An Introduction to Crowdfunding

It's an amazing time to be alive. From the Boston Herald on crowdfunding (via Instapundit):

In fact, it’s what you do — or plan to do — that can make or break success in the world of “crowdfunding,” which allows anyone to raise money with online video and blog pitches. Through sites like Kickstarter.com and Indiegogo.com, the top crowdfunding conduits in the U.S., donors big and small can contribute to projects that catch their eye.

“At a time when it’s very challenging to get money, it democratizes the process,” said Tory Johnson, 40, a small-business expert and founder of Spark & Hustle. “People you don’t even know will give you money.”

For British Columbia: The "Environment" is More Important than Education

Despite the financial crisis facing Vancouver's school board, under legislation passed under the previous Premier Gordon Campbell, the board has been forced to divert nearly half a million dollars to carbon offsets (Vancouver Sun).

The budget approved by the Vancouver school board includes $405,725 to pay for such offsets, money that board chair Patti Bacchus said Friday could have been put to better use.

"I could pay for about five teachers," she says.

Adding insult to injury, the board is required to pay the province about $45,000 for a "smart tool" to assess its carbon footprint and to supply staff to make it work. Bacchus said the payments are particularly galling because many of the schools operated by the VSB are old, poorly insulated and inefficient, so they have high energy costs.

"These are schools that are cold in the winter because we've turned down the heat to save money and we have parents and children and staff shivering and complaining about that," she said.

More unintended (?) consequences (SF Chronicle via Instapundit)

Chile: The Land of 15% Growth

Another reminder that the best form of disaster prep is economic growth and wealth. Chile, however, also shows the world of developed nations a path to sustainable economic growth (Investors' Business Daily):

A year ago, Chile lay in rubble, victim of the world's fifth most powerful earthquake. So Chile's 15.2% growth is a big bounce from a bad setback.

But it shouldn't be dismissed as an anomaly. It's a showy number, but not the only one.

The same day Chile released its data, Goldman Sachs raised its 2011 growth forecast for the country to 6.4% from 6%. In its annual regional business index, Latin Business Chronicle ranked Chile as having the best business climate in Latin America in 2011. [...]

Bamrud says Chile has been turning heads with investors the past year and a half because of its emphasis on improving its corporate environment, its tax regime and its economic freedom, all of which rate highly.

"Chile has always been held out as a model for Latin America, but the reality is ... it's now a model for the U.S.," he said.

Corporate taxes are the second lowest in Latin America at 18%, behind Paraguay's 10%. The Latin average is 28%.

Meanwhile, Goldman Sachs' chief economist for Latin America, Alberto Ramos, says Chile has wisely fostered growth by reducing the size of government and not printing too much money.

In 2011, it cut government spending to 5% of GDP, or $700 million, more than its projected 5.5%. So GDP has room to grow 6.4%, rather than 6% as first estimated.

For the average household, renting better than buying?

An interesting study to look at in greater detail later:

A new academic article in Real Estate Economics turns this conventional wisdom on its head. Using data from 1979 to 2009, the authors demonstrate that renting was the superior investment strategy for most of the past 30 years. Counterintuitive as the finding may be to some, it is actually quite logical. Unless someone possesses the cash necessary to buy a residence, he or she will be renting one way or another. The choice is between renting the property directly or instead renting the capital necessary to buy the property. The amount of capital to be rented is a function of house prices, while the bulk of a mortgage payment is interest, which is the rental payment on this capital. After 2 years, the typical 30-year amortizing mortgage balance has been reduced by less than 3%. This means that a household that took out a $300,000 mortgage with a 5% interest rate to buy a home has only reduced its mortgage balance by $8,600 after two years despite spending nearly $39,000 in total over this period.

Update: Not sure I agree entirely with this study. The basic question of rent vs buy comes down to whether or not you could make more money with the money you would otherwise use to pay for your mortgage/downpayment.

For many people though, I suspect that without the mortgage interest rate deduction (and given rent you pay on residential property is not tax deductible in the US), rent makes more sense financially than buying.

Megatrend Watch

From VC Fred Wilson:

But right now we are in the midst of a number of these megatrends all happening at the same time. There are at least four big ones going on at the same time:

- Mobile - yesterday I wrote that at least 16% of the visits to this blog are coming from mobile devices and that number is up from essentially zero six quarters ago

- Social - Facebook will have 1bn users in the next year or so

- Cloud - A third of Netflix' new subscribers are opting for the streaming only plan

- Global - companies like Skype, Facebook, Twitter, Google see upwards of 80% of their users from outside the US and these numbers are growing faster than ever

Each one of these megatrends would be an investable wave on its own. But we are in an environment when all four are crashing on the shore ata the same time. Twitter, for example, is mobile and social and global. It is the world in your pocket. And it is changing the world too.

Quote of the Day

John Adams (via Instapundit):

Be not intimidated… nor suffer yourselves to be wheedled out of your liberties by any pretense of politeness, delicacy, or decency. These, as they are often used, are but three different names for hypocrisy, chicanery and cowardice.

