Slowing China, cheaper commodities

A slowing China could take some of the strain off of the commodities market. China's buying a whole lot of trees and rocks and liquefied dinosaurs and stuff, and that is driving prices up. If they slow down, maybe the prices of commodities will recede a bit as well.

Obviously the question of a slowing China is how controlled it will be. A hard landing has some people losing sleep.

A recession... or something like it.

look, I'm not going to say the economy is not in trouble... it is and it may get worse before it gets any better.

Hell, it may get much better, and then get much worse all over again for an entirely different reason.

But I cannot help but think the current economic hit we're taking is smacking the financial sector particulalry hard and their whining is getting the rest of us down. So the farther you get from financials, the less of a whack you may be getting.

Factories Remain Solid as Orders Increase - WSJ.com

China exports inflation

I guess I'm in the mood to read and write about inflation this evening...

Here's a piece in the NYT about China's inflation being exported to the US.

Krigman, however, thinks the piece overstates the case.

You know, it wasn't that long ago that I'd spend my Saturday nights out partying rather than blogging about economic issues that, in all truth, I really don't know a whole lot about.

Inflation in Europe

The Europeans are taking inflation much more seriously. But I'm wondering if their main inflation worries are trying to stamp out inflation expectations amongst the population.

When workers begin to expect inflation, they build it into their wage demands and in effect it becomes a self-fulfilling prophesy. People get inflation because they expect it and price it in themselves.

The ECB seems to be aware of that and is trying to nip expectations at the bud.

I would thing that other price increases, especially for imported goods, would be mitigated by the super-strong Euro. (Strong Euro increases the ability by Europeans to buy goods on the global market.)

Let's talk about inflation, baby

FINALLY... amongst all of the talk about interest rates and recession, someone bring up the problem of inflation.

I've been yabbering on about inflation for a while but it seemed no one was paying attention to me... I was starting to take it personally.

Greg Mankiw weighs in with:

A rise in expected inflation is not consistent with the conventional wisdom that the economy is on the verge of a serious slump driven by inadequate aggregate demand.

My thoughts (sorta) on that here and here.

In a nutshell, recession talk in the US may be fueled by low domestic demand, but high global demand for products will keep pushing prices up at the exact same time the US dollar (read, American’s ability to buy stuff) drops.

Please get fiscal policy out of the way...

I'm going to agree with Mankiw on this one, the current mess is no place for fiscal policy. I don't have high hopes for the current stimulus package.

I would even go one step farther and suggest that the Fed's monetary policy isn't helping much either.

In praise of decoupling

A kindler, gentler look at decoupling but I remain unconvinced.

Basically there are two huge drivers to global growth right now, US and China, both are at the center of an ecosystem of other economies feeding into them.

And here's the kicker, China relies on the US.

Here's the money quote:

Diversification will only go so far, however, particularly if US consumption nosedives, says Mr Sheard. “Asia, centred on China, has become even more interlinked into the global economy, the driving impetus of which has been the US,” he said. It is hard to be global and decoupled at the same time.

Next bubble?

Looks like we're deep in a GreenTech one... with agriculture quickly gaining ground?

The new paradigm: Bubbles

Basically this is MarketPlace article on an upcoming Harper's article relates back to what I said here, about a new bubble paradigm overtaking the economy.

While the Asimov and Frankenstein references in the article point to a woeful misunderstanding of great sci-fi literature, the point is clear... we're entering into a fast and loose economy of blowing bubbles, rather than sustainably creating wealth.

The price of cheap money (see Fed cut) to fuel unreasonable growth (see past dot-com, housing bubbles), is an economy that will continually run through rabid big bang and big crunch phases, sort of like viewing the entire history of the universe in fast forward at a Kagillion time speed.

Hepped up on goof-goof

ok.. fantatic, markets are shooting up. I hope the crash doesn't hurt so hard when the high from the interest rate cut wears off....

BBC NEWS | Business | US rates cut to avoid recession

Now They Tell Us - Forbes.com

Ummmm... isn't the ability to evaluate risk kinda important? If we just throw our hands up and say we can't do it, doesn't that make investing a tad more difficult?

Now They Tell Us - Forbes.com

Foreign Demand Aids Durable Goods - WSJ.com

This is one of the more interesting articles I've come across and I think gives some hints as to what is going on in the economy:

1) This is a consumer lead downturn

2) From a US business perspective, it is financial institutions that are in trouble. Sure, financial institutions are important but when we talk about an economic slow-down, is it really impacting US businesses across the board or is it focused on one (admittedly large) segment of US enterprise?

3) US manufacturers like the low dollar. That is good in the short term but what happens when/if the dollar goes back up?

4) I still equate low-dollar with the inevitability of higher inflation... it is out there, somewhere.

Foreign Demand Aids Durable Goods - WSJ.com

We Need Their Money

Not a great interview here, but an important bottom line. We can whine and complain all we want about sovereign wealth funds (not that I think we should), but the bottom line here is "we need their money."

To my mind, I think it is better SWFs invest in US assets than try to sell US currency for something of higher value (not that they would, of course, because doing so would probably harm their own currencies that are pegged to the dollar.)

Here's a great (rhetorical) question, how did they get all this money to begin with? US savings.... anyone....?

We Need Their Money - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

Market’s Wild Ride Ends With Dow at 15-Month Low - New York Times

My new phrase of the day: "American contagion".

I think US/global decoupling was a nice theory, but clearly it doesn't hold. When you think about it, it is also counter-intuitive... in a globalized market all economies are being increasingly "coupled", right?

Market’s Wild Ride Ends With Dow at 15-Month Low - New York Times

Fed and a new paradigm?

As usual, the Big Picture succinctly puts into words what many of us may be thinking... is it really the Fed's job to be bailing out the markets? I'm hurting as much as the next guy with the markets tumbling, but it strikes me that much of the cause of the current pain is due to too much meddling in the past (excessive policies on both the monetary and fiscal fronts). Therefore, I'd be willing to go through some pain now to ensure smoother, more sustainable growth in the future.

We're had at least two bubbles in less than a decade... tech and housing (and I suppose an emerging market bubble that is biting me in the ass right now). So maybe this is the new paradigm; in search of increasingly more rapid growth, we need to also be prepared for more frequent bubbles and their subsequent bursts.



The Big Picture | Is the Fed a Paper Tiger?

The Fear Is Palpable. Time To Buy. - Seeking Alpha

Sage advice...In a nutshell... don't worry, be happy.

In a little less flippant way, unless you feel there is something fundamentally wrong with your current portfolio or the capital markets in general, the average investor shouldn't make moves to try to avoid or out-think the market.

So Much for the Decoupling . . . .

wait... that is what I just said.

The Big Picture | So Much for the Decoupling . . . .

The bears are having their day it seems, but I would be suspicious of too much kodiak chest-thumping. If you claim anything long enough (like the economy is about to tank) it is bound to come true sooner or later.

World stocks routed on fears for economy - Yahoo! News

"Risk aversion is widespread as the market thinks (the economic downturn) is not just a U.S. centric story," said Paul Robson, currency strategist at RBS Global Banking.


oh well... so much for the oft told theory of the "decoupling" of the world economy and the US economy.



World stocks routed on fears for economy - Yahoo! News

Time to re-enter the market?

Two views from Big Picture.... maybe yes.... or... maybe maybe...

Bernanke Backs Calls for Quick Action

Federal Reserve Chairman Ben Bernanke threw his support behind quick and temporary tax breaks, combined with the possibility of "substantive" rate cuts, in testimony before Congress.

Isn't that the formula that got us into this mess to begin with? If previous growth wasn't sustainable, with this new "stimulus package" aren't we just starting down a new path of unsustainable growth?


Bernanke Backs Calls for Quick Action

American recession, global inflation?

I heard from an economist the other day that the world may be heading towards both a US and China slow-down. The US slow-down (recession) he argued will be relatively mild and not have a great impact outside the US. A China slow-down would hurt emerging countries (because China buys all of their commodities) but will have little impact on the West.

But what about a US recession and continuing strength in China? Economic growth slows domestically and the dollar drops, but global prices remain high and even climb?

The US faces recession from within, and inflation from without. That could greatly exacerbate what may otherwise be a mild US slow-down.

The economy | A delicate condition | Economist.com

Inflation vs. Recession

What scares you more, inflation or recession?

Me....I'm more afraid of inflation so I say "boo" to agressive rate cuts.

Fed's Inflation Fears Might Trump Calls for Another Big Rate Cut - WSJ.com

Deconstructing Krugman

It seems that few economists can raise the ire of other economists the way Paul Krugman can. In his latest column on trade, Krugman begins to discuss the increasing downward pressure being exerted on US wages by increased trade with developing nations.

