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Archive for February, 2009

In the 6th edition of “On the Origin of Species” Charles Darwin lamented over the power of “steady misrepresentation” of the facts and observations of his work 150 years ago. Those were days when God’s grace meant you could be hanged for opposing what everyone knows was the “WORD”.

While there has been a steady diet of multidisciplinary science that continues to support, extend and find nuances of his findings on natural selection, genetic drift, mutation and speciation, there is, and will always be groups that obfuscate the information in favor of their own approach to origins of life and man in particular.

As authors Glenn Branch and Eugenie C. Scott have laid out in their review in the recent Scientific American, these various miscreants of misinformation; these groups or people that have no science, no peer review, no database of exceptions, no body of anecdotal evidence to support their views also have no conflicting data points they can point to in support of their views. In fact, their approach is not about science, evidence, methodology or technology. It is about “faith in dogma” and it is shared by millions of people around the globe.

The real pariah in the whole mess is the body of people that take a “live and let live” approach. You know who they are… “Hey, as long as they don’t make me kiss a ring, they can do what they want in Rome.” These are the people who traffic in ambivalence. They too will always be with us. They sit on a fence, not necessarily supporting dogma and yet the view that man is a kin of other primates, that our hiccup reflex is a remnant of our fish history, or that we have to deal with the almost two dozen versions of extinct humans (Viktor Deak) is just upsetting enough, if not unconventionally disturbing for them to ignore. (As if prayer for soldiers being shot at isn’t or holy wars where millions have died are somehow, in comparison, OK.)

Remember Galileo who was convicted of suspicion of heresy for following the position of Copernicus which went contrary to that laid down by the Roman Catholic Church authority of Holy Scripture.  All of this today is still about the dogma of faith vs. data of science. Same stuff, different year.

There have been crusades, ethnic cleansing and the other stuff that made up the Dark Ages. And here we are in the Spring of 2009 reviewing our civilization and thwarted by those who don’t want people to figure out what the heck is going on out there.

Enter Governor Bobby Jindal who is a potential presidential hopeful of those currently out of favor in US politics. In 2008 he literally signed the Louisiana Science Education Act into law.

Marketed as supporting critical thinking in classrooms, the law threatens to open the door for the teaching of creationism and for scientifically unwarranted critiques of evolution in public school science classes [in Louisiana].

(Branch and Scott, 2009)

Does it sometimes seem to you that, while we may have evolved, there are some that didn’t get the memo? Next FOX News will be telling me that Mike Huckabee, former Presidential hopeful (who believes in the literal and biblical interpretation of Genesis) will administer the plan.

Chezz!

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I did a lot of business travel in the last 18 months and have witnessed the variety of TSA and airport security changes.  Most of the improvements have actually, well, improved the security experience.  However one thing that NEVER changes is the Threat Level.  At airports it sits at ORANGE, one less than RED (SEVERE).

I cannot find a chart or trend or any historical log of the threat level bulletins.  Only the daily update.

This ambigious scale and its unchanging nature defeats its intended behavior shaping power.  This scale is no better than issuing alerts when there is an actual threat.

If the goal is to shape people to be more aware in general, this scale lost its use a long time ago.  It’s like a banner ad that you no longer notice on a web page.  Or, more specific to the airlines, it’s like the Safety Information cards NO ONE reads.  (The Hurricane Saffir Simpson scale, when used for public awareness, also suffers from this same problem.  Hurricane warnings extensively discussed here.)

The ambigous nature of the scale itself also confuses.  What should one do if the threat is HIGH but not SEVERE? what’s the difference?  Shouldn’t I be GUARDED even if the threat is LOW?

If you want people to strength behavior you need to vary the stimulus.  Hell in this case, you don’t even have a set of behaviors you’re reinforcing…. just a “state of being” or something weird like that.

To make this more effective as an awareness shaping tool, the TSA and Homeland Security should create signs and messages that vary and are behavior specific.

“Take a look around you, is everything as you expect?”

“Last week’s reported incidents: X, Y, Z. Do you have something to report?”

“Pay attention.  Reported incidents and diligent citizens reduce risk of incident by 50%!”

Perhaps these messages are a bit strong, hopefully you see my point.  Marketing types call this a “call to action” and marketing folks know that you must vary the call to action to continue to heighten the response.

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At the delayed morning meeting with an attorney that hates attorneys, we got around to talking about the money… yeah, THAT money.

