Thursday, May 31, 2007

The decline of newspapers

This long crie du coeur from journalism professor, Neil Henry, decries the decline of the newspaper and considers taxing Google to make up for the industries woes.
Is it not possible for Google and other information corporations to offer more direct support to schools of journalism to help ensure that this craft's values and skills are passed on to the next generation?

Is it not possible for these flourishing corporations to assist and identify more closely with the work of venerable organizations, such as the Society of Professional Journalists, in support of their mission and to preserve this important calling? I like to think such things are possible. Meantime, I can't help but fear a future, increasingly barren of skilled journalists, in which Google "news" searches turn up not news, but the latest snarky rants from basement bloggers, fake news reports from government officials and PR cleverly peddled in the guise of journalism by advertisers wishing only to sell, sell, sell.
Neil is bad at economics (but probably just fine at being a journalism professor) and so confuses certain points in this article.

Firstly, although he correctly identifies the decline of newspaper's classified business as being the true driver of the industries financial problems, he calls for a tax on Google, not craigslist, eBay, HotJobs, Monster, etc, the websites most responsible for newpaper's ills. Google and blogs may compete with papers for eyeballs, but not for money.

Secondly, he calls for Google to support journalism schools, as if the problem is a lack of supply of would-be journalists. If the problem is that newspapers are laying off staff, then why would adding more journalists to the mix be at all helpful? The problem here surely lies on the demand site.

He gets to his main point:
While that may be true, the time has come for corporations such as Google to accept more responsibility for the future of American journalism, in recognition of the threat "computer science" poses to journalism's place in a democratic society.

It is no longer acceptable for Google corporate executives to say that they don't practice journalism, they only work to provide links to "content providers." Journalism is not just a matter of jobs, and dollars and cents lost. It is a public trust vital to a free society.
I do not want to debate the quality of American journalism, or how vital a public trust it is (or even exactly what that means) but it is worth think about alternatives to the current model that maintain true investigative reporting.

One model is the vanity press, where rich individuals essentially subsidize papers to go out and report the "news". I believe that this is the model ideological publications like Reason, Mother Jones, and the Nation follow, so perhaps it would work for papers as well.

The second model is the BBC one, where basically tax payers subsidize media organizations. This has worked quite well for the BBC (whatever snarky things people have to say about Auntie), but I'm not sure if it would work here in the US.

There are probably other models as well.

Finally, I would add that hyper local weeklies, such as my local Palo Alto paper, do just fine even in this age of Google. True the stories are not of interest at the national level, but that's just their strength -- they tell me what's going on down the street.

Wednesday, May 30, 2007

TED: John Doerr

Here's the TED talk given by one of the biggest VCs in the Valley -- John Doerr. John's TED talk was not my favorite, but you can watch it here and make up your own mind.

His company, Kleiner Perkin, is a major investor in greentech right now. He talks about his lobbying efforts in California.

Florida and property taxes

This article in the WSJ talks about Florida's plans to cut their property tax. Rising real estate prices in the state have jacked up people's tax bills, but they have no more paper money than they did before, so they are complaining.
Across the nation, the rise in home values in recent years has boosted property-tax bills sharply. The average annual property-tax burden in the U.S. stood at $1,132 per person in 2005, up 13% from 2000 in inflation-adjusted terms, according to data from the Commerce Department. Residents of Wyoming and Washington, D.C., saw the largest rises: Their tax bills went up by 49% and 42%, respectively. New Jersey had the nation's biggest property-tax bills, at $2,206 per capita, up 13% from 2000.

In many areas, housing prices in recent years rose too quickly for local tax assessors to keep pace with them. Now, tax assessments are catching up just as market prices are slumping.

Responding to an outcry from taxpayers, politicians in some states have come up with plans to ease the pain. This year alone, New Jersey, New York, Indiana and Montana have cut property taxes in one way or another, says David Brunori, professor of public policy at George Washington University and vice president of Tax Analysts, a nonprofit tax-information company in Falls Church, Va. Pennsylvania did the same last year. None of those measures, however, compares in size and scope to Florida's.

"This is the biggest tax break being considered anywhere since Proposition 13 in California," says Prof. Brunori, referring to the 1978 initiative that radically slashed property taxes in that state.
Prop 13 in California basically said that property tax would be set at the value of the home when it changed hands, and then remain at that level until it changed hands again. The consequence of this is that you have a $2M home paying pennies on the dollar, while a $800K home across the street pays through the nose, since one is owned by old owners, and the other by new owners. It also means that it is very expensive for Californians to move from one home to another within the state, as their property taxes would then reset at a higher rate.