As Krugman lays out the basic framework of his argument, he takes pains to state (twice) that he is not a protectionist. He does state in his final thought, however, that we should be wary of knee-jerk acceptance of trade and that we should listen to those who question trade.

This final thought has lead to two interpretations by Dani Rodrik and Greg Mankiw.

For his part, Mankiw seems intrigued by Krugman's thoughts(although would like to see the data backing them up) but wonders if we should take trade-questioners seriously if they are really just closeted protectionists.

Rodrik jumps on Mankiw's statement and asserts that people who question trade should not all by labeled as protectionists.

In fairness, I don't think that is what Mankiw was saying, that everyone who questions trade is necessarily a "protectionist" (which seems to be a bad word in economist circles.) What Mankiw (I think) was asking was if we know someone is a protectionist, should we listen to their views on trade? (presumably because their views will be highly skewed against trade).

My answer to Mankiw is yes, we should list to different (intelligent) views on trade, even if they are posited by a protectionist. Trade is crucially important to the economic growth of humanity and needs to be discussed, examined and deconstructed from many different angles. The purpose of this IMO is not to try to find a way to stop trade, but to continually try to find ways to make it better.

And to Rodrik I would agree that applying blanket terms to describe people's views is not helpful, but that is not what Mankiw was doing in this instance.

Good review of what caused the subprime mess...

... also check out the final thought on the piece about the possible "cleansing" effects of a recession.

Economics Blog : Are Manufacturers' Inflation Worries Growing?

Remember what I said earlier on inflation?

Right now manufacturers are eating the increases in raw materials, but that may not last much longer.

My concern on inflation is simple, the US imports a lot of stuff, including commodities and raw material. A falling US dollar means all that stuff if going to cost more; a USD from a year ago bought more imports than it does now.

Up until now, manufacturers have absorbed these costs so as to not lose marketshare, but eventually these manufacturers (as profit-maximizing entities) will have to pass along those higher costs to the consumer, and viola: inflation.

Consumer confidence up...sorta

A quick compendium of economists' take on consumer confidence is about as clear as mud.

Confidence is up...sorta.

Spending is up...sorta.

More subprime woes in the works...kinda.

Basically, it is going to be hard to judge the economy by what people say, rather you're going to have to do it by what people do. People may say they have confidence in the economy, but if they're not going to buy houses and not going to go shopping, then clearly their confidence is slipping.

And oh, BTW, businesses don't seem it be in a great rush to spend either.

Housing: The slow band-aid method

Housing prices are "sticky", meaning that they don't just bounce up and down the way stock prices do. Rather, the housing market corrects itself in a manner that is analogous to slowly and painfully peeling off a band-aid. News reported here in the WSJ suggests however that the traditional slow peel of a housing correction this time may be more like the quick and efficient band-aid rip method. (still painful, but at least the pain comes and goes in a shorter period of time)

Rather than housing prices slowly dropping to eventually reach the bottom in a few years time (some estimates I heard where that we would still be fishing around the bottom as far into the future as 2012) it looks like the decline may be more rapid, possibly bottoming out sometime in 2009.

The obvious follow-on thought is that with a quicker drop, we could begin a quicker recovery. Housing prices going up sooner would relieve pressure on consumers who are currently feeling crushed under the weight of low savings and low housing prices. A rise in 2009 could help bring the economy back from any slowdown (or recession) we are likely to experience in 2008.

How to Avoid Recession? Let the Fed Work - New York Times

I agree with Mankiw here that the economy should be handled with a very light touch from a policy level, especially considering how unpredictable markets currently are and how potentially fragile the entire financial system may be. (Still almost 200 basis points between LIBOR and 3 month Treasuries).

I would actually go further than Mankiw and suggest that even the Fed should stay out of the way and not mess further with interest rates.

Here are my concerns:

1) Inflation: I understand the need to boost the availability of capital, but cuts in interest rates will have a continued eroding effect on the dollar and as we import so much stuff, the price of that stuff is bound to go up. Interest rates drop, the dollar drops and inflation shoots up, that is my fear.

2) I heart savings: There has been a continued downward trend in US savings. I dunno, this can't be healthy. I'm not begging for a recession, but a bit of financial pinch may encourage consumers to save more, which may shore up the dollar and may even help restore some consumer confidence (especially for those consumers who right now are shaken by a drop in their home values and have no money in the bank.)


How to Avoid Recession? Let the Fed Work - New York Times

MBIA says it has $30.6 bln exposure to CDOs - Yahoo! News

Daily stories like this is why there is an existential crisis in financial markets, as illustrated by the LIBOR/Treasuries spread.

This story is but one small example of many more to come....

MBIA says it has $30.6 bln exposure to CDOs - Yahoo! News

DIY financial crisis monitoring

Great quick article on a short-hand way to track the growing financial crisis, track the difference between LIBOR and Treasuries. LIBOR is the rate one bank loans to another and in theory should carry only slightly more risk (higher interest rate) than US Treasuries. Sure, Treasuries have the backing of the US government, so that should be pretty secure. But LIBOR has the backing of our entire financial system, which should be pretty secure as well.... but it seems it isn't.

Based on my readings, the difference between LIBOR and Treasuries will continue until the market feels that all the bad news from the financial industry has been articulated, but that could take a long time...

Gauging the credit crunch: A do-it-yourself guide

Krugman talks about the subprime meltdown

Good stuff....

Dani Rodrik's weblog: Real wisdom on trade

Yet another article to get to when I'm done with school. I've build a larger reading list post-school than I ever had during school!

I think Dani Rodrik gets unfairly labeled as anti-trade or anti-globalization. I admit, I haven't read a ton of his work, but what I have read makes me think he's more of a skeptic, wanting to point out the problems and inefficiencies in global trade.

To my mind, this doesn't make him anti-trade, but an important voice in asking the question how to make trade better.

As I read more of his material, we'll see if my opinion remains the same.

Dani Rodrik's weblog: Real wisdom on trade

Market Power: Mobile Phones Empower the Base of the Pyramid (by NextBillion Writers Rob Katz and Ana Escalante) | NextBillion.net - Development Through Enterprise

Lot of talk about the role mobile phones play in promoting development around the world, so is there space for OLPC? Is the future of development a mobile device and something as clunky as a laptop (no matter how well designed) will remain a relic of western IT usage?

By pushing PCs on developing countries, are we really just force-feeding them a technology they really don't want/need?


Market Power: Mobile Phones Empower the Base of the Pyramid (by NextBillion Writers Rob Katz and Ana Escalante) | NextBillion.net - Development Through Enterprise

For profit vs. non-profit

The battle between OLPC and the Classmate PC is a fascinating proxy for the debate of business vs. charity to aid in development.

Nokia Siemens sees profit from "greener" networks - Yahoo! News

Every bit of power savings helps.

Nokia Siemens sees profit from "greener" networks - Yahoo! News

Sovereign Wealth World: Financial Page: The New Yorker

As always, James Surowiecki finds exactly the right words to sum up a current trend (in this case, the rise of sovereign funds.)

But it’s a problem of our own making. The reason that sovereign wealth funds are so flush with cash is all the dollars we spend on oil and Asian consumer goods. If we want to consume far beyond our means, then, one way or another we’re going to end up selling off assets to pay for it.

Sovereign Wealth World: Financial Page: The New Yorker

For Geert

it is not my favorite Catherine Wheel song, but it is the one I've grooving to as I complete G7II

AMD sells 8.1 pct stake to Mideast firm - Yahoo! News

Up until now, sovereign funds have been investing mainly in PE-types of investments...ports, real estate, huge infrastructure and so on.

But pretty soon, all those countries holding mountains of US dollars will begin to look for other assets in which to invest.

Enter the tech sector.

Looks like AMD is getting ahead of the curve. But what will be more interesting is when sovereign funds get into the local VC game.

AMD sells 8.1 pct stake to Mideast firm - Yahoo! News

First going on second...

Rodrik explains the general point of disagreement between economists. If I ever grow up to be an economist, I think my first instinct is to be what he calls a "first-best" economist... but I have to admit, I am finding "second-best" arguments increasingly compelling.

Dani Rodrik's weblog: Why do economists disagree?

Bill Gates's Charitable Vistas

A critique by by economist Robert Barro on the role Bill Gates's philanthropic activities have had on the world, verses his activities as the founder of Microsoft.