There is the Stimulus Package I & II, the normal government loads to states, the bailout to some banks (but not the ones with a passion for customer loans), the bailout of the car mfgs which seem, now in retrospect to amount to overspill from a Super Bowl game by comparison. But en masse, we’re talkin’ real money here folks.

Does anyone grasp the numbers anymore? Yeah, yeah, yeah, I know that is slightly rhetorical.

We do need to do some stuff and that is what we are doing but it occurred to me that the numbers are all running together and perhaps even Federal Reserve Chairman Ben Bernanke doesn’t have the necessarily grasp on the meaning of those $$$$ trillions. But, maybe I am wrong. He deals in money. We don’t. For all we know he may be more scared than we are… On the other hand, none of them want to have the collapse of the world’s leading economy on their watch.

During the Obama speech Tuesday night the camera’s panned to Hillary in the front row. It’s as if a little cartoon bubble rose above her head during the 2nd third of the speech and it had in it…

“I’m soooooooooo glad you are standing there right now….”

Oh, there is a new item that came out after the address to both Houses and the Judiciary of the government… another $75.5 billion for the two fronts of the war… which seems to have gone to the, “I don’t know why we’re here now; ask the guys from Halliburton” stage and another $663.7 for 2010 defense spending.

So, where are we? We have a $3.5+ trillion plus budget and we are not sure what that will bring or yield. Talk about a ‘faith-based’ initiative! We need the changes but no one said the right ones would be the first ones.

Here’s the deal. The people in 99.5% of the positions in Washington DC got there by doing some things better than their opponents. They won. They learned from those there how it all works. They copied those methods and those rationales. They were re-elected with the promise to continue to do the job like they’d been doing.  (read: status quo) That also is the case for the bankers, the auto executives, and some of the brokers on Wall Street.  You’ve heard it before and it applies here as an example of what went terribly wrong:

to a carpenter, every problem can be solved with a hammer.”

Now we need some new technologies and greater grasp of other ‘tools’ besides a hammer.

Changing individuals is difficult.  Changing cultures is almost infinitely more complex to pull off. You have to change the contingencies, the consequences of behavior to get different results. Not at all easy. The culture there is strong and ideas of what is right and wrong only die when the people holding them die. Any changes that come quicker are difficult to anchor because no one knows how those will work in that culture.


And, just about the time they get a rhythm and some solutions there will be another election. That is why you have to follow what’s going on.  Short of death you can get rid of those that don’t do right by the country’s standards.  Elections!

One component is to follow the money. Another is to follow your representatives in Washington and your state as they get THE MONEY. Things have got to change. No one wants to pay more taxes but everyone wants something more from the government.

You want a bailout? It will cost your kids. You want cheap money? It will cost a lot more? You want something for nothing? Good luck with that… maybe the tooth fairy will entertain that idea but even she require a tooth.

It’s time… lead, follow or get out of the way.

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Ok, let’s review…

Car crash outside the front window every Friday night… what happens?

Keith Olbermann goes nuclear on an unsuspecting dolt…what happens?

Car crash on 3 corner of Darlington raceway… what happens?

Rush Limbaugh says he hopes the President ‘fails’ in efforts to steer the country… what happens?

The latest, but not the last unfortunately, is Dr. Phil… Dr. Phil has a two-day interview to skewer his “what’s her name” patient and what happens?

(I really hate myself for writing this but there are contingencies everywhere.)

Highly probable that no one will read this any way ‘cause it is not as entertaining as Dr. Phil turning into Dr. Jekyll, the absolutist psycho-blimp – not his physical state necessarily but his approach to working through challenges that float around pop media based on the ratings…

Oh, yeah, the ratings… Up 20%. Gee, that’s a lot… must be a relationship there between getting in front of the best parade in town once you know is being watched on TV and trying to look like the band director.

When combined with his psycho-shock-jock approach about an 11 year-old murder suspect, he is in full stride. His mother is so proud! But, then she is getting a stipend no doubt so that is hardly the criteria to “oh and ah” over. This makes Dr. Phil what???, the “Dr. of talking heads?” Is that different than a “talking heads Dr.”? Somebody else figure that out, please!

Or, it could be a contract year for him at his network and, like any self-focused pro athlete, he is playing for a new contract rather than the integrated best interests of his headline sucking patient.

