Business advise today is pretty sophisticated and is largely a spreadsheet dominated trade. However, one need not read many articles and analyses documenting the serious missteps that corporations have made while taking steps from business advisory firms and management consultants to wonder how some things get overlooked. This occurred to me as I read this piece describing how the 3D movie theatres and accompanying equipment is totally unsuited for children and younger audiences. This is unbelievable to me because to start with animated movies are particularly suited for 3D viewing hence are particularly dependent on an audience of children.
Steve Chamberlain of the Guardian presents his experience as a frustrated parent who realized that viewing glasses do not fit his children in spite of having spent a premium to provide the children with a fantastic viewing experience. This just leads me to ask whether the corporations developing 3D movies theatres and developing the content ever heard of anthropologists. It is such serious omissions that give business advisers and marketing people a deservedly bad name. I hope they lose sufficient business to recall that children's heads are of different circumferences. It looks like some of these guys have never heard of deviations from the mean.
Tuesday, October 13, 2009
Monday, October 12, 2009
How do Pacesetters Affect the Outcome of Races?
As a person who watches sports events and tries to put in some analysis about what it takes to win one event or another, I am still unable to understand fully how record breaking performances benefit from pace setters or not. For instance, Sammy Wanjiru is without doubt a phenomenon in the marathon. I first watched him run during last year's Olympics games in Beijing and was impressed with his control of the race and the calculation towards the ends of that race. My thinking then as he casually jogged into the stadium was that this was definitely a unique runner among elite athletes in an extremely difficult and painful event.
Apart from that performance, the same athlete handily won the Chicago Marathon a couple of days ago. Liz Robbins of the NYT reports on the race and mentions the progress in that race. The fascinating thing in my view is the versatility of the athlete here because the running conditions in Beijing last year where the temperatures were very high. Come Chicago a year later and in vastly different conditions, he still won impressively.
The lingering question in my mind though is that the races are also different because unlike the elite marathon events, the Olympics event does not allow for pace setters. I wonder what effect, if any, the pace setters really have on the outcome of a race and whether there may be a better device for pacing an athlete towards breaking the record without involving other runners. In my view, the use of pace setters involves the introduction of assistance during the race. Not that it would matter for Sammy Wanjiru who lowered the record in Beijing by three minutes despite the absence of a designated pace setter. And noting that pace setting is not possible for the sprints, are there conditions in which pace setters are most siutable?
Apart from that performance, the same athlete handily won the Chicago Marathon a couple of days ago. Liz Robbins of the NYT reports on the race and mentions the progress in that race. The fascinating thing in my view is the versatility of the athlete here because the running conditions in Beijing last year where the temperatures were very high. Come Chicago a year later and in vastly different conditions, he still won impressively.
The lingering question in my mind though is that the races are also different because unlike the elite marathon events, the Olympics event does not allow for pace setters. I wonder what effect, if any, the pace setters really have on the outcome of a race and whether there may be a better device for pacing an athlete towards breaking the record without involving other runners. In my view, the use of pace setters involves the introduction of assistance during the race. Not that it would matter for Sammy Wanjiru who lowered the record in Beijing by three minutes despite the absence of a designated pace setter. And noting that pace setting is not possible for the sprints, are there conditions in which pace setters are most siutable?
Wednesday, October 07, 2009
Are Maestros Like Bankers?
Any reader of this obscure blog will most probably have read the Freakonomics weblog too and knows that one of the principal authors there argues that high-priced wine is largely indistinguishable from moderate or even cheaper ones. My conclusion from this demonstrated fact is that expensive wine is largely a matter of choice and communication of the ability to pay. So while I am not a connoisseur of wines in any way, I am in possession of a modest though diverse collection of classical music CDs and therefore find her questions relevant.
I have it in mind to one day attend a live opera performance or one of the major philharmonic orchestral performances. Reading this piece by Philippa Ibbotson of the Guardian just led to me to consider the economics of orchestra music. Judging from the story, there are two really important things to note. The first is that the most acclaimed orchestras pay their conductors extremely well. The second is that there's a substantial gap between the instrument players and the maestros. This leads Philippa to question whether these conductors add sufficient value to the performance to justify their pay. Indeed, she seems to conclude that there would probably be very little difference in performances if the conductors were not physically present.
I am new to the economics underlying orchestras but I think that what the most acclaimed conductors earn is explained by scarcity. Because there are much more regular players than there are conductors, the pay differential would be expected though I am unsure that it ought to be that large. Secondly, conductors like Lorin Maazel are themselves among the best composers and players and so bring to an orchestra a rare knowledge and ability that enables them to recruit and perhaps shape other musicians. The combination of the two points above would lead to recognition of the name and this has the added benefit of attracting music lovers to a particular orchestra.
Clearly labouring to explain the reason that orchestra conductors earn sums equivalent to top bankers, I still am not sure that these are sufficient to explain their income levels. It is not obvious to me that if we took separate recordings of orchestras playing with conductors and another without, the music lovers would notice that difference. The maestros themselves would then be asked in a blind test to judge the quality performance and guess which had a conductor. The results of that test would then allow me to state with confidence whether Philippa is right to ask my favourite conductor to take a pay cut.
I have it in mind to one day attend a live opera performance or one of the major philharmonic orchestral performances. Reading this piece by Philippa Ibbotson of the Guardian just led to me to consider the economics of orchestra music. Judging from the story, there are two really important things to note. The first is that the most acclaimed orchestras pay their conductors extremely well. The second is that there's a substantial gap between the instrument players and the maestros. This leads Philippa to question whether these conductors add sufficient value to the performance to justify their pay. Indeed, she seems to conclude that there would probably be very little difference in performances if the conductors were not physically present.
I am new to the economics underlying orchestras but I think that what the most acclaimed conductors earn is explained by scarcity. Because there are much more regular players than there are conductors, the pay differential would be expected though I am unsure that it ought to be that large. Secondly, conductors like Lorin Maazel are themselves among the best composers and players and so bring to an orchestra a rare knowledge and ability that enables them to recruit and perhaps shape other musicians. The combination of the two points above would lead to recognition of the name and this has the added benefit of attracting music lovers to a particular orchestra.
Clearly labouring to explain the reason that orchestra conductors earn sums equivalent to top bankers, I still am not sure that these are sufficient to explain their income levels. It is not obvious to me that if we took separate recordings of orchestras playing with conductors and another without, the music lovers would notice that difference. The maestros themselves would then be asked in a blind test to judge the quality performance and guess which had a conductor. The results of that test would then allow me to state with confidence whether Philippa is right to ask my favourite conductor to take a pay cut.
Tuesday, October 06, 2009
Digital Books Piracy
An article in the NYT notes the fact that digital copies of books are gaining appreciable sales. Naturally, the copyright holders are worried about what this means for the possibility of piracy. The article by Randal Stross asks whether digitized copies of popular books will be Napsterized. By this the article seems to assume that the ability to copy is already a given and that what is to be questioned is whether a network for their distribution of digitized texts will be established.
Reading from the piece, it is clear that there is a limited ability at this time to receive the copies of the most popular material from a variety of sites. Still, it is important that most of these sites are peer exchange or file storage sites that do not overtly mean to ensure the unauthorized exchange of digitized books. As a representative of Rapidshare states, everything is just a file and implies that the exchange could take place.
And therein lies the answer for e-book sellers because to the extent that these products are reduced to digital files, they will almost certainly be copied and transferred irrespective of the wishes of the producers. To my mind then, the publishers are in a situation where they must study this market carefully because a law and order approach will not work. It is also clear that the pricing mechanism must change significantly to reflect the fact that digital copies are cheaper to produce. for most publishers, this will affect the profitability per copy but perhaps for the most dedicated readers, there may be higher purchases.
As argued in this blog here and here, the cumulative lessons from Napster should be studied keenly. it is also essential not to overstate the effects and degree of piracy. If indeed book purchases are shrinking, then it is essential to determine how any improvements in the quality of products for readers compares to more sophisticated digital rights management technology and law enforcement.
Reading from the piece, it is clear that there is a limited ability at this time to receive the copies of the most popular material from a variety of sites. Still, it is important that most of these sites are peer exchange or file storage sites that do not overtly mean to ensure the unauthorized exchange of digitized books. As a representative of Rapidshare states, everything is just a file and implies that the exchange could take place.
And therein lies the answer for e-book sellers because to the extent that these products are reduced to digital files, they will almost certainly be copied and transferred irrespective of the wishes of the producers. To my mind then, the publishers are in a situation where they must study this market carefully because a law and order approach will not work. It is also clear that the pricing mechanism must change significantly to reflect the fact that digital copies are cheaper to produce. for most publishers, this will affect the profitability per copy but perhaps for the most dedicated readers, there may be higher purchases.
As argued in this blog here and here, the cumulative lessons from Napster should be studied keenly. it is also essential not to overstate the effects and degree of piracy. If indeed book purchases are shrinking, then it is essential to determine how any improvements in the quality of products for readers compares to more sophisticated digital rights management technology and law enforcement.
Monday, October 05, 2009
Russia's Population Problem
One thing that makes Russia comparable to Japan is that they both face an impending demographic crisis. True, the reduction in Russia's population is already evident while Japan's is at most a decade away. So it is more exact to state that Russia's is real and present, while Japan's population shrinkage is yet based on an extrapolation of present growth rates.
It is therefore interesting that while on one side of the world, there's the concern for high growth rates, these two countries face this unique kind of demographic pressure that man has not been experienced at this scale since the agrarian revolution a couple of centuries ago.
This article reported by the associated press in the NYT makes the profound claim that Russia's population has shrunk by 6.6 million souls since the year 1992. While the options available include immigration and pro-natalist policies, the relative homogeneity of Russia makes it unlikely that the latter will be considered a part of the solution. To my mind, Russia's leaders are faced with a difficult problem that would affect future growth but enlightened immigration should not be certainly off the table.
On the other hand, the high mortality rates of Russians is attributed to the tendency to consume higher amount of alcohol and there is a fix here too. A tax based on the alcoholic volume of beverages should assist in reducing early mortality and deaths. eve for a shrinking population, the attempts to ban alcohol consumption is not sensible. In a sense, there's no silver bullet solution but the reconsideration of the immigration policy should lead.
It is therefore interesting that while on one side of the world, there's the concern for high growth rates, these two countries face this unique kind of demographic pressure that man has not been experienced at this scale since the agrarian revolution a couple of centuries ago.
This article reported by the associated press in the NYT makes the profound claim that Russia's population has shrunk by 6.6 million souls since the year 1992. While the options available include immigration and pro-natalist policies, the relative homogeneity of Russia makes it unlikely that the latter will be considered a part of the solution. To my mind, Russia's leaders are faced with a difficult problem that would affect future growth but enlightened immigration should not be certainly off the table.
On the other hand, the high mortality rates of Russians is attributed to the tendency to consume higher amount of alcohol and there is a fix here too. A tax based on the alcoholic volume of beverages should assist in reducing early mortality and deaths. eve for a shrinking population, the attempts to ban alcohol consumption is not sensible. In a sense, there's no silver bullet solution but the reconsideration of the immigration policy should lead.
Tuesday, September 29, 2009
Leading UNESCO
I understand fully that in international organizations, the political issues that underly election of top officials sometimes go beyond pure merit. In these instances, the clout of the country from which a professional comes from is material. There is not only a lot of lobbying and promises to exchange support in the future but also reference to a candidate's standing about issues that are divisive. A fortnight ago, member states elected a new Director General for UNESCo and as reported here by Michael Slackman of the NYT, this was even more overtly political.
In spite of those facts among many others that I have not mentioned, I am glad that the elections of the Director General of UNESCO was determined as it did. My main reason is that Farouk Hosny did not deserve to be elected to UNESCO leadership for the reason that while he has held intellectual positions, he particularly advocated for the burning of books for the reason that they were the works of Jewish authors. While I hold no illusions about the perfection of all men and the processes that determine elections to international bodies, I think that for an intellectual to adopt such nativist and dangerous populism is an indication that they are insufficiently independent minded to hold positions of advancing literacy and such culture. I now little about UNESCO but I know who does not deserve to serve in its leadership.
In spite of those facts among many others that I have not mentioned, I am glad that the elections of the Director General of UNESCO was determined as it did. My main reason is that Farouk Hosny did not deserve to be elected to UNESCO leadership for the reason that while he has held intellectual positions, he particularly advocated for the burning of books for the reason that they were the works of Jewish authors. While I hold no illusions about the perfection of all men and the processes that determine elections to international bodies, I think that for an intellectual to adopt such nativist and dangerous populism is an indication that they are insufficiently independent minded to hold positions of advancing literacy and such culture. I now little about UNESCO but I know who does not deserve to serve in its leadership.
Thursday, September 24, 2009
Quantifcation as a Stunt
For any reasonably qualified student of economics, the mathematical and modeling skills are bound to be quite high. Indeed they are now thought to be a good predictor for successful completion of any graduate course in economics. This is a view that is almost accepted by a majority of economists and has begun to creep throughout the other social sciences. One is not a serious policy wonk or academic unless there is a high facility with numbers and modelling techniques.
What many economists have yet to explain properly is that the need to quantify more and more things sometimes leads to very ridiculous results. Nobody takes a more measured view on the use for calculus and other higher order mathematical techniques than John Kay. In his latest article, he gives an interesting view of how far the demand for quantification is taken with the result that beautiful algorithms explain nothing that was unknown. Taking forward his example, the UNDP's Human Development Index is itself derived from education levels, national income levels and life expectancy and in spite of the concoction of a sophisticated formula, it reveals nothing more than was plugged into the algorithm.
In a matter of speaking, it is just a mathematical stunt because it correlates so highly with income that there is little distinction between the two. Citizens of countries with sophisticated economies will have higher life expectancy and higher educational attainment. To put the three by according them different weights is a matter of taste and the resulting index is not useful.
What many economists have yet to explain properly is that the need to quantify more and more things sometimes leads to very ridiculous results. Nobody takes a more measured view on the use for calculus and other higher order mathematical techniques than John Kay. In his latest article, he gives an interesting view of how far the demand for quantification is taken with the result that beautiful algorithms explain nothing that was unknown. Taking forward his example, the UNDP's Human Development Index is itself derived from education levels, national income levels and life expectancy and in spite of the concoction of a sophisticated formula, it reveals nothing more than was plugged into the algorithm.