While I think Barro is a little harsh here, he makes an interesting point that creating a product that increases productivity is far more beneficial to the world that simply giving away millions (billions?) to charitable causes. The argument goes that creating such a product (Windows), increases the ability for people to generate their own economic value. It is hard to argue with this point and in general terms, I would agree with it.

Of course, Gates isn’t just throwing around money and the focus of his foundation is (in part) funding research for cures that may not be economically attractive to some pharmaceutical companies (building software can be profitable, finding a drug that only poor people really need is not).

Why Africa needs a Marshall plan

An excellent opinion from Glenn Hubbard and William Duggan of Columbia Business School. As I start my new gig with the global BD team, this sort of thing very much inspires my thinking. Is there a role for big business in helping the development of small business and of economic activity in general in poorer parts of the world?

I'm not talking about charity or "CSR" here, I mean opportunities that hold economic upside for all involved; opportunities that make strong business sense for all participants.


FT.com / Home UK / UK - Why Africa needs a Marshall plan

Facebook | Oh Canada...

This pretty much confirms what I've suspected all along, for some strange reason, Facebook is really popular in Canada, particularly my home town Toronto.

Over the course of a few weeks, I got a bunch of invitation to join Facebook from friends up in the Great White North. It took me quite by surprise because I've never really looked into Facebook here in SV, and there aren't many people I know around here who are into it.

Facebook | Oh Canada...

Thoughts on the Pigou Club

Greg Mankiw references two articles that support the “Pigou Club” thinking, which is basically a carbon tax should be levied to encourage “green” behavior and account for the true costs of carbon in the atmosphere.

I agree with this position and am encouraged that economists of Mankiw’s background and expertise support such a plan of action.

I won’t summarize the two articles, but I will highlight a couple of concerns that I have. Nothing I mention here means that I necessarily disagree with any of the points raised in the articles, just that these are things I thought of while I read them.

From Jeffery Sachs quoted in Scientific American:

The key to solving the climate change crisis is technology.

Broadly speaking, I agree with this point. But I do get nervous when someone says there is a single magic bullet solution to any large problem. I’m not sure that is what Sachs means, but to my mind technology and societal behavior change are equally important. True, new technologies could inspire societal behavioral change, I just think we need to be more up-front about that or talk about how to marry the two concepts.

For example, car-pooling is a behavior change, hybrids are a technology innovation; put the two together-- car-pooling in a hybrid—and now you’re really talking!

Sachs also mentioned low or zero emissions through clean coal. I’m far from smart enough to debate him but, is that for real? I should do more research.

The next article was from Fortune. One point made here on ethanol was:

The net effect is close to nil; if you doubt that assessment, check out this recent study by the Canadian government, which found that a 10 percent blend of corn-based ethanol would reduce emissions by about 1 percent.

Again, I’m sure this is true and I have been a little skeptical of the recent craze around ethanol. But to that point, we all know that with any new technology it starts out expensive and inefficient, but as it gains adoption, price goes down and efficiency goes up. So it is consistent to say that ethanol may not be very efficient now, but it is reasonable to assume that as it gains widespread use, its ability to offset emissions will increase.


Greg Mankiw's Blog: Readings for the Pigou Club

Footnotes to trade

Economist Dani Rodrik takes two separate looks at other issues that get attached to trade agreements. One is a look at labor and environmental issues (which he seems in favor of) and the other is IP and patent protection (of which, he seems a little more suspicious)



Dani Rodrik's weblog: Trade and environmental agreements in trade deals

Dani Rodrik's weblog: More on market-access rent-seekers

Watching Blade Runner...

instead of studying.

Conversation between Roy Batty (a Nexus replicant, which is an artificial life form) to Chew, the genetic engineer who designed his eyes.

Chew: "You Nexus, huh? I design your eyes"

Roy Batty: "Chew... If only you could see what I've seen with your eyes."

Batty's line one of the greatest in cinema history. (And its engraved on my iPod)

The many faces of globalization

NY Times has an interesting profile of Dani Rodrik, a Turkish born economist who pushes alternative theories on globalization.

I gotta be honest, I haven't read any of Rodrik's work but he does seem intriguing based on this profile.

In fact, I'm not sure what he's saying is all that different from a lot of other economists, that ultimately global trade is good for populations as a whole. But where he seems to take the discussion one step farther is admitting that while global trade is good on the whole, it is not good for everyone and he highlights that there are individuals (if not entire industries) who suffer as a result of it.

Rodrik seems to posit that rather than going after trade as a single minded goal, go after it with a two pronged approach; with the second prong being a thoughtful series of policies on how to assist those who are inevitably harmed by trade.

Seems like a pretty sound strategy to me. Again, I haven’t read anything else by Rodrik so I’m just going off of what’s on the profile. However, I think I am more pro-trade than he is. If I read Rodrik correctly (based on this profile), he is much more cautious about free trade and would probably advocate keeping certain barriers up (or even returning some barriers) while certain industries improve and can become globally competitive.

I see the logic here, but I’m not sure I could support it. Wouldn’t increased global competition encourage slow industries to improve? I guess he would counter that a certain amount of protection would help these industries grow and strengthen, but unfettered competition would wipe them out before they’ve had a chance to establish themselves.

I dunno, I still can’t really buy it. But I applaud that he is able to thoughtfully point out the challenges of globalization and even when doing so, does not dismiss globalization outright.

As usual, there is a lively debate on Mankiw’s blog about this story.

Om Malik launches NewTeeVee

Quick update on what Om is up to... as I've mentioned earlier, I love the idea of online content aggregation.

But another idea I like is creating several blogs, covering different but related topics, around a single brand. It's been done before, but I think it is pretty interesting. With that, it is good to hear that Om is up to some new ideas around his winning GigaOm brand.

Cooked Books? It's Toast for Firm's Market Value, Says Prof

A main incentive for “cooking the books” is to put out solid numbers for your quarterly analyst call. This call is when analysts pour over (or act like they took the time to pour over) your financial statements and attempt to formulate a reasonable opinion on the financial health of your company.

But the thing is, while analysts may put a company in the hot seat over quarterly earnings, investors have a much longer-term view of a company. Sure, quarterly earnings may send stocks ticking up or ticking down, but the overall investor-perceived value of a stock comes from looking at the firm’s financial and reputational performance over the long term.

I don’t see individual investors having the time, knowledge or energy to make decisions based on what are (for the most part) pretty incomprehensible GAAP financial statements. And insistutional investors? I imagine they are too sophisticated to by drawn into a short-term view of a stock (I could be showing my naiveté here).

Either way, the fallacy of the numbers-by-the-quarter thinking is that investors, by and large, are short term thinkers.

James Surowiecki touches on this issue in far more elegant terms than I can muster.

Hat tip: Paul

A softer landing?

Chalk up a couple more points for those who said the economy may enjoy a softer, than rather have to suffer through a harder, landing. If inflationary pressures are easing at this report points out, then the Fed will be less motivated to increase interest rates.

Also, some signs from the housing market that the worst may be over. To me, this sounds a little optimistic. I wonder if it is more of a signal to the Fed saying if you want the worst to be over, think about dropping those rates.

Acquisitions Happen Quickly, but Integration Is a 'Slow, Steady Process'

So here is part two of the podcast series on Cisco's acquisition strategies. Here we talk about the integration process and I would highlight the word "process" because that is very much how Cisco thinks about acquisitions. Signing the deal is the first step in an acquisition, but the real work begins after the deal has closed.

Cisco has earned its reputation as being a successful acquirer because it puts so much attention on the integration of the new company.

In this podcast, director of integration Graeme Wood talks with Wharton management professor Saikat Chaudhuri about Cisco's integration philosophies and the lessons learned from integrating Scientific Atlanta, Cisco's biggest acquisition to date.



Podcast: Cisco's Graeme Wood: Acquisitions Happen Quickly, but Integration Is a 'Slow, Steady Process'


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Graeme Wood is director of acquisition integration at Cisco, the leading worldwide supplier of networking equipment and network management for the Internet, headquartered in San Jose, Calif. Since joining the company in 1998, Wood has held marketing and business development roles, and in his current position he has overseen the integration of 30 Cisco acquisitions -- the most notable of which is Scientific Atlanta, the Lawrenceville, Ga.-based global provider of set-top boxes, end-to-end video distribution networks and video systems integration. The $7 billion deal, completed earlier this year, allows Cisco to offer an end-to-end data, voice, video and mobility solution for carrier networks and the digital home. During a recent visit to campus, Wood spoke with Wharton management professor Saikat Chaudhuri about how acquiring a global company like Scientific Atlanta fits into Cisco's overall acquisition strategy, and the lessons learned about integrating on a large scale.

