Tuesday, December 15, 2009

Less is More

From today's Meet the Press:


Kramer: The CEOs I talk to - they're hiring ... in Russia, they're hiring in Brazil, China ... its rather quizzical that we know what the Communists will give us, but we don't know what the capitalists will give us.

Greenspan: Investment occurs when you have a stable economy and when you can foresee what's going on in the future ... it's very critical that we get the uncertainties out of the system.
It's simple math, included in pretty much every good risk model - volatility is a multiplier on risk. Higher risk leads to lower willingness to invest at a given return. (Smart) investment is a multiplier on growth. Growth is a multiplier on income. Sustained income (without excessive debt) creates wealth.

Washington ... don'tcha want wealth? Think of all the new taxes you could levy.

Friday, December 11, 2009

Tawdry Tiger

Everybody loves a hero. I get that. Heroes do the impossible when we need it most. Heroes reaffirm our belief in humanity. Heroes set the example. Heroes motivate. Heroes save the asses of the meek.

Apparently, the only thing we love more than a hero is a fallen one. They reaffirm our fallibility. They set a nice low bar for everyone to stoop to. They make the meek feel not-so-bad. They're a backhanded self-esteem boost ... I assume. I don't get it.

To me, raking the country through Tiger's muck is disgustingly counter-productive. If someone craves tawdry drama, they should pick up a Jane Austen novel.

Strike that - they should feel dirty and trashy and embarrassed. C'mon people - we have better things to spend our brainwaves on than TM-goddamn-Z.

Sunday, November 29, 2009

It Could Drive a Man to Rhyme

I was reading the FT last week and one headline after another quoted Obama parroting something some Asian leader had told him to say. Fiscal responsibility. Harumph! Where was that in his playbook 6 months ago? How does that sync with the new healthcare plan he advocated (as opposed to the waterier one seeping thru Congress)? How does that sync with these not-so-fiscally-responsible splurges he authorized (to quote my anti-Stimulus blog post from last Feb):

"100 acres of new energy efficiency industrial zones" [in Puerto Rico] is gonna cost us $17 billion. That would be $4,000 a square foot ... or $11 million per job created. Why don't they just hand out shovelfuls of cash to these Caribbean shits? That would probably be cheaper than one of their other requests: $500 million to give solar water heater tanks to rural families. 14 very short-term jobs there (by their own count), so $35 million per job. Apparently the current $2,000 tax credit just isn't enough for these people, even though that's precisely the price of a one-family sized tank. Not that they're the only ones. Miami (city and county) have put in for nearly the same amount, mostly for transportation projects like the "Two hundred million dollar mile" project ($2.4 billion to extend the "Orange Line" east-west transit by 10 miles). By comparison, their pitch for $1.4 billion to expand the same "Orange Line" north-south is a bargain.
It drove me to verse:

Oh Jeez (after reading the first story)
Oh No (after reading the second story)
Oh Shit (after reading the third story)
Oh-Bama.

Friday, November 27, 2009

And I Suppose People Were Not Expecting This ...

From the FT today:


Dubai shockwave hits global markets

Tremors from the shock request by Dubai’s flagship government-owned holding company for a debt standstill spread through global equity markets on Friday, triggering a sell-off in Asia and heavy losses on Wall Street.

While European markets staged a modest but nervous
rally after heavy sell-offs this week, investor sentiment remained jittery amid
a scramble to assess the broader fallout of the problems of Dubai World.
In depth: Dubai in turmoil - Jul-06
Editorial Comment: Dubai reveals the fragility of finance - Nov-27
Lex: Banks’ Dubai exposures - Nov-27
Opinion: Reality catches up with the Gulf’s model global city - Nov-27
Nakheel’s creditors dash to minimise damage - Nov-27
Abu Dhabi expected to prop up smaller brother - Nov-27


Hmm ... a scrap of the most inhospitable, useless land on the planet somehow convinces the world that it's rich simply by fiat. It goes on a spending spree to prove it. It falls flat on its face. I suppose that won't stop people from being shocked and awed.

Merriam-Webster defines a Mirage as:

... 2 : something illusory and unattainable like a mirage
synonyms: see delusion

Get it? A mirage? In the desert?

How's this for a rule, space cadets: nothing times any amount of leverage is still nothing. Remember that next time you are considering what to do with your kids' inheritance.

Saturday, November 14, 2009

Yeah, What HE Said: Warren Buffett

From the self-awareness file:

"We learned that a rising tide lifts all yachts."
-Warren Buffett on Charlie Rose last night

I was a bit surprised by his concerns on rising income inequality.

Tuesday, November 10, 2009

Sports Newspeak: Things Coaches, Athletes, and Announcers Shouldn't Say

Look - there are some people in sports who can do and say no wrong; Madden could read the Federalist Papers and it would be just as hilarious-slash-wtf as his MNF commentary. Cosell, Albert, Berman, Vitale, Carey - every guy has his list of classics who defined the trade. They can do no wrong. Nor can the old standards who are there to keep your focus on the sport, not the color commentary like Costas and Michaels. Nor can the big personalities like Deion, Tiki, and whoever shouts GOOOOOOOOOAL! On the other side of the mic are the golden-tongued coaches/managers (Holtz, Bowden, Torre, Riley to name just a few) who get away with saying the craziest things.

All those guys could make knitting interesting with the the force of their huge personalities.

This blog series is for everyone else. As the theory of multiple intelligences tells us, people can be really good at some things and not so good at others. There's no causal link between one type of intelligence and another. Athletes get recognized based on their physical "intelligence." Some are lucky enough to also have strong interpersonal and verbal "intelligences." Others ... not so much. Sadly, that doesn't stop many from trying to overcome stage fright with big words and fancy phases when presented with a mic. Often, they end up just parroting stuff they've heard other people say, even if it has little to do with the topic at hand ... and even if they don't really know what it means. At best, it's inane. So, why say it?

