not too stunned to object. Try reconciling Joseph Stiglitz attack on "capitalist fools" (Vanity Fair) - an attack fraught with ontradictions as John Tamny in RealClearMarkets.com points out. It's frustrating to watch the government response pointing stubby little fingers at "Wall Street Greed" despite the volumes of evidence to the contrary (Reason.com).

Blame Capitalism? Only if we really had it in the first place (PJMedia). But with the stated intentions of the coming Congress and US Administration, it would seem that Capitalism's about to take a break - and that's bad news for everyone.

Web Resources for Startups

It's never been easier to start a business - with some of the services available over the web, you need less money to be more productive, appear more professional and established than ever before. Here's a small list of web services I've come across - let me know if there are any others you'd recommend.

My suggestion to you: grab a large cup of joe and browse through some of these services. I'm going to bet at least a few of these companies will blow your socks off. Sometimes knowing that they exist are enough to realize that you could grow or develop faster than you ever imagined possible.

Manage contacts & develop new ones.

Email. First, setting it up. Google Apps (*$), Yahoo SmallBusiness (*$), and Zimbra. Use it Productively. Xobni (*), Google Desktop (*). Track & Build Effective Email Campaigns (not to be confused with spam). MailChimp ($), CampaignMonitor ($), Industry Mailout ($), StreamSend ($), GoogleMail's Guidelines, YahooMail's Guidelines. Online CRM. ZohoCRM ($, but first 3 users are free), Highrise ($). Other. MyPunchBowl, Anyvite, Proof Email Designs.

Calls & voicemail. Asterisk, GotVmail ($), FonGenie ($), Twilio ($), Grand Central, Ringcentral ($), GotVoice (*$), Skype (*$), Jajah (*$). Call center services. Live Ops ($), Alpine Access ($), Convergys ($), Weavepartners ($). Other. Slydial.

Web. Balsamiq ($), Amazon Web Services (*$), FeedbackArmy ($), Wufoo ($), Kampyle, Animoto (*$), UserVoice, CrowdSound ($), Google Website Optimizer, CrossbrowserTesting, and Other Web Design Analytics Tools. PSD to HTML sites. HTMLmafia ($), P2H ($) and Codemyconcept ($)

Blog. PCWorld's '07 Comparison of Blogging Platforms.

Develop new leads. LeadVine ($), Sales Genie ($).

Tell the world

Print Layouts. Branddoozie ($), Inkd ($), Stocklayouts ($).

Microstockphotography. iStockphoto (*$), SnapVillage ($), SnapVillage ($), BigStockPhoto (*$), ShutterStock ($), Fotolia, Dreamstime ($), and StockXpert ($).

Website Templates. TemplateMonster (*$), ThemeForest ($)

Manage projects and files.

FolderShare (*), Unison File Synchronizer, Basecamp ($), Huddle ($), Project Pier, Callanos, Streamfocus, Redmine ($), Trac, Syncplicity, LiquidPlanner ($) and Groove (*$). Specifically for webapps: ProductPlanner.

Collaborate & share.

Delicious (*), Twiddla (*), Smugmug (for pics $*), Scribd (*), Nosco's IdeaExchange ($), Kluster, Issuu, Slide Rocket, Zapproved ($), Prezi ($), Review Basics, Conceptshare ($), Octopz ($), Cozimo ($), ProofHQ ($), Thinkature, DimDim ($), MindMeister ($) and a compilation from FreelanceSwitch

Figure out what you do well, Outsource the rest.

Elance (*$), Guru ($), oDesk ($), Redesignme ($), Ask Sunday ($), Get Friday ($), Mechanical Turk($), Spudaroo ($), 99 Designs ($), Crowdspring ($), vWorker ($), ScriptLance ($) and Freelancer ($). For product/process development: InnovationExchange ($) or OneBillionMinds ($). For content/knowledge: GenApple ($).

Manage accounting and finances.

Corduroy ($), Freshbooks ($), Quickbooks Online ($), Xpenser (*). Collecting payment. Google Checkout ($), Paypal (*$), Noca ($), and Credit Card Processing Reviews. Sell your receivables @ ReceivablesXchange.com (you need to be based in the US, at least 2 years old, have minimum 1.5M in revenues in last 12 months)

Track Time/Productivity/Reminders.

Jotlet, Clockspot, Flexlists, GetHarvest, TimeBridge, Jiffle, GTDInbox, Jott, RemembertheMilk, 30boxes, CulturedCode's Things for Mac, IDidWork, JoesGoals, Evernote and TSheets ($).

Travel.

ExpertFlyer, FlyerTalk (*), TripIt (*), ParkingSpots, Yapta, Farecast, 2itch.

Legal paperwork (Great for ideas but I'd still get a lawyer to review any important agreements! But it's generally far cheaper to have a lawyer review your draft than to start from scratch).

RocketLawyer (*), Startupcompanylawyer, FreeLegalForms, LegalRiver ($), MyCorporation ($), MyLLC ($), YCombinator's Legal Templates (*), Orick's Startup Forms Library, theFunded.com's Founder friendly Legal Docs.

Other.

Don't learn that you need to backup your stuff the hard way. Carbonite ($), JungleDisk ($), Mozy ($), Backblaze ($) and Dropbox ($).

Finding new digs. SuiteMatch, ZoomProspector, Regus.

People & HR. Spokeo ($), EHealthinsurance, Healthinsuranceinfo.

Shipping & fulfillment. TrackMyShipments, Amazon Fulfillment Services ($).

Starting a business can be a lonely experience. Consider networking online. Sta.rtup.biz, StartupNation, Biznik, Micromentor, IdeaCrossing, PartnerUp and GoBigNetwork.

Other. Google Translation Center (*), myGengo ($). Find a name: Wordoid. Finding the best ideas in your organization. Kindling ($). Charts. LovelyCharts. Research and innovate. US Patent and Trademark Office and Trademarkia.

($) denotes if you need to pay in order to get anything useful out of the service (*) services I've used and recommend.