Imports Spurring Push to Subsidize Produce - New York Times

“The Chinese garlic totally caught us off-guard and knocked us down,” Mr. Mantelli said recently as he checked on newly planted garlic bulbs. “I think our industry has hit rock bottom. Maybe now we can figure out how to make it a level playing field.”

So Mr. Mantelli has joined the coalition of about 75 growers of specialty crops who have united to grab a much bigger slice of the federal subsidy pie.


I certainly do not want to trivialize the challenges Mr. Mantelli and other farmers face. Farmers, and the goods they provide, are an important part of the past and present fabric of our society. That said, I'm afraid I can't agree with Mr. Mantelli that subsidies will help "level the playing field" verses Chinese agricultural imports. I say this on the basis that subsidies are inherently market-distorting and therefore do the exact opposite of leveling playing fields.

“Things that help farmers band together and compete are not inherently protectionist or harmful,” Professor Morici said. “It is not an unreasonable thing for a fragmented industry to ask the government for assistance to make the virtues of their industry better known.”

Hard to argue with this point, I guess I just don't understand why it has to come in the form of government subsidies. Farmers highlighting the virtues of their industry is a great way to deal with competition, both foreign and domestic, but do they need the input of government to do this?

True, the agricultural industry in China is heavily subsidized and they have an artificially low currency. But subsidies battling subsidies will only distort the market further and prevent real innovation from taking place.

Imports Spurring Push to Subsidize Produce - New York Times

Art and science of M&A

Cisco recently did a podcast interview with Dan Scheinman, Cisco SVP of corporate development and management professor Saikat Chaudhuri (from Wharton... but don't hold that against him!)

It's a great 16 min conversation about the art and science of M&A, the importance of integrating an acquired company, and the importance of timing when making a deal.

Dan has overseen over 30 Cisco acquisitions including Airespace ($450M), Linksys ($500M) and Scientific Atlanta ($7B).

Cisco Podcasts

Cisco SVP Dan Scheinman and Wharton's Saikat Chaudhuri Discuss Acquisitions and Innovation, Part I: An Innovation 'Ecosystem'

In the first of a four-part interview, Cisco SVP Dan Scheinman talks with Wharton management professor Saikat Chaudhuri about the key drivers of acquisitions at Cisco and the critical role customers play in innovation.

Quick econ thoughts

Based on the brief snapshot in Reuters here are some quick thoughts....

Core prices are down so the Fed may be thinking interest rates are at the sweet spot. With inflation perhaps in check there may not be any sense in raising them to further slow the economy.

Could Home Depot's disappointing results signal a further slowing in the housing market? That seems a little too basic an analysis to me. But either way, it could be something worth watching and could perhaps mean that there won't be much more happening in the economy from the Fed or the government for fear of tipping this delicate inflation vs. slow economy balance.

There goes one excuse for deficits....

Latest economy figures show that productivity was flat last quarter and per unit labor costs went up. This is renewing concerns that inflation is on the way.

Here’s my take on it based on the little I know: Per unit labor costs are going up, which means labor is consuming more capital to do its work. We get this capital from abroad as foreigners find new and interesting ways to invest in the US.

That is all fine and dandy so long as we can find interesting ways to use their capital; put another way, an argument can be made for trade deficits if we use the capital coming in to up our growth rate, which is intrinsically tied to our growth in productivity.

Productivity doesn’t grow, the US economy doesn’t grow, and those deficits look more and more worrying.


U.S. Productivity Idles As Wage Pressures Rise - WSJ.com

What happens to Africa with Chinese cash?

Certainly in a part of the world as wracked by poverty as Africa, it is hard to not to be happy when anyone comes in with loads of cash for local investment.

Loads of cash seems to be what China is dropping on the continent in exchange for natural resources. Hopefully, that investment is putting local people to work on ground there but the Economist here asks the right questions, what else is Africa getting? Know-how? Greater transparency and efficiency?

These questions shouldn't, of course, be restricted to Chinese investments happening in Africa, but all foreign investment there.

If Africa really wants to benefit from this trade, individual African countries should band together to up their negotiating power and extract more for their people and their individual countries than piles of money (which undoubtedly will be misspent in several quarters.)

When I was in South Africa on vacation a while back, there was a lot of debate on TV about the benefits of doing more business with the Chinese (and again, this discussion should be extended to all powers, the US, EU, etc.) If Africa is just selling away its resources and getting little else in return, then this sort of trade will provide little more than a few poorly-paid local jobs.

I'm not advocating any sort of protectionism here, open trade between Africa and China could be a good thing. I guess what I'm saying is that Africa should negotiate for more broad investment in their countries, perhaps to beef up local infrastructure such as roads and energy transmission. There should also be some sort of real oversight with teeth to ensure that any foreign money coming into individual countries is well spent.


Africa and China | Wrong model, right continent | Economist.com

Designing For Behavior In Massive Multiplayer Games - Forbes.com

I guess between this and my earlier post today on Linden dollars, I'm seeing a lot of real-life MBA lessons are being found in the virtual world.

We've obviously discussed a lot about how to organize teams and how to keep teams motivated in real business, but it seem this is a similar problem being faced in the gaming community. How to keep people motivated (either on their own or part of a team) is a key way of keeping them engaged with your game.

Interesting parallel in real life. What is also interesting is that the more of a social community is created in a game, the less likely a player will leave for another offering. But as soon a players start leaving, that opens the floodgates and people begin to leave the game en masse.


Designing For Behavior In Massive Multiplayer Games - Forbes.com

Real exchange in the virtual world

So instead of working or doing school work, I’ve been looking at virtual exchange rates this morning. Yes…my time put to good use. Last class we had a look at exchange rates and I’ve been taking a quick look at Second Life “Linden Dollars” and seeing their rates of exchange for real USD on eBay.

What’s amazing is how consistent LDs go for in USD. The going rate seems to be about 223LD/USD with very little variation between LD lots of similar sizes—lots of thousands and tens-of-thousand LDs go for about the same price per LD. Where there does seem to be a price change is when you are looking at lots of 100 thousand LDs or higher. Here you see prices of LDs drop to about 238LD/USD to 243LD/USD.

This presents an arbitrage opportunity I think to buy up large lots, divide them up, and then sell them off.


eBay - linden dollars, Internet Games, Video Games items on eBay.com

The economic cost of doing nothing

More than anything we need to debunk the myth that doing positive from a social, environmental or ethical point-of-view is negative from an economic point-of-view. This is a false juxtaposition that serves only to act as a cheap excuse to do nothing.

What is really costly is to do nothing on the issues that challenge us today. Throughout capitalist history, the rewards have gone out to those who have sought to change things and drive innovation, the losers have been those who have favored the status quo.

Doing something about the environment (for example) is not a cost, it is an opportunity. The real cost comes from ignoring the problem.

Read on:
Climate change could tilt the world's economy into the worst global recession in recent history, a report will warn next week.

Capacity utilization...who cares?

I've been looking at some of the PPI numbers that came out today and for some reason, the one that really stuck in my mind is Capacity Utilization, which is at 82% and slightly worse than expected.

Two things came to mind when I looked at this number:

1) It has been argued that US trade deficits could be a good thing because deficits provide the US with capital. But if we're not using all the capital (although I'm sure it is impossible to get to 100% utilization), then aren't the deficits truly excessive and should be therefore reduced?

2) The other thought I had was that the US hit the 300M population mark this week. The US population is actually growing (compared to EU or Japan where it is stagnating or shrinking), so this means in the near future we will need more capital per effective worker in order to maintain our current level of growth. So perhaps then this underutilization is a good thing, as it gives us some room to easily add more workers?

Tension in interest rates

The Economist runs a story on the rise of the Asian consumer and points out that because of them, the world economy now has a back-up if the American consumer starts spending a little less. (hat-tip: Maurilio)

This all has me thinking about interest rates. Let's say the US economy slows down and even gets a little rocky, this would push interest rates down, right?

But I'm also looking at this new Asian consumer who, contrary to the traditional consumer from that part of the world, may actually have a lower savings rate. Asians saving less may push global interest rates up.

Now, like any good economic model, this would eventually reach equilibrium. The interesting question here is where would interest rates eventually come to rest, at the lower level as desired by the Americans, or at the higher levels as pushed up by shopping Asians?

Again, just throwing this out there to test my (weak) grasp of macroeconomic principles.

Will work for peace

Whenever you talk about the Middle East, you are bound to inflame the passions of one side or another so I am going to attempt to tread lightly here...