We are watching the consequences of media at work here. Everyone needing to stay in the limelight has an opinion on those things that they don’t understand or affect. It is hard to tell the opinion of a taxi cab driver in Denver from the pundits these days. Biggest difference is that the taxi cab drivers have no media contracts to pump. Yup, there were 8 or 9 celebs eating their $250 a plate dinners at one of the awards celebrations that had their opinions as well but no solutions.

No, I refuse to weigh in on this nationally pop-news dot. Every time another dot is added, look around. What you see is self-puffery from everyone involved…everyone! Everyone has something to gain from doing what they are doing. Not so you say; prove me wrong.

Oh, …returning to the review above, contingency management is operating there too in each and every example.

In each case there is a greater likelihood…

… you’ll watch out the window on Friday night; you’ll watch Keith parley his tirades to bigger dolts in the future; people will want tickets near the 3rd corner of Darlington next year; and the Rush-ter will get larger columns in the press and media reports than he otherwise wouldn’t received.

And of course, if you attend to Dr. Phil and what’s her name, you are part of Dr. Phil’s contract extension because you were part of that 20% spike. He is just responding to the consequences he’s experienced in the past… just like you and I do.

Move on.

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Here’s the transcript from tonight’s Presidential Address to Congress:

Get it from the WhiteHouse.gov site.

My favorite part:

But it is the responsibility of every citizen to participate in it.  And so tonight, I ask every American to commit to at least one year or more of higher education or career training.  This can be community college or a four-year school; vocational training or an apprenticeship.  But whatever the training may be, every American will need to get more than a high school diploma.  And dropping out of high school is no longer an option.  It’s not just quitting on yourself, it’s quitting on your country – and this country needs and values the talents of every American.  That is why we will provide the support necessary for you to complete college and meet a new goal:  by 2020, America will once again have the highest proportion of college graduates in the world.

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Reproduced from  a private email by Mahesh Johari:

For most of the last 25 years we (as a nation) have been sold a story about investing in stocks for the long run.  Invest steadily, mindlessly, and over the long run stocks will earn almost 10% annual returns.  By the time this bear market has ended, this notion will be questioned by a great many.

I’ll give all of you a head start.

Let’s quickly review one of the greatest achievements of the past 15 years – the rise of the personal computer and the growth of the Internet.  During this time we saw two giants dominate this market – Intel (NASDAQ: INTC) and Microsoft (NASDAQ: MSFT).  They were the veritable Pippen & Jordan of the tech Bulls dynasty: nearly pure monopolists with gigantic profit margins, huge revenues, and fantastic cash flows.

Today, Intel’s share price closed at $12.08, the same level it was at when I turned 25 years old.  That was almost 12 1/2 years ago.  Let’s look at Intel closely and see what they have to show for this incredible run.

At the end of September in 1996, Intel’s share price was $12.08.  Adjusted for splits, there were 7.14 billion diluted shares outstanding.  The book value per diluted share was $2.09.

We could go into a brief academic debate about why I’m using book value instead of some other measure.  Book value is the accounting net worth of the company.  With some caveats, it is a reflection of value that takes into account all of what the company owns and all of its obligations.  The book value reflects the amount of capital the company has available to deploy productively in the course of business.

I use book value per share because one share of Intel essentially grants you ownership to that amount of book value.  If you simply hold that share, you could imagine that the value backing that share of Intel is growing by the same rate as the book value.  Book value is not influenced by the share price, which can fluctuate wildly with the market.

Compare it to your own situation.  If I asked how you have done financially over the last 12 years, I could look at your net worth 12 years ago, compare to what it is today, and have a pretty good idea of how you fared financially.  It’s the same idea.

Today, Intel’s book value is $6.80 per diluted share.  Over the last 12 1/2 years, it means that Intel has grown book value per diluted share at an annual rate of 9.94%.  Some of you will argue that I am not including dividends that were paid out.  Those dividends have totalled $2.25 over that time frame.  Including dividends, Intel generated annual rates of return of 12.50% over the last 12 1/2 years (assuming you didn’t reinvest the dividends).

That number sounds pretty good.  Until you realize that Intel was a near monopolist operating through one of the highest growth phases of their industry.  Think about that for a minute – a monopolist in a boom was only able to generate 12.50% per year in returns.  What does this imply for the 495 companies in the S&P 500 that are NOT monopolies, and are NOT going to be going through an incredible boom in demand?  A 10% annualized rate of return for the entire market suddenly sounds like a fantasy, doesn’t it?

So what the heck happened?  What about all those studies that touted how stocks would make 9-10% over long periods?  Is 12 1/2 years not long enough?