I suppose it's because we listen with baited breath to everything they say. We're all obsessed with these guys. Since the days of gladiators ... OK, probably genesis ... we have idolized and venerated physical prowess leading to victory. Unfortunately, we over-do it. Victory is not always directly ascribable to some dude's super-human aptitude.

Here's my own personal list of peeve phraseology that just makes us dumber, football edition:

Take Care of the Ball (v): The ability to not mess up. Just say "don't fumble."

Movement in Space (adv): Usually referring to an athlete's awareness or acuity in finding gaps in the opposing team's formations or plays. Just because the guy got a few yards doesn't necessarily mean he has some genetic mutation giving him radar-vision. So just say "good job running to a place where the opponent wasn't."

Good Feet (n): Another attempt to ascribe a specific success to an athlete's overall endowments. Just say "Good. He didn't fall down."

Hard-Fought (adj): Passive-agressive method of complimenting yourself via complimenting your opponent which can be used irrespective of whether your team won or lost. Just say "I think we're super."

I'm not Thinking About the Future... (ic): A thinly-veiled attempt to convince yourself that others believe you when you say that you're truly incentivized by the joy in the hearts of your fans, as opposed to the eight-figure contract your agent is negotiating or your mom says you deserve when you get to the pros.
Also: I'm just looking ahead to Sunday.
Also: All that matters is beating our next opponent.
Also: One game at a time.

Game-Time Decision (n): A way to avoid announcing a stupid decision you've made in the hope that, in retrospect, it will appear much smarter or will get forgotten.

Wednesday, November 04, 2009

What Will Tomorrow Bring: Program Trading for Everyone!

When the stock market (and every other market) is on a one-way trip to the clouds, brokers convince their prey (err, I mean customers) to "buy and hold" via "dollar-cost-averaging" with some nice "rebalancing" from time to time. As the great investor Issac Newton explained: What goes up must continue up. It's simple physics. It's the laws of Mother Nature. Don't you like nature? Of course. In that case, they might have a hot tip on a cool green stock you should sink your children's inheritance into.

Or you could just discipline yourself to sock away 10% of your monthly income in Spiders and forget about it.

Or you could get all control-freak and OCD and get all into options and day trading and lose your shirt.
These days, the markets follow a different law of physics called the Super Rubber Bouncy Ball law. What goes up hits the ceiling, accelerates, shoots downward, hits the bottom, accelerates further, shoots upward, bounces off the furniture and pings sideways into Mom's expensive vase. The vase shatters on the floor and scares the cat, which shreds the nearest curtain and then pisses on the carpet.

In such a world, the only way to grow your kids' inheritance is to be able to make money no matter what direction the market is moving. The only way to do that is to buy and cover low, sell and short high ... and play volatility in between ... all the while hedging against soaring interest rates and inflation.

In short - do what hedge funds and Wall Street have done for years ... Hopefully, with a little more prudence since it's your own dinero ... and maybe within the law.

I suspect you won't have armies of traders and analysts to do this for you like Wall Street does. Fear not. Hedge funds don't have armies either. You just have to learn to invest like they do: with computahs. Over 70% of all US stock trades are executed by computers following rules with no human intervention. Welcome to Program aka Algorithmic Trading. In short: rather than picking specific investments or trades, you define rules for investing and trading. Then the computers do the grunt work of hunting for opportunities that fit your rules and they execute the trades for you.

Yesterday: Have lunch with your broker. Listen and nod for an hour as he ruminates, boasts, rattles off arcane irrelevancies, pretends to see the future, and slips in stock pick recommendations. Then blindly agree, give him a check for another ten grand, and let him pay the lunch tab.
Tomorrow: Have a pre-defined amount of money automatically sent from each paycheck to your brokerage account. Have lunch with your broker. Listen and nod for an hour as he ruminates ... well, you know, they're creatures of habit ... but the difference is that his suggestions should be strategies (aka packages of rules that make sense together) as opposed to prognostication and specific picks.

Yesterday: Pore over stock info online. Read the WSJ. Check Morningstar and Jaywalk. Watch CNBC and Kramer (yuck!). Every day or two, jot down a stock symbol that someone seems to think are going to "pop." Then, log into eTrade or Merrill Online and key in your stock symbol, amount, and price. Then, sit back and watch as that stock inevitably does the unexpected. Finally, freak out and sell the stock. Take the money that's left and repeat.
Tomorrow: Pore, read, check and watch, but much less frequently. Every month or two, jot down a strategy that fits the new market and economic realities. Log on and key in the rules comprising the strategy. Have a pre-defined amount of money automatically sent from each paycheck to your brokerage account. Then, sit back and watch (or not) as the computer buys and sells things you didn't even know existed at prices you don't care about. Some trades go the right way and the computer exits with a nice profit for you. Other trades go the wrong way and the computer applies your stop-loss rules to ensure you don't end up living in a cardboard box. The computer repeats tens, hundreds of times a week without your input. Hopefully, profits pile up. If not ... well, bad strategy. Just like LTCM.

Don't look now, but the future is already here. Folks have been developing trading rules for decades. A growing number of folks are using a growing number of online brokerage sites which offer rule-based trading. It's a bit amateurish still, but getting better ... fast. This time last year, it was a treat to enter a rule requiring more than a stock symbol and a price. Now, the likes of TD-Strategy Desk and Credit Suisse-AES have rolled out platforms allowing folks to effectively build entire entry and exit strategies, taking into consideration multiple asset classes, company fundamentals, and market conditions.

Vague and arcane, right? Here's a simple concrete example:

Assumptions: Short-term, the dollar will continue to slide against Chinese and Emerging Market currencies. The US will buy less from abroad. Emerging market stocks will do better than domestic ones. The US stock markets will be volatile around earnings seasons. Medium-term, drug companies will be pressured by Obama to cut costs, and profits will shrink accordingly. Long-term, house prices will go back up while commercial real estate prices will go down.