As an everyday joe looking at news from that region it seems to me (without laying blame or praise on either side) that it is an impossible, no-win situation. A stable solution in the region seems impossible from where I sit right now (in my cube, looking out the window, it is a nice sunny day.)

Peace, unfortunately, has not seemed to work. War, as we've witnessed countless times, hasn't worked either.

So what is the alternative? Well, as ludicrous as it may seem on the surface, maybe business is the answer.

The argument goes that if you invest some money, put people to work, they'll be too busy to kill each other. That's so crazy it just might work! I know my day is so packed with work and school I scarcely have time to yell at my neighbor for playing music too loud... much less engage in mortal combat with him.

I mean, what do we have to lose? Things can scarcely get any worse over there. So let's have the soldiers and the diplomats and (above all) the ideologues step aside and let's have the business people come in with some money and a business plan and see if indeed corporations can be a force for peace in a part of the world where peace has seemed impossible.

Outsourcing diplomacy to TV

This NYT story of US culture as a tool to improve America’s reputation in Europe reminds me of other recent revelations that Jackson Pollack exhibitions were used by the CIA to improve the US's image there during the height of the Cold War.

Economist talks convergence

Fixed-line phone calls are going the way of the dodo, the future is broadband and IPTV/digital video, and cable and telcos are butting heads as they continually try to steal each other's customers. We've been saying this for years, but if the Economist says it, it must finally be true.

Pretty solid "audio interview" (I guess they don't like the word "podcast") about the convergence of communication services on a single IP network.

German economic recovery continues apace

Germany ups GDP growth estimates to around 2%-2.5%. This helps it pull ahead of the euro zone in general (about 2%) but still lags the US (about 3.4% GDP growth).

I am the world's single worst investor but about a year ago I dropped a few pennies in a German-tracking ETF and it is up almost 25% so far. I hope this news could push it up further (I'm saving up for a newspaper and a pack of gum)

FT.com / World / Europe - German economic recovery continues apace

America's population | Now we are 300,000,000 | Economist.com

So what's the impact of a rising population?

Greater demand for capital overall to maintain a consistent amount of capital per effective worker (so America's hungry demand for foreign capital--and the resulting deficits-- make sense here).

Necessity for increased capital could also prove to be the mother of greater productivity invention.

Europe and Japan: consistent amount of capital per effective worker, but flat growth unless added productivity makes each worker... well... more productive.


America's population | Now we are 300,000,000 | Economist.com

Investing non-traditionally

Paul Grim talks about investing in non-traditional targets (airplanes) and I think he has cause a bit of a minor local stir. But it all makes sense to me.

Aviation is an entire industry that is dying because there hasn't been any real innovation, and from a VC point-of-view, where they see neglect in the past, they may see profits in the future. (And personally, when it comes to airplanes I'm happy to have someone innovate beyond, as Grim puts it "rubber mallets pounding ill-fitting parts into place.")

Look around now at all of the VC money going into alternative energies, that is really just funding innovation on top of 100+ year old combustible engine technology. Seems to me that this is the same thought process as Grim's avaiation adventures. Hopefully investments made today in energy will clean up our air in the future (and probably make a few people rich in the process).

So is energy, then, technology? Again, I would say yes. In the same way I would say that fire and the wheel were technology. (You may want to flip through "Guns, Germs and Steel" by Jared Diamond for a fantastic discussion on how technologies, shaped by local environments, have helped plot the development of humanity; starting with fire and the wheel, but even moving on to seed and animal breeding "technologies" and methods.)

My MySpace baby

OK, you can rightly think that I've gone out of my mind linking to some random MySpace page but here is my logic:

It is late, I can barely keep my eyes open, and I've got a ton of work to do. So what am I doing? Trying to look up random songs online that I used to listen to way back when going to school meant goofing off and not trying to improve my career.

Why am I linking to this page? Well, I loved "The Crow" when it came out and because of this page, I've come to the realization that
"Time Baby 2" is actually a better song than "Time Baby III"

Take on Tetlock: Everyone's a framer

In “Everyone’s an Expert”, Phil Tetlock (Berkeley-Columbia EMBA Organizational Behavior prof., Genius Grant recipient and a fellow Canadian!!) argues that pundits and experts generally cannot predict the future in areas they study any better than the rest of us. Often these “hedgehog” types of personalities who try to stress one big idea or concept upon the rest of use succeed in doing so more by their overconfidence rather than by their clarity of vision.

What I find most interesting about experts, particularly those who appear often in the media, is not whether they are right or wrong, but how they are able to successful frame the debate. The impact of their accuracy is second to their impact in making us see the world in their terms, and then either agree or disagree.

My favorite example of this is Thomas Friedman and his famous book “The World is Flat.” In his book he argues that technology-powered business is making the world “flat,” meaning that borders and time no longer confine global commerce. Anyone with an Internet-connection and an idea can now compete in the global economy, no matter where in the world he/she is located.

When I read his book I didn’t read anything that I myself have not experienced in my own professional life. Everyday I work with people from around the globe and sometimes I have more interaction with someone across the planet than I do with someone across the hall.
So is Friedman right? Are we in a new, unprecedented era of techno-globalism I don’t know… maybe. But just to debate the issue in his terms shows that he has succeed in his role of pundit.

What was genius about Friedman was not that he predicted some sort of new-world-order based on the Internet, but that he named and gave the concept a form. Now, simply saying “the world is flat” is a convenient shorthand for everything to do with globalization. I’m sure there are many people who have never read the book but go around talking about how flat their world is.

Applying Finance smarts to GooTube

We've been talking about different sorts of financing in my Financing class (good place to discuss these issues, I suppose) so here is some of my new-found knowledge in action:

Google buys YouTube for $1.6B.

Since rumors surfaced last week that Google/YouTube were in talks, Google's stock shot up about $10. Given that they have about 215M shares outstanding that means Google gained about $2.15B on the news alone. Which means that not only is the deal for free, they had actually at one moment profited about $500M from the deal (in addition to getting YouTube.)

I'd love to say this was all my thinking, but I stole it practically word for word from here

This all makes sense after the fact, of course; the GooTubers couldn't have known before the deal that the stock was going to bolt the way it did (although, they may have suspected!)

A wise classmate of mine reminds me that it is always a good idea to analyze your ex-ante (before the fact) reasons for doing an investment once the investment is completed. He goes on to say that even if the investment works out in the end (ex-post), it is rarely for the same reasons you had initially considered.

Group think and chaos

MIT has proposed a new project to make "group-think" a positive endeavor. They are getting a bunch of people, connected Wiki-style, to collaborate and essentially jointly write a business book on (what else?) collaboration.

One thought that immediately jumps out at me. What if we got everyone in the world to collaborate on a single project, similar to what MIT is doing. Imagine drawing on the skills and insights of everyone on Earth, and focusing that brainpower on a single project or a single piece of writing.

And how depressing would it be if the end-result sucked?

What would it say about the human condition?

I guess this goes to the heart of the question of where do really great ideas come from? A group or an individual? A wise person once told me that never in the history of the universe has a good idea been thought up by committee. But MIT's project here isn't about ordinary committees (or indeed, some sort of super-committee).

In Chaos, a single random event can launch of a series of other events culminating in a completely unpredicted result.

Is it therefore possible to use technology to take the chaotic inputs from many individuals and assemble them so that the end result is greater than the sum of the most valuable inputs from each individual?

I don't know the answer, but I think it is a great question and I look forward to seeing what MIT comes up with.

The War Against Studying Economics

So this Krugman article on WalMart its "war against wages" has been circulating among classmates of mine.

I'm a Krugman fan although I haven't really kept up with him recently because I'm too cheap to pay for "Times Select" (which was a really dumb idea IMHO) and too lazy to constantly troll the internet for re-postings.

If you know anything about Krugman and anything about WalMart, you won't really have to read his article. It is as you would expect... WalMart sucks and is making money by paying people a pittance. There, I saved you a few minutes of basking in Krugman's glory (again, I'm only being hard on his because I love him.)

Anyway, in this case a re-posting was handed to me on a silver platter, so I hereby post it here.

And in the spirit of studying for my upcoming economics mid-term, here is an attempt at what might be a rebuttal from an economist with an opposing point-of-view.

*ahem*

Without the wage rigidity of unions and (to a lesser extent) of a dominant minimum wage the market can reach an equilibrium where the demand by WalMart for cheap labor is met by a supply of people willing to work at those wages. If this market-clearing equilibrium is not reached, than WalMart would hire fewer people. So the question then become what would you rather, more people hired at some sort of "artificially" increased wage, or some sort of full employment at the market-clearing, but lower, wage.