The Walmart Effect

Walmart is instantly polarizing amongst some - with its hostile views towards unions, and its success at pushing to lower prices, it's also an icon that is admired around the world. Instead of fighting Walmart by building and patronizing what they see as better stores, opponents would rather deprive us the choice of shopping at Walmart:

Why Central Planners Fail: The Knowledge Problem and Why Markets Win

By one of my favorite bloggers, the "knowledge problem" is the recognition that no one can be an expert at everything while markets are able to facilitate cooperation and communicate through pricing signals (Washington Examiner):

Economist Friedrich Hayek explained in 1945 why centrally controlled "command economies" were doomed to waste, inefficiency, and collapse: Insufficient knowledge. He won a Nobel Prize. But it turns out he was righter than he knew.

In his "The Use of Knowledge In Society," Hayek explained that information about supply and demand, scarcity and abundance, wants and needs exists in no single place in any economy. The economy is simply too large and complicated for such information to be gathered together.

Any economic planner who attempts to do so will wind up hopelessly uninformed and behind the times, reacting to economic changes in a clumsy, too-late fashion and then being forced to react again to fix the problems that the previous mistakes created, leading to new problems, and so on.

Market mechanisms, like pricing, do a better job than planners because they incorporate what everyone knows indirectly through signals like price, without central planning.

Read the whole thing. Sadly, there isn't any shortage of "experts" who believe they can allocate resources and price better than markets leading the Cato Institute to observe that "inside every leftist, is an authoritarian dying to get out."

"Poverty has been man’s condition throughout his history"

In our age of relative affluence, it's remarkable how far we've come - but it's a road that's often forgotten. The Freeman via The Thinker:

There is very little either complicated or interesting about poverty. Poverty has been man’s condition throughout his history. The causes of poverty are quite simple and straightforward. Generally, individual people or entire nations are poor for one or more of the following reasons: (1) they cannot produce many things highly valued by others; (2) they can produce things valued by others but they are prevented from doing so; or (3) they volunteer to be poor.

The true mystery is why there is any affluence at all. That is, how did a tiny proportion of man’s population (mostly in the West) for only a tiny part of man’s history (mainly in the nineteenth, twentieth, and twenty-first centuries) manage to escape the fate of their fellow men?

Is Intellectual Property Necessary?

An interesting argument from UK's Adam Smith Institute - though I think it's more an argument against copyrights than all IP:

If...

- Dickens could make money from Americans without copyright
- Musicians could feed themselves before Edison
- Plant breeding could bloom before the US Plant Variety Protection Act of 1970
- Software got written before the 1981 SCOTUS decision in Diamond vs Diehr
- Most of the 2009 Billboard Top 40 music earners made most of their income from live performances, not recordings
- Harry Potter novels sold enough in their first twenty-four hours to keep J K Rowling in style

...why do we think they need state protection now? The plain truth is that because of the grip of the small number of media giants who control the production, marketing and distribution of their favoured artists, many more undiscovered artists subsist on live gigs in local venues. And because of the modish patent trolls who have no intention of ever exploiting their patents, many innovators never even know someone else “owns” an idea until the writ arrives end up broken.

19th century libertarians ranked Intellectual Monopoly as state created privilege that impoverishes the majority. We should heed them: they are still destructive, unnecessary, statist and evil.

Trailer: Revenge of the Electric Car

Not for the Luddites amongst us. While battery tech has come a long ways, and it killed the electric car the last time around, I'm not sure that it's good enough yet judging only by pricing of electric cars. It's coming though - if only in the meantime they'd make it easy to do natural gas conversions.

Lexus' 360-Degree Carbon Fiber Loom

An ad for Lexus but there's something amazingly cool about this (via Core77):

How Thorium Could Quench Our Thirst for Energy

Another reason why high gas prices at the tank are unsustainable - and as a corollary, spur the development of alternatives. Now if only governments would reduce the barriers to innovation... (via Instapundit)

What do Markets "Owe" to the Common Good?

Megan McArdle points out a classic flaw of those who downplay the role and power of markets (TheAtlantic):

John Quiggin complains that what the classic essay I, Pencil actually shows is the wonders of a mixed economy, not the market. The essay traces all the amazing transactions that need to occur for a simple pencil to be made, pointing out that not one of the people involved could make a pencil by themselves, and most of them don't even know that they're involved in producing a pencil. But what about the US Forestry Service? Rail rights of way? The education system?

This is an argument to which the left-wing has a great deal of recourse whenever anyone suggests that people have a right to keep what they earn from voluntary transactions. You can only make money in the context of society, and so society has a right to regulate your transactions, and seize the proceeds, in any way that society sees fit.

And yet, the argument applies just as well to our sex lives or our political beliefs: they take place in the context of all sorts of government protections, from rape prosecutions to whistleblower laws. Without markets and the government, the "anything between two consenting adults" morality to which the majority of the elite subscribes would be impossible; the closest substitute for these things is family, and families have a very clear, deep, and persistent interest in regulating the sexual behavior of their members.