In a matter of speaking, it is just a mathematical stunt because it correlates so highly with income that there is little distinction between the two. Citizens of countries with sophisticated economies will have higher life expectancy and higher educational attainment. To put the three by according them different weights is a matter of taste and the resulting index is not useful.
Tuesday, September 22, 2009
Israel's Miracle in Development Economics
The small country of Israel is one that many people have political opinions on and perhaps the one that few understand pretty well. However, whenever people talk of the countries that have pulled off economic miracles, I am wont to think of Hong Kong, Singapore and Ireland. Lately, the focus has turned to India and China with huge expectations of their longer-term development.
I have just read for the third time this well-told piece analyzing the genesis of Israel's development miracle from a relatively backward socialist country into the most sophisticated country in the Middle East today. Writing in City Journal, it is clear to me that George Guilder has taken an analytical survey of Israel's technology driven growth.
To my mind, the elaborate survey of Israel's economy shows that well thought reforms based on rational economics always pays off in a big way. It is not by default that Israel has managed to survive in the hostile neighbourhood while maintaining a far higher standard life for its citizens in comparison to other Middle Eastern nations. And it is clear that as it's private sector races forward with more investment in technology backed by solid economic reforms, it will continue to be formidable as a military adversary.
As a small country, the arrival of a reform-minded government ensured that new businesses based on new models emerged and naturally supplanted state supported competitors. This was closely followed by venture capital funds which have made Israel a leader in total investments after adjustment for population. It is also clear that success in the semiconductor design business opens up opportunities in biotechnology and software development.
In conclusion, unlike the author, I agree that Israel's performance over the last two decades should form a chapter in development economics course readers in addition to case studies for business schools. As a country, its business leaders are right on top of their game and are ensuring that the country will continue to be on the cutting edge of technology and therefore prosperous. To my mind, similarly clear thinking should be applied to political reforms so that the entire Middle east needs gets an example from this enigma.
I have just read for the third time this well-told piece analyzing the genesis of Israel's development miracle from a relatively backward socialist country into the most sophisticated country in the Middle East today. Writing in City Journal, it is clear to me that George Guilder has taken an analytical survey of Israel's technology driven growth.
To my mind, the elaborate survey of Israel's economy shows that well thought reforms based on rational economics always pays off in a big way. It is not by default that Israel has managed to survive in the hostile neighbourhood while maintaining a far higher standard life for its citizens in comparison to other Middle Eastern nations. And it is clear that as it's private sector races forward with more investment in technology backed by solid economic reforms, it will continue to be formidable as a military adversary.
As a small country, the arrival of a reform-minded government ensured that new businesses based on new models emerged and naturally supplanted state supported competitors. This was closely followed by venture capital funds which have made Israel a leader in total investments after adjustment for population. It is also clear that success in the semiconductor design business opens up opportunities in biotechnology and software development.
In conclusion, unlike the author, I agree that Israel's performance over the last two decades should form a chapter in development economics course readers in addition to case studies for business schools. As a country, its business leaders are right on top of their game and are ensuring that the country will continue to be on the cutting edge of technology and therefore prosperous. To my mind, similarly clear thinking should be applied to political reforms so that the entire Middle east needs gets an example from this enigma.
Wednesday, September 16, 2009
Closing Vietnam's Think Tank
In my view one indicator of the level of freedom in any country is the number, quality and variety of issues that think tanks do. This is not to argue that there is a causative relationship between the two. This trite point occurred to me today after reading through this short piece in the LA Times. the main point of news in the story is that an independent think tank in Vietnam has opted to close down in response to an unreasonable quest to circumscribe the areas of independent research. The Institute of Development Studies has made a difficult and even arguably bad decision by opting to close down but it is understandable that independent thinkers are distressed by this appalling decree.
It is clear that the government of Vietnam is making a very serious mistake in placing restrictions on the matters that may be made the subject of research in that country. to start with, the most palpable purpose of research is to discover the unknown and clarify knowledge. It is therefore presumptuous for a government to insist that there are only 317 issues that should be subjected to research. I am most impressed with the statement by the IDS in asserting that banning independent thought is the antithesis of scientific endeavour and that open discussion is useful for policy creation.
As a previous visitor to Hanoi, I am disappointed because my assessment was that the country would continue to open up over time. I hope that Vietnam's savvy politicians can justify their reputation for pragmatism and regain my confidence by taking seriously the implications of this decision by a body of scholars to close down the thought factory. As I often quoted from Anthony Fisher before, ideas have consequences.
It is clear that the government of Vietnam is making a very serious mistake in placing restrictions on the matters that may be made the subject of research in that country. to start with, the most palpable purpose of research is to discover the unknown and clarify knowledge. It is therefore presumptuous for a government to insist that there are only 317 issues that should be subjected to research. I am most impressed with the statement by the IDS in asserting that banning independent thought is the antithesis of scientific endeavour and that open discussion is useful for policy creation.
As a previous visitor to Hanoi, I am disappointed because my assessment was that the country would continue to open up over time. I hope that Vietnam's savvy politicians can justify their reputation for pragmatism and regain my confidence by taking seriously the implications of this decision by a body of scholars to close down the thought factory. As I often quoted from Anthony Fisher before, ideas have consequences.
Thursday, September 10, 2009
Steven Landsburg on Antidotes
" The antidote to bad religion is good science. The antidote to astrology is the scientific method, the antidote to naive creationism is evolutionary biology, and the antidote to naive environmentalism is economics". Steven Landsburg, in The Armchair Economist.
Wednesday, September 09, 2009
Saltwater Versus Freshwater Economists
For a discipline that has ridden high in the last two decades, I think that the recent financial crisis and subsequent economic recession will leave economists of all kinds with lots of explanation to do. For one, the state of affairs makes it clear that the confidence that professional macro economists have had was largely undeserved. More pertinently, though, the state of affairs in the US and Europe have led to the need to re-examine the theories that have informed most economic explanations at the macro economy.
Coming back to one of its most lucid writers, Paul Krugman revisits the ideological arguments in the discipline generally and especially in macroeconomics. because the story is worth reading for itself and I am not as competent in explaining macroeconomics, I do not attempt to summarize it. However, it clearly states the fair point that the major assumptions of rationality by the discipline are not tenable any longer. It is clear now that the hasty dismissal of Keynesian understanding was premature and the resurgence of this alternative is almost guaranteed. With credit to Paul Krugman, he does not push the Keynesian alternative too far but has concentrated the essay in demonstrating that its; explanation of recessions and the prescriptions for going over them is more complete and demonstrably effective.
As he says, the search for a more complete theory of macroeconomics is on but I would wager that there are already careers invested in one approach. this means that irrespective of the merits or demerits of the Neoclassical approach, the success of the administration in restoring market activities will not be as easy to concede. It is also clear to me as a student of economics that the rigour of economics must require proper models but more importantly, the difficult math must yield sensible results. The absolute rationality of all financial market participants is not one of them and thankfully, markets do not demand rationality from all.
Coming back to one of its most lucid writers, Paul Krugman revisits the ideological arguments in the discipline generally and especially in macroeconomics. because the story is worth reading for itself and I am not as competent in explaining macroeconomics, I do not attempt to summarize it. However, it clearly states the fair point that the major assumptions of rationality by the discipline are not tenable any longer. It is clear now that the hasty dismissal of Keynesian understanding was premature and the resurgence of this alternative is almost guaranteed. With credit to Paul Krugman, he does not push the Keynesian alternative too far but has concentrated the essay in demonstrating that its; explanation of recessions and the prescriptions for going over them is more complete and demonstrably effective.
As he says, the search for a more complete theory of macroeconomics is on but I would wager that there are already careers invested in one approach. this means that irrespective of the merits or demerits of the Neoclassical approach, the success of the administration in restoring market activities will not be as easy to concede. It is also clear to me as a student of economics that the rigour of economics must require proper models but more importantly, the difficult math must yield sensible results. The absolute rationality of all financial market participants is not one of them and thankfully, markets do not demand rationality from all.
Friday, September 04, 2009
Falling Asleep Over the Board
This story in the Times newspaper reports that Vladislav Tkachiev, a professional chess player fell asleep over the chessboard while facing an opponent at a tournament. As the story goes ahead to explain, it is being posited that the maverick player, who is ranked 58 worldwide, was probably inebriated. I think that chess players are also entitled to having fun.
What I find most surprising is the call by Nigel Short and the tone of other officials in seeking to punish the player further. This is all unnecessary and the action of desperate official in professional sports in thinking that more rules will lead to their version of better behaviour. My view is that the response here is extremely silly. To start with, I play chess occasionally against friends and while I am nowhere near master level, I understand more than these officials are betraying.
They seem to be unaware that to be a chess Grandmaster requires such discipline and a high degree of concentration that it is in the interest of any player who relies upon it for income to be alert throughout matches. So to introduce any rules of overreact in this instance is just show for the crowds and the sponsors but this indignation is completely unjustified. I also think that due to the required level of alertness and the generally high intelligence of competitive chess players, the single event of a player falling asleep on the board is some remote and unlikely. The appropriate response is to let it pass and not make rules for an event that is so unlikely to occur again. True, Mr. Tkachiev should forfeit the match and the prize money and that is all. Chess is played at that level by extremely intelligent, if eccentric people, who do not need to be governed by more rules. And while at it, may i ask who benefits from rules?
What I find most surprising is the call by Nigel Short and the tone of other officials in seeking to punish the player further. This is all unnecessary and the action of desperate official in professional sports in thinking that more rules will lead to their version of better behaviour. My view is that the response here is extremely silly. To start with, I play chess occasionally against friends and while I am nowhere near master level, I understand more than these officials are betraying.
They seem to be unaware that to be a chess Grandmaster requires such discipline and a high degree of concentration that it is in the interest of any player who relies upon it for income to be alert throughout matches. So to introduce any rules of overreact in this instance is just show for the crowds and the sponsors but this indignation is completely unjustified. I also think that due to the required level of alertness and the generally high intelligence of competitive chess players, the single event of a player falling asleep on the board is some remote and unlikely. The appropriate response is to let it pass and not make rules for an event that is so unlikely to occur again. True, Mr. Tkachiev should forfeit the match and the prize money and that is all. Chess is played at that level by extremely intelligent, if eccentric people, who do not need to be governed by more rules. And while at it, may i ask who benefits from rules?
Wednesday, September 02, 2009
Why Are So Few Athletes Articulate?
While I do not spend too much money buying sports merchandise, I dedicate a lot of time to watching soccer, Formula 1 racing and a couple of other sports events during weekends. And I also understand that these athletes are not only supremely fit but capable of amazing feats. to get to that level of physical conditioning requires significant practice because the elite athletes are all outliers according to Malcolm Gladwell's claim.
However, one of the areas in which I am almost always disappointed is while watching or reading interviews by various sportsmen who excel in their fields. Judging from a vast majority of soccer players, they are often thoroughly incoherent and speak in very short and generic sentences. I think among the phrases that athletes have explored to death are "great", "awesome" and "fantastic play". My near conclusion has been that many soccer players in particular have all their talent on their feet alone.
But there are exceptions and one of those has been Patrick Vieira who plays soccer and the vast majority of Formula 1 drivers. I have added to that list the name of Clarence Seedorf, one of the most accomplished soccer players in Europe. In this piece in the NYT sports pages, he responds to a series of questions from readers about European football management, the incomes that accrue to players and many others. He has entered my hallowed list of brainy athletes especially in reference to his answer about the determinants of players incomes. His answer suggests some knowledge of the economics of the game. He nails is properly by alluding to the fact that the market is rewarding skills for a limited set of players and that is why they are able to have large incomes.
However, one of the areas in which I am almost always disappointed is while watching or reading interviews by various sportsmen who excel in their fields. Judging from a vast majority of soccer players, they are often thoroughly incoherent and speak in very short and generic sentences. I think among the phrases that athletes have explored to death are "great", "awesome" and "fantastic play". My near conclusion has been that many soccer players in particular have all their talent on their feet alone.
But there are exceptions and one of those has been Patrick Vieira who plays soccer and the vast majority of Formula 1 drivers. I have added to that list the name of Clarence Seedorf, one of the most accomplished soccer players in Europe. In this piece in the NYT sports pages, he responds to a series of questions from readers about European football management, the incomes that accrue to players and many others. He has entered my hallowed list of brainy athletes especially in reference to his answer about the determinants of players incomes. His answer suggests some knowledge of the economics of the game. He nails is properly by alluding to the fact that the market is rewarding skills for a limited set of players and that is why they are able to have large incomes.
Monday, August 31, 2009
Competition for Trainers Gaining Momentum
A while ago, I covered here and here the story about the innovative footwear that is based on the principle that running barefoot is a natural way to prevent injury. It is not surprising that a number of corporations with an interest one way or another are contesting the fact. This story in the NYT covers the small trend for certain runners to either go unshod or take up the new foot covering that mimics the bare foot.
It is fascinating that in spite of the claim that trainers today have integrated better technology and new products, the author avers that the proportion of injuries to athletes has not reduced at all. What is not in doubt is that the claim about these innovations is leading to an upward creep in the prices of trainers and an expansion in the total expenditure on trainers. In order to hedge their bets however, they have responded to the trend and are producing rival coverings that emulate the Five Fingers running shoes.
An interesting read in itself, I will watch this industry closely not only because I have run a couple of marathons casually but also because this is an education in how markets for new products form and how established products are replaced or not.
It is fascinating that in spite of the claim that trainers today have integrated better technology and new products, the author avers that the proportion of injuries to athletes has not reduced at all. What is not in doubt is that the claim about these innovations is leading to an upward creep in the prices of trainers and an expansion in the total expenditure on trainers. In order to hedge their bets however, they have responded to the trend and are producing rival coverings that emulate the Five Fingers running shoes.
An interesting read in itself, I will watch this industry closely not only because I have run a couple of marathons casually but also because this is an education in how markets for new products form and how established products are replaced or not.
Why Sports Franchises Should Adopt Experiments
US sports franchises ordinarily employ very sophisticated marketing ideas. However, the teams have all had to review these marketing methods because of the direct effects that the economic crisis has had on consumer spending. This has been manifested in the inability of sports franchises to fill up stadiums and get the sales for their products moving.