So waddia, think? Full marks?

YouTube!

(sorry, I thought putting YouTube in the header again would be a good way to boost my traffic)

Google reportedly in talks get its pants sued off

There must be dozens of studios, labels and other copyright owners just begging for Google to buy YouTube.

Finally, someone with really deep pockets to sue!!!

Let's Kill YouTube Mania

Mark Evans (now ex-National Post) come up with the best idea I've heard all week.

Video projects to talk about other then YouTube

Not a big fan of the current broadcast model/DVR model. I like shows when I want them without fiddling through commercials (don’t mind if the commercials book-end the show). At the moment I'm relying heavily on Netflix and stuff on YouTube for my TV fixes, as I’ve discussed elsewhere.

With that in mind I read with great interest Om’s GigaOM »interview with Janus Friis, of Kazaa, Skype and now the mysterious Venice Project fame. P2P TV… sounds a little like YouTube without all the huge bandwidth issues we always hear they have.

Also, this project is trying to go legit so hopefully there will not be another endless series of repetitive articles wondering aloud over and over again how on Earth will YouTube ever make money, who is going to buy it, for how much, and will the studios pull a Napster on them.

In case you’re about to read one such article I’ll save you the trouble… no one has a clue what is the answer to any of these issues.

Smaller start-ups, smaller funds

The Sleuth has a great video interview with Neil Sequiera with General Catalyst Partners talking about how GYM (another goofy IT acronym… this one means “Google”, “Yahoo” and “Microsoft” but for some reason I find this acronym amusing) are aggressively buying small technology-play companies. He goes on to state that GYM would rather buy small companies and just focus on the technology purchase. If the start-up gets too large, then GYM figure it is cheaper to just build the technology themselves.

This is probably true for some of these more consumer-facing “Web 2.0” applications but I doubt it holds true for deeper, more complex technologies. There you probably want a slightly more mature company with some market traction. This way the acquiring company can pick up a technology that has already been market-tested, and they can pick up a few more customers in the process. But I don’t think this is the level that Sequiera is talking about.

A lot of what he is saying was also recently said by PayPal co-founder Max Levchin said at a talk I recently attended at B-school. If Sequiera is saying it, and Levchin is saying it… so it must be true

Sequiera also goes on to say that VCs are really only interested in bigger deals, because smaller ones aren’t worth their while. With that in mind, I was interested to read about microfunds. These are smaller funds some VCs are putting together to go specifically to go after the $10m-$15m deals.

Makes sense… if companies now require less capital to start-up, VCs should probably evolve to address and invest in those smaller firms.

Armstrong 'got Moon quote right'--GoldWave PR

I gotta admit... the whole "small step for man" think did confuse the heck out of me for a while. Glad to hear that GoldWave cleared things up and got some super amazing PR for themselves in the process.

Did they clean up the Armstrong audio themselves as a PR stunt or where they just used as part of some other effort.

No fix for Netflix.

Wisdom of the crowds or is Netflix out of good ideas? I dunno... this sounds a little flakey to me.

I mean asking the public to come up with a new tag-line or sneaker logo is one thing, but I imagine it is hard to come up with a new algorithm off the top of your head (but what do I know about such things... I'm in PR).

Hey, if someone out there can write me a new algorithm or computer-program thingy that increases my income by 100% (or more), I'll shoot you a few dollars also.



TechEffect: Netflix looks to the public for help

Two reads on Yahoo: BusinessWeek and Economist

As the eldest among my siblings, I used to get caught in-between my parents when they used to argue. I come from pretty hysterical, melodramatic Mediterranean stock, so you tell me how comfortable that position used to be.

I just got that feeling all over as I read about Yahoo’s acquisition strategy. Yahoo is too bureaucratic says the Economist, but BusinessWeek says that Yahoo’s acquisition strategy is the path to growth paved with gold.

Waahaaaa….. Mom and Dad… can’t you just agree???? Bwahhhhh!!!!!

So what am I to make of this? This disagreement by the two critical and highly analytical publications of BusinessWeek and the Economist.

Maybe one of these stories were filed in a parallel universe where Yahoo is really a great acquirer of companies…or a crummy one depending on which universe you happen to be as you read this.

Or even better, maybe this proves that there really is no such thing as pack journalism and that reporters are careful, thoughtful people who diligently research stories and in doing so may actually come to different, but well argued positions.

Um… yeah… I’m going with the parallel realities explanation too.

Content aggregation is the new black

Content aggregation… that’s been what’s on my mind as of late (well, what’s been on my mind that I feel like posting on this blog in any event.)

So lots of people what to make content, right? Everyone’s a critic, a pundit, a poet, an intellectual, a comedian….whatev, whatev.

And hey, that’s great. All sorts of people turning out all sorts of content and for the most part, the content is really only of value to the content-producer’s mother. But somewhere, somehow amongst all that mediocre stuff must be some good stuff, or at least some stuff you can convince someone to pay for or otherwise sponsor. This isn’t Chris Anderson “Long Tail” stuff… that’s not what I’m referring to. Well, OK, maybe I am a little but long tail stuff really isn’t of interest to me at the moment.

What is of interest to aggregating all sorts of content until the aggregated whole is greater than the sum of its disaggregated parts.

I was blown away by the deal SeekingAlpha cut with YahooFinance! I mean, that was awesome.

What is interesting about this deal is that SeekingAlpha is a blog that aggregates financial and stock information from many different individual contributors. Some are in the finance business already; some are private, individual investors; some are independent bloggers; and there is even a PR person who contributes regularly.

Once comments are on the SeekingAlpha blog, they will now be linked to a company's page on YahooFinance, right next to articles by mainstream business publications and even the company’s own press releases.

SeekingAlpha does’t write-up diddly-squat, they just rely on their contributors who post their thoughts for… get this… FREE. SeekAlpha gets tons of content that they pass along to Yahoo and they pay jack to the content providers. Now there is a business model if I ever heard one. True, they do apparently pay some human editors to go through the stuff so the content doesn’t read as free as is costs.

Anyway, I still think it is pretty cool.

Playing go-between: Mankiw vs. Stiglitz

Economist Joseph Stiglitz uses a green arrow to take aim at the folly of using GDP as the target number for assessing an economy (and yes, I am having fun with this mental image.)

It looks like he’s thinking about some sort of “total cost accounting” that takes in environmental degradation (which he likens to depreciation).

Sounds good to me. In assessing the health of a country’s economy its income shouldn’t be the only thing that is counted, but how it is depreciating its assets.

Fun part about taking an MBA is that I can read statements like this and actually know what the @$@*%#@ he is talking about:

A startup can have no cash flow and yet be creating a software program of immense value. A company with positive cash flow can be running itself into the ground as its capital depreciates.


But speaking of MBA, Greg Mankiw, the author of one of my Econ textbooks, thinks Stiglitz is being “pedantic” and you can color him unimpressed.

Are dogs' mouths really cleaner than humans'?

FINALLY!!! A truth revealed!!!

On lonely girls and murderers...

For much of the past few days I’ve been sucked in by the invented on-line personalities of two different people. Last week, I knew nothing about either of them, but this week it feels like I’ve spent hours clicking through the various details of their on-line lives. One has amused me, the other has horrified me.

One of them seemed real, but we found to be a fake. The other seemed fake, only to find he was so terrifyingly real.

The real/fake one was Lonelygirl15, the young YouTube diarist who was recently uncovered (by the son of Silicon Watcher Tom Foremski, incidentally) to be an actress playing out a well-rehearsed script. Upon reading all of the brouhaha about “LG15”, I checked her out on YouTube and I have to admit that I found myself drawn into her little misfit world. Her diary on Pluto’s demotion I thought was particularly funny and summed up the whole high-school misfit experience.

I find the whole “LG15” episode fascinating as it blurred the boundaries of on-line and real world existences. It is no wonder some fans were upset when they found her to be fake. But did that make her stories and insights any less relevant?

The fake/real person was Kimveer Gill, who created a sinister on-line persona of an “angle of death”, and then brought this persona to life in the most horrific way. He was a real person who created his character of “Trench” on-line, and then defined that character with photos, internal monologues and ruminations for all to witness. But the existence of "Trench" seemed so contrived, so cliched in its comic-book fantasy.

He stands in the photos stiffly, dressed in black, with a gun in what appears to be a very suburban basement. I mean, what suburban boy has not posed in front of a mirror in some get-up with some sort of weapon acting out some sort of adolescent hero (or anti-hero) fantasy? (Granted Gill was not an adolescent). The horror of course is that Gill did not put away his banal fantasy like 99.9999% of us do, but chose to act on it.