What happened is what always happens when people blindly follow historical statistics en masse.  The underlying behavioral model changes.  As naive shareholders piled in and stopped paying close attention to how the company was run, profits got transferred from shareholders to employees through stock options and bonuses.  Additional billions were blown on share buybacks at much higher prices.  Looking at the result after more than a decade of shareholder un-friendly behavior, it’s no wonder Intel’s results are mediocre.

The time to buy stocks for the long run will be when those that bought for the long run realize they have been fleeced.  When those people are so disgusted that they sell at low prices and the shareholder outrage forces companies to change their behavior – that is the time to buy stocks for the long run.  Price matters.  That’s how it has always been.

For those who like to check the numbers, I suggest the following:
Intel 2008 Annual 10-K:
http://idea.sec.gov/Archives/edgar/data/50863/000089161809000047/f50771e10vk.htm#301
Intel Q3 2006 10-Q:
http://idea.sec.gov/Archives/edgar/data/50863/0000050863-96-000040.txt
Intel splits (shown on chart):
http://finance.yahoo.com/q/bc?s=INTC&t=my

As a side note, if you actually bought that share of Intel in September of 1996, your rate of return was not 12.50% but 1.38% annually, assuming you didn’t reinvest dividends.  Ouch!

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Latest data has Oscars Ratings up about 6% (see here and here), a little above 30 million viewers.

This was inline with what I imagined.

If you’re looking for Winners and actual info on the show, here ya go and here.

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Update 2/23 – Oscars Ratings up about 10% (see here and here) putting the ratings around 33 million. Not a great bump from recent trends…  Review the last 50 years of ratings here.  

Certainly the show was better than in the last decade, but as someone commented below… the movies nominated largely had small fan bases and Hugh Jackman, though very talented, also has a smallish fan base. To get the extra 5-10 million viewers above the base of 30 million  it really does appear that the fan base size of the nominated pitches matters – biggest years feature some of the biggest movies (and movie stars) or all time – See Titantic, Forest Gump, Ghandi, Braveheart.  Recession and raging wars seem to dampen viewership – see 1968, 69, 86,87, 2003.  (in 2003 it was held in march and competed with first Operation Iraqi Freedom mission and March Madness basketball).

All that said, the households tuning into the Oscars is largely unchanged in 50 years.  Some 21 million plus homes watch it every year.  Only in the year of Titanic, the most popular box office film ever, was the telecast audience significantly changed.  The issue of Oscar ratings comes down to the expectation of growth.  I can’t find a telecast, other than the SuperBowl, maintaining this size of an audience for so long.  Perhaps an interesting question might be why we expect the Oscar audience to grow when the movie going audience hasn’t really grown and the Internet’s dominance in celebrity has (see below).

If you’re looking for results, here ya go and here.

——————

It’s about 2 hours to showtime.

The ratings will be down again, despite efforts to liven up the show.  The ratings troubles have nothing to do with the show nor do they even reflect the public overall interest in the Oscars.  

Somewhat related to my post yesterday, the Internet is destroying any media franchise that draws audience primarily on gossip, pics of celebrity and “results”.  The Internet provides all of that better than TV does (like Time’s live blog), without the 4 hours of TV commitment and annoying commercials.

Yes, of course, competing media, the recession and general lack of Oscar marketing isn’t helping the ratings.

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The Conicidence of Wants, the conceptual basis of our money system, has this formulation:

The phrase double coincidence of wants was used in Jevons (1893). “[T]he first difficulty in barter is to find two persons whose disposable possessions mutually suit each other’s wants. There may be many people wanting, and many possessing those things wanted; but to allow of an act of barter there must be a double coincidence, which will rarely happen.”

About.com

— or go to the Jevons source.

Basically, barter doesn’t scale because it requires trading parties to be present and have what other parties want at the right times and locations.

The Internet destroys this inefficiency.  In kind trading is rampant on the Internet.  In fact, it’s a foundational component of how web pages, search engines, ad networks, p2p networks and pretty much everything else works online.  From the hyperlink to bittorrent to YouTube.  No money exchanges hands – just in kind trades of art, coding, content, and sometimes even physical goods (many cd/dvd, purse, shoes, cars swap sites exist).