A strategy might include a set of rules like:
  • Constantly assess cash available and asset allocation
  • Constantly assess current interest rates, dollar prices, relative yuan prices, etc
  • Constantly assess prices of bazillions of assets and fundamentals of bazillions of companies around the globe
  • Always maintain a certain cash balance, subject to a hard minimum plus some extra when market volatility increases ... and at Christmas times
  • Slowly build up interest bearing assets which mature in about June 2012, because that's when you'll be ready to buy your next fancy new car
  • Always maintain asset allocations within a few percentage points of the target pie-chart you've defined. If this appears to be limiting your profits because of missed opportunities (meaning another rule would have fired in the past and would have made you money, but it was prevented from doing so because of the allocation limits), alert you to reassess the allocation strategy
  • Auto-buy into dips in the market, especially around earnings seasons
  • Auto-sell when the asset reaches a relative target, either a % gain or crossing a certain statistical threshold like a moving average
  • Auto-exit if any trade goes south by more than a few percentage points
  • Auto-exit if a better opportunity presents itself
  • Keep an eye out for opportunities to buy residential real estate and related assets (like homebuilders, landlords, and residential REITs) when the asset's fundamentals look better than the average for the market and its price is below its 3-month moving average. Exit these positions once the price has jumped more than 10% in a day, risen by at least 20% overall, dips more than 3% below acquisition price, or 6 months have passed, whichever comes first.
  • Keep an eye out for opportunities to sell commercial real estate and related assets whose debt levels look particularly ugly and prices are above their 3-month moving averages. Exit these positions once the price has fallen more than 10% in a day, fallen by at least 20% overall, drifted up by 5% above acquisition price, or 3 months have passed, whichever comes first.
  • Ceterus paribus, slowly transition from US, dollar-denominated assets to those from China and other emerging markets. When the dollar temporarily spikes against these currencies, exit some laggard dollar-denominated assets and move the money into attractive Chinese and other emerging market assets. Avoid companies that export a lot to the US
  • Ceterus paribus, watch for opportunities to slowly move from investments in companies with non-dollar-denominated debt into those of similar companies with more dollar debt
  • If a headline turns up for one of the assets in your current portfolio, analyze the price vector (direction of change) after the headline and buy more or close out in order to beat everyone else to the punch.
  • Always maintain an appropriate level of rate hedge (for example, shorting treasuries, selling dollar futures/options, etc) in proportion to overall exposure, especially around significant announcements about the economy or the FOMC. If rates surge over a decent period of time, alert you to re-assess the strategy
  • And, of course, the security blankey: tell you if the model seems wrong compared with other peoples' behavior. Before accepting new rules from you, back-test them over some previous, similar time period to tell you you're being dumb. Oh, and slam on the brakes if the portfolio starts hemorrhaging money because of a flawed rule.
And Bob's your uncle! Ten years forward, investing like this will be commonplace. Believe me: I can see the future!

Illustrations Copyright http://www.niquette.com

Sunday, October 25, 2009

Follow Up: I Keep Waiting for Somone to Say "Joke"

Stuff ain't cool unless it's secretive. See how it worked for Nixon? He was about as un-cool as they come until ... well, you know.

In that vein, the Nobel Peace Price nominees are kept secret for 50 years in order to avoid offending anyone ... and to respect Alfred's will, in which he ordered that the Peace Prize be the "coolest" of all prizes offered.

So we'll never know which deserving candidates really got snookered in this year's run-off for said prize. In lieu, more than one reader/friend (you know who you are) has suggested I come up with my own list. I'd never be so presumptuous as to assume I knew better ;-) but here are just a few names I might have offered if asked:

The US Military - How many lives HAS the US Military saved? Seriously, folks, is there any other entity on the planet who has actually DONE more to quell conflict? Every life is valuable - everyone is someone's son or mom. These guys are the only group on the planet willing to make the REALLY tough decisions about life - their own and those of others. If this is too big a group for ya, pick the current leaders - Gates, McChrystal, Mullen.

Ronald Reagan - Jeez, where to begin. Not only did he take the first steps to de-escalate the Cold War, he finished the job he started. He understood this had to be done from a position of power. Along the way, he left us with guiding principles that serve us well even today. "Trust but verify" would get us a lot further along with the Evil Leaders League than sending the Clinton twins for photo-ops.

The faceless, nameless, and thankless who dedicate their lives selflessly to promote peace one person at a time - Each of us knows one, but no one can see them all.

SOS Children’s Villages - In their own words, the "world's largest charity dedicated to orphaned and abandoned children"

Morgan Tsvangirai - Pick your metaphor. He put his life on the line. He went all-in. He took a leap of faith. He spoke truth to hideous power. He stood toe to toe ... and continues to do so in the most peaceful, calm manner possible.

Mordechai Vanunu - On a one-man lifelong crusade against military escalation.

Japan - For quietly fostering over 50 years of peace in Asia


Romeo Dallaire - Betcha don't know this one. Look 'em up.

Bono - If you don't know this one, your name must be Osama.


Wei Jingsheng - Oft mentioned as a candidate, and for good reason. Standing up to the People is beyond ballzy.

Helmut Kohl - Yeah, really. How quickly we forget. He accumulated and then spent incredible political capital to see through the peaceful reunification of a nation. Who'd have thought a commie police state could be turned into a beacon of democracy and capitalism in a mere decade? Who'd have thought West Germans could be convinced to effectively donate a quarter of their income for a decade or more to fund the reconstruction of the rusty East


Gerry Adams, Martin McGuinness, Ian Paisley, Hugh Smyth, Tony Blair, and Bertie Ahern - One of the world's best examples of conflict resolution, de-escalation, de-militarization, empowerment, and legitimization. They dealt with an incredibly sticky wicket with patience and trust from the grassroots up. In a scary world, they proved that, at least in some cases, there IS a way out of terrorism ... err ... I mean 'troubles.'


Gates Foundation - I'll never understand why anyone considers it novel or controversial that development creates stability creates wealth creates peace. There are too many examples to list, yet the Gates foundations is one of the few major benefactors attempting to take whole economies from zero to a stable platform for development in order to facilitate true wealth (and thus peace) creation.

Safaricom, the M-PESA, and the Safaricom Foundation - Along the lines of the above, these guys are establishing the factors of development in order to let poverty-stricken people bootstrap themselves.

The 150 (and counting) Russian Journalists murdered for speaking truth to power

OFAC - Struggling, albeit bureaucratically, but fairly successfully to cut off the lifeblood of conflict.

Rodrigo Lara Bonilla - Colombian Minister of Justice who sacrificed his life in the fight against the collapse of his country into a cartel-owned narco-state.

Virgilio Barco Vargas, C├ęsar Gaviria - Colombian politicians at a time when that was a decidedly ill-advised career choice.

Monday, October 19, 2009

Queer Eye for Karzai


On yesterday's Face the Nation, John Kerry said we won't win the war in Afghanistan thanks solely to our fabulous military.

The US military is a lotta things, but Fabulous? No, you're fabulous, dah-ling!

Just stunning.

Maybe the Afghan government would be more legitimate if they dressed for success. On your next fact-finding mission maybe you could take them some good ole' home-grown American queer eye.

Friday, October 16, 2009

Dhammacakkappavattana Sutta

The Tathagata (aka Perfect One) realizes the middle way, eschewing both extremes.

This "crystallizes the Buddha's Nirvana-bound [Noble Eightfold] Path of moderation away from the extremes of sensual indulgence and self-mortification and toward the practice of wisdom, morality and mental cultivation." (Thanks Wikipedia).

Guess The Perfect One doesn't live 'round here. Or at least I can't find him on the TeeVee anywhere.

I wonder where he might be. Where the heck's that path, anyway? Is that off A1A somewhere? Nah. More likely PCH. Here's what Google Karma Maps says:

Follow Signs to "Wisdom":
1. Right view

  • Law of Karma
  • Three Characteristics (nothing is permanent; we are not permanent; we are
    not much of anything at all)
  • Suffering (specifically, how to get rid of it)
  • 2. Right intention

  • The exertion of our own will to change
  • Take a Right at "Ethical Conduct":

    3. Right speech
  • Abstain from lying, from divisive speech, from abusive speech, and from idle chatter
  • 4. Right action
  • Don't act in ways that would be corrupt or bring harm to oneself or to others
  • 5. Right livelihood
  • Don't engage in trades or occupations which, either directly or indirectly, result in harm for other living beings ... (I choose to practice the Middle Way on this one ... some yellowtail and a good rib eye every now and then give me moderation and balance and harmony or whatever ... veggies are people, too, you know)
  • Keep Straight onto "Concentration":
    6. Right effort
  • Always foster what would be good and useful to ones self and others in one's thoughts, words, and deeds, without a thought for the difficulty or weariness involved
  • 7. Right mindfulness
  • Constantly be alert to phenomena that affect the body and mind. Be mindful and deliberate, making sure not to act or speak due to inattention or forgetfulness
  • 8. Right concentration
  • Reach full concentration and meditative absorption. Cut off all defilements and reach self-awakening. During the practice of right concentration, one must investigate and verify their right view. In the process, right knowledge will arise, followed by right liberation.
  • What's that got to do with this blog?

    Pretty much everything.

    Saturday, October 10, 2009

    I Keep Waiting for Somone to Say "Joke"

    Oh, those wily Norwegians. They've long been maligned for being low on humor. Boy, they showed us!

    What could be funnier than beating the Americans at their own quaint, juvenile (aka American) April holiday? Only better!

    Step 1: instead of a marginally-credible joke, go all-out and do something entirely ludicrous.

    Step 2: spring the joke on a day that has nothing whatsoever to do with the first of April

    Step 3: (this is the kicker!) don't tell anyone it's a joke. In fact, never even break your straight face. Go all the way through with it. Make the announcement. Draw up the certificate. Hold the fancy party. Get Kenny Chesney to sing. Mount some tin on a ribbon and drape it 'round Obama's neck. Let him Cheshire the whole way.

    All the while, chortle internally, knowing that everyone on the planet is wondering what the fuck just happened. If the joke comes off just right, you might even teach those happy-go-lucky numb skull fattie Americans a lesson about being world-wise (aka cynical). That would be so funny!

    Morn-de-shmorn, dorn-de-born! Bork! Bork! Bork! Ho ho ho! Ja?
    (yes, I know this was the Swedish Chef and the Peace Price folks are in Norway, but my blog is funner this way. Get over it.)

    At least I prefer to believe that's what's going on. The alternative disappoints even a cynic like me. The performance this week was truly epic, and to everyone's epic detriment.

    Perhaps we should have known they had joined the uselessly political ranks of the UN and Congress when they gave their peace medal to two terrorists and a philanderer. Twice.

    Out of 6,787,570,618 people on the planet, these Swedish Chefs couldn't find a single one more deserving?

    For shame, political people.

    Tuesday, September 29, 2009

    Yeah! What HE Said: Adam Smith Edition

    The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.
    -Adam Smith

    Sunday, August 30, 2009

    Yeah, What HE Said: Opportunities



    Most critiques of free markets can be better phrased as business plans.
    - Devin Finbarr of Intellectual Detox

    Tuesday, August 25, 2009

    I Don't Care if it's Legal or Not...


    For shame, poisonous people.

    Barney Frank has this one right.

    Monday, August 24, 2009

    What Will Tomorrow Bring: Moving Magazines

    Right out of the pages of Popular Science: Entertainment Weekly will pilot embedded video screens in some of its magazines next month.