In his mind, the barrier between fantasy and reality broke down, as did the barrier separating on-line from real life.

Daily Show off YouTube!?!?!?

While I'm pretty laissez-faire about the idea of certain copywrited materials appearing on sites like YouTube (c'mon, that’s tones for free publicity... I bet Daily Show owes at least some of its enormous popularity to YouTube), Mark Evans makes an interesting point that some hardship may be needed for these video sharing sites to eventually develop some sort of business model.

Basically, he highlights that video sharing sites attract a lot of viewers using clips that are, let's say, ambiguous at best in terms of their legal right to be on these sites. Because they have easy access to content and users, video sharing sites have been able to attract attention, investors and advertisers without too much effort. But if the clip-spigot is turned off and viewers float away, will the business models of these sites still wash?

(Regardless of the outcome… please don’t take Daily Show off of YouTube)

Content Isn't Worth a Damn

I totally agree with VCMike's statement about content not being worth a damn.

With SO MUCH CONTENT being produced everywhere (blogs, games, YouTube and we still have the MSM) it seems to me that content is turning into a commodity product. Anyone can produce it, anyone can consume it, barriers to entry are low and the price people are willing to pay for it is dropping like a rock.

I get all the content I want and all I pay is a monthly broadband connection (actually I expense it), a dirt cheap BusinessWeek subscription, my Economist was free with my NPR donation (you guys need to bring the Economist back, BTW), my Netflix subscription and MAYBE the occasional movie ticket.

All in all, I'm probably not shelling out $30-$40 months for content and I promise, I am getting it all legally.

Online ad spend is going up on average across the industry, but with so many online content sources out there I gotta think that competition for those dollars is fierce. From the advertiser POV, do I go with the popular site with broad appeal, or the small site with a niche audience?

Content is a way to try to lure an audience, but it isn't enough to keep it and it will be difficult to maintain a critical mass of audience that is of high enough value to advertisers.

That is why VCMike is right on the money, you need something else to form a solid relationship with an audience. I dunno, subscription content? Aggregation tools? Conference and special events?

Hey, if I knew I'd have a nicer car by now. But really, if engaging, witty, insightful, high-quality content was all that was needed to attract and maintain an audience, my sitemeter would go through the roof.

Digital TV Nation

Am I excited about the fusion of the Internet and entertainment? Sure, who wouldn’t be? First off, the more the Internet gets used (for entertainment or anything else), the more money Cisco makes and the more job security I have. I like job security, so I like Internet and entertainment.

The Internet is a great delivery vehicle that can allow you to access any movie at anytime. I’d love to do a search on my TV and just chose what I want to watch as easily as I choose what website to check out.

I may have mentioned this somewhere before but I think I am the only PR person in the history of the universe without access to TV at home (I hope my boss isn’t reading this… who am I kidding, no one is reading this….) So not only do I have no clue what is happening right now on CNBC, nor do I have a first hand opinion on Katie Couric’s debut on CBS News (nor do I care to have a first hand opinion), but I also (happily) have zero access to a lot of the rubbish that currently passes for prime-time television.

For my TV fixes, I turn to Netflix to get my Sopranos, Simpsons, and The Office (UK version) updates. I reckon that is all I need at the moment. If I hear something is good (Rome) I’ll add it to my Netflix queue and check it out later.

It’s TV procrastination… why weed through a ton of crappy TV today, when you can check out only the decent stuff tomorrow?

So I guess this is where the Internet comes in. So-long Netflix and with a click of my TV mouse I can watch the show of my choice in an instant. Nice thing is when the Internet becomes directly plugged into my TV and I can access all my content straight from the boobtube instead of always via YouTube. I mean, I spend enough time in front of my computer for work, so I totally do not want to use it to watch TV as well. Besides, the resolution isn’t that great and there are fingerprints all over the screen because I keep trying to choke the damn thing every time it crashes (which is often… don’t get me started.)

Anyway, some Cisco folks went to talk digital film at the Telluride Film Festival the other week. Really interesting stuff. What is reassuring is that you’ll see here that ARTISTS are still in-charge of the creative process (hopefully!) so the advent of new technology will hopefully enhance the creative spirit among filmmakers, rather than replace it.

Media and B-Schools

I’m currently doing Berkeley-Columbia Executive MBA Program and am loving every minute of it. My profs are great, the classmates are the best and I’m finding the whole process both challenging and rewarding (although I now have no time to do things like blogging, exercising, sleeping reading for recreation, interacting with other human beings).

We’re only in our second semester so there are still a lot of classes to come, but best I can tell there won’t be a whole lot of discussion on the impact of the media and on-line media on business.

In my mind, on-line sources like blogs, bulletin boards, vlogs, and user-generated content sites constitute part of the on-line media. So when I refer to on-line media as a shorthand, I’m referring to these outlets as well as the more traditional media outlets such as NYTimes.com, for example.

OK, with that out of the way…

We used to say that we live in a media-dominated society, but I do not think that is still true. We live in an entirely media saturated society where opinions (and occasionally facts) invade every aspect of our waking lives. This to me is a PR challenge for companies but I still think, despite all the information and PR consultants out there, companies are ill-prepared to deal with this challenge and, more to the point of this posting, B-schools are ill-prepared to explain the impact of these new forms of media to students.

The impact of the media does not fall neatly into a B-school program. It is not economics, accounting or finance (obviously) but (more importantly) nor is it marketing. There are elements of media studies that are relevant to marketing (i.e., getting a news story about a new product) but there does not seem to be a broader look at how the evolving media culture impacts the way a firm is viewed by both internal and external constituents.

A decision a manager makes, be that decision one of finance, HR or marketing, now has the very real potential to be discussed and commented upon openly on-line. Are there schools that study the impact of the media on a business? This to me seems like a critical issue and one managers need to have some knowledge of.

Doerr on VentureBeat

Matt Marshall of SiliconBeat fame has re-invented himself as VentureBeat and what a fine job he has done. To be honest, I haven’t had the time to fully explore the site but at first blush looks like a sophisticated and informative blog, definitely raising the bar of similar out there.

One feature I really like is this one, where you can look for companies that interest you. Very clever and a great way to add value for readers.

Matt also hits a home run with his contributors like Silicon Valley uber-VC John Doerr . Matt has been giving a lot of coverage to the emergence of greentech funding in the Valley, a topic he is obviously very passionate about. Well it seemed he got Doerr to share a few thoughts about this as well.

As usual, whenever someone tries to present a progressive view and illustrate how markets can help bring about positive change, there are cynical ignoramuses who end up taking up a lot of room in the comments section but really say nothing of value.

Anyway, the Doerr essay is an interesting, if high-level thought on the power of markets to bring about desirable change in behavior.

Noah takes a photo of himself everyday for 6 years.

Just wanted to share an amazing video. Yes, it is a little derivative, but a stunning work none-the-less, if more on a technical level than an artistic one.

A Chuck Close of the YouTube set…


YouTube - Noah takes a photo of himself everyday for 6 years.: ""

Om Says "Web Workers of the World...Unite"

I like it… I’m not sure I get it… but I really really like it. As Om Malik branches out to make his mark in the world of independent journalism, he has launched a new site called WebWorkerDaily.

It has a great design and a great feel and I’m kinda excited just by looking at it. Now, I gotta be honest (which is tough for a PR person) I’m not 100% sure what the site is supposed to be about. I don’t think it is just another blog for Om. I reckon this is supposed to be more community oriented where people log on to share thoughts and ideas about being connected, but working independently.

If I’m right, and if this catches on, then it could be really cool. I’ve been a huge fan of “wired working.” I live in San Francisco and work in San Jose so any day that I can save the commute, stay up in SF but still get out of my shoe-box-sized apartment, and spend an afternoon doing emails from a café is probably a day that I’m far more productive that battling traffic for 1.5 hours and spending a day in a soul-destroying office cube.

While there are a lot of great blogs out there, GigaOm is hands down the one I pay most attention to. Om covers virtually every space that impacts Cisco and, more importantly, the interplay and cross-overs between those spaces. Om knows telecom like few others so his insights I know come from years of talking to people about the state of the industry; so you know you’re always dealing with quality when he writes.

Now, of course, he’s got a whole new host of writers on the newly independent GigaOm. They all seem to be top notch and I’m find this site as informative as ever. If I have one complaint about the new GigaOm, is that there is TOO much stuff on this site and rarely is a post up long enough on the front page to get a good dialog going between readers.