Right now the world has a multitude of fundamental changes underway – I posit these almost all have ties to the Internet and the above destruction of physical inefficiences.  Pundits, historians, economists, political scientists banter about various theories but few of them discuss with any seriousness the impact of the Internet.  Perhaps only in the case of Obama’s campaign has anyone seriously claimed it was a fundamental game changer.  Micro donations en masse flat out crushed the old competitive process of knocking on doors and expensive dinners to raise money and garner votes.  Obama’s campaign no longer had inefficiences of time and space to contend with – the double coincidence of finding wanting voters at a time when they could listen to the message and provide a donation was not so rare.

However, this effect of the Internet is not limited to political campaigns.  The Internet completely eliminated all old media models.  This past weeks court case of ThePirateBay is the latest high profile example.  Just like napster before it, ThePirateBay simply connects trading parties -and there is no one in the middle controlling the currency, extracting a cut.  This week also saw some controversy with Last.fm and RIAA.  It too is based on this shift.

The media industry lived of the time and space limits for hundreds of years.  It controlled distribution and was in the middle of the flow of money.  Now that the distribution problem is completely gone (all the parts inbetween the recording of the media and the consumption of it – all now mostly done on computers), there is no media industry as we knew it.  The media industry has never really been about the media or the content, it’s always been about who controls distribution.  (Hell, even the great Ben Franklin new that when he “helped improve the postal system”).  Creators and consumers are now directly connected – sometimes there’s a search engine inbetween, sometimes a social network or an IM or an email or an SMS.

Additional examples of this reality are the NYTimes company problems, Microsoft’s Balmer wanting more openness from Apple, Facebook’s Privacy back and forth

This overturning of the foundation is not limited to politics and media.  Literally, our entire modern economic theory of money is upended by the Internet.  Information used to be controlled by a small set of outlets.  It is now completely distributed.   Since money was disengaged from coinage and precious metals in the 70s the value of our currency is completely based on “belief in future value” and that belief is formed from our interaction information.  Now that information flows so freely without controlling parties, it’s getting harder and harder press value statements on consumers.

Some economists and historians claim that history gives us clues about how our current situations will turn out.  I just don’t buy it.  There was no Internet in the 1930s nor in the 50s nor in the 70s.  This isn’t about “the world is flat” logic.  This is about the complete destruction of value system supporting current economic theory.  When you don’t need a physical currency to trade goods nor do you have physical constraints, the theory, rules, values of the past simply can’t hold.  The old theories and policies based on those theories relied on the concept of “scarce goods”.  In a mostly information world, what is scarce? (yes, information requires physical goods to be created and transmitted, but generally we’re not even close to getting a scarcity of computing, bandwidth and information consumption.)

The implications of the destruction of our old sense of values can be found in:

  • The passing of over 1.5 trillion dollars in government spending (does anyone even know how much that really is and what its really going to do?) without a voter uproar
  • Home values going down the tube this fast
  • The pending failure of major print media giants (NyTimes, Tribune)
  • Yahoo going from a $40 billion acquisition to $16 billion market cap in weeks
  • Car buying behavior – off 45% from “annual averages”

Money has lost its correlation with actual value in all those above examples.  No amount of money is going to solve the US economic issues.  The government uses big dollar figures as a value statement – “we’ll spare no expense to keep you safe” – not that the dollars can actually generate physical value in an information world.

Home values aren’t going to recover quickly in a world where “the American dream” of a home in the country was left in the dust by metropolis build out, going green and the hard facts that our former most desirable places to live happen to be bankrupt (California) or under constant natural threat (gulf coast and eastern seaboard).

The print companies are finished not because they don’t have the right content or the advertisers left for a better medium – they don’t control the distribution mechanism anymore.  They pay higher and higher levies to get their product in front of users while users move to 100000s of alternatives on the Internet.

Yahoo lost the battle of information.  It’s value isn’t tied to much of what value it actually brings to users or advertisers.  It had  perceived value – the promise of a future buyout by someone silly enough to buy it.  That was exposed and now it’s just a clearinghouse for super cheap CPM campaigns and low cost pay per click search buying.  (This is the reality of brand advertising online right now…)

Car buyers have left from high prices, wrong vehicles, gas trouble, sure.  In this process though, they also learned, perhaps, that you don’t need a great car to go about your business.  So many things can be done online that used to take physical travel. Banking, meetings, grocery store trips, shopping, post office trips, movie rentals… these things add up.  The time and space part of these activities have been eliminated and the auto companies relied on our formerly ever growing need to travel to cross the chasm.

An analysis of the impact of the Internet and increasing the probability of double coincidence of wants in all facets of modern life is required to create policies, businesses and culture that can be sustained.

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