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):