Does this mean that the government (or our employers) may properly restrict our sexual behavior to that of which a majority of our neighbors approve? That bed you're having sex in probably travelled on the interstate highway system, so standby for government inspection . . .

Read the whole thing.

The Next Generation of X-Prizes

I've been a big fan of the X-Prizes because of the first Ansari X-Prize that spurred the creation of the private space industry. Here's a look by Vivek Wadhwa from TechCrunch at the next generation of X-Prizes:

There are several X PRIZE competitions in progress, such as the $30 million Google Lunar X PRIZE—which will reward anyone who can send a robot to the Moon that travels at least 500 meters and transmits video, images, and data back to the Earth. The Wendy Schmidt Oil Cleanup X CHALLENGE is offering $1.4 million to anyone who can speed the pace of cleaning up seawater surface oil resulting from spillage from ocean platforms, tankers, and other sources. And the Archon Genomics X PRIZE is offering $10 million for a device that dramatically reduces the time and cost of sequencing the human genome. [...]

As X PRIZE founder Peter Diamandis explains, unlike venture capital, which backs one possible solution, incentive competitions inspire a multitude of solutions; they build robust industries and ecosystems. The competitions do this by setting a target and goal that multiple players strive toward. And, unlike traditional philanthropy, which often spends only cents in the dollar toward a desired outcome, incentive competitions create tremendous leverage, with the prize purse attracting operating capital, and teams spending multiples of the prize purse. By setting an audacious but achievable target and vetting that target through experts, incentive competitions offer credibility and “air cover” for entrepreneurs, innovators, and inventors who want to pursue a path that would otherwise be considered too risky, Diamandis adds.

It is very possible that some of the of the technologies we discussed over the weekend will come to fruition and change the lives of billions; that investments of a few million dollars will do more good for the world than the billions that are invested in the me-too social media technologies that Silicon Valley is so excited about. My hope is that more of world’s greatest minds do what some did last weekend: brainstorm to save our civilization.

Awesome: Doing what you love and making money at it

While the swissmiss uses this diagram to describe worthwhile side projects, why isn't there a greater overlap? The best job ought to be the one that doesn't feel like a job.

via the swissmiss:

A wandering mind is an unhappy one

Something that to note to self(BarkingUptheWrongTree): "People spend 46.9 percent of their waking hours thinking about something other than what they’re doing, and this mind-wandering typically makes them unhappy."

It would seem David Allen was onto something.

A Few Fascinating Things

From Fool.com:

• "Today, of Americans officially designated as 'poor,' 99 percent have electricity, running water, flush toilets, and a refrigerator; 95 percent have a television, 88 percent a telephone, 71 percent a car and 70 percent air conditioning. Cornelius Vanderbilt had none of these." --Matt Ridley


• "As late as the 1950s, New York's garment industry was the nation's largest manufacturing cluster. It employed 50 percent more workers than the auto industry in Detroit." --Edward Glaeser


• "Two married 66-year-olds with roughly average earnings over their lives will end up paying about $110,000 in dedicated Medicare taxes through the payroll tax, including the portion their employers pay. They can expect to receive about $340,000 in benefits. Two average-earning 56-year-olds will pay about $140,000 and get back about $430,000 in benefits." --David Leonhardt


• "In 1941, the U.S. economy produced almost 40 percent more output than it had in 1929, with virtually no increase in labor hours or private-sector capital input. Almost all of the increase in output per hour is attributable to technological and organizational advance. ... The [Great Depression in the] 1930s were indeed the most technologically progressive decade of the century." --Alex Field

Lots more at the link.

Is the Real Estate Bubble Finally Bursting in China?

I haven't been blogging much about China lately and I guess there's a lot to catch up on but this one is a bit of an eyeopener: Beijing real estate prices plunge 27% in one month (ZeroHedge). Oddly this is a bit at terms with a WSJ blogging entry from today:

Through its official mouthpieces, China has in recent days conspicuously stepped up its rhetoric–and in some cases its actions–on its largely unsuccessful campaign to rein in the country’s stubbornly high property prices.

In a prominently displayed article that was also carried on the Xinhua News Agency’s website, the People’s Daily reported Wednesday on a top-level official property inspection team’s arrival in Hangzhou, the capital city of the affluent eastern province of Zhejiang.

The article quoted Yun Xiaosu, a vice minister of the Ministry of Land and Resources, as telling the Zhejiang officials that “the central government is of the view that the problem, which chiefly involves urban housing, has already affected the overall situation.”

“We must be determined to resolve the property price issue while reining in inflation,” Yun said.

[...] It’s been more than a year since Beijing vowed to keep the country’s increasingly unaffordable property prices in check. But after rolling out three rounds of tightening measures, prices remain near record levels, despite shrinking transaction volumes. This has put Beijing’s credibility to a serious test.

A Mathematical Love Song: Finite Simple Group Of Order Two

via The Thinker: