Gordian Knots

“More importantly, free market exchanges are win-win scenarios”.

Well, there’s a bit of a dramatic oversimplification…

while it is potentially true that free market exchanges benefit the two consenting parties (although this is not always the case, especially where highly inelastic goods and services are involved) there is often a strong negative effect on non-consenting third parties.

These by-effects of free marketism are called ‘externalities’. for those of you who slept through econ 220, the technical definition of an externality is ‘when the actions of one agent (in a free exchange) affect the interests of another agent other than by affecting prices’.

The classic example of an externality as posited by Milton Friedman is that of the company with the smoke stack that dirties someone’s shirt downwind. the owner of the shirt must pay for its cleaning and that cost is not borne by the factory owner. it’s freebie. we’ve see a lot of externalities in the modern ‘free market’ economy, the most obvious ones being environmental: ie, the chemical company that dumps its waste into the river for ‘free’.

Of course there are tonnes of other externalities in the modern economy. the wiki page on it is here [wikipedia.org] but you’ll need to have been awake for econn 220 to grok it.

Bottom line: saying that a free market transaction benefits both parties is an oversimplification and does nothing to contribute to a meaningful debate on economics.”

Well-rounded: “As someone who has spoke to many in the position of hiring, here is what they always say they are looking for:

- Well Rounded… not just knowledge of the job, but working with people!,

- proven ability to learn something new.

- Experience

- overall industry knowledge

- Has previously handled job of equal stress/commitment

- has reason to be a long term employee (show job commitment)

explanation

1. All jobs require working with people. From dealing with the boss, to clients, to fellow employees on a group project. Most inefficiency is from bad communication between employees.

2. Need to show that you can evolve with the job. Industries are moving faster now. You need to show that you can adapt and keep the company on the leading edge. Not trailing behind.

3. Experience is self explanatory.

4. Lots of people get a good job… then decide they don’t like the lifestyle, or stress, and quit. It’s expensive to hire an employee (between searching, interviewing, and training… it costs thousands, if not more often tens of thousands of dollars)… losing a new employee is a major loss for a company. Getting a good one that stays on: that’s a major gain.

5. Long term is key. Besides for higher morale, less absence, they tend to be more productive (because they know how to do their job well from experience), capable, and have good relations with fellow co-workers. These are the gem’s in the company… they know exactly how things work. They require little effort on behalf of management, and can do a whole lot.

“

Good to see Knowledge@Wharton’s commentary on India. Sign of times, baby….sign of times!!

A New Passage to India – Knowledge@Wharton: “Taking India’s Pulse: The State of Health Care

India is now one of the world’s largest producers of generic drugs and vaccines. Companies like Ranbaxy and Dr. Reddy’s Laboratories are becoming well known around the world. But interest is growing in the health care industry’s domestic agenda. How India plans to leverage its reputation on the global pharmaceutical stage to address the needs of its own people was the focus of a panel and keynote address at the Wharton India Economic in Philadelphia.

To Grow Faster, India Must Unshackle Industries from Government Controls

The Indian economy could be growing at double-digit rates, but for that to happen, local politicians and bureaucrats must work to cut away red tape and privatize inefficient government-run firms, according to experts who spoke recently at the Wharton India Economic Forum in Philadelphia.

Investing in India: On the Ground Floor, Going Up?

Overseas investors have often viewed India as a risky bet, a perception shaped by the country’s on-again, off-again commitment to building infrastructure, financial markets that are often beset by scandals, and a legacy of protection against imports. Now, however, that perception is changing, according to participants in the Wharton India Economic Forum. Interest in sectors such as manufacturing and real estate is rising rapidly.”

As usual, Steve Jurvetson has an excellentpost on memory and the human brain. He writes on Jeff Hawkins’ book On Intelligence, on the resonant coherence of the memory-prediction framework for how the cortex works.

It seems that the developmental trajectory of electronics is recapitulating the evolutionary history of the brain. Specifically, both are saturating with a memory-centric architecture.

Hawkins argues that the cortex stores a temporal sequence of patterns in a repeating hierarchy of invariant forms and recalls them auto-associatively. The framework elegantly explains the importance of the broad synaptic connectivity and nested feedback loops seen in the cortex.

The cortex is relatively new development by evolutionary time scales. After a long period of simple reflexes and reptilian instincts, only mammals evolved a neocortex, and in humans it usurped some functionality (e.g., motor control) from older regions of the brain. Thinking of the reptilian brain as a “logic�-centric era in our development that then migrated to a memory-centric model serves as a good segue to electronics. Hawkins estimates that the memory size of the human brain is 8 terabytes, which is no longer beyond the reach of commercial technology. The issue though, is not the amount of memory, but the need for massive and dynamic interconnect.

Great!!! Wonderful! Exactly what I wanted!!

I have ordered a Apple – iPod Shuffle and a Mac Mini

Way to go….!!! Steve Jobs!

The McKinsey Quarterly: talks about valuations for companies in high-growth Asia. Interesting read:

“In Asia, the outlook is favorable for companies looking to build long-term value and improve manufacturing efficiencies. But Asian markets may not be the easy answer for companies attempting to boost their short-term growth. Those investing in Asia should take a careful look at what really affects returns to public shareholders.”

Capital returns. Despite high margins in most sectors and product markets, the average return on capital in the four northern Asian markets we analyzed is well below the US and European average (Exhibit 3). That’s caused in part by poor discipline. Banks, through their uneven underwriting and their high levels of nonperforming loans, allocate capital in an inefficient manner. Companies that allocate their capital better than the average Asian corporation does might see an opportunity, but the fact that Asian competitors can operate with lower average capital returns could also pose a threat to them. Family ownership of companies also inhibits efficient allocation of capital.