Cutting the property tax, however, is a windfall for current homeowners, as the consequence of that cut gets factored into the purchase price. If you lower the property tax, you will at the same moment increase the purchase price by the net present value of that tax cut. This is great for the home owner, but lousy for the person who does not own a home, but may want to own a home in the future. Given the recent gains in home prices, I'm not sure it's good policy to be transfering wealth from people who do not own homes, to people who own homes.

Friday, May 25, 2007

Hedge funds and private equity

There have been a number of articles recently on the outrageously high pay rates for hedge fund managers, their often paltry performance, and the huge amount of money flowing into the private equity industry at large.

I was at a securities conference recently with a large number of fund managers, and one story they told me was how low interest rates triggered this flood of money into their industry. If you're a pension fund, and you have an 8% real return/year bogey, then having 30% of your portfolio (bonds) go from 6% to 2% will have you scurrying around for yield wherever you can get it. I knew that low interest rates had distorted the housing market through mortgage financing, but did not consider that the same phenomenon was driving the growth in private equity.

The second major topic of conversation was there China buying Blackstone was a signal of a market top.

Don't get it

I always struggle a little when free market economist types take issue with Thaler's concept -- Libertarian Paternalism. It's easy to understand how this particular branch of behavioral economics came out of U Chicago since it takes the very real findings of systematic human fallibility and synthesizes it with the very real benefit of individuals making their own choices.

Thaler sums it up well in this WSJ debate:
Let's recapitulate. People make mistakes, so sometimes they can be helped. It is possible to help without coercion. That is libertarian paternalism. The concept can be and is used in both the public and private sectors. For example, in London, pedestrians from abroad are reminded by signs on the pavement to "look right" because their instincts from back home are to expect traffic to approach from the left. No one is forced to look right, but fewer pedestrians are hit by trucks.
I find this position impossible to argue with. Since we cannot help but to have default choices (emphasis on *default* and *choices* separately) we might as well try to get central planners to pick the best defaults. These central planners will make mistakes, as they always do (they have the same systematic human fallibility as the rest of us) but since we've left the *choice* part in, these centralized decisions should have less bad consequences as they do not bound people's actual opportunity set in any way.

Nevertheless, everyone doesn't agree:
Mario Rizzo writes: Libertarianism is a political philosophy that seeks to reduce the activities of the state to a very low level. It is very much about less government. Paternalism is a political or moral philosophy that seeks to override the actual or operative preferences of individuals for their own benefit, however defined, according to Donald VanDeVeer's 1986 book on the subject. When applied to the actions of government, paternalism cannot be libertarian. It can only be more or less intrusive.
With respect, this is a pedantic argument. Libertarianism does focus on reducing the activities of the state, and this is because it presumes that the states activities are harmful. But there is still some state there. Why not try to make it a better state which encourages (hopefully) good decisions and does not bind people to the bad decisions it will nevertheless make?

Monday, May 21, 2007

Stop Fleecing Poor Americans

A nice, succinct debate in Newsweek about whether the government should restrict what car sellers, pay day lenders, tax preparers, etc. can offer to poor Americans.

Nouriel Roubini says safeguards are critical, because these unscrupulous people are ripping the poor off and taking advantage of their financial naivete. Tyler Cowen says people should be able to do what they want, and outlawing these types of legal exchanges would simply move the activity to the illegal realm, with worse consequences for the poor.

I'm reminded of the law (I think it was in New Jersey) to ban rent-to-own schemes. Basically, when someone rented a VCR for $20 a month for more than 24 months, they were given the VCR (they had already paid many times its purchase price in rental fees). The government banned this practise for the same reasons Nouriel states in his position, so the the companies stopped giving the VCR to their customers after 24 months, they just kept on renting it.

(btw. I'm getting all the facts wrong in the above. It may not have been VCRs, or NJ, or $20/month, or 24 months. But the point stands). You can read more about rent-to-own here, and from the FTCs site here.

Thursday, May 17, 2007

Moats vs Policemen

The Economist has a nice article on Google Checkout vs PayPal. One comment on the article noted
You missed a crucial strategic element in Google's development of its Checkout service. Currently, Google's income comes from a "pay per click" advertising model that is exposed to click-frauders. Linking advertising all the way through to a payment service could, in future, provide a compelling alternative that eliminates the risk of click-fraud and the wasted half of the advertising budget. Rates would, of course, rise to compensate but we should all welcome improved efficiency as well-focused advertising can be as interesting as the news.
Fraud is a key element not just to AdWords and Google Checkout, but to online payment in general.

A buddy of mine, who is expert at fraud, told me there are two basic approaches to minimizing it. The first, popular with banks, is the "moat" method where you make it really really hard to get in, but once you are in you can do what you like. The second, pioneered by PayPal, is the "policeman" method where you eliminate virtually all of the barriers to entry, but then you carefully watch what people actually do and spot the bad guys that way.

