Thursday, July 29, 2004

O'Hare delays

I fly through O'Hare about twice a week, and usually at least one of my flights is delayed by 2 hours or more. But I'm not sure if the Fed's involvement to improve delays is in my interest. The Fed wants to make O'Hare reduce slots and so ease delays, but this means that I may not end up getting a convenient flight, which means I am now delayed somewhere other than the airport with no chance of getting home on time, instead of delayed at the airport with a slim chance of getting home on time. What O'Hare needs is more runways--sane people already avoid it whenever they can.

iPod gets Real

RealNetworks has enabled its users to transfer songs they have paid for and downloaded to their iPods. Apple, instead of hailing this as a great thing because now their iPods are more valuable, are thinking about stopping it, presumably because it cuts into their lucrative iTMS business.

But I think their margins on iPods are much greater than whatever cut the RIAA lets them keep from iTMS. Maybe the issue is they want greater clout vis a vis RIAA and so want to become the dominant source for legal, digital music? If so, then this is a doomed strategy because, since the RIAA holds the copyrights, they can always appropriate rents from Apple, no matter how dominant iTMS becomes.

Confucius was no Adam Smith

This post on the delightfully named Marginal Revolution discusses whether Confucianism or Taoism is more free-market friendly. They seem to come down on the side of Confucianism because of the deep Luddite stance of the Tao.

I studied a fair amount of Chinese philosophy in school, and in my humble opinion Confucius is the most overrated philosopher out there. His Analects are mostly a collection of ritual and minutiae outlining things like how many days of mourning there should be for each different rank of relative, and how the appropriate number of days of mourning could be extended or reduced based on the quantity of genuflect one made, and how the number of appropriate genuflect could change based on when they were performed, and with how much sincerity. It struck me as being less a philosophical treatise on life, and more a manual of human civilization, but a manual written by someone really dumb who didn't understand very much about people, or really, anything. Oh yeah, and the writing was as stiff as the thought.

The best distillation I have found of Confucian thought was in the Sword & the Citadel by Gene Wolf. In it, there is a race, obviously modeled (kinda sorta) on the Chinese, where people speak only in "Confucian" sayings. I felt that that captured the insane conformity and rigidity in the Analects

Lao-tzu, on the other hand, is really fun to read.

Wednesday, July 28, 2004

More eBooks

This is a good article that outlines the chicken-and-egg problem eBooks will face even when someone cooks up an iPod equivelent for eBooks. But there already exists a very simple source of useful content that should be available for eBooks already -- the web. Instead of RSS feeds and the like moving content into a RSS reader, why not simply stream it all onto an eBook so you can carry around your favorite parts of the web with you, offline? If ads are included, there is even a model to get this content paid for (it would show up on the eBook screen), and there are some online sites that already charge (WSJ, the Economist) for content and would simply offer this as an extension to their service.

People call them "eBooks", but "mobile local storage for the Web" may be better.

Yet Another Kill-the-Internet Copyright Bill

The DMCA was supposed to stop the rampant illegal downloading supported by Napster, as well as keeping encoding standards (such as those that make DVDs region specific) off the Internet.

It failed at both, as online file trading and information sharing continue to grow apace. It's worth noting that online file trading is already illegal under existing copyright law but simply impossibly expensive to enforce. Although the RIAA has brought law suits against hundreds of individuals, this is simply not a meaningful deterrent to the millions of file traders across the world.

Understandably, the RIAA is working on another bill that would simply outlaw file trading software, or software that might be used to trade files. The benefit of this new bill is that it gets to the heart of what the RIAA wants: the ability to shut down any network that people can/might trade mp3s over. It's also unfortunate that 6 years after Napster, no legitimate constituency to support online file trading has emerged. Lots of people happily use it, but they are all actually breaking the law (asinine as it is) and so they can't really stand up and be counted. Warnings about a "chilling effect on innovation" are true and accurate, but people tend to look at out-of-pocket costs (we're no longer selling CDs!) and ignore opportunity costs (the various unknown, unknowable technologies that will never be developed if the bill passes).

In part, though, it is the absence of any distinction between a legal mp3 that can be traded online and an illegal mp3 that should not be traded online, but is, that has prevented a legitimate P2P constituency from emerging. An unknown artist, eager and willing to have their songs distributed online for free, currently has no advantage over a famous artist that does not want his songs distributed online for free.

And on an incidental side note: I give a shout out to the Fuzzy Elf!

Tuesday, July 20, 2004

Balkanized email

Yahoo! seems to be refusing to forward my mail to gmail as I have configured it to do. I opened a service request to figure this out, but they refuse to respond. I was a yahoo! premium customer but now I am canceling my service. What crooks.