So it appears that sports team have had to devise new incentives to try and raise attendance at sports events and to raise the sales of merchandise. As Vincent Malozzi reports for the NYT here, the New Jersey Nets basketball franchise has started to offer ticket buyers free jerseys. It is trying to put together the jerseys as a compliment to the purchase of several tickets while allowing for the reversible jerseys to also bear the names of competing teams.
While the story does not mention what the relative prices of the jerseys and every seat are, it is understandable that the promotion of a competing team is not necessarily a loss. The reason being that a league is such that all teams have an interest in promoting the entire package even if they are competitors for the prizes. This means that even strong teams need the others I the franchise in order for the NBA to continue to thrive. Because it is really difficult to tell whether these initiatives will be the most effective, it would perhaps be better for the marketing teams in each franchise to devise different incentive schemes and adopt an experimental method for determining which is the most effective. The incentives scheme that presently exists cannot be fairly compared to an alternative and proved to be the better. But to my mind, it is clear that marketers are not applied economists.
So it appears that sports team have had to devise new incentives to try and raise attendance at sports events and to raise the sales of merchandise. As Vincent Malozzi reports for the NYT here, the New Jersey Nets basketball franchise has started to offer ticket buyers free jerseys. It is trying to put together the jerseys as a compliment to the purchase of several tickets while allowing for the reversible jerseys to also bear the names of competing teams.
While the story does not mention what the relative prices of the jerseys and every seat are, it is understandable that the promotion of a competing team is not necessarily a loss. The reason being that a league is such that all teams have an interest in promoting the entire package even if they are competitors for the prizes. This means that even strong teams need the others I the franchise in order for the NBA to continue to thrive. Because it is really difficult to tell whether these initiatives will be the most effective, it would perhaps be better for the marketing teams in each franchise to devise different incentive schemes and adopt an experimental method for determining which is the most effective. The incentives scheme that presently exists cannot be fairly compared to an alternative and proved to be the better. But to my mind, it is clear that marketers are not applied economists.
Friday, August 28, 2009
Market Signals from Cash for Clunkers
My view about the Us government's stimulus programme is that it really did help the economy from a faster slide and a worse crisis. In spite of this general approval, I was most upset by the support for banks considered too big to fail on the one side and the support given to US-domiciled car manufacturing companies based in Detroit. To my mind, there was no justifiable reason to save firms that were out of touch with their main customers and produced cars that nobody bought.
As if that was not enough, the stimulus plan had this bright idea of subsidizing US citizens who wished to but new fuel-efficient cars. By all accounts, this part of the stimulus has also been successful and has had to be shut a little earlier than initially anticipated. For all its successes, this NYT piece leads me to surmise that the way in which the plan worked out showed very strong consumer choices. Two facts stand out. The first is that a majority of the cars purchased by US citizens taking advantage of the subsidy were Asian made. This stresses the fact that even with a subsidy, fewer US citizens are willing to buy the cars manufactured by some of the US firms that benefited from a subsidy too. Secondly, the cars that have been surrendered under the programme are also overwhelmingly those produced by the same US car makers. Essentially therefore, there is some kind of substitution away from some of the US manufacturers towards the Asian cars.
To my mind, the lessons are clear here. The Detroit corporations have some carching up to do and it may even be too late for a number of them.
As if that was not enough, the stimulus plan had this bright idea of subsidizing US citizens who wished to but new fuel-efficient cars. By all accounts, this part of the stimulus has also been successful and has had to be shut a little earlier than initially anticipated. For all its successes, this NYT piece leads me to surmise that the way in which the plan worked out showed very strong consumer choices. Two facts stand out. The first is that a majority of the cars purchased by US citizens taking advantage of the subsidy were Asian made. This stresses the fact that even with a subsidy, fewer US citizens are willing to buy the cars manufactured by some of the US firms that benefited from a subsidy too. Secondly, the cars that have been surrendered under the programme are also overwhelmingly those produced by the same US car makers. Essentially therefore, there is some kind of substitution away from some of the US manufacturers towards the Asian cars.
To my mind, the lessons are clear here. The Detroit corporations have some carching up to do and it may even be too late for a number of them.
Wednesday, August 26, 2009
Bank Secrecy and Public Good
Swiss banking has acquired an enviable reputation for efficiency and solidity in keeping assets safe for individuals with large incomes and assets. Indeed, one of its main selling points has been the bankable value of Swiss bank secrecy as a recognized character of most of those banks. I have been at a loss about the virtual arm twisting that has led Swiss banks to accept the release of details of a number of account holders who may have evaded taxes in the US and European countries.
Lacking the clarity and certainty that has been expressed by various liberty-loving and libertarian bloggers on the one side and state agents arguing for the right to find and punish banks that collaborate with tax evaders, I have eschewed a contribution to that discussion on this blog or elsewhere. However, reading what I think is a mildly tilted but passable opinion by Holman Jenkins Jr. of the Wall Street Journal here, I consider that I could venture with my views too.
To begin with, businesses of every kind should design and retain the liberty to emphasize features that would give them an advantage over others based in different countries or nations. For that reason alone, there is nothing completely objectionable about Swiss banking institutions stressing the secrecy as a sacrosanct feature in their service to clients. As Holman Jenkins Jr. states, this specific feature was developed by the Swiss legislature entirely for defensible purposes aimed at preventing the confiscation of private property by the government of Nazi Germany. To his admission too, the author states that the feature was neutral and allowed both some Nazis and the Jewish families to shield their property from confiscation.
Later however, the deployment of bank secrecy as a business feature has given Swiss banks a bad name and this was bound to boomerang badly sooner than later. To start with, many African and Latin American despots and killers are known and suspected of holding comparatively large fortunes in Swiss banks. Often after the demise of these despots, Swiss banks have hidden behind this secrecy feature to prevent national governments from claiming property that was stolen from national treasuries, all in the name of absolute bank secrecy laws. This has been a frustrating state of affairs for many residents of developing nations and has made a useful instrument highly suspect and the banks largely despised.
So while I am loath to concede to government wide regulation and forced participation in a disclosure scheme, I think that the banks could have preempted this loss of public confidence by refining the secrecy laws to allow fewer despots and thieves from escaping with large sums of cash. To my mind, a person who relocates his assets across countries to evade taxes is, strictly speaking, breaking the law but cannot compare to outright killers and thieves whose money has been parked in Swiss banks for decades. Unlike Holman Jenkins Jr., I am less inclined to accept that the the problem was that the banks deployed Swiss banking too widely, but agree that it indeed was cheapened by making outright killers keep dollars that they obviously did not earn and that were stolen from national treasuries. Swiss banking has a valuable attribute but it made itself cheap by keeping assets for killers and outright thieves.
Lacking the clarity and certainty that has been expressed by various liberty-loving and libertarian bloggers on the one side and state agents arguing for the right to find and punish banks that collaborate with tax evaders, I have eschewed a contribution to that discussion on this blog or elsewhere. However, reading what I think is a mildly tilted but passable opinion by Holman Jenkins Jr. of the Wall Street Journal here, I consider that I could venture with my views too.
To begin with, businesses of every kind should design and retain the liberty to emphasize features that would give them an advantage over others based in different countries or nations. For that reason alone, there is nothing completely objectionable about Swiss banking institutions stressing the secrecy as a sacrosanct feature in their service to clients. As Holman Jenkins Jr. states, this specific feature was developed by the Swiss legislature entirely for defensible purposes aimed at preventing the confiscation of private property by the government of Nazi Germany. To his admission too, the author states that the feature was neutral and allowed both some Nazis and the Jewish families to shield their property from confiscation.
Later however, the deployment of bank secrecy as a business feature has given Swiss banks a bad name and this was bound to boomerang badly sooner than later. To start with, many African and Latin American despots and killers are known and suspected of holding comparatively large fortunes in Swiss banks. Often after the demise of these despots, Swiss banks have hidden behind this secrecy feature to prevent national governments from claiming property that was stolen from national treasuries, all in the name of absolute bank secrecy laws. This has been a frustrating state of affairs for many residents of developing nations and has made a useful instrument highly suspect and the banks largely despised.
So while I am loath to concede to government wide regulation and forced participation in a disclosure scheme, I think that the banks could have preempted this loss of public confidence by refining the secrecy laws to allow fewer despots and thieves from escaping with large sums of cash. To my mind, a person who relocates his assets across countries to evade taxes is, strictly speaking, breaking the law but cannot compare to outright killers and thieves whose money has been parked in Swiss banks for decades. Unlike Holman Jenkins Jr., I am less inclined to accept that the the problem was that the banks deployed Swiss banking too widely, but agree that it indeed was cheapened by making outright killers keep dollars that they obviously did not earn and that were stolen from national treasuries. Swiss banking has a valuable attribute but it made itself cheap by keeping assets for killers and outright thieves.
Monday, August 24, 2009
Retiring Racehorses
Joe Drape's interesting article about the lives of retired thoroughbred horses here has just reminded me about the similarity between retired racehorses and athletes. The first comparable feature is that both racehorses and professional athletes compete for prizes in sports disciplines with a very fat tailed curves. In essence, a very small proportion of athletes and racehorses win a majority of the prizes available both in volume of races or overall value of prizes. In the story of the Tour of the Cat, one is not surprised that this racehorse won US$ 1.1 million over a nine year career and is already unfit to compete further due to injury and advanced age. It is quite akin to the work life of professional athletes who earn the large portion of their incomes early in life and are often forced into retirement by age, injury and often by both.
The comparison breaks down because retired athletes receive financial advise and are able to keep aside some cash for their retirement while the money that is won by horses is often fully taken over by their owners. So whereas both have retirement homes of sorts, the horses do really badly because with broken down bodies and increasingly injury prone, they are conveniently taken for slaughter or auctioned off to kind keepers. Still, it is worthy of mention that a number of athletes end up being destitute as well in spite of their incomes. Again, the solution here may involve mandated savings for horses as well since many sports franchises require athletes to receive assistance with planning that for their retirement. A pity that it would be difficult to impose that on horse owners who may appropriate the entire race income and dispatch the horse back to an undignified retirement.
The reason for this tendency to abandon horses is clear. Competition is so intense that the owners of racehorses have to nurture several horses but only manage to recoup profits from a much smaller number of winners. Aging or injured horses are then caught in this game of numbers and are dispensable. Sad but a fact.
The comparison breaks down because retired athletes receive financial advise and are able to keep aside some cash for their retirement while the money that is won by horses is often fully taken over by their owners. So whereas both have retirement homes of sorts, the horses do really badly because with broken down bodies and increasingly injury prone, they are conveniently taken for slaughter or auctioned off to kind keepers. Still, it is worthy of mention that a number of athletes end up being destitute as well in spite of their incomes. Again, the solution here may involve mandated savings for horses as well since many sports franchises require athletes to receive assistance with planning that for their retirement. A pity that it would be difficult to impose that on horse owners who may appropriate the entire race income and dispatch the horse back to an undignified retirement.
The reason for this tendency to abandon horses is clear. Competition is so intense that the owners of racehorses have to nurture several horses but only manage to recoup profits from a much smaller number of winners. Aging or injured horses are then caught in this game of numbers and are dispensable. Sad but a fact.
Friday, August 21, 2009
Politicians on Facebook
I have recently acquired an intense interest in the use of quantitative measures to explain political and other facts. However, I have had to blink after seeing something about the number of visits to Facebook sites by various politicians in the US. I will refrain from a very hard interpretation of this fascinating chart appearing here on the Daily Dish Blog but it tells a story about where the real following is. So what's one to make of it?
My Hat Tip to: Patrick Appel
My Hat Tip to: Patrick Appel
Wednesday, August 19, 2009
Quoting Alan Greenspan
"We often forget that to function effectively, a competitive market must be voluntary and free of significant threats of violence, and that trade must be unencumbered. remember markets are not ends in themselves. they are constructs to assist populations in achieving the optimum allocation of resources".-Alan Greenspan in The Age of Turbulence p. 461.
Proof That DNA Evidence Can be Fabricated
I consider that the use of cutting-edge technology is an imperative in the provision of public goods and services. Therefore in spite of my real skepticism for some functions undertaken by governments, one area where I support it is in the provision of public safety as a public good. But having read Actual Innocence, and encountered the critical ways in which DNA evidence has been used to free people who were wrongfully convicted for murder, I have had enormous respect for DNA evidence in forensics and law enforcement.
My impression from that book was that thanks to lawyers such as Barry Scheck and the Innocence Project, DNA evidence is really a neutral factor in criminal prosecutions because it can work (sometimes retrospectively)to clear innocent accused and expose police and prejudicial prosecution and corruption. So in a way, the oft-stated conservative mantra that only criminals need to fear was partially justified.
However, Andrew Pollack's interesting piece in the NYT today states that scientists in Israel have demonstrated that DNA evidence can be fabricated. To my mind, this does not on its own discredit DNA evidence as much but is a mere reminder to law enforcers generally and judges in particular to treat evidence carefully and to allow for wider and dispassionate scrutiny. Indeed, the point of the story is to illustrate that the firm called Nucleix has developed a mechanism for distingusihing between authentic samples and manipulated ones.
Having read the book stated above, I am not sure that the average criminal would be interested in fabricating samples to incriminate another person. Instead, it is the police and prosecuting authorities whose evidence must be subjected to stricter tests. The real concern for anyone with a liberatarian inclination is the possibility that one's DNA material may be illegally harvested and published. Still, I am sure that the response is not to banish technological development as much as ensure that there are appropriate legal remedies for such action.
My impression from that book was that thanks to lawyers such as Barry Scheck and the Innocence Project, DNA evidence is really a neutral factor in criminal prosecutions because it can work (sometimes retrospectively)to clear innocent accused and expose police and prejudicial prosecution and corruption. So in a way, the oft-stated conservative mantra that only criminals need to fear was partially justified.
However, Andrew Pollack's interesting piece in the NYT today states that scientists in Israel have demonstrated that DNA evidence can be fabricated. To my mind, this does not on its own discredit DNA evidence as much but is a mere reminder to law enforcers generally and judges in particular to treat evidence carefully and to allow for wider and dispassionate scrutiny. Indeed, the point of the story is to illustrate that the firm called Nucleix has developed a mechanism for distingusihing between authentic samples and manipulated ones.
Having read the book stated above, I am not sure that the average criminal would be interested in fabricating samples to incriminate another person. Instead, it is the police and prosecuting authorities whose evidence must be subjected to stricter tests. The real concern for anyone with a liberatarian inclination is the possibility that one's DNA material may be illegally harvested and published. Still, I am sure that the response is not to banish technological development as much as ensure that there are appropriate legal remedies for such action.
Monday, August 17, 2009
Usain Bolt Takes 36 Strides to the Record
I have reviewed casually the data from the Olympic games from last year. I told myself that the men's 100 meters sprint record was in my view off the curve that within two games, the timers would have to include at least three decimal places. My reason then was that with a world record established at 9.69 seconds by Usain Bolt, it would be soon not be possible to break that record by large margins.
Its its a good thing that I did not place a large bet on that because Usain Bolt run a race at the World championships that set the record at 9.58 seconds. To my mind, it was not just the way that this runner made the world's best trained sprinters to look ordinary but the margin was huge in two ways. In my calculation to cut down that record of 9.69 seconds over a year by 0.11 seconds is an amazing feat notwithstanding the new training methods and technological aids. tThe second point is that his challengers run a fast race that would have won Ggold medals for the first four, two games ago.
As the story in the Irish Times here states, he did it all in 36 strides. That does not sound too many but they were really quick slides. Just like a bolt of lightening. It just makes me wonder how far the record can go and with the impression that Bolt has some more sprint power in reserve, we need not start taking 4 decimal places yet.nNot until bBolt is done with running.
Its
As the story in the Irish Times here states, he did it all in 36 strides. That does not sound too many but they were really quick slides. Just like a bolt of lightening. It just makes me wonder how far the record can go and with the impression that Bolt has some more sprint power in reserve, we need not start taking 4 decimal places yet.
Tuesday, August 11, 2009
Australia Needs Effective Camel Population Control Solution
We live in a world in which sensitivity to the effects of human and animal activity to the environment is facing sharp scrutiny every day. So Australia has designed a camel population control policy that relies will rely primarily on shooting the animals from the air. Without doubt, animal rights activists are unhappy as they term this particular approach as completely brutal and unnecessary. As this story states, it appears that all the discussion is based on contentions without new and alternative proposals coming to the fore.
What most impresses me about the story is the fact that the camel population, which is estimated at 1 million, is expected to double in another nine years. The effective growth rate therefore is close to 8% annually. At this rate of growth, it is clear that a working solution is required. And I am pretty convinced that there's definitely a far better solution that could be brought to bear on this problem than that at hand. Again, admitting my bias towards solutions developed from competition, I am certain that for a prize equivalent to the anticipated cost of the camel population cull, a far better market derived option can be developed and put to use.
For instance, using a proportion of the Australian $20 million as a prize, the Australian government should set out a competition on the development of a viable population control plan that could be implemented across a time frame. In my view, the prize money could then be paid out in slices depending on the achievement of certain metrics. This can be done and I would myself enter that competition encouraged by even a small proportion of that prize.
So what would I propose? I cannot state this off the top of my head now but I think that the chosen approach would probably involve a variety of solutions as opposed to a silver bullet model. It is possible that a 900 kilogrammes animal could yield meat for export, with skin used as leather and live animals being auctioned too. I would wager that a composite solution comprising a market mechanism would emerge that would bring back a significant proportion of the Australian $20 million.
What most impresses me about the story is the fact that the camel population, which is estimated at 1 million, is expected to double in another nine years. The effective growth rate therefore is close to 8% annually. At this rate of growth, it is clear that a working solution is required. And I am pretty convinced that there's definitely a far better solution that could be brought to bear on this problem than that at hand. Again, admitting my bias towards solutions developed from competition, I am certain that for a prize equivalent to the anticipated cost of the camel population cull, a far better market derived option can be developed and put to use.
For instance, using a proportion of the Australian $20 million as a prize, the Australian government should set out a competition on the development of a viable population control plan that could be implemented across a time frame. In my view, the prize money could then be paid out in slices depending on the achievement of certain metrics. This can be done and I would myself enter that competition encouraged by even a small proportion of that prize.
So what would I propose? I cannot state this off the top of my head now but I think that the chosen approach would probably involve a variety of solutions as opposed to a silver bullet model. It is possible that a 900 kilogrammes animal could yield meat for export, with skin used as leather and live animals being auctioned too. I would wager that a composite solution comprising a market mechanism would emerge that would bring back a significant proportion of the Australian $20 million.
Barefoot Trainers Are Here!
A couple of posts ago I made reference here to a review of Christopher McDougal's book making the argument that humanity is especially evolved for running barefoot over long distances. In addition, I presented an anecdote about my experience running two marathon races in new trainers and the effects that this had. Concluding that blog post, I argued that there was little chance of my running the marathon unshod even while admitting that expensive trainers are not always worth their cost.
Clearly, an entrepreneurial firm agrees with my contention about the comfort that comes with running with trainers and has designed an alternative form of trainers. Vibram's Five Fingers running shoes mimic the effect if running barefoot and illustrate to me the ingenuity of firms in responding to the needs that people have. While acknowledging this factor, I am sure that even Vibram has tow challenges because at £98.99 Sterling, these are still an expensive and specialist pair. Secondly, the marketers of the pair of alternative footwear will probably face the task of selling the item because it does not compare well to conventional trainers and sneakers on the aesthetics side.
What must be stated though is the fact that markets respond to opportunity and perhaps for this item of footwear, the cost may be absorbed entirely by those who are specialist runners for whom it is obviously good value. I now wait to see whether the East African elite marathoners will be asked to endorse the product. More power to the markets.
Clearly, an entrepreneurial firm agrees with my contention about the comfort that comes with running with trainers and has designed an alternative form of trainers. Vibram's Five Fingers running shoes mimic the effect if running barefoot and illustrate to me the ingenuity of firms in responding to the needs that people have. While acknowledging this factor, I am sure that even Vibram has tow challenges because at £98.99 Sterling, these are still an expensive and specialist pair. Secondly, the marketers of the pair of alternative footwear will probably face the task of selling the item because it does not compare well to conventional trainers and sneakers on the aesthetics side.
What must be stated though is the fact that markets respond to opportunity and perhaps for this item of footwear, the cost may be absorbed entirely by those who are specialist runners for whom it is obviously good value. I now wait to see whether the East African elite marathoners will be asked to endorse the product. More power to the markets.
Monday, August 10, 2009
Broadband Arrives in Africa
It is unimaginable to many people outside Africa that the eastern coast of the world's second largest continent was the sole area with no undersea communications cable. Thankfully, this distinctive measure of underdevelopment is now coming to and end through the development of a number of undersea links to the eastern coast of Africa. Bearing names such as The East African Marine System (TEAMs), the East African Submarine System (EASSY), Seacom and others, the world is finally fully connected.
Cat Contiguglia of NYT covers the amazing series of infrastructure development for Africa and traces some of the expected effects on business and other measures of human developments. Clearly, the west African coast was long connected by cable but this has not had as much effect as the is now expected.
That African citizens have relied on slow satellite communication for so long when the better alternative was available is a story about the national monopolies that did little but bar competition and better service. It is essential to note that the diverse set of investments imply that there will be a degree of competition which will lead to a reduction in prices for communications generally. In spite of the enthusiasm for the new dispensation, I wonder where the extra capacity in large bandwidth will be applied.
It is clear that there may be scope for developing call centers but the worldwide competition in this service is already high and the premium has been largely harvested by India and other English-speaking Asian countries. I fear that in this business, Africa generally may have come to the table too late as usual. My cynicism notwithstanding, the mere drop in costs of telecommunications will lead to innovations and costs savings all around. My own bet is that it will not necessarily be in the call centres. As the main story states, there are businesses that will probably rue the arrival of the Undersea cable. let's see creative destruction at work too. I will be watching as new businesses develop but also as others are rendered obsolete.
Cat Contiguglia of NYT covers the amazing series of infrastructure development for Africa and traces some of the expected effects on business and other measures of human developments. Clearly, the west African coast was long connected by cable but this has not had as much effect as the is now expected.
That African citizens have relied on slow satellite communication for so long when the better alternative was available is a story about the national monopolies that did little but bar competition and better service. It is essential to note that the diverse set of investments imply that there will be a degree of competition which will lead to a reduction in prices for communications generally. In spite of the enthusiasm for the new dispensation, I wonder where the extra capacity in large bandwidth will be applied.
It is clear that there may be scope for developing call centers but the worldwide competition in this service is already high and the premium has been largely harvested by India and other English-speaking Asian countries. I fear that in this business, Africa generally may have come to the table too late as usual. My cynicism notwithstanding, the mere drop in costs of telecommunications will lead to innovations and costs savings all around. My own bet is that it will not necessarily be in the call centres. As the main story states, there are businesses that will probably rue the arrival of the Undersea cable. let's see creative destruction at work too. I will be watching as new businesses develop but also as others are rendered obsolete.
Thursday, August 06, 2009
Another Reason not to Buy Expensive Sneakers
I have run a city marathon in the tropics on two consecutive occasions a couple of years ago and learnt that running the marathon is an extremely painful endurance event. Because I ran as a full amateur and with less than a week of training, I was quite pleased to have done it in time slightly less than four hours. Another of the major mistakes that I and my brother made was to purchase moderately costly running shoes just before the race day. Needless to mention, the shoes were comfortable for the first ten kilometres and a real pain for the rest of the race. Blisters are common for professional runners too but to have lost toe nails is evidence of that imprudence because there are things even the best running shoes would not give.
Karen Knee's book review looks at states the argument by the author that running unshod is the perfect way to run comfortably over distances while avoiding injury. Christopher McDougal writes in the book that he took up running years back and over time came to realize that the Tarahumara are able to maintain pace and cover long distances not only because of their innate ability but because they run in flat rubber sandals. Other biological evidence show that the human species is specifically engineered for long distance running because of the ability to dissipate heat through sweat and that the pace of breathing is also independent of stride. In addition, it states that the upright posture is complimented with tendons which enable the human head to stay upright while running.
The book reviewer has made the book's arguments really well and I find the thesis really fascinating. Still, when I run the marathon again in October of this year, I will recall all this but remember that running shoes can still be very comfortable even if unnatural and predisposing towards injury. In the long run, I still will prefer running shoes. Are Nike's sports shoes engineers listening?
Karen Knee's book review looks at states the argument by the author that running unshod is the perfect way to run comfortably over distances while avoiding injury. Christopher McDougal writes in the book that he took up running years back and over time came to realize that the Tarahumara are able to maintain pace and cover long distances not only because of their innate ability but because they run in flat rubber sandals. Other biological evidence show that the human species is specifically engineered for long distance running because of the ability to dissipate heat through sweat and that the pace of breathing is also independent of stride. In addition, it states that the upright posture is complimented with tendons which enable the human head to stay upright while running.
The book reviewer has made the book's arguments really well and I find the thesis really fascinating. Still, when I run the marathon again in October of this year, I will recall all this but remember that running shoes can still be very comfortable even if unnatural and predisposing towards injury. In the long run, I still will prefer running shoes. Are Nike's sports shoes engineers listening?
Tuesday, August 04, 2009
Oxfam Enters Used-books Market With a Bang
It is without doubt that Oxfam is one of the world's most influential advocacy organizations addressing poverty in low-income countries. the organization also has very wide recognition and undertakes a lot of activities related to international trade and how the rules work against the interest of many low-income countries. However, I respectfully classify it as a capable organization whose advocacy is sharp but whose discomfort with market mechanisms almost leads many to think erroneously that developing countries should eschew all international investment and competition. In particular, I find the Fair Trade argument unconvincing, if not altogether disingenuous.
Steven Morris' article in the Guardian here illustrates the fact that I was perhaps wrong in my assessment regarding that organization's understanding of how markets and competition work. Indeed, Oxfam has employed a very market savvy model and infused competition in the used books market in specific cities within the UK. In addition to providing competition to second hand booksellers, it also classifies the books and uses an auction model to raise the value of rarer texts. While I understand the complaints by its competitors, it is clear that Oxfam's entry into the used books market and choice of location is demonstration of the value of markets. Now I hope that it will support free trade and competition within the low-income countries that justify its existence. May the Oxfam bookshops continue to thrive.
Steven Morris' article in the Guardian here illustrates the fact that I was perhaps wrong in my assessment regarding that organization's understanding of how markets and competition work. Indeed, Oxfam has employed a very market savvy model and infused competition in the used books market in specific cities within the UK. In addition to providing competition to second hand booksellers, it also classifies the books and uses an auction model to raise the value of rarer texts. While I understand the complaints by its competitors, it is clear that Oxfam's entry into the used books market and choice of location is demonstration of the value of markets. Now I hope that it will support free trade and competition within the low-income countries that justify its existence. May the Oxfam bookshops continue to thrive.
Thursday, July 30, 2009
Do Golfers Earn Income the Hardest Way?
In an article praising the recent performance by an older golfer during the British Open tournament, Thomas Friedman considers how unique Tom Watson's performance was. It was a singular achievement because Tom Watson was 59 years and therefore the oldest golfer among the competitors, but also lost in a play-off. Most of the field was comprised of golfers at least two decades younger.
However, the most fascinating part of the article is the way in which he chooses to distinguish golf from many other sports events. one of those is that golfers tend to play as individuals and not in team events and where ability is demonstrable to all. the playing surface for golf is also largely created to be an obstacle unlike for other sports events. But the most unusual one is the fact that playing professional golf requires that one wins in order to earn money. While this is not unique to golf, this is a poignant distinction about how sports prizes are distributed.
The lesson here is that the manner in which sports prizes are organized for team events leave scope for a lot of free riding. i wonder what the pay differential would be like if team players were paid by certain objectively identifiable deliverables. Granted that certain Formula One teams also pay huge salaries, a good number of them also pay for finishing and placing among the points. On the other hand, I think that the pay structure for team sports recognizes that a element of team work is useful and that athletes ought to see their success as a product of joint work.
However, the most fascinating part of the article is the way in which he chooses to distinguish golf from many other sports events. one of those is that golfers tend to play as individuals and not in team events and where ability is demonstrable to all. the playing surface for golf is also largely created to be an obstacle unlike for other sports events. But the most unusual one is the fact that playing professional golf requires that one wins in order to earn money. While this is not unique to golf, this is a poignant distinction about how sports prizes are distributed.