My buddy argued that the "moat" method as a loser because, when people have options (as they do online), high barriers to entry deter honest users more than they deter thieves. Thieves know that there is a money pot on the other side of the moat and will do whatever it takes to get over it. Honest users just want to pay their bill, so will quickly switch to other channels. This is why PayPal was able to dominate online payment, and banks still suck at it.

Banks seem to suck in general. Here is an example of a bank sucking.

Tuesday, May 15, 2007

Unintended consequences

Kaiser released a homeless woman from ER back onto the street. There is now a call to forbid ERs from releasing people to the street.

The idea of taking someone who is down and out, and sending them back to skid row is decidedly icky, and I can see why people would want to pass a law against that. The problem is that it will shut down ERs.

Right now, ERs are required by law to serve *everyone*, no matter if they can pay or not. This means that they serve as primary care/shelter/hang-out spot etc. for homeless folks who, for whatever reason, do not want to stay in homeless shelters (this was certainly true in Boston where my wife worked). Once the person was done with their hospital visit, they needed to be discharged from the ER so a new person could be admitted. A new law would require them to be sent to an address, but their actual home is the street.

If ERs cannot discharge homeless people to their "homes" (the street) then they will need to keep them in their ER, using up a bed which is now no longer available to a new patient. The result is gridlock. Please note, that releasing people to shelters is not an option since they do not wish to actually live in shelters (which is why they arrive with no return home address, if they were with a shelter, they would arrive with a shelter return address, and some do, but not the ones we are talking about here).

It's a sad situation to be sure, but keeping ERs from treating sick people is not the solution.

Monday, May 14, 2007

Amazon buys dpreviews

dpreviews convinced me to get a finepix f20, which I then bought on Amazon. In this age of user-generated content fever, it's interesting that Amazon, who started doing user reviews first, just bought very expert content.

Thursday, May 10, 2007

Mobile phones in India

Winterspeak reader Newley sent me a nice article about cell phone usage in India. Even in rural villages they understand that fancy features like digital cameras just drain battery life, which is a more important feature.
Lalid Kishore, 36, said he was shopping for his sixth phone in two years, after having problems with some and trading in others for new features. Kishore said he wasn't in the market for the newest camera phone, though, because the camera would weaken the battery.
I saw Jan Chipchase from Nokia talk about his mobile phone research at TED and it was very interesting -- recommended.

Wednesday, May 09, 2007

Digital Camera

I'm selling my Canon 5MP Digital Elph for a Fuji FinePix F20. The F20 came out in '06, but I have high hopes for it.

The Digital Elph, while very small, took lousy photos unless you were in bright light, stood perfectly still, and shot subjects that also stood perfectly still. Great for landscapes, but lousy for 99% of real world situations when you want to take a photo, ie. birthdays, sports, parties, weddings etc. It took forever for the shutter to actually engage after you pressed the button, and then all you ended up getting was a blur. Useless.

The old FinePix F20 is supposed to focus on taking fast pictures in low light conditions using a chip that has fast ISO instead of just cramming in megapixels. The F30 has longer battery life but is the same as the F20. The F40 has more mega pixels, so undoubtedly has compromised on the quality of the fast, low light photography it can manage.

This NYTimes article sums up the issue neatly:
About 65 percent of camera buyers are buying their second or third digital camera, but this time they probably will not be focusing on the number of megapixels as they did in past purchases. (Anything over 5 megapixels is going to provide the resolution any amateur photographer needs.) Instead, they might want to think about how well that camera takes pictures, including the action shots.
It then talks about shutter lag and ISO, without ever mentioning the old P&S that dealt with them first.

Thursday, May 03, 2007

Made for each other

Pamela Anderson has bought Greece.

No, not the country, a small fake island that will (maybe) someday be built in Dubai as part of "The World". The World for those who don't know is a planned fake archipelago planned just off the coast of Dubai. It's schtick is that your address has a country in it, e.g:
Your Name,
The World,
Dubai, UAE
Cool no? Just as an FYI, the first fake island project in Dubai -- Palm Island -- is still uninhabited because the shallow, warm Persian Gulf grows algae around such constructions, whic then stink to high-heaven.

I cannot think of two things more suited to each other than Pamela and Dubai.

Tuesday, May 01, 2007

Gel 2007

Recently returned from Gel 2007. A wonderful experience. Jane Galt was kind enough to accompany me -- you can read about her experiences here.

My personal standouts include:

Andrew from Songs to wear pants to. Funny, smart, unique. Check out his site, and maybe make a request of your own.

John Williams from Frog's Leap Winery. I'll certainly be stopping by next time I'm in Napa. A great guy, and very inspirational.

Peter Skillman from Palm was fantastic, Douglas Quin the sound naturalist was great, as was virtually every other speaker.

Sign up for Gel 2008. Or go to the one in Copenhagen. It's like TED, but way better.