Monday, July 19, 2004

Are we better than we were N years ago?

Arnold Kling has a nice summary of work by Fogel (Econ, Chicago, Nobel Prize) who calculates whether people really are or are not better off than they were in the past. Fogel notes astonishing improvements in health, leisure, consumption, longevity etc -- virtually every statistic one could associate to wellbeing has become dramatically better. While some people like the characterize the US as a land of "haves" and "have nots", from a historical perspective it really is a land of "haves" and "have mores". The same goes for most of Europe, parts of Asia, China, and India. I'm not sure what the specs are for Latin America or Africa though.

It is also true that real incomes for the lowest quintile in soceity have decreased by a significant amount in real terms over the past 30 years, but their consumption has only improved. Arnold attributes this to second or third earners for a household (low wage / high consumption), but I've also seen people argue that transfer payments (government benefits) have made up the gap.

Wednesday, July 14, 2004

Minimum wage

It's worth reading this Slate article on the minimum wage, not because it's particularly correct about the minimum wage, but because it raises an effect of regulation that is generally true.

The article argues that minimum wages are not bad because 1) who wants that nasty low paying job anyway, 2) it helps some people who now enjoy higher salaries, and 3) it does not seem to cause much unemployment (which is what economics predict will happen). Instead, it says that minimum wage laws are bad because they place the entire burden of this wealth redistribution on employers of low-wage workers and their customers, folks who probably run small neighbourhood operations in marginal areas, and there are much better ways to do this. Therefore, minimum wage laws act as a giant, inefficient, harmful tax that does not appear on any government account.

I have written about the minimum wage many times before on this site, and I don't offer anything beyond the basic economic explanation: raising the minimum wage prices workers who produce less than that new wage out of the market and makes the unemployable. Since these folks are the poorest workers, and banning them from gainful employment is cruel and pointlessly stupid.

Landsburg seems to take a "let them eat cake" attitude towards this last point what? Sure, you've lost your job. But don't forget, this was a minimum-wage job in the first place. Losing a lousy job might not be a whole lot worse than keeping it
The above position makes no sense to me.

You could argue that the minimum wage does not hurt people *much* because demand at that wage level is very inelastic, and there is good empirical evidence to support this point, but it is also inescapable that you are taking some of the poorest folks out there and hurting them a little. I missed where that became OK.

More important is the point where Landsburg points out (correctly) that the law could also be a implemented as a tax on lowest-wage employers which then funded cash handouts to lowest-wage workers. You could calculate how large this tax would be, and then consider what it would do to lowest-wage employers (if anything). This it the way to think about almost any government regulation that does not create markets but instead tries some social engineering. The benefit of thinking about it this way is that it makes transparent what the economic consequences of a particular policy are, something that folks generally have no clue about at all.

Personally, I think there would be many benefits to a political system where every decision was auctioned off to the highest bidder, but whomever was hurt by that decision would need to be paid the full extent of that harm. This would move all the bribery/lobbying into public view, and let markets operate fully, and efficiently, in regulation. Any rule that would be worth more to one party to create than it would cost to compensate other negatively affected parties is probably a good one.

Friday, July 09, 2004

Microsoft financials

There's a piece in yesterday's WSJ about Microsoft focusing on cutting costs and boosting profits. The problem is Microsoft's flat share price, or rather the difficulty shareholders/employees and managers have accepting the reality that Microsoft is now a mature company in a mature market segment. Here are clips from the article:
Determined to keep Microsoft Corp. from becoming a lumbering giant, Chief Executive Steve Ballmer laid out plans in a 4,900-word memo to employees for a billion dollars in cost-cutting and what he promised would be stepped-up innovation to boost the company's sales and stock price.

Yesterday's memo comes as Microsoft is mulling action to address shareholder concerns about the company's stagnant stock price. Some investors have grown impatient as the company sits on a cash hoard of $56.4 billion as of the end of March. Analysts, meanwhile, predict Microsoft will announce multibillion-dollar stock buybacks between now and the end of July, or sharply raise its dividend. Microsoft paid its first dividend in March 2003, and doubled it, to 16 cents a share, in November 2003.


The "core" issues facing the company, Mr. Ballmer wrote in the e-mail to the company's 57,000 employees world-wide, are largely those that have been put to him by the company's own workers: "Will we be first with important innovations? Will process excellence lead to greater ability to make an individual difference? Will our focus on costs hurt employees personally and will it hinder new investments? Will we grow and will our stock price rise? Will the PC remain a vital tool, and will we remain a great company?"

