Btw.

I am back from London. The city is much nicer than it was when I last visited ten years ago--it's cleaner, brighter, less run down, and everything from the clothes to the interior of shops is much much nicer. It is also extraordinarily expensive.

I visited the Cabinet War Rooms which only opened last year, and I recommend them to all. It's amazing to think that a large chunk of WW2 was run from a tiny warren of underground bunkers underneath the Ministry of Work in London. Amazing. They are building a Churchill Museum that should be ready next year, and I look forward to that too.

I would recommend avoiding St. John. While they have the coolest logo of any restaurant ever, their food (always a little dicey, I mean, "traditional English cuisine" does not have a history of being any good at all) is bad. I heard that they focus on offal, and I was ready for a real freak-show of innards--the odder the better. I tried winkles, sardines, ox heart, venison, and rabbit, and I think I could do better with all of them. But I do want the t-shirt once they get around to printing them up.

The weather in Boston this Memorial Day weekend is *fantastic*!

Making it easy to blog

This Atlantic article discussing how political muckrakers get the news media to carry negative articles about their opponents struck me as being very similar to the blog world. The article itself has a tone of "how could these evil people do this/look how sophisticated it all is" outraged/ironic slant, but really all these folks are doing are writing stories that 1) people want to read and 2) are easy to publish. Back when I was concerned with driving traffic to this blog, I would write posts to make them easy to link to, links being the life-blood of blogs because they bring in new readers. I would read other people's blogs, and write my posts so that they in some way would add value to the original post. I would keep my blog focused on a topic so people knew what to expect when they came to it. I'd keep my posts short. I'd make them easy to link to -- going as far as creating special URLs that were easy to put in emails. I would produce original, researched content and get that published on Wired or slashdot or kuro5hin or whatever. The point is that I worked hard to make things as easy for others to use as possible. The political operatives in the article seem no different.

Division and specialization of labor

One of the major drivers of cost in the computer game business is the generally higher standards for realistic graphics and animation. A single person could once create a simple vector-graphic arcade game over a month, but now it takes teams of dozens year to produce a new game. This high cost, coupled with the hit-driven nature of the industry, means that publishers have become very cautious and there are few novel games out there. Expect companies to start focusing on producing rendering engines, interaction handlers, physics engines, tree engines, crowd engines, and dozens of other geegaws that will save designers from having to re-invent the wheel, falling body, exploding barrel, rampaging horde etc. again and again.

Integrated content and distribution

Much as I could not understand why other web-retailers did not mindlessly copy Amazon's excellent user interface (in 1999), I cannot understand why other manufacturers do not mindlessly copy Apple's excellent iPod design.

I've looked at Rios etc. etc., and yes they do offer more larger storage at lower cost, but Apple's ease-of-use still makes it hands down the best mp3 player out there. Everyone says it cannot last (and I do not think it will either), but I am wondering why it's taking so long. It tells you something about the importance attached to usability that companies don't pay attention even when it's driving competitive advantage.

Sony, whom I hoped would offer the most interesting mp3 devices given its hardware pedigree AND media business, has turned out one crippled dud after the other. Oh well

mp3s are not good substitutes for CDs

While the RIAA continues to blame falling CD shipments on Napster, Soundscan (that tracks retail sales) says CD consumption is going up. The best evidence, to my mind, that CD sales have not fallen as much as the RIAA claims is that CD stores do not seem to be closing down in the vast numbers than a 10% decline in sales would suggest.

I do not understand why mp3s are not a better substitute for CDs, but I can't find evidence that they are. For me, I buy the same (small) number of CDs I used to buy before -- my mp3s (on my iPod) substitute for radio.

Internet 2.0

The quest to combine the easy distribution of the Internet with the rich functionality of the desktop continues. In Longhorn, MSFT combines rich, easy-to-build applications with secure network distribution, all under their proprietary formats. The idea is that it will be easy to build these small local applications than web applications (ie. Amazon.com, not staticpage.html). IBM has a similar product launched within it's Lotus brand (division) called something like the "On Demand" workspace client.

Incidently, as far as I can tell, IBM no longer plays the "stack" game, at least not in a way I can discern. Microsoft still is.

Poor quality, not bias

After 9/11, USS Clueless experienced a dramatic rise in traffic and became my source of choice for analysis on the war in Afghanistan. Here was a guy who knew how militaries worked, and his accounts of strategies, tactics, logistics, manouvers, equipment etc. were detailed and informed in a way that I simply had not seen anywhere else. In general, I saw new blogs shift from discussing technology, to politics. The war blogger was born.

The Belmont Club has become my source of choice for the war in Iraq. In particular, his understanding of information quality, and how that impacts decisions, puts other coverage of events to shame. Check out this post where he nails why newspapers are lousy conduits of true information.

In London

Blogging will be light.

Working for a psychopath

It's well worth comparing this story from the Economist to this one from USS Clueless. The Economist points to a documentary called "The Corporation" that, through interviews etc., concludes that if the corporation was a person, it would be a psychopath, caring for nothing but higher profits. My time working both in, and for, corporations means that I can only wish that was true. Sadly, corporations are not solely afflicted with psychosis, they are also laden with schizophrenia, paranoia, neurosis, delusions, bi-polar disorder, and probably several others I can't think of right now. Anytime you have people trying to organize themselves to do a task so complex that no one person can keep it all in their head, you will find poor decisions and restricted responsibility. The Economist takes the documentary to task for not comparing it to how government bureaucracies work, which brings us to the Captain and www.kafka.be. It turns out that if you stumble upon a piece of truly asinine Belgian administration, you can tell them about it on a website and, presumably, it will then go to committee.

The object of his chronic dismay is something far more prevalent and insidious: at the heart of his obsessive and horrifying narratives is an unfathomable bureaucracy, one that has emerged through a combination of inertia, default, and the institution of political power, perpetuating itself by feeding upon the rights of the people it was ostensibly designed to serve.

... Itself devoid of selfhood, this bureaucracy nevertheless creates scenarios in which selves become increasingly irrelevant--hardly more than feckless dreams flickering on and off in the crepuscular shadow of machines that mean nothing in themselves, but paradoxically in meaning that nothing, intend that nothing and no one else should ever mean anything, or have meaning . . . or deviate in any way from the absolute meaninglessness of their tyrannical power.

Corporations struggle with this but can go out of business--bureuacracies are forever.

Ummm, voyeurism?

Instapundit argues that people searching for the Nick Berg execution video at the hands of Muslim terrorists on the Internet indicates that "Big Media" -- focused on Abu Ghraib -- is out of touch with what people want.

While I have no doubt that "Big Media" produces output of very low quality, I don't think that these search rankings reflect thoughtful care and concern about the true nature of the GWOT. I think they simply reflect the fact that people want to see someone getting their head sawn off.

More lousy economics from Slate

Slate's economics columns have been lousy every since they lost pre-insanity Krugman. But to be honest, almost everything written in mass media on economics is lousy -- making Slate average -- but I hold them to a higher standard because once-upon-a-time they did so well.

Their latest column is on the Evil Evil Bush (who LIES!!!) Evil Evil economics policy (built on LIES!!! and maybe OIL!!! TOO!!!) which, the author assures us, will lead to socialist revolution if it works.

At the heart of the article is Bush plans to reduce taxes on income and savings -- also known as capital. The reason for this, according to Slate, was because

academic economists began to favor a new set of theoretical models where the savings rate took a more prominent role as a determinant of economic growth. In addition, the models suggested that the pace of technological change depended on changes in the size of the capital stock, which can only grow if investors save more

The major ground-breaking work that I know of which links capital investment (what the article refers to as "savings") to long term economic growth is the Solow Growth Model which, unfortunately, demonstrates that a high savings rate is BAD for economic growth. The reason is that large capital investments mean there is all this capital lying around that now needs to be maintained, and the resources that go towards maintaining the capital stock come from the cash that the capital investment throws off. So capital stock ends up eating most of the profits it throws off because, just like a bird with big wings who needs big muscles to move those big wings, but then ends up needing even bigger wings to carry around the extra weight of all those muscles, etc.

An economy that maximizes consumption--ie. one worth a damn--has just the right amount of capital stock, not too much and not too little, and that is the central insight of the Solow growth model. The most observant amongst you will note that this is the exact opposite of what the article claims.

There is a very good reason to not tax savings -- it's very inefficient. Savings can run around easily to avoid tax. Companies can hide profits through depreciation schedules, debt payments, share buy-backs, and a hundred other things taught in first year business school classes. Investors can house money offshore, in various financial instruments, in nonprofit annuity schemes etc. People can simply move savings into things like houses which can be classified as consumption, come with tax breaks, but really are an asset just like anything else. The inefficiency from taxes chasing this money come from 1) the high auditing cost to try and pin this money down and 2) the dead weight loss (economic distortion) that comes from the forgone opportunities that these shenanigans preclude. Countries with high tax loads, like Sweden, have much lower capital tax rates than the US because of these inefficiencies.

It's also important to make a clear distinction between savings and investment -- another critical distinction that the article fails to grasp. Savings is just deferred consumption--instead of spending money now you are just spending money later. People are very bad at it, and in the US the savings rates are very low. Investment, on the other hand, is money set aside to generate new wealth in the future. It is possible to invest too much and reach a state where money, instead of buying consumption goods, is squandered on hare-brained schemes with zero to negative return. This is happening in China, btw, (and Japan, but for very different reasons).