The lesson here is that the manner in which sports prizes are organized for team events leave scope for a lot of free riding. i wonder what the pay differential would be like if team players were paid by certain objectively identifiable deliverables. Granted that certain Formula One teams also pay huge salaries, a good number of them also pay for finishing and placing among the points. On the other hand, I think that the pay structure for team sports recognizes that a element of team work is useful and that athletes ought to see their success as a product of joint work.
Is Public Sector Wage Hike the Cure for Corruption?
Mark Gimein's piece in the Bigmoney.com has given me some reason to think about how to design systems of compensation for workers in the public sector to improve service delivery and reduce corruption. Mark uses the recent indictments and arrests of public service professionals in New Jersey to argue that the problem could be solved by raising substantially the compensation of public servants in the US. In my reading, he suggests that this principle perhaps has general application.
First, I am generally cautious at an supposedly incisive account for sorting out public problems that concludes with the need to merely spend more money. But I am really surprised with the comparisons that Mark makes by saying that public servants in the US should be brought as close as possible to private sector pay I order to reduce the temptation to accept bribes. Later in the story he unbelievably suggests that a raise in the pay of public servants would in turn ratchet upwards the cost f bribes and perhaps reduce their number.
To my mind, I see the fact that public service professionals frequently bear discretionary power for which there is little oversight as the main driver of the tendency to abuse that power. I suspect that there's little link between this and the absolute income per se. By stating that the US$ 171,000 pay for the governor of Illinois makes the individual particularly susceptible ti trying to sell a senatorial seat, Mark is obviously overstating the case. What I see here is that Governor Rod Blagojevic merely tried to capitalize his very broad discretion. That would most likely happen even if he earned US$ 1 million.
Because the piece makes interesting reading, this blog post will not summarize it fully. Instead I will comment on the link between lower corruption and higher wages for public sector workers that the author cites.To my mind, I suspect that the direction of causality is not only unclear but would be stronger for a high income nation because of the ability to develop more robust oversight mechanisms. While the influx of wealthy people into public service in the US is laudable, I would not dare say that I am convinced that this has reduced the degree of corruption in public service. Perhaps Mark Gimein should tell whether any town would want Madoff for mayor.
First, I am generally cautious at an supposedly incisive account for sorting out public problems that concludes with the need to merely spend more money. But I am really surprised with the comparisons that Mark makes by saying that public servants in the US should be brought as close as possible to private sector pay I order to reduce the temptation to accept bribes. Later in the story he unbelievably suggests that a raise in the pay of public servants would in turn ratchet upwards the cost f bribes and perhaps reduce their number.
To my mind, I see the fact that public service professionals frequently bear discretionary power for which there is little oversight as the main driver of the tendency to abuse that power. I suspect that there's little link between this and the absolute income per se. By stating that the US$ 171,000 pay for the governor of Illinois makes the individual particularly susceptible ti trying to sell a senatorial seat, Mark is obviously overstating the case. What I see here is that Governor Rod Blagojevic merely tried to capitalize his very broad discretion. That would most likely happen even if he earned US$ 1 million.
Because the piece makes interesting reading, this blog post will not summarize it fully. Instead I will comment on the link between lower corruption and higher wages for public sector workers that the author cites.To my mind, I suspect that the direction of causality is not only unclear but would be stronger for a high income nation because of the ability to develop more robust oversight mechanisms. While the influx of wealthy people into public service in the US is laudable, I would not dare say that I am convinced that this has reduced the degree of corruption in public service. Perhaps Mark Gimein should tell whether any town would want Madoff for mayor.
Monday, July 27, 2009
The Vanishing Envelopes of China
Looking at Chinese progress throughout the last two decades, it looks as if it has a very competent government and public service generally. Now, this story in the NYT is one that reminds about the ridiculous things that happen in that otherwise impressive economic growth story. It chronicles the life of Xue Longlong and the loss of his certificates due to what officialdom describes as misplacement and which increasingly looks like something really corrupt. As the story states, it appears that the ability to validate academic qualifications rests entirely with public sector workers and that records throughout a student's career are kept in a single file kept throughout one's life. The risk associated with these seem to escape the bureaucracy or perhaps some in its understand that once all the records are in one place, then it is easier to purvey them corruptly.
To my mind, this suggests a simple lesson that should be clear to any bureaucracy. Highly centralized systems may appear effective in getting people to do big building projects but it is not necessary to keep the record of millions of students in one place and in a single institution. I am at a loss when I consider China's population and imagine that any one person's records can only be verified through a single office. This is a failure of centralization taken too far because academic qualifications should be verifiable from the institutions that offered the courses. In which case, there would be a distributed network of offices bearing different records that could be used to build a composite picture. To my mind, there's good reason for the rise of a number businesses that would reliably verify academic qualifications.
The most surprising bit is that the China's private sector continues to rely upon the public officers to confirm individual capability when it ought to be clear to them that these are corrupt. The best way out is for them to show less respect for the brown manila envelope an ask Mr. Xue Longlong's University to verify his academic qualification. To continue to insist on the production of that Brown envelope allows the corrupt market to thrive.
To my mind, this suggests a simple lesson that should be clear to any bureaucracy. Highly centralized systems may appear effective in getting people to do big building projects but it is not necessary to keep the record of millions of students in one place and in a single institution. I am at a loss when I consider China's population and imagine that any one person's records can only be verified through a single office. This is a failure of centralization taken too far because academic qualifications should be verifiable from the institutions that offered the courses. In which case, there would be a distributed network of offices bearing different records that could be used to build a composite picture. To my mind, there's good reason for the rise of a number businesses that would reliably verify academic qualifications.
The most surprising bit is that the China's private sector continues to rely upon the public officers to confirm individual capability when it ought to be clear to them that these are corrupt. The best way out is for them to show less respect for the brown manila envelope an ask Mr. Xue Longlong's University to verify his academic qualification. To continue to insist on the production of that Brown envelope allows the corrupt market to thrive.
Wednesday, July 22, 2009
Amazon and Remote Deletion
Farhad Manjoo of Slate Magazine covers here the recent deletion of certain book titles from the Kindle by Amazon without prior consultation with the owners of the gadgets. To my mind, this shows an exceptionally broad remit that Amazon retains for itself regarding a gadget that it sells expensively and which I have written exuberantly on this blog. While Amazon has explained that the deletion of the books from the Kindle gadgets was occasioned by the fact that digital titles had been mistakenly published and may have been in breach of intellectual property rights, I am truly amazed at this degree of brazenness.
As a person who is seriously considering the purchase of the Kindle 2, I am taken aback by the enormous power that Amazon not only had but which it has unilaterally wielded against its own customers. This reminds me of the behaviour of firms that tried to impose unrealistic Digital Rights Management systems on purchasers of CDs. The bigger question in my mind though is on who really owns the Kindle devices and the digital books that are read on them. As the article under reference states, the service contract suggests that Amazon interprets this as its property.
Well, Amazon is entirely entitled to its interpretation but I think that when I eventually purchase a Kindle 2, I will continue to fully assume and claim property rights to the titles that I have paid for just as I am convinced of my ownership of the number of books that I have bought from the Amazon store. Nobody should sneak into my library and take away titles from my shelf just because the titles were mistakenly sold to me. I would fully appreciate a note perhaps reminding me that the title was sold to me erroneously and that I should consider adherence to the law by returning it for a full refund. That's just sound etiquette and one that Amazon should consider before acting with stealth like it did. This is the first regulatory issue regarding the rights of Kindle users.
As a person who is seriously considering the purchase of the Kindle 2, I am taken aback by the enormous power that Amazon not only had but which it has unilaterally wielded against its own customers. This reminds me of the behaviour of firms that tried to impose unrealistic Digital Rights Management systems on purchasers of CDs. The bigger question in my mind though is on who really owns the Kindle devices and the digital books that are read on them. As the article under reference states, the service contract suggests that Amazon interprets this as its property.
Well, Amazon is entirely entitled to its interpretation but I think that when I eventually purchase a Kindle 2, I will continue to fully assume and claim property rights to the titles that I have paid for just as I am convinced of my ownership of the number of books that I have bought from the Amazon store. Nobody should sneak into my library and take away titles from my shelf just because the titles were mistakenly sold to me. I would fully appreciate a note perhaps reminding me that the title was sold to me erroneously and that I should consider adherence to the law by returning it for a full refund. That's just sound etiquette and one that Amazon should consider before acting with stealth like it did. This is the first regulatory issue regarding the rights of Kindle users.
Monday, July 20, 2009
If Tap Water is Better Why Ban Bottled Water?
An article in the NYT here reports the fascinating case about a small town of Bundanoon in Australia that has effectively banned the sale of bottled water within its jurisdiction. I agree with some of the intended effects but think that a number of presumptions have been made and the policy prescription unduly restrictive and probably ill-considered.
I maintain the view that in many developing countries, bottled water is an urban luxury while in high-income countries, the purchase of bottled water is a reflection of preference for a marked product. It is also true that many people ascribe to bottled water, a level of superiority to tap water that it neither has nor deserves. water is an increasingly important resource and the extraction by bottling companies is receiving widespread attention. The main concern is that bottled water leads to the a large number of plastic bottles and the transportation all over the wold leads to the emission of pollutants and earth-warming gases.
This is a plausible argument that is acceptable by many people but like in earlier blog posts such as this one, I depart company when it argues for banning of bottled water. To rehash the arguments, it has been demonstrated that tap water suffers a bad reputation when in reality it is safe enough to drink in most places in the world. What bottled water marketers perhaps should be compelled by policy is to internalize the costs of the pollution that comes from the containers (whether glass or plastic). I am not sure that these two should be treated as perfect substitutes when one is consumed as a luxury product. Indeed, the best way for bottled water to pay its way is for the city fathers of Bundanoon to support the creation of a carbon tax which would then ensure that bottled water finds its rightful prices. A ban is very statist and altogether unwise. If the belief is really that tap water is better, then why ban the inferior product?
I maintain the view that in many developing countries, bottled water is an urban luxury while in high-income countries, the purchase of bottled water is a reflection of preference for a marked product. It is also true that many people ascribe to bottled water, a level of superiority to tap water that it neither has nor deserves. water is an increasingly important resource and the extraction by bottling companies is receiving widespread attention. The main concern is that bottled water leads to the a large number of plastic bottles and the transportation all over the wold leads to the emission of pollutants and earth-warming gases.
This is a plausible argument that is acceptable by many people but like in earlier blog posts such as this one, I depart company when it argues for banning of bottled water. To rehash the arguments, it has been demonstrated that tap water suffers a bad reputation when in reality it is safe enough to drink in most places in the world. What bottled water marketers perhaps should be compelled by policy is to internalize the costs of the pollution that comes from the containers (whether glass or plastic). I am not sure that these two should be treated as perfect substitutes when one is consumed as a luxury product. Indeed, the best way for bottled water to pay its way is for the city fathers of Bundanoon to support the creation of a carbon tax which would then ensure that bottled water finds its rightful prices. A ban is very statist and altogether unwise. If the belief is really that tap water is better, then why ban the inferior product?
Japan's Coming Population Growth
I sometimes play a very simple game with friends who travel frequently throughout the world. The game involves asking them which cities they have visited over their adult lives and try to tick off those against my very modest list of cities visited in international travel. I invariably find that in spite of its being the world's second largest economy, a very small number of people known to me have visited any city in Japan. My index of isolation is far from perfect because the people I encounter tend to have travelled mostly within Europe, South Asia and North America.
However, even my very unsophisticated algorithm of the correlations between the travel destinations of my acquaintances got me thinking when I read this today. Daniel Gross argues there that in spite of a growing demographic crisis in the form of a shrinking population from low fertility rates, Japan seems to be reluctant to allow for immigrants. Indeed, the issue of the population problem is discussed broadly but the real options of a flexible immigration policy or raising the fertility rates go unresolved.
I am suspicious of most linear forecasts suggesting that the world's population growth rates threaten human survival. Most of these claims tend to be based on a preacher's approach towards controlling populations in Africa, Latin America and places in south Asia where populations are undeniably poor. To my mind, Japan seems to be facing some danger but it ought not to be overstated because fertility rates could kick off with the right incentives and immigration policy could also be adjusted to ensure that the appropriate choices are made by individuals. On this instance though, one must see that the obsession with cultural purity in a scientifically advanced society is part of the problem. Still, its no problem if a society wishes to have robots help it maintain industries and work going. My bet though is that in the next decade or two, Japanese immigration policy will be gradually eased to allow for immigration from the region and among those who departed earlier. Sometime in the future, something will have to give and I suspect the domestic politics will not keep the options bottled up for too long.
However, even my very unsophisticated algorithm of the correlations between the travel destinations of my acquaintances got me thinking when I read this today. Daniel Gross argues there that in spite of a growing demographic crisis in the form of a shrinking population from low fertility rates, Japan seems to be reluctant to allow for immigrants. Indeed, the issue of the population problem is discussed broadly but the real options of a flexible immigration policy or raising the fertility rates go unresolved.
I am suspicious of most linear forecasts suggesting that the world's population growth rates threaten human survival. Most of these claims tend to be based on a preacher's approach towards controlling populations in Africa, Latin America and places in south Asia where populations are undeniably poor. To my mind, Japan seems to be facing some danger but it ought not to be overstated because fertility rates could kick off with the right incentives and immigration policy could also be adjusted to ensure that the appropriate choices are made by individuals. On this instance though, one must see that the obsession with cultural purity in a scientifically advanced society is part of the problem. Still, its no problem if a society wishes to have robots help it maintain industries and work going. My bet though is that in the next decade or two, Japanese immigration policy will be gradually eased to allow for immigration from the region and among those who departed earlier. Sometime in the future, something will have to give and I suspect the domestic politics will not keep the options bottled up for too long.
Friday, July 17, 2009
Banks and Compensation
I have argued on this blog before that the financial crisis was caused primarily by regulators who slept on the job in addition to the idea that government will not let some banks to fail. I am less convinced that the remuneration that firms choose to pay their employees should concern anyone other than shareholders. In the last week, there has been confirmation that Goldman Sachs and JP Morgan, both investment banks, are back to high profitability and are prepared to pay bonuses and perks that are no different from the behavior that their critics loath.