    Sadly, its only for ads not articles right now, but hey - somebody's gotta pay for it ... might as well be those evil corporate world dominators over at Pepsi. Too bad we haven't nationalized the magazine industry yet ... I'm sure Barney Frank coulda seen to it that such essential live-giving technology would be used for more worthy causes like subliminally convincing inner-city youth to save less and consume more ... in the name of national progress, of course.

    Oops ... did I go politico again? Damnit, I keep doing that.

    Photo Credit: Caroline McCarthy/CNET

    Sunday, August 23, 2009

    What Will Tomorrow Bring: Death to Paper Dinosaurs!

    On Chris Matthews this morning, a bevy of career journalists held a pity party. Boo hoo, the world is coming to an end! We're headed off a cliff!

    Were they talking about the economy? Politics? Healthcare? Afghanistan? No, all that was over on Meet the Press.

    These highbrow muckrakers were singing the dirge of the whole "all the news that's fit to print (and most of it that isn't)" industry. RIP Rocky Mountain News. RIP Seattle Post-Intelligencer. RIP New York Sun.

    The quotes were just so ridiculous to me:

    "The Internet doesn't have the fact checking."
    "The Internet dumbs people down because it's so targeted." "You'll never get that out-of-the-corner-of-your-eye story about haircuts in Cambodia."
    "We're losing the group sensibility that creates stories."
    "We'll just never have those good ole days of newsroom collaboration. Blogging is very solitary."
    "Everyone loses when a newspaper shuts down."
    "There's just something special about freezing your butt off going outside in the morning to get the paper in your jammies."
    Puh-leaze. I won't rebut line-by-line; I have enough windmills. I would write it off as a generational gap, but sadly, even some younger journalists bemoan the change.

    I feel almost silly making the following self-evident statements. The Internet is the salvation of journalism. It puts news on steroids, going wider AND deeper. It enables new levels of cost efficiency and simultaneously new levels of democratization/decentralization. It's vastly lower bars to entry increase entrepreneurial participation. The spectrum of available viewpoints is broader, and can be communicated more effectively via richer multimedia. Rather than damaging credibility, democratization actually ensures that sharp minds and good ideas gain much better (and quicker) visibility. They are self-propelled by the level of interest they generate. No need to support the massive old "launch" infrastructure.

    These journalists need not worry. Democratization does not erode their credibility ... as long as they continue to earn it ... and invest some new synapses in figuring out what's going on.

    This guy, certainly gets it. He's an Ivy League math/econ major who calls print media "the dead tree and typewriter industry." Yet he's the Web Editor-in-Chief for The Daily Pennsylvanian and is avidly pursuing a career in journalism. Why would such a smartypants peg his future to such a dinosaur? He's not afraid. He understands the new business model. Why does it not surprise me he's a first generation American?

    He's not alone. Fellow Ivy-leaguer Jason Kilar is closer in age to the talking heads on Chris Matthews, yet he's not scared either. He's dragging print and TV into the 21st century kicking and screaming ... and making big bucks at it.

    Sam Altman, a poster child for a bright future, and Inc. Magazine's #4 "coolest entrepreneur", told Charlie Rose that when he wants to know the most important thing going on right now, he checks Twitter. "It always scoops traditional media."

    Even Al-Jazeera isn't complaining ... and in this case, that's a good thing.

    Wednesday, August 19, 2009

    When a Bad Reputation is Just Fine

    For a couple of weeks, I've been following a debate on the importance of reputation.

    In this entry on his NY Times blog, Paul Krugman argued that insurance companies don't give a rat's rear about their reputation or the satisfaction of their customers. He didn't say, but clearly was saying that he'd found yet another need for a governmental white knight. He explicitly launched snark at a series of Bryan Caplan Econlog posts which placed great importance on reputation in economic decisions. Bryan responded with this post, entertainingly including pirates and VDs in his case. At the end, he asked his audience:

    What is your favorite example where reputation doesn't make voluntary
    interaction work well? Is the problem demand, supply, or what?
    As moths drawn to fire, many responders couldn't help but focus on the pirates and sex. Others have thought up niche examples such as the "fall forward" effect of bad bosses with good employees. They needn't. His question can be answered with common real-world examples. My contribution to the debate is as follows:

    When doesn't it work? When there is:
    1. A very large, fragmented population of consumers, most making infrequent purchases
    2. A largely standardized product (ie: highly regulated or commoditized), leading to high inelasticity of demand to price ... causing price to be the major differentiator
    3. And a highly transparent market in terms of price

    Airlines, credit card companies, and banks are all great examples. Major players make little investment in customer retention, preferring instead to counter attrition with new customer acquisition, based largely on price, combined with creation of monopoly/oligopoly power (usually only local or short-lived). Any marketer in these industries will tell you that their key metric is the ratio of attrition to acquisition.

    Said concretely, an airline can sell confirmed seats to someone else, strand 300 customers in a layover airport overnight, make us stand in line for hours to get re-booked, pack each of us between sumo wrestlers on a tiny aircraft, over-charge us for a bottle of water, and then wreck your luggage. All the while, their demoralized, unionized employees will make scant few attempts to pay attention to, much less accomodate us customers to retain our business. The airline knows it can lure most of us back next time by simply offering the cheapest fare for the route and time of our next trip.

    Unsurprisingly, the story is much different in the international market where they have far less ability to secure those temporary monopolies and thus must compete on something other than price alone. Fly the same carrier domestically and internationally. You'll find it hard to believe it's the same company.

    Gee, I wonder if therein lie the seeds of a real answer for both Paul and Bryan.

    Friday, August 14, 2009

    Yeah! What HE Said: John Mackey Edition

    Sometimes I read something that just makes me go "yeah, man! THAT's what I've been looking for!" Sometimes it's even something written by someone other than myself. This is one of those times.