But with the WebWorkerDaily, it looks like Om is trying to expand his on-line real estate which is way smart. One blog site does not a business make, IMHO. I don’t have any insight into anyone’s finances but it just seems to me that it would be too difficult to make any serious cash just by selling a couple of banner ads on a single blog.

A blog I don’t think can exist in a vacuum and needs to be part of some sort of larger strategy. When I think of bloggers, for some reason I think of Bloomberg News. Bloomberg (if I understand them correctly) essentially uses the news to sell terminals. Their real business is terminals, their brand making exercise is news. That to me is the model for bloggers. The blog builds the brand and creates noterity, but the real business itself has to come from other sources. Those other sources could be other aligned blogs or on-line services, or they could come from off-line sources like organizing events and conferences. (Looks like Paid Content is getting the groove on that as well… will need to follow that trend to see where it goes.)

Anyway, I don’t know what Om’s strategy is, but I wish I did. I don’t think anything I’ve written here is news to him so I’m sure he’s got few tricks up his sleeve. I wasn’t terribly impressed by the whole job board thing , but I don’t think that is the be-all and end-all of his GigaOm strategy. I’m sure there are more things to some and WebWorkersDaily is a peak perhaps to what’s in store.

Mark Evans :: My [NYT] Times My Way

Another blogger-journalist (but one who has kept theday job), Mark Evans hints at what's to come with the the new My Times, from the NY Times.

Battle for the eyeballs continues. Who will win, personalized media outlets or personal media outlets?

Another day, another journo-gone-blogger

So Matt Marshall got off to a rough start today . Despite what I’m sure were careful preparations for launch, the lights never turned on at his new blog VentureBeat (or if they did, I blinked and missed them.)

Some 16 hours or so after launch the site still remains dead. Anyway, I’m sure this is but a minor blip in what will otherwise be I’m sure a glorious blogging endeavor. Who knows, it could even go down as some Silicon Valley lore someday as the auspicious beginning to a media empire that will someday will rule the world….or something.

So not that I’m keeping count, but that is now Dan Gillmor , Tom Foremski, and Om Malik who have left comfy jobs with publications to start their own blogs. I’m sure there are a bunch more that I’m missing.

Dan’s the director at the Center for Citizen Media and will soon be hawking the paperback of his book; Tom’s got a couple of other blogging gigs with ZDNet and “Friday’s with Foremski” with the Chron; and Om still has his column with Biz2.0 and he’s venture backed.

So they all have side jobs, as well as job boards.

So other than his blog, I’m wondering what else Matt has up his sleeve. I guess his servers are going to keep me wondering.

Don’t get me wrong, I’ve got an enormous amount of respect for all of these guys. They’ve rightly earned the title “entrepreneur” and they are trying to remake one dog-of-a-business, the media business. From a media and cultural studies point-of-view, they are the way of the future.

My question remains, however, are they the way for the future from a business point-of-view.

Yes, I know TechCrunch is making gobs of money. I saw the article in Biz2.0 as well. But I’m still wondering if there is a sustainable, repeatable business model around these blogs.

(Arrington, however, seems to have no interest in sustainable business models and is waiting for all the other schmoes to go down.)

Also, what’s the market size? Can the market support a bunch of stand-alone blogs that are all (broadly speaking) in the same space?

Reading what these guys write is always interesting. Seeing how this stand-alone tech blog market plays out will be even more so.

Bloggers really need a job

Weren't we just talking about this????

Now Silicon Valley Watcher has launched a job board


And forget what I was talking about $150 or $100/pop job postings, the Watcher is offering them for free! (So far, one has signed up...a marketing position in New York.... hmmm...interesting....)

Guys, seriously... if you are all writing about the future of Silicon Valley and the future is job boards, then I'm cashing in whatever stock options I have that are above water and heading for the hills.

Scoop on the Sleuth

One of my favorite bloggers is Silicon Valley Sleuth. The Sleuth doesn’t try to be an “insiders” blog that talks about the names and faces of Silicon Valley, or one that tries to latch on to the latest tech fad. I like the Sleuth because it is a solid meat ’n’ potatoes tech blog without the pretension.

What’s on the Sleuth? What works, what doesn’t; what’s real, what’s vapor; who’s got something, and who is full of something.

Although the Sleuth is not a technologist by training (I think he studied Russian and Eastern European Studies or something really useful like that), he is one of the most tech savvy bloggers out there. Maybe sometimes he’s a bit too savvy and ends up writing about things that bore the heck out of me (try as I might, I can’t get excited about open source software). But even then, he puts a spin on it that makes the blog colorful.

But most of all what I like about the Sleuth is that he is trying to innovate. He is the first (and one of the only?) bloggers to actively incorporate video into his blog. And he does so using available tools such as YouTube, Yahoo Video and Google Video, which adds (dare I say) a more community, open source feel to his blog.

Also, the video is news video, not a vlog of punditry or self-congratulatory “insider’s insight.” It’s straight up technology news from the technology newsmakers. An idea so simple no one else seems to have thought of it.

And I’m not the only one who has noticed the Sleuth’s video innovation. Luminaries like none other than Sun CEO Jonathan Schwartz also appear to be fans and are ripping off some ideas.

Video seems to be good for traffic as Sleuth says that his exclusive “One Laptop Per Child” has attracted an impressive 100,000 viewers so far.

One thing worth noting is that unlike guys like Om Malik or Tom Foremski, Sleuth is not independent and has the backing of the mighty VNU corporate machine, so maybe that gives him more resources to add things like video? Who knows…

Anyway, I know that journalists consider it faint praise indeed when a PR flack pays them a compliment (only when they rile us up and we are forced to use threats of violence and lawsuits that many feel like they’ve done their job). But in this instance the Sleuth will have to listen closely because I am saying something nice.

Farewell, Pluto - we thought the world of you - National - theage.com.au

With the endless horrors going on in the world right now and an overwhelming feeling of helplessness to do anything about it, I find it uplifting to read about a debate that does not involve life or death, but makes us contemplate the wonders of the universe.

I've been reading a few stories on Pluto's cosmic demotion, but leave it to the Aussies to really sum up how people feel about this decision:

"Pluto," she writes, "retains an emotional hold on planethood. People love Pluto. Children identify with its smallness. Adults relate to its inadequacy, its marginal existence as a misfit."




Farewell, Pluto � we thought the world of you - National - theage.com.au

Bloggers get jobs...

So GigaOm has launched a job board a few weeks after TechCrunch did the same.

Michael Arrington of TechCrunch held out an olive branch to Om to start up a separate company for job postings which Om declined.

Om’s a smart guy and to be honest, I like his blog more than TechCrunch (matter of what I find interesting) and I’m sure he has his reasons for passing on Arrington, but I can’t figure out what they are.

Job listings are a commodity product, you can get them anywhere and it doesn’t really matter where you get them. And with RSS readers, for the most part you may set up your search once and then you’ll have no idea where you got them from. They’ll just show up in your reader.

So why is Om attempting to make a big splash in a commodity market? He set his price at $200/pop, which is the same as CrunchBoard. This is smart because the last thing either probably wants is a price war. However, I’m sure some other blogger is going to come in with a cheaper job board and there goes the market. No barrier to entry, no differentiation of value.

I see the blogger job board market last a short while and then melt away like Icarus’ wings. It takes one blogger with an RSS and $50 postings and the whole market will plummet to Earth.

Sure, both Om and Arrington could argue they get higher traffic numbers, but who cares? I’m a MyYahoo junkie. All I need to do is set it up once and then I’ll never know/care how much traffic the original site gets.

In fact, you could imagine a Craigslist type place with a solid RSS feed, no content to get in the way and super-cheap price for companies and there you go.

Or, you could imagine that either Om or Arrington see a slow down in their $200/job post model, and dip their toes in the $150 pool. Then it is just a race to the bottom.

I’m not trying to be a bag of downers… I really hope both Om and Arrington succeed and that they can finally create some sort of repeatable blogger business model. I just don’t really see how offering competing job post boards will do it.

Pluto sent down to Minors

A view of astronomy from the dug-out. It is sad, but I think demoting Pluto was the rigth choice... I just feel like I've lost part of my childhood in the process.

Major League Baseball : News : Major League Baseball News

Selling arms by the pound

Yesterday Cramer on Mad Money talked about how Cisco is selling arms to both sides of a battle (cabelco vs. telco) like the Swiss.

Here's USA Today article on how that battle is shaping up on Long Island.

As a Sopranos fan, I worry what happens when turf wars get a little too heated around that area....

USATODAY.com - Verizon, Cablevision skirmish as war nears