I have little sympathy for the argument that such high pay is harmful to the financial system because it does increase the propensity for reckless risk taking. To my mind, the reason for high profitability in an industry is because of a unique ability or insufficient competition. That both JP Morgan and Goldman Sachs are making profits that are considered too high should lead to proper diagnosis of the problem. First, that many financial services firms and investment banks needed cash from government means that their managers are certainly not as bright as they believe. Secondly, it is possible that the distribution of profits favours a few firms in that industry and this to me makes more sense.
As Graham Bowley of the NYT states here, the recent crisis nearly decimated a large number of firms and that has allowed JP Morgan and Goldman Sachs to become the preeminent bakers for the moment. It is not clear that they will maintain this position but the fact that the crisis has led to a new industry with new opportunities exploited by the two shows that the markets are working decently. That these firms were propped up with public funds does not bother me much now because they have paid back. More competition is always better and regulatory policy should concentrate on this side of the business.
However, the possibility of a new crisis that devastates the market and leads to a widespread economic crisis still exists. So while governments are unhappy with the new bonus plans, I have little respect for this view. All they need to state categorically is that there will be no future bailouts irrespective of the cause and leave investment banks to their devices. Reigning in poorly designed incentive schemes in banks is the work of shareholders.
I have little sympathy for the argument that such high pay is harmful to the financial system because it does increase the propensity for reckless risk taking. To my mind, the reason for high profitability in an industry is because of a unique ability or insufficient competition. That both JP Morgan and Goldman Sachs are making profits that are considered too high should lead to proper diagnosis of the problem. First, that many financial services firms and investment banks needed cash from government means that their managers are certainly not as bright as they believe. Secondly, it is possible that the distribution of profits favours a few firms in that industry and this to me makes more sense.
As Graham Bowley of the NYT states here, the recent crisis nearly decimated a large number of firms and that has allowed JP Morgan and Goldman Sachs to become the preeminent bakers for the moment. It is not clear that they will maintain this position but the fact that the crisis has led to a new industry with new opportunities exploited by the two shows that the markets are working decently. That these firms were propped up with public funds does not bother me much now because they have paid back. More competition is always better and regulatory policy should concentrate on this side of the business.
However, the possibility of a new crisis that devastates the market and leads to a widespread economic crisis still exists. So while governments are unhappy with the new bonus plans, I have little respect for this view. All they need to state categorically is that there will be no future bailouts irrespective of the cause and leave investment banks to their devices. Reigning in poorly designed incentive schemes in banks is the work of shareholders.
Thursday, July 16, 2009
Time for Book Publishers to Study Napster
Anyone who observes the market development of electronic books cannot help but wonder about two things. The first is which of the various platforms such as Amazon's Kindle or the alternatives will carry the day. Secondly, one is struck by the fact that Napster's effects on the music industry are not properly heeded by book publishers today. In spite of the fact that the industries are not the same and the effects of digitization are not the same, there are ways in which the complete refusal to consider new formats shows that there is lack of thought by book publishers.
While I have written on this blog here and here on my thinking about Kindle and what effects it would have on the book publishers markets. Writing in Slate Magazine, Jack Shafer illustrates the wrong-headed thinking that characterizes the responses from book publishers with their obsession with higher margins from hardback and other copies of books. To my mind, in spite of the evidence that there is consumer appetite for electronic formats in books, the industry's giants seem to be prepared to die defending their longstanding business models. I admit that there are no certainties about how big the e-book industry will eventually become but that the option for buying books in this format is one that cannot be rolled back.
To my mind, the majority of books are being read in formats that are comfortable today but the spread in the proportion of books available electronically will drive more intense readers towards digital formats. All these mean that the industry will not remain the same and that the Kindle and its competing gadgets will only get better and provide cheaper products while people ask why a hardback really has to cost US$ 25. Whatever happens, my bet is that consumers will win and e-books will continue to take up an increasing proportion of books that are sold. While Napster did not live to appropriate all profits from sale of digital music, no doubt it changed the music industry by destroying a comfortable business model. As these book publishers are spending time defending their paper-based markets, they are letting the gadget sellers as Amazon and its competitors to define the market. That cannot be good news. Let's watch.
While I have written on this blog here and here on my thinking about Kindle and what effects it would have on the book publishers markets. Writing in Slate Magazine, Jack Shafer illustrates the wrong-headed thinking that characterizes the responses from book publishers with their obsession with higher margins from hardback and other copies of books. To my mind, in spite of the evidence that there is consumer appetite for electronic formats in books, the industry's giants seem to be prepared to die defending their longstanding business models. I admit that there are no certainties about how big the e-book industry will eventually become but that the option for buying books in this format is one that cannot be rolled back.
To my mind, the majority of books are being read in formats that are comfortable today but the spread in the proportion of books available electronically will drive more intense readers towards digital formats. All these mean that the industry will not remain the same and that the Kindle and its competing gadgets will only get better and provide cheaper products while people ask why a hardback really has to cost US$ 25. Whatever happens, my bet is that consumers will win and e-books will continue to take up an increasing proportion of books that are sold. While Napster did not live to appropriate all profits from sale of digital music, no doubt it changed the music industry by destroying a comfortable business model. As these book publishers are spending time defending their paper-based markets, they are letting the gadget sellers as Amazon and its competitors to define the market. That cannot be good news. Let's watch.
Monday, July 13, 2009
Charities Using Naming Rights
Many people find it difficult to ignore pleas for assistance to citizens of poor countries in Africa, Asia and Latin America. At the same time, it is often difficult to demonstrate convincingly that this private assistance makes a big difference and this has led to cynicism about what real difference one can make. However, a number of philanthropists are matching dollars to big but useful ideas in a way that is making a difference and exploiting market mechanisms. In this article by Nicholas Kristof of the NYT, it is clear that in spite of the broad cynicism about charity from the countries whose citizens have higher incomes, there are new approaches to delivering assistance with better results than before.
To my mind, the most impressive is the offer for naming rights to wells in countries where a given charity has sunk a number. I find the replication of naming rights together with specific GPS coordinates an interesting way for verifying that the project does exist. Given the lucrative contracts that companies have had for Stadiums and other sports facilities, I think that this illustrates the growing sophistication of these charities in harnessing new opportunities. Giving credit where it is due, i am not sure whether the proliferation of wells is not always the best way to deliver water to rural villages.
However, I think that the possibility of extending naming rights to portions of tropical forest, coral reefs or fragile lands may be an idea that private sector firms may explore as green messages help in communication of environmental awareness.
To my mind, the most impressive is the offer for naming rights to wells in countries where a given charity has sunk a number. I find the replication of naming rights together with specific GPS coordinates an interesting way for verifying that the project does exist. Given the lucrative contracts that companies have had for Stadiums and other sports facilities, I think that this illustrates the growing sophistication of these charities in harnessing new opportunities. Giving credit where it is due, i am not sure whether the proliferation of wells is not always the best way to deliver water to rural villages.
However, I think that the possibility of extending naming rights to portions of tropical forest, coral reefs or fragile lands may be an idea that private sector firms may explore as green messages help in communication of environmental awareness.
Thursday, July 09, 2009
Pixar Movie Beats the Analysts
To try and slam any Wall Street analyst at this time is obviously to come to the party while the tables are being cleared. My only hope would be that Wall Street technical analysts would by now have had some decency to be more humble and less hubristic about forecasts of whatever nature. And yet it appears that they have continued to give aggressive forecasts and made calls that gullible investors take seriously, or not.
This article from the NYT reports about Richard Greenfield a celebrated analyst has had to eat humble pie after making a forecast on the movie Up. To my mind, the admission is still qualified by the statement that the single movie's success does not mean that Disney will do well all around. That in my view is a more reasonable statement than the crunching of numbers and technical analysis stating how much a movie will gross. With respect to the training and professional capability of Mr. Greenfield and other analysts, they do not always understand businesses that they pontificate about as well as the managers of those businesses do. And the moral of this story is that it should be fine for a professional to say, "I do not know" as opposed to presenting dubious forecasts. Leave that to witchdoctors.
Still, I am curious about what the revenue forecasts from Epagogix would be for this movie.
This article from the NYT reports about Richard Greenfield a celebrated analyst has had to eat humble pie after making a forecast on the movie Up. To my mind, the admission is still qualified by the statement that the single movie's success does not mean that Disney will do well all around. That in my view is a more reasonable statement than the crunching of numbers and technical analysis stating how much a movie will gross. With respect to the training and professional capability of Mr. Greenfield and other analysts, they do not always understand businesses that they pontificate about as well as the managers of those businesses do. And the moral of this story is that it should be fine for a professional to say, "I do not know" as opposed to presenting dubious forecasts. Leave that to witchdoctors.
Still, I am curious about what the revenue forecasts from Epagogix would be for this movie.
Wednesday, July 08, 2009
Doubt and Certainty
" If a man will begin with certainties, he shall end in doubts but if he will be content to begin with doubts, he shall end in certainties". Francis Bacon
Tuesday, July 07, 2009
How Should Movies be Ranked?
Its summer in the northern hemisphere and the blockbuster movies are now showing in theatres throughout the world. There are a number of guesses about what movies will do well in the theatres (perhaps with pirates too) and the rest. However, an important feature of these is the extent to which sensible economics is usually put aside in the comparison of which movies are most successful. Zachary Pincus-Roth writes in the Slate Magazine about the inappropriate comparisons on the gross revenues from movies without accounting for inflation.
So many people continue to believe that the highest grossing movie of all time is the Titanic when this is not at all true. As argued there, to compare the nominal revenue figures for movies made over six decades apart is hugely problematic. Depending on the chosen metric, such as nominal or real revenues, the overall number of tickets sold or the population base for the sales, the ranking of the pictures considered varies quite a bit.
However, this merely shows that journalists should be more cautious in taking up the best parameters to suit the point being made. In spite of this, it altogether incorrect to rank movies made years apart on the basis of nominal revenues. As the story concludes, a number of reasonable algorithms can be drawn to provide plausible ranking of movies. In my reckoning though, it would be helpful to consider what proportion of the entertainment budget of households is spent on movies and weight that accordingly.
Finally, it is also worth considering to what Epagogix, a company that uses sophisticated models to predictive the box office takings of a movie, consider inflation.
So many people continue to believe that the highest grossing movie of all time is the Titanic when this is not at all true. As argued there, to compare the nominal revenue figures for movies made over six decades apart is hugely problematic. Depending on the chosen metric, such as nominal or real revenues, the overall number of tickets sold or the population base for the sales, the ranking of the pictures considered varies quite a bit.
However, this merely shows that journalists should be more cautious in taking up the best parameters to suit the point being made. In spite of this, it altogether incorrect to rank movies made years apart on the basis of nominal revenues. As the story concludes, a number of reasonable algorithms can be drawn to provide plausible ranking of movies. In my reckoning though, it would be helpful to consider what proportion of the entertainment budget of households is spent on movies and weight that accordingly.
Finally, it is also worth considering to what Epagogix, a company that uses sophisticated models to predictive the box office takings of a movie, consider inflation.
Thursday, July 02, 2009
Professional Tennis Makes Drug Testing a Joke
Institutions that manage professional sports are still overwhelmingly opposed to the use of steroids and performance enhancing substances. The idea behind this is that the use of such substances results in unsportsmanlike behaviour or outright cheating. But it is essential to note that the incentives to cheat in professional sports today exists primarily because of the financial and reputational rewards that attach to athletic excellence.
With this fairly commong background, it appears that some sports management bodies are far more thorough in vetting for drug use than others are. Similar to the claim by Bill Gilford in the Slate Magazine, it is clear that the organizations that more throughly vet and test athletes are at a disadvantage because a larger proportion of the athletes there are bound to fail the tests. It is therefore very curious that a disproportionate number of professional tennis players are caught for use of these prohibited drugs.
As Gilford explains, while it is possible that professional tennis players are probably more honest than others, the advantages that are conferred by the substances would be relevant for this sport too. While I am wont to give the professional players the benefit of doubt, the very poorly designed testing regime for tennis is one that raises the possibility that a number of cheats are getting away. A better regime would obviosuly step up the number of tests and include a testing regime that is timed to ensure that the substances that are being tested for can be reliably detected.
With this fairly commong background, it appears that some sports management bodies are far more thorough in vetting for drug use than others are. Similar to the claim by Bill Gilford in the Slate Magazine, it is clear that the organizations that more throughly vet and test athletes are at a disadvantage because a larger proportion of the athletes there are bound to fail the tests. It is therefore very curious that a disproportionate number of professional tennis players are caught for use of these prohibited drugs.
As Gilford explains, while it is possible that professional tennis players are probably more honest than others, the advantages that are conferred by the substances would be relevant for this sport too. While I am wont to give the professional players the benefit of doubt, the very poorly designed testing regime for tennis is one that raises the possibility that a number of cheats are getting away. A better regime would obviosuly step up the number of tests and include a testing regime that is timed to ensure that the substances that are being tested for can be reliably detected.
Tuesday, June 30, 2009
Afghanistan Opium Policy Turnaround
On innumerable occasions, I have mentioned that the US and its allies in Afghanistan have picked the wrong fight by concentrating on opium poppy eradication. This story in slate Magazine states that Richard Holbrooke has clarified that the policy from now will be the quest for an alternative. In truth, that some distance away from the futility of trying to fight Opium and not the Taliban. The same story proves why the economics of growing opium poppy in the region makes it a very attractive activity compared to alternatives. It demonstrably has higher returns for the effort. That should not have taken five years, and more, to figure out.
Monday, June 29, 2009
Netflix Prize is Taken
I have stated on this blog that I am fascinated with the use of competition and prizes to find solutions to technical problems. The one real example that i have observed is the Netflix prize on which I last wrote about here. To recap, the prize of US$ 1 million was offered by a Netflix corporation in 2006 to any team or individuals that would provide a model to improve the predictions of Cinematch by at least 10%. I entered the contest sometime last year not because there was a chance that I could win but merely to get access to that data.
It is now vertain that the prize will be claimed within 30 days because the Netflix Prize Leader Board shows that the Bellkor's Pragmatic Chaos team presented an algorithm that has managed to improve the predictive ability of Cinematch by 10.05%. While I understand that there's a probability that another team could present an alternative that is better, I think that the probability is too low that Netflix should just write the cheque.