    John Mackey, weird product of weird Austin, vegan, rancher, collector of a $1 a year salary, donor of over $1m a year, libertarian, and CEO of Whole Foods, made an appearance on the WSJ Opinion page this week talking about practical, sensible fixes for health care. Thanks Obama for finally motivating good people to talk about some really good ideas. John's are as follows:

    • Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.
    • Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.
    • Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.
    • Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.
    • Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor's visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?
    • Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.
    • Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid or the State Children's Health Insurance Program.

    Yup.

    Friday, August 07, 2009

    Killing 2 Birds with 1 Stone

    I am pro death penalty, pro abortion, pro assisted suicide, pro regular suicide. I'm for anything that gets the traffic moving.
    - Bill Maher.

    Wednesday, August 05, 2009

    Blog Shout Out: John J. Ray, Ph.D.

    This is probably as apropos a time as any for me to send a shout out to a blogger I've followed for a long time. Most curious.

    You see, John's a doctor, originally from Britain where they already have socialized medicine, now way over down under in Australia where they also already have socialized medicine. And he kinda doesn't like it. And he tells us all about it as a warning to this Last Best Hope. Unlike the debate here, he presents his side in an almost painfully stoic tone, letting facts speak for themselves.

    Check it out here: http://socglory.blogspot.com/

    You'll run into discussions that just might make ya go "aha" like this did for me:

    The reason ... is the profusion of mandatory minimum coverages state
    governments require to be included in health insurance policies sold within
    their states’ borders. This results in residents being forced into uniformly
    high-priced, coverage-heavy “Cadillac” insurance policies as a result of state
    law, not their own choice.

    While there is no doubt these coverages are both useful to and desired by some consumers, all insured residents of the Ocean State are forced to pay for asthma ed and IVF insurance, even if they aren’t potential consumers of either. Rhode Islanders’ premiums are is also higher than they otherwise would be because every policy sold there is required by law to cover the cost of smoking cessation, hair prosthesis, and acupuncture – along with 65 other treatments, procedures, and conditions.

    Or this one:

    the drug Avastin is widely used in America to treat advanced colon cancer.
    But it costs $50,000 a year -- so Canada's national-health system doesn't permit
    its use. As a result, 41 percent of colon-cancer patients in Canada die each
    year, as opposed to 32 percent in the United States. (Canada's average
    eight-month wait for colonoscopies, another result of national-health rationing,
    also contributes to the problem.)

    Or this one I totally didn't expect from him:
    The Post Office Factor. Americans are deeply cynical about government's ability to do anything right. Putting a man on the moon, building an interstate-highway
    system, fielding history's most lethal army -- nothing has changed that. Even
    Mr. Obama makes jokes about how standing in line at the post office has
    convinced him he doesn't want the government running private firms.

    Sunday, August 02, 2009

    What Will Tomorrow Bring: Concrete Ideas for Improving Healthcare

    I'm sure hard on the healthcare industry (cough, cough, Land that Time Forgot, cough). Call it constructive criticism. But I'm not just full of nay-say. Allow me to offer a few very concrete, actionable recommendations to go with all the high-falutin' principles I've been throwing out lately.

    On medical records and privacy:
    It goes without saying that medical records must be put online. Period. Now. There is NOTHING technologically standing in the way (see here, here and here for just a taste of what's already out there). That isn't to say that all the rocks have been removed from the road of course. But we're smart, right?
    Ideally, one should be able to control which individuals can see which pieces of their health record by setting policies ahead of time. For example, one might say that, in an emergency, EMT staff can see all current health info; hospitals can see more; a radiologist can see less; a pharmacist can only see current medicines and allergies.

    At a national level, health data must be irretrievably separated from identifying info and then aggregated for statistical research.
    On prescriptions and drugs:

    Doctors should write up prescriptions on a secure iPhone/Blackberry/Palm/Android app. This isn't dreamware. The foundations already exist.

    Contra-indications, genetic red flags, and bad interactions with other current meds should all be checked automatically via an online service accessing a national database (perhaps run by the FDA?). The doctor should be immediately notified of issues.
    Controlled substance notifications and approvals should be automatically taken care of as necessary.
    Insurance approval should be automatically collected and the billing process should be launched.
    Then, the 'scrip should be sent electronically to my "pharmacy" (this is no more technologically complicated or insecure than direct-depositing a paycheck). I put pharmacy in quotes, because it would bear a closer resemblance to Amazon.com than your the local chemist of yore.
    An automatic "broker" looks at my urgency as well as current drug supply to determine where the order gets filled.
    Urgent orders go to the closest local drug warehouse which currently has the drug in stock. Non-urgent orders go to a national fulfillment center. Again, think Amazon.com ... come to think of it, maybe we should just let them do it.
    In either case, a robot distributes the right number of pills into the right bottles. It then marries that with the right instructions and documents. A human quality control might be performed before the robot packages the whole thing up, and hands it off to the delivery system (either via local same-day delivery or simply UPS).
    An email is automatically sent to me confirming fulfillment, and providing links to all the usual legal-ese, warnings, indications, and stuff required by the FDA.
    If required by the FDA, a pharmacist should call me to explain the required mumbo-jumbo. If this gives lawyers fits, an alternative would be to provide this info face-to-face before the patient leaves the doc's office.
    Then the 'scrip should be put in my medical record, the doc's files, and, anonymously, in national databases available for research. For one thing, this prevents me from double-dipping. For another, it provides drug companies with a much deeper source of usage and efficacy data.
    If the 'scrip calls for refills, they should be automatically processed in the same way. Neither the doctor, nor I, nor a pharmacist should have to lift a finger.
    On Insurance:
    As I said previously, employer-provided insurance has GOT to go! Each individual or family should buy their own plan, based on their own preferences, and considering their own unique situation.