The article finally argues that taxes on savings tend to be progressive, so reducing them exacerbates inequality. It is true that rich people save more and so bear a heavier tax burden on savings, while a tax on consumption falls more heavily on the poor, and this is the main reason why consumption taxes are so unpopular. It takes a higher tax burden than the US has now for people to recognize that tax efficiency is important, which means taxing consumption and labor, not savings and capital. The only thing letting the US get away with its inefficient but "socialist" capital focused tax structure is its efficient and "capitalist" low overall tax burden.

A university in Cambridge, MA

I wonder which house he was in.

Venture Financing for Video Games

I had the good fortune of meeting Greg Costikyan a number of times when I lived in New York. Greg is a games designer, and he runs an excellent blog that talks about, well, games. He has a write up to a piece by Gordon Gould on why the games industry needs venture-style financing to grow as production costs sky-rocket. While, as Greg is always reminding us, games are a very different media than movies, the fact that they are both hit driven industries with expensive stars and high production costs suggests that they may end up being very similar businesses.

Incidentally, Gordon Gould is the founder and presumably still CEO of Upoc, whose site I designed when I worked at Creative Good waaay back in 2000. At that time, text messaging was pretty unknown in the US, and I'm glad to see that the site, and business, has matured since then. They were a cool company and a great client. Small world.

Netscape 2.0

One of the most interesting things about the upcoming Google IPO is the fact that it uses a Dutch auction to allocate shares instead of the usual investment bank brokers. Somehow, during the Internet bubble, people came to beleive that an IPO "pop" (a dramatic increase in share price in the first few days after an IPO) was a good thing. In fact, a "pop" was simply a massive transfer of wealth from the company going public to the well connected investors who had the right connections with the kick-back hungry banks.

Google is not the first IPO to be structured like this, but it is the most high profile, and if this ushers in a more rational age of technology investing, all the better. Some investors have critisized this structure saying that the company's value will be set too high, but this simply means that they should pass on the opportunity to buy it, the same way one would pass on any over-priced trinket. Others complain that the company does not have a large enough float (i.e. insiders will retain too much of the company's stock), but they fail to realize that this fact, if detrimental, should be fully priced into the IPO price. Here is a link of articles on the Google IPO.

eBooks

My old buddy Stumblingtongue has a fine post on how eBooks are on their way, no matter what the naysayers claim. I agree. Much of the argument that eBooks will never replace the old paper variety is based on a certain sepia-tinted nostalgia, much beloved by the same sort of people who really like books. But the rest of the argument is based on practical things like price, resolution, contrast, battery life etc., and those things technological progress can deal with. At any rate, well worth reading.

His previous post on long books actually fits nicely with the eBooks one. I use audible+iPod for planes, and have managed to work through about one-two lengthy books a month during otherwise dead commute time. However, my copy of Neal Stephenson's Quicksilver (900 pages) sits half read on top of my copy of Neal Stephenson's The Confusion (sequel, 900 pages) which is unread. I planned to read Quicksilver this weekend, but life intervened. I can't take the book on a plane because it measures one cubic foot and weighs well over 40 pounds (approx). In electronic format, audio or not, I would probably be done with both by now.

The Distrust of Strangers

Economic Principals is a strange column, more literary than analytical, which focuses on influential figures and thinkers in Economics through history. Although Warsh, the editor, become delusional on the subject of Howard Dean, I can't think of a better read early Sunday morning.

His latest column, not yet up on the website, discusses "The Company of Strangers: A Natural History of Economic Life," by Paul Seabright, which explores the potential vulnerability of the cooperation on which economic life depends. In his review, Warsh writes

But he goes a smidgen deeper than this. He asks what is it that permits humans to surmount their hunter-gatherer instincts in order to sustain the kinds of intricate webs of trust that are required to, say, exchange a credit card number for a sack-full of groceries?

Human beings ten thousand years ago had inherited a psychology that made them intensely suspicious of strangers and capable of savage violence towards them under some circumstances, but able to benefit spectacularly from institutional arrangements that made it reasonable to treat strangers as honorary friends.

There follow several really interesting chapters on various mechanisms, both internal and external, that have arisen to facilitate such cooperation: the taste for reciprocity, the institution of money, banking and its various disorders, systems of professional authority.

I've been thinking of why people find economics so fundamentally repugnant, and I think the fact that it goes against millennium of natural selection that re-enforced building, monitoring, and maintaining social relationships, is a large part of that. We humans are hard-wired to prefer interacting with those we know and trust, those we consider family and friends, and the soul-less transactional nature of the market makes that cozy circle compete with anonymous firms, tellers, recorded voices, etc. For a multitude of obvious reasons, the cozy close-knit circle loses when set against the benefits of scale economies, division of labor, and flexible capital, but we still shed a Neanderthal tear when we realize how many of our transactions are with strangers, not kin.