That aside, the lesson from this to me is that innovations cares not for recessions but through competition, the learning takes place and real solutions are developed. Secondly, it is important to note that the prize was announced in October 2006 and the teams have worked hard to deliver the prize in less than three years. The third conclusion that I draw is that the similarity of names for a good number of the leading teams suggests that they may be the same teams using different techniques. Since the prize requires that the winning team will not only claim the prize but also explain how this was done, this last point will be proved one way or another.
From Bookish Posts, congratulations to the Bellkor's Pragmatic Chaos team for delivering a lesson in the use of prizes. If only the public sector would follow suit and pay for results and not effort.
It is now vertain that the prize will be claimed within 30 days because the Netflix Prize Leader Board shows that the Bellkor's Pragmatic Chaos team presented an algorithm that has managed to improve the predictive ability of Cinematch by 10.05%. While I understand that there's a probability that another team could present an alternative that is better, I think that the probability is too low that Netflix should just write the cheque.
That aside, the lesson from this to me is that innovations cares not for recessions but through competition, the learning takes place and real solutions are developed. Secondly, it is important to note that the prize was announced in October 2006 and the teams have worked hard to deliver the prize in less than three years. The third conclusion that I draw is that the similarity of names for a good number of the leading teams suggests that they may be the same teams using different techniques. Since the prize requires that the winning team will not only claim the prize but also explain how this was done, this last point will be proved one way or another.
From Bookish Posts, congratulations to the Bellkor's Pragmatic Chaos team for delivering a lesson in the use of prizes. If only the public sector would follow suit and pay for results and not effort.
Thursday, June 25, 2009
Broadway Leaving Money on the Table
Since I read this research paper by Justin Wolfers and Joseph price, I have had a keen interest in the use of formal academic tools to provide irrefutable evidence of biases that are difficult to observe. That paper used the calls by basketball umpires to provide evidence that black players are penalized by umpires more frequently than would be expected if calls were to be distributed randomly.
Now, a new story in the NYT here shows the advancement of this idea into the investigation of the existence or not of gender bias in the theatre industry. Emily Sands, a student at Princeton undertook three interrelated studies to answer the question by reviewing whether there is this bias in the industry. Specifically, she examined the number of scripts submitted by men and women, the returns on plays performed by each sex and the reaction of directors (male or female) to scripts produced b people bearing names that are characteristic of males or females.
Emily's findings are interesting to the extent that they confirm the existence of gender bias but also because they reveal the nature of that bias as expressed by directors of either sex. To start with, using data covering 20,000 playwrights obtained from Doollee.com, the study reveals that i spite of the production of scripts at the same rate, there are twice as many men as women. This proportional difference in the membership yields a higher number of scripts produced by male script writers.
Secondly, the study then conducted an experiment in which the same scripts were sent to artistic directors. The difference was that these scripts were marked with names that would betray the sex of the writers. This experiment revealed that men rated scripts presented by either sex the same way.
Thirdly, Emily turned to the Broadway stage to consider the relative number of plays performed on this stage considered the numbers of plays written by women and men in addition to how these performed. Considering 329 plays performed over a decade, the study finds clear evidence of bias. This bias in the sense that plays by women sold 16% higher tickets per week and delivered 18% greater profitability. To my mind, the curious fact is that while they constituted only one eighth of the total, plays by women earned more money but were not kept on stage for much longer.
Apart from the concerns about data quality, this study shows that biases can not only be demonstrated but that they actually occur in ways that are more complex than is conventionally spoken of. My enduring question though is that perhaps it is possible for rival theatre corporations to choose and screen plays written by women and earn the large profits being left on the floor due to the bias against women in Broadway.
Now, a new story in the NYT here shows the advancement of this idea into the investigation of the existence or not of gender bias in the theatre industry. Emily Sands, a student at Princeton undertook three interrelated studies to answer the question by reviewing whether there is this bias in the industry. Specifically, she examined the number of scripts submitted by men and women, the returns on plays performed by each sex and the reaction of directors (male or female) to scripts produced b people bearing names that are characteristic of males or females.
Emily's findings are interesting to the extent that they confirm the existence of gender bias but also because they reveal the nature of that bias as expressed by directors of either sex. To start with, using data covering 20,000 playwrights obtained from Doollee.com, the study reveals that i spite of the production of scripts at the same rate, there are twice as many men as women. This proportional difference in the membership yields a higher number of scripts produced by male script writers.
Secondly, the study then conducted an experiment in which the same scripts were sent to artistic directors. The difference was that these scripts were marked with names that would betray the sex of the writers. This experiment revealed that men rated scripts presented by either sex the same way.
Thirdly, Emily turned to the Broadway stage to consider the relative number of plays performed on this stage considered the numbers of plays written by women and men in addition to how these performed. Considering 329 plays performed over a decade, the study finds clear evidence of bias. This bias in the sense that plays by women sold 16% higher tickets per week and delivered 18% greater profitability. To my mind, the curious fact is that while they constituted only one eighth of the total, plays by women earned more money but were not kept on stage for much longer.
Apart from the concerns about data quality, this study shows that biases can not only be demonstrated but that they actually occur in ways that are more complex than is conventionally spoken of. My enduring question though is that perhaps it is possible for rival theatre corporations to choose and screen plays written by women and earn the large profits being left on the floor due to the bias against women in Broadway.
Monday, June 22, 2009
Why Dictatorships Fear Elections
"Recently, many people thought it was clever to say that elections on their own don’t make democracies. But election campaigns stoke the mind and fraudulent elections outrage the soul. The Iranian elections have stirred a whirlwind that will lead, someday, to the regime’s collapse. Hastening that day is now the central goal". David Brooks
Tuesday, June 09, 2009
ATM Hold Up in Ireland
It is without doubt that banks bear very little risk for robbery relative to the amount of money dispensed by Automated Teller Machines (ATMs). To my mind, the security risks relate to thieves who take advantage of gullible clients and secure their ATM cards before using that to clean up accounts. In addition, my view has been that in less secure places, a person using an ATM in a secluded place may be held up and robbed. As a result, it appeared to me that by transferring cash withdrawal processes towards these machines, the financial institutions have successfully externalized the risk of petty robbery to their clients.
However, I must have misjudged the temerity of thieves and their attraction for cash. According to a story in the Irish Times, an ATM was completely ripped off the walls and carried away in Kildare, Ireland. This turns around my crude theory that the weakness regarding ATMs was actually the human end. There are daring thieves out there who have probably invested in a whole arsenal of drills and impact tools in order to blow apart the machine that they took away.
Turning to the economics of incentives, is it that being unable to hold up people or the banks, the robbers opted to hold up the ATM?
However, I must have misjudged the temerity of thieves and their attraction for cash. According to a story in the Irish Times, an ATM was completely ripped off the walls and carried away in Kildare, Ireland. This turns around my crude theory that the weakness regarding ATMs was actually the human end. There are daring thieves out there who have probably invested in a whole arsenal of drills and impact tools in order to blow apart the machine that they took away.
Turning to the economics of incentives, is it that being unable to hold up people or the banks, the robbers opted to hold up the ATM?
Monday, June 08, 2009
Let the Kids Join the NBA
As a fan of a variety of sports events, I occasionally come across rules and regulations barring either teams or individual sportsmen from action that just makes no sense to me. One of those is the age limit that sports leagues of various kinds place on when entry is allowed. This story in the NYT records the fact that a congressman in the US has decided to question the National Basketball Association for placing an age limit of 18 years and an additional college year on athletes who may be drafted to play for the franchises.
As the story states the congressman's reasonable agreement (I find it convincing) is that this not only disproportionately affects athletes of color, but that it is an arbitrary and preposterous requirement altogether. I am unsure what serious harm would come from suspending college education in order to play for the basketball franchises. In addition, Congressman Steve Cohen notes that a number of current players who were not subjected to this rule have built successful NBA careers.
Thinking about the principles of economics that may apply, I think that the unreasonable nature of these rules come from the fact that successful sports leagues are often outright by monopolies. The NBA insists upon such a rule and is unashamedly considering its extension because there is no real alternative for the potential draftees. Secondly, for a majority of the students, the opportunity costs that attach to being in college for the extra year or so is pretty high. Therefore, these athletes are making rational decisions to forgo college altogether in order to make the best of a sports career. This is especially important when considered against the fact that a sports career usually takes about one and a half decade of high income before its tapers off really quickly. Thus young athletes are calculating that they should join the leagues early in order to establish their credentials and maximize their incomes during the short window of time.
To my mind therefore, the athletes in the league should look at the excellence that has been demonstrated by Le Bron and Kobe among others and raise their voices against this anti-competitive rule. It is possible though that the athletes that have gained entry are also concerned about competition from the youngsters and are therefore bound to accept the poor reasons given for maintaining such rules. If education is so important to David Stern and the NBA, then perhaps they should cut a proportion of their profits and invest that in more education for the larger proportion of youngsters who do not make it to the league. Anyone who makes it to the league will most probably be able to afford that upon retirement should it be necessary. Very few youngsters manage to make it into the league in the first instance hence the possibility that a large proportion of students would forgo college education just does not rise.
As the story states the congressman's reasonable agreement (I find it convincing) is that this not only disproportionately affects athletes of color, but that it is an arbitrary and preposterous requirement altogether. I am unsure what serious harm would come from suspending college education in order to play for the basketball franchises. In addition, Congressman Steve Cohen notes that a number of current players who were not subjected to this rule have built successful NBA careers.
Thinking about the principles of economics that may apply, I think that the unreasonable nature of these rules come from the fact that successful sports leagues are often outright by monopolies. The NBA insists upon such a rule and is unashamedly considering its extension because there is no real alternative for the potential draftees. Secondly, for a majority of the students, the opportunity costs that attach to being in college for the extra year or so is pretty high. Therefore, these athletes are making rational decisions to forgo college altogether in order to make the best of a sports career. This is especially important when considered against the fact that a sports career usually takes about one and a half decade of high income before its tapers off really quickly. Thus young athletes are calculating that they should join the leagues early in order to establish their credentials and maximize their incomes during the short window of time.
To my mind therefore, the athletes in the league should look at the excellence that has been demonstrated by Le Bron and Kobe among others and raise their voices against this anti-competitive rule. It is possible though that the athletes that have gained entry are also concerned about competition from the youngsters and are therefore bound to accept the poor reasons given for maintaining such rules. If education is so important to David Stern and the NBA, then perhaps they should cut a proportion of their profits and invest that in more education for the larger proportion of youngsters who do not make it to the league. Anyone who makes it to the league will most probably be able to afford that upon retirement should it be necessary. Very few youngsters manage to make it into the league in the first instance hence the possibility that a large proportion of students would forgo college education just does not rise.
Thursday, June 04, 2009
Finding the Commercial Value of Gold Medals
To my mind, the Olympics gold medal award for the Decathlon is perhaps one of the most prestigious by virtue of the fact that this athlete has to perform in ten different disciplines over a few days. One would expect that given the technical requirements of that sport, the winner would be a recognized icon for sports promotion and endorsements. And yet, the story of Bryan Clay featured here, who won the gold medal at the Beijing Olympics shows that the endorsement power of decathletes is certainly below that of leading swimmers and sprinters.
It is appreciable that the economic circumstances obviously call for corporate caution in taking out new faces for endorsements, I am perplexed by the differential ability of sports disciplines to attract vastly different commercial interests and endorsements. The economists who study sports are probably able to tell pretty quickly why this is so, but I will try and understand why the gold medal for the Decathlon is much less valuable as compared to that of sprinters.
So which Olympics sports discipline has the least commercial value for an Olympics champion. Is it my favourite shooting, rowing or gymnastics? Whatever it may be, I think that recognition of the intelligence, strain and effort in becoming an Olympics decathlete is undervalued. Why?
It is appreciable that the economic circumstances obviously call for corporate caution in taking out new faces for endorsements, I am perplexed by the differential ability of sports disciplines to attract vastly different commercial interests and endorsements. The economists who study sports are probably able to tell pretty quickly why this is so, but I will try and understand why the gold medal for the Decathlon is much less valuable as compared to that of sprinters.
So which Olympics sports discipline has the least commercial value for an Olympics champion. Is it my favourite shooting, rowing or gymnastics? Whatever it may be, I think that recognition of the intelligence, strain and effort in becoming an Olympics decathlete is undervalued. Why?
Quoting Razeen Sally
"Depending on a crisis for reform is myopic, and ultimately crazy, policy. It is far better to nurture a culture of permanent, incremental and mutually reinforcing reforms". Razeen Sally
Friday, May 29, 2009
Should Artistes Take Royalties from BNP?
Successful artistes rarely face a dilemma like this, where a group or organization dedicated to a racist ideology uses songs from successful musicians to promote its causes. It is easy to understand why the these artistes are determined to stop the use of their music by the BNP. The main concern is that they see this as creating the impression that they do favour the views of the British National Party.
To my mind, this is a case where the strong intellectual property rights that artistes and music companies receive may earn artistes lots of money but may undermine other centrist ideas that they may hold. The structure of these contracts mostly allows the corporations to take all control of marketing hence their tendency to try and maximize sales. As the story suggests, it is unlikely that any such concerns would be relevant as the contracts are drafted to emphasize the commercial aspects of the productions. Few of these artistes considered the possibility that BNP would use their creations in this way.
My view though is that I sympathize with these artistes and understand their concern that their music is being used in ways that they consider inappropriate, but this is merely the unintended consequence of the strong intellectual property regime that exists and that they must find a different way to deal with this. I do not see any courts compelling the music marketing corporations or the BNP to stop trading in that music provided they observe the existing laws and contractual terms.
Their legal options are probably many and these do not have to involve litigation. Instead, they could in turn produce other songs that support political parties or organizations committed to equality and tolerance. Perhaps the most potent one in my view would be to take the royalties emanating from the sales by the BNP and donate that to other groups whose philosophies and ideologies would counter those espoused by BNP. To my mind, that would turn the tables on BNP by encouraging it to work, albeit indirectly, for the other side.
To my mind, this is a case where the strong intellectual property rights that artistes and music companies receive may earn artistes lots of money but may undermine other centrist ideas that they may hold. The structure of these contracts mostly allows the corporations to take all control of marketing hence their tendency to try and maximize sales. As the story suggests, it is unlikely that any such concerns would be relevant as the contracts are drafted to emphasize the commercial aspects of the productions. Few of these artistes considered the possibility that BNP would use their creations in this way.