    Yes, this means the end of the "one size fits all ... at one price" policies that we get from our employers. That's a good thing, because currently, we're spoiled. All the talking heads on TV keep trying to get Obama to say there will be sacrefice. He chickens out, but I won't. When it comes to your health, you should have to do your fair share. Today, we're just passengers getting taken for a ride. Instead:
      • We see more and more evidence recently of just how bad people are at making certain types of decisions. Specifically, we suck at assessing extremely unlikely events. Inevitably the "won't happen to me" gene kicks in. When the inconceivable happens, we're caught unprepared and confused. Thus, the vast majority of Americans should have catastrophic insurance. Period. No excuses. It should be cheap, and should only cover the really nasty stuff. No pills for sniffles or aches ... it should only kick in once expenses are above, say $15k. With a nice scotch, a good joke, and a pat on the back, Obama could probably convince me to socialize this piece of healthcare, as long as he doesn't go Robin Hood on me.

      • Today, prudent travellers take out trip insurance; prudent SCUBA divers have DAN; hikers (and extreme skiiers) get evacuation insurance. This should be the norm for all health insurance. Smokers should pay more. Skydiving injuries should not be covered unless a risky-activity premium has been paid. Conversely, people who do more than an hour of cardio a week should get a rebate. Triathletes should be damn near free.

      • Folks who prefer one treatment to another should be able to negotiate this with their insurance. For example, someone with terminal cancer should be able to trade. "I'll give up chemo, but ya gotta pay for accupuncture, a home nurse, and a pain clinic." Someone with a blown ACL should be able to say "I want extra PT. In exchange, I promise to follow their advice dilligently and keep the knee in good shape so this doesn't happen again." Someone who injures their spinal cord should have the ability to agree "Let me try this experimental treatment, but if it doens't work, I won't sue, or ask you to treat any side-effects." People who are willing should be able to get treatment offshore if the cost differential is significant.

    Friday, July 31, 2009

    Talk Amongst Yourselves: Body Doubles?

    Don'tcha think the economic discussions at the White House must be a ball o laughs these days with these guys around?

    Obama really showed his connection with regular American values when he appointed



    Dr. Phil Axelrod




    and Stephen Peter Colberzag.

    Tuesday, July 28, 2009

    Follow-Up: If we REALLY wanted to fix healthcare, we'd put the patients in charge, not the government!

    If you lived in quaint Europe 100 years ago, it would have taken you most of the day to shop and prepare meals. You'd have to make separate stops at the local butcher, baker, grocer, and so on. If the dairyman had no more butter, you'd just have to live without it. If the local miller sold sub-standard, gravelly flour, you'd just have to eat it that way. And since there was no refrigeration, you had to repeat the whole shopping process every day. Fast forward to today, and you can stop at the Super Wal-mart on the way home from work to pick up an incredibly broad diversity of foods at quality incredibly higher. Strangely, healthcare, the Jurassic Park of industries, hasn't had to go through the same evolution. As a result, its tragically inefficient, with quality tragically uneven, at costs tragically high.

    Who could disagree with a new healthcare industry that focuses relentlessly on Efficiency, Transparency, Customer (=patient) Satisfaction, and Objective Effectiveness? The devil, of course, is in the dollars ... but not in the way Congress keeps telling you.

    All the hype and sob-stories aside, the bottom line problem with US healthcare is that the consumer doesn't get to choose, and doesn't have to pay. The consumer is not empowered.

    This can be seen in, for example, the dysfunctional, polygamo-incestuous oligopoly of employer-subsidized insurance. Lose your job and lose your health insurance? Dumb.

    The same issue can also be seen within individual insurance plans. Coverage and treatments are black or white, take it or leave it, as opposed to a menu of shades of grey to better fit individuals' situations, expectations, and desires.

    Health law and privacy are similarly all-or-nothing. Even when no other treatment works, experimental or alternative approaches are shunned by doctors simply on the basis of legal or bureaucratic grounds. Despite best intent, and even if the patient is warned of heightened risks, one unforeseen turn for the worse is likely to cost even a stellar a doctor or nurse a career. Why risk it? Doctors are afraid to consult anyone else about tough cases. Privacy? We can't even see our own health records, much less share them with others who might help.

    Healthcare reform must be addressed on multiple fronts, but if consumer empowerment is a clear path to mitigating a multitude of our issues, why not fix it first? See what issues resolve themselves when people are informed and empowered. THEN size up the residual problems and start making the tough, expensive choices.

    Arranging healthcare for the poor and sick is a good goal. Obama's pet "public option" does improve the lot of a certain subset (the poor, the sick, and inevitably the lazy). Sadly, those unfortunate souls may find that they were better off before the plan. Obama demonstrates his demagoguery by placing the lion's share of the financial burden on "the rich." Surcharge expensive health plans; surcharge businesses; surcharge small business owners; surcharge benevolent folks; surcharge those who earn the most; hell, just surcharge Goldman Sachs directly while you're at it. But what happens when costs overrun budgets, as they have in nearly every other public health plan (Hawaii, Massachusetts, Canada, and the UK just to name a few familiar examples)? Does the government begin to ration care, as in Canada? Cancel the plan, as in Hawaii? Or just flat deny coverage, as in Britain?

    Moreover does the public option even empower consumers? Does it ensure patients and doctors decide what treatments are best? Or does it give that power to an unaccountable, appointed board of politically-charged "wise men" in DC? Does it increase competition for better ideas, treatments, and service? Or does it simply tilt the playing field toward one plan, one way of doing things, and one group of administrators who get to play by a different set of rules than the rest? Does it "crowd out" other insurance plans because it's better? Or by the fiat of unfairly preferential treatment, enshrined in Federal law? Do we really want a Fannie and Freddie for healthcare? Or Apple and Google?

    My take: the public option erodes choice (and thus empowerment) when it should be fostering it.