While answering each of those questions with a firm "yes," Mr. Ballmer's memo acknowledges big hurdles in satisfying software customers, shareholders and employees. Microsoft workers, in particular, roundly complained when the company reduced discounts they receive on company stock purchases and reorganized its medical benefits, and morale has been fragile.


Mr. Ballmer said the cost-cutting was necessary, noting that the company's expenses have grown more quickly than revenue for three years running. He urged employees to take more accountability for their work, calling for them to prioritize goals better than in the past and focus on five to seven measurable "commitments" each year. A Microsoft spokesman said the cuts don't involve any layoffs and that hiring for the current year will be "consistent" with past years.

Slowed growth of personal-computer sales in recent years have throttled sales of Microsoft's two main products -- the Windows operating system and its Office suite of software. The company's revenue since 1999 has grown at an average annual rate of 13%, compared with 34% in the four years to 1999. Profits, which grew at a 52% annual rate from 1995 to 1999, have essentially been flat since.


Mr. Ballmer points out that Microsoft's share price is about the same as it was in late 1998, though the company has doubled its operating profits since then. "The key now to growing our stock price is growing profits even more."

Stagnant shares have led to employee griping about other issues, including salaries, benefits and working conditions. Mr. Ballmer addressed some employee questions over why the company's cash hoard isn't being used for employee benefits, writing that "the cash is shareholders' money, so we need to either invest in new opportunities or return it to them."

When a company starts to manage revenues and costs as two seperate entities, in my mind it no longer has a competitive strategy. Competitive strategies focus on (economic) profit, where revenue and its associated cost are linked together by a unique business logic that reduces substitutes and allows the firm to raise its prices. If the two are decoupled then all that is left are tactics -- hack off some expense here, run after some business there, but no sense of how the whole comes together. Many businesses--perhaps most--are so complicated that they have no option but to operate this way.

Here's an older piece I wrote about how Microsoft mustrenege on some of its compensation promises to employees as it goes from high-growth to mature.

Saturday, July 03, 2004

The Ghost in the Machine

Many years ago I used to do a little cloning (yes, the DNA kind, but only with tiny bacteria). I would take two circular pieces of DNA (called plasmids) and use special enzymes to cut them. I'd cut one in one place -- creating a string of DNA, and the other in two places, creating two little strings of DNA. I'd then mix them all together, and because of special details around what the cut ends look like, I would be able to insert one slice of DNA into the other and then turn it back into a circle, but now the circle would have something new in it.

But sometimes the new circle (plasmid) would have other stuff in it two. Sometimes the two ends would just stick back together, or multiple pieces of the new DNA would insert themselves, or the two small strings might join back up, or they might form two plasmids themselves. The point is that instead of ending up with a tube of just the plasmid you desired, you'd end up with a tube of mostly the plasmid you desired, and then some other stuff. We referred to this other stuff as "artifacts" because they were there, they were a neccessary part of the experiment, but they were really only present by accident. I don't know of a good way to express "neccessary, inevitable, AND accidental" when refering to the by-product of some other process or system, so I use the word "artifact".

This is just a long winded way to setting some context for this fascinating article looking at religion and the brain. Much like Pinker's The Blank Slate it discusses how advanced in neuroscience demonstrate what religios beleif actually is, how that is distinct from what we think religios beleif is, and how religious beleif is an artifact of the way our brains are wired to process social relationships.

Our brains evolved in an environment very different from the one we live in today, so it's not surprising that our instinctive preference for personal exchange makes us hostile towards the efficiency maximizing impersonal exchange delivered (and protected) by market economies. Similarly, it seems that the same neural mechanisms that enable us to monitor personal exchanges and relationships might also have created the "god" artifact, and hence religion.

It's not clear to me what one does with this sort of knowledge. So, even if people's natural revulsion to Economics comes from a brain structure shaped by Neolithic pressures (or whatever) it still doesn't change the fact that they are revolted.


It's well worth reading this Boston Globe article on Operations Research--the field of figuring out how to improve the operations of fairly hum drum activities such as lines, restocking shelves, etc.

The area of ops research I've become most familiar with is queuing theory which was cooked up in 1909 by a Danish engineer for the Copenhagen telephone company. One of the central units in queueing theory when applied to the phone business is named after him, the Erlang.

Over a century later, people are still using it and refining it to improve their operations. Remarkable.

Thursday, July 01, 2004


I have never been to a gaming convention, but it was great to read Greg Costikyan's account of Origin's 03. Worth reading.