My view though is that I sympathize with these artistes and understand their concern that their music is being used in ways that they consider inappropriate, but this is merely the unintended consequence of the strong intellectual property regime that exists and that they must find a different way to deal with this. I do not see any courts compelling the music marketing corporations or the BNP to stop trading in that music provided they observe the existing laws and contractual terms.
Their legal options are probably many and these do not have to involve litigation. Instead, they could in turn produce other songs that support political parties or organizations committed to equality and tolerance. Perhaps the most potent one in my view would be to take the royalties emanating from the sales by the BNP and donate that to other groups whose philosophies and ideologies would counter those espoused by BNP. To my mind, that would turn the tables on BNP by encouraging it to work, albeit indirectly, for the other side.
Wednesday, May 27, 2009
How Should Irn Bru Formula be Protected?
If I was asked what is Scotland's greatest export, then I would state without compunction that this is Whiskey and to a lesser extent, the Kilt. I thought a while back and realized that measure for measure, bottled water and Whiskey are the drinks that are more expensive than petroleum. This is significant factor because in the case of whiskey, there is no coordination of prices by countries. So while I am not sure now how closely the firms that produce whiskey do compete, I still think that it is a far more open market than the petroleum market.
The main point of this post though is that quite apart from the more recognized whiskey production, Scotland produces a less recognized but equally valuable beverage that goes by the very Scottish name of Irn Bru. And I am amazed at this because when I took the Whiskey tour in Edinburgh a couple of years ago, I never heard mention of this drink produced by the company of similar name. Like whiskey, Irn Bru is also fascinating in the sense that its exact composition is only known to two people and one of whom has had to transfer the production process to his daughter who will take over from the patriarch.
As the story in the Guardian states, the only two people with knowledge of the formula may not travel on the same plane. I surmise that the purpose for this is to prevent the loss of the formula in the event of a plane crash. Well, the Irn Bru corporation should take my advise and review the data because the probability of a plane crash for miles travelled is much much lower than that for other forms of transportation. In my view, the greatest risk that the corporation faces is obviously related to the loss of the formula but the coincidental death of the custodians of that intellectual property from a plane crash is not only highly remote but is also not at the top of the list of risks.
My suggestion then is that the formula should be cut up and encrypted and then stored in very secure but diverse locations and may be referred to by a select number of people. That is infinitely more secure than having the formula inside the heads of two people who are then prevented from travelling together by plane or car. This is ridiculous for a corporation producing Scotland's most popular fizzy drink.
The main point of this post though is that quite apart from the more recognized whiskey production, Scotland produces a less recognized but equally valuable beverage that goes by the very Scottish name of Irn Bru. And I am amazed at this because when I took the Whiskey tour in Edinburgh a couple of years ago, I never heard mention of this drink produced by the company of similar name. Like whiskey, Irn Bru is also fascinating in the sense that its exact composition is only known to two people and one of whom has had to transfer the production process to his daughter who will take over from the patriarch.
As the story in the Guardian states, the only two people with knowledge of the formula may not travel on the same plane. I surmise that the purpose for this is to prevent the loss of the formula in the event of a plane crash. Well, the Irn Bru corporation should take my advise and review the data because the probability of a plane crash for miles travelled is much much lower than that for other forms of transportation. In my view, the greatest risk that the corporation faces is obviously related to the loss of the formula but the coincidental death of the custodians of that intellectual property from a plane crash is not only highly remote but is also not at the top of the list of risks.
My suggestion then is that the formula should be cut up and encrypted and then stored in very secure but diverse locations and may be referred to by a select number of people. That is infinitely more secure than having the formula inside the heads of two people who are then prevented from travelling together by plane or car. This is ridiculous for a corporation producing Scotland's most popular fizzy drink.
Wednesday, May 20, 2009
Is Cash for Grades Really Bribery?
Roland Fryer Jr. of the University of Harvard has been an advisor to educational officials in New York who are interested in raising achievement by students in schools. the unquestioned realization as that performance for students was falling or poor in specific schools that are primarily in deprived neighborhoods. His primary response was to design an experiment in which students would be promised cash or cash equivalents in prizes that are conditions to the improvement on their grades or attendance of classes.
To the extent that I can tell, the preliminary results of this experiment has demonstrated beyond doubt that students respond to the incentives by raising their grades substantially and that this is attributable largely to the incentives scheme. Naturally, it is an experiment that some purists appear to question and the thesis of their opposition is based on the fact that this amounts to bribery of students to study because it robs education of its intrinsic value.
In the critique published here, Prof. Alex Standish seems to be unhappy with the approach and suggests that this is an extreme form of commoditization of education. I am unsurprised that a professor holds such a purist view of education in spite of the fact that states have had a longstanding problem in raising the grades and educational interest of disadvantaged youth. My hats off to Prof. Roland Fryer and I wish that the experiments go ahead because the investments in education that most societies make make it necessary to raise achievements especially for students for whom there is a high opportunity cost to staying in schools. To my mind therefore, if additional phones and calling minutes is what it takes to raise their interest in educational achievement, then Prof. Standish ought to reconsider his ideas. I suspect that education became a commodity long ago and one that racial minorities among other distinctly disadvantaged groups rightly considered costly.
To the extent that I can tell, the preliminary results of this experiment has demonstrated beyond doubt that students respond to the incentives by raising their grades substantially and that this is attributable largely to the incentives scheme. Naturally, it is an experiment that some purists appear to question and the thesis of their opposition is based on the fact that this amounts to bribery of students to study because it robs education of its intrinsic value.
In the critique published here, Prof. Alex Standish seems to be unhappy with the approach and suggests that this is an extreme form of commoditization of education. I am unsurprised that a professor holds such a purist view of education in spite of the fact that states have had a longstanding problem in raising the grades and educational interest of disadvantaged youth. My hats off to Prof. Roland Fryer and I wish that the experiments go ahead because the investments in education that most societies make make it necessary to raise achievements especially for students for whom there is a high opportunity cost to staying in schools. To my mind therefore, if additional phones and calling minutes is what it takes to raise their interest in educational achievement, then Prof. Standish ought to reconsider his ideas. I suspect that education became a commodity long ago and one that racial minorities among other distinctly disadvantaged groups rightly considered costly.
Tuesday, May 19, 2009
Wikipedia: User Beware
There's a rising realization that disparate networks throughout the web are capable of devising and generating knowledge for a variety of matters. One of the more cited illustrations of the power of these networks is the relative success of Wikipedia. In truth, while I have also made use of select references from Wikipedia and especially regarding definitions for technical terms, I have had reservations of the veracity and accuracy of some fact based information on the site.
It looks that the Achilles Heel of Wikipedia was best illustrated by most recently by a student who inserted a sleeper fact that was later quoted without verification by journalists. Writing in the Irish Times here, Shane Fitzgerald explains the motivation for that experiment. As he explains it, it shows that this concern about both the possibility of manipulation and misinformation are more likely than is recognized.
What most surprises me is that some very well regarded authors of books have used Wikipedia as references for assertions in their books. I am sure that editors should consider that again in spite of the fact that even peer reviewed papers are found to contain errors. To my mind, all this states is that when a source begins to be used without critique, then its limitations are bound to be overlooked.
It looks that the Achilles Heel of Wikipedia was best illustrated by most recently by a student who inserted a sleeper fact that was later quoted without verification by journalists. Writing in the Irish Times here, Shane Fitzgerald explains the motivation for that experiment. As he explains it, it shows that this concern about both the possibility of manipulation and misinformation are more likely than is recognized.
What most surprises me is that some very well regarded authors of books have used Wikipedia as references for assertions in their books. I am sure that editors should consider that again in spite of the fact that even peer reviewed papers are found to contain errors. To my mind, all this states is that when a source begins to be used without critique, then its limitations are bound to be overlooked.
Thursday, May 14, 2009
Norway Bucks the Trend
A number of Northern European countries have attained a very high level of human and material development. More particularly, the Scandinavian countries have some impressive achievements in life expectancy, educational attainment, comparatively low unemployment rates and high income levels. Even among them, Norway stands out at this time in economic history for the reason that it has totally escaped the ravages of the economic crisis facing most of the world.
As this article states, the leadership in Norway ascribes their unique and comfortable position to prudent economic policy management and the placement of some limits on markets. It does help that Norway also has a large natural resource endowment starting with petroleum to other metals. To its credit, the country has records a high level of state capability and foresight as evidenced by the establishment of a sovereign wealth fund.
While Norway's leaders relish their contrariness and emphasize the fact that it is a cohesive and socialist model, I think that their use of the socialist model is altogether inaccurate. Fine, the country has very robust and overgenerous safety nets but its approach to economic affairs and prudent public finances has allowed substantial private sector growth. It is also material that the country has a small and homogeneous population.
As the article concludes, it is essential to note that this prudent management ought to contend with the effects of the generous safety nets which appear to have discouraged some workers. It is not clear from the article whether the number of lay abouts is as large or even growing but the growth model that Norway has chosen clearly has trade offs. Not every country can pull this off but the bigger question is whether this model can be maintained indefinitely.
As this article states, the leadership in Norway ascribes their unique and comfortable position to prudent economic policy management and the placement of some limits on markets. It does help that Norway also has a large natural resource endowment starting with petroleum to other metals. To its credit, the country has records a high level of state capability and foresight as evidenced by the establishment of a sovereign wealth fund.
While Norway's leaders relish their contrariness and emphasize the fact that it is a cohesive and socialist model, I think that their use of the socialist model is altogether inaccurate. Fine, the country has very robust and overgenerous safety nets but its approach to economic affairs and prudent public finances has allowed substantial private sector growth. It is also material that the country has a small and homogeneous population.
As the article concludes, it is essential to note that this prudent management ought to contend with the effects of the generous safety nets which appear to have discouraged some workers. It is not clear from the article whether the number of lay abouts is as large or even growing but the growth model that Norway has chosen clearly has trade offs. Not every country can pull this off but the bigger question is whether this model can be maintained indefinitely.
Tuesday, May 12, 2009
Oprah Markets for KFC
Endorsement deals of enormous amounts are common for celebrities of all kinds. I have wondered often how profit-seeking firms determine the price and the size of any endorsement deals that they offer. I am quite impressed that Oprah Winfrey's feature about a chicken give away by KFC has resulted in such an overwhelming response from the public that the franchise has had to cancel the promotion.
This leads me to note two things. First is that Oprah Winfrey is capable of pulling consumers towards a brand. The second and more material question is whether KFC took account of the fact that the economic situation added to Oprah's promotion could lead to such a response. In short, the KFC's marketing managers should be thankful to Oprah while their supervisors ought to take them back to school. they have not figured out yet what moves their product.
This leads me to note two things. First is that Oprah Winfrey is capable of pulling consumers towards a brand. The second and more material question is whether KFC took account of the fact that the economic situation added to Oprah's promotion could lead to such a response. In short, the KFC's marketing managers should be thankful to Oprah while their supervisors ought to take them back to school. they have not figured out yet what moves their product.
Wednesday, May 06, 2009
Testing Demographic Forecasts
Apart from environmental concerns, the one other area that has a lot of unworthy theories is the argument for population control. Well-meaning people argue often that the population growth rates in the world are far too high and have become a real threat to future human survival. Adrian Stott Brendan of Optimum Population Trust placed this response in rebuttal to an earlier article by Brendan O'Neill of Spiked Online that covered the OPT conference arguing for population reduction or control. Both articles are well argued as polemical pieces and worthy of reading on their own.
Martin Walker of the Wilson Quarterly takes a very empirical approach to exposing the assumptions that demographic forecasters frequently make. As a result, it is found that the forecasting record for demographers since 1970s has been very poor. One of those silly assumptions is the tendency to assume that high or very low population growth rates will maintain indefinitely and therefore claim that population growth rates in developing countries generally and sub-Saharan Africa in particular are a source of future threats.
As the evidence of population tracking shows, demographers are often flummoxed when they have made forecasts based on present circumstances. The major effects have been that the suggestions of European population shrinkage has not materialized everywhere as the forecasters assumed. Instead, there has been a sustained rise in births in the UK, France and Sweden. The second is that the concern that the racial profile of the European countries is not changing as first as was feared by cultural purists.
Needless to state, I remain a skeptic of population growth as a danger and have virtually no respect for Neo-Malthusian ideas. To my mind, these alarmist simply exploit the fear of nationalist domination. I am prepared to wager the bet that the population of sub-Saharan African nations populations will not match those forecasts because increased education, urbanization and improved health care. That African populations are still desperately poor is indubitable and in my view, population control is not the way out of that squalor.
Martin Walker of the Wilson Quarterly takes a very empirical approach to exposing the assumptions that demographic forecasters frequently make. As a result, it is found that the forecasting record for demographers since 1970s has been very poor. One of those silly assumptions is the tendency to assume that high or very low population growth rates will maintain indefinitely and therefore claim that population growth rates in developing countries generally and sub-Saharan Africa in particular are a source of future threats.
As the evidence of population tracking shows, demographers are often flummoxed when they have made forecasts based on present circumstances. The major effects have been that the suggestions of European population shrinkage has not materialized everywhere as the forecasters assumed. Instead, there has been a sustained rise in births in the UK, France and Sweden. The second is that the concern that the racial profile of the European countries is not changing as first as was feared by cultural purists.
Needless to state, I remain a skeptic of population growth as a danger and have virtually no respect for Neo-Malthusian ideas. To my mind, these alarmist simply exploit the fear of nationalist domination. I am prepared to wager the bet that the population of sub-Saharan African nations populations will not match those forecasts because increased education, urbanization and improved health care. That African populations are still desperately poor is indubitable and in my view, population control is not the way out of that squalor.
John Kay on Mark to Market Accounting
Another worthy quote from John Kay. Can someone use this as the heading for a chapter in business school text books?
"If a question has no right answer in principle, then people will argue for the answer they want in practice. Financial markets want steady growth in reported earnings and that is what finance officers gave them." John Kay
"If a question has no right answer in principle, then people will argue for the answer they want in practice. Financial markets want steady growth in reported earnings and that is what finance officers gave them." John Kay
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