    As I advocated over a year ago in this blog entry, a better plan would decentralize control to those who have the strongest interest in getting it right: the patients. This would naturally put a burden on their primary health providers to ensure patients were informed with the best facts and recommendations, so they could make the best choices. As I put it in my earlier blog:

    There is no measure of supply and demand driving the rates of top doctors up or warning me against going to cheap-o ones. Insurance companies (and Medicare) engage in collective bargaining to drive rates down for some, but it's like squeezing a balloon - the air just moves around inside - there's no net savings. Horrifying though it may be for you to think of being sick and having to bid on some Medical eBay for a spot at the best hospital, this would drive overall costs DOWN by rooting out inefficiency, inappropriate risk, statistically unsuccessful procedures, and bad eggs. It would provide a whole new incentive system which would align the interests and thus the efforts of patients, hospitals, insurers, scientists, technologists, businesspeople, investors and doctors alike.

    It would also create a bouquet of different kinds of offerings, at different price points. Health care is the only industry I can think of that still follows Henry Ford's original principle: "Any customer can have a car painted any colour he wants so long as it is black." To see hints of what healthcare could be, look no further than the current world of elective/cosmetic treatments. It should be no mystery why medical tourism is referred to as a "nip-n-tuck tour." That whole industry is built on treatments people want which are not covered by insurance (and on wealthy citizens of countries with sub-standard levels of care). Suddenly, incentives are aligned. Choice and price exist ... and, unsurprisingly, so does a diversity of offerings. The differences are shocking.

    Empower the patient, and they'll always opt for the Cadillac treatment, many say. You need faceless insurers and that group of wise men in DC to tell people "no." Hopefully by now, my rebuttal of that is predictable.

    • First, if the whole industry stepped into the 21st century and was forced to improve on all fronts, the overall average cost-per-level-of-service would come down, just like Wall Street brokerage fees after deregulation broke apart that cartel. To use Dubya's words, it would make the whole pie higher (we knew what he meant).
    • Second, if care was properly priced, and if people could choose their level of care (and assoicated price), the whole industry would look a lot different. For proof, look out on the streets today: hundreds of different cars exist with different levels of performance, comfort, and safety, all zipping around together on the freeways.
    • Third, again if pricing and choice were introduced, many people would find out that they pay for a Cadillac today, but only get an old Chevy. These folks could pay less, and keep the exact same level of treatment.
    • Fourth, yes, people who choose cheap-o policies need to be told "no" when they ask for Cadillac service. Canada or Brittain, for all their warts, at least address this point well. You should be courteously re-routed to the appropriate level of care. You don't use an elephant gun to kill an ant. You don't need an ER full of trauma docs and machines that go bing to fix a rash or when your kid swallows a coin. Wait 'till the morning and go see a nursing clinic.
    • And finally, having set aside the impact of those first 4 points, we get down to some residual "tough nuts" to crack. Recently, we've all had our eyes opened to just how bad humanity is at making choices at the margin. We always assume that the unthinkable won't happen to us. Remember, more than half of bankruptcies are triggered by exorbitant, unexpected medical expenses. Avoiding this very difficult, expensive (to the overall economy), and destructive route would give the economy a measurable boost. As a society, it needs to be viewed as foolish and unacceptable to go around without at least a modicum of catastrophic-only insurance. I'd welcome thoughts on how to get there. Like Obama, I'm willing to consider all ideas. I even think we could make it financially viable to socialize this level of care without breaking the system or Uncle Sam's budget. I also think that private solutions could be had.

    My blog entry last year highlighted 7 major issues with our healthcare system. To summarize:

    1. Risk-aversion: FDA approval is painfully slow and bureaucratic. Healthcare providers choose the safe treatment to avoid being sued.
    2. Litigation: lawyers keep us all honest, but ambulance-chasing and malpractice insurance have run amok
    3. Stone-age Science: how is it that we STILL have no cure for the common cold, the most frequent killer (heart disease), or the most common ailment (back problems)? Medicine should be a science, not a craft.
    4. Stone-age Technology: Hand-written paper files and prescriptions? Seriously? Find me a successful banker, journalist, engineer, marketer, accountant, grocer, soccer mom, or even a McDonalds worker who hasn't deeply integrated the power of computers and the interwebz into their lives.
    5. Ambiguous Economics: the economics of choice and price are largely absent ... and predictable, unfortunate consequences have ensued.
    6. Reactiveness: As Obama pointed out in this week's press conference, prevention is worth a pound of cure. So pay for it!
    7. Mutated Morality: OK, so here goes. The sticky wicket of healthcare. Nobody likes to admit two things: some people are too sick to live ... and the Bible was not meant to be interpreted literally in the realm of healthcare. Get used to it. Death is a part of life. (Allow me to duck now.)

    The "better" plan addresses these things, and more. Through the principle of putting patients in the driver's seat, it:

    • Prevents maladies (and thus lowers long-term cost) by focusing on "wellcare"
    • Abandons all the hype, BS, bureaucracy, and litigiousness in favor of careful cost management and a focus on customer service a'la the HelloHealth clinic in Brooklyn
    • Requires an objectivity about determining what works and and what's most efficient. Then, ensures those things are deployed wide and quick (and that old, inefficient, or ineffective things disappear right quick).
      • Frank Lichetenberg's recent study shows us the way. It should be mandatory reading on this topic.
    • Encourages the creative destruction of new technologies and procedures. (Again, see Lichtenberg for some interesting figures.)
    • Studies the system with the rigor of a physicist, and rebuilds the system with the structure of a systems engineer. (idea courtesy of Dennis Cortese, former Mayo Clinic CEO).
    • Ensures that the consumer is fully informed by aggregating all his medical records, test results, history, etc in a single place. Sorry, privacy nuts: this is one area where a trade-off is required to gain improvements in care

    Principles are nice, but concrete, actionable ideas are better. Don't worry, I have those too. Too much for one blog, but stay tuned. I'll be back in a few days with some very detailed conversation-starters!