Governance. Companies looking to compete directly in Asian markets or to enter them through joint ventures and other partnerships should keep in mind that Asian companies have not been particularly kind to minority and public shareholders. Numerous publicly listed companies have seen their share price drop amid accusations that the controlling shareholders manipulated the relationship between listed and privately held subsidiaries. Admittedly, we can look only at the second-order effect of how much institutional investors are willing to pay for better governance. Yet a 22 percent premium for Asian equities is significantly higher than the 13 or 14 percent that these stocks enjoy in the United States and Europe. Poor governance contributes to market inefficiencies, which in turn lead to volatile markets that have to make larger corrections periodically in order to adjust for gaps in information and in perception.

Volatility and risk. Asia has been volatile. Volatility alone would not result in lower valuations, but the higher betas associated with it increase the cost of capital for Asian companies. Compared with US and European equity markets, volatility in Asian markets has been more pronounced over the past ten years. The lone exception has been Japan, which didn’t create any value over this period either

“In other news from the blogging world, Six Apart this week acquired LiveJournal. That means control of the four leading blogging platforms (Movable Type, TypePad, Blogger, and LIveJournal) is now in the hands of just two companies — Six Apart and Google (which owns Blogger).”

Somehow I don’t think its a good idea!

Careerjournal has some interesting observations:

“We have to end our dreams of having one big job and get prepared for career seconds, thirds and even fourths. This requires a different approach to our careers — one where we’re all constantly upgrading our skills and always keeping an eye out for what’s next.

* Do you do your homework on your company and its competitors?

Back in 1954, two of the top seven companies in the Fortune 500 were Swift and Armour; now they’re subsidiaries of subsidiaries. Things change. I think it’s important to read everything you can about your company so you can spot early signs of trouble and start that resume circulating.

* Are you always on the lookout for what’s next?

When a co-worker goes to work for a competitor, do you pretend they’ve died, or do you touch base with them to see if there might be a place for you with them? I’m not saying that you should be handing out your business cards to every passerby that you meet, but that you should always have your ear to the ground for new opportunities.

* Do you upgrade your skills on a regular basis?

When was the last time you gained a new skill at work? If you can’t remember, then it’s time to start adding to your workplace toolkit.

* Do you have a contingency plan?

Most actors that I know have a ’straight job’ that they can fall back on when they are between acting gigs. What’s your contingency plan? Make a list of all the things you can do to put food on the table.

A friend of mine sums up his career philosophy by saying, ‘I always try to be a little bit thirsty.’”

Cringely’s predictions for 2005, are interesting; especially the cheap Mac.

1) Microsoft’s entry into the anti-virus and anti-spyware businesses will be a disaster for users.

2) Carrying over from last year, I predict that Burst.com will beat Microsoft in their current lawsuit.

3) Apple will take a big risk in 2005. This could be in the form of a major acquisition. With almost $6 billion in cash, Steve Jobs hinted to a group of employees not long ago that he might want to buy something big. We might see that as early as next week with the rumored introduction of an el-cheapo Mac without a display. The price for that box is supposed to be $499, which would give customers a box with processor, disk, memory, and OS into which you plug your current display, keyboard, and mouse. Given that this sounds a lot like AMD’s new Personal Internet Communicator, which will sell for $185, there is probably plenty of profit left for Apple in a $499 price. But what if they priced it at $399 or even $349? Now make it $249, where I calculate they’d be losing $100 per unit. At $100 per unit, how many little Macs could they sell if Jobs is willing to spend $1 billion? TEN MILLION and Apple suddenly becomes the world’s number one PC company. Think of it as a non-mobile iPod with computing capability. Think of the music sales it could spawn. Think of the iPod sales it would hurt (zero, because of the lack of mobility). Think of the more expensive Mac sales it would hurt (zero, because a Mac loyalist would only be interested in using this box as an EXTRA computer they would otherwise not have bought). Think of the extra application sales it would generate and especially the OS upgrade sales, which alone could pay back that $100. Think of the impact it would have on Windows sales (minus 10 million units). And if it doesn’t work, Steve will still have $5 billion in cash with no measurable negative impact on the company. I think he’ll do it.

4) The Recording Industries Association of America will continue to sue customers while their business slowly dissolves.

5) WiMax will be a huge story by summer, but widespread adoption of the wireless networking technology will take at least another two years. I

6) VoIP will continue to shatter the telephone industry with the arrival of WiFi phones.

7) The trend of repurposing Linux-based consumer electronics devices through revised firmware will expand dramatically as people realize the cost-benefit advantage.

Desktop Linux will finally make some serious inroads as Linspire sets the trend for how to make Linux more user-friendly. There will undoubtedly be other players in this space, but they’ll just be emulating Linspire (formerly Lindows). Now if Linspire could only manage a one-click installation of MythTV.

9) And speaking of MythTV, 2005 will start to show some innovative online video initiatives, most of which will fail.

10) In 2005, the major beneficiaries of the Peoplesoft-Oracle merger will be SAP and IBM, NOT Peoplesoft or Oracle customers.

11) Cisco will rediscover its ability to buy and assimilate startup companies.

12) There is no evidence that Sun will change its current course, which is inexorably downward.

13) While Intel thinks its 2004 course corrections will do the job, I just don’t see much in the new product roadmap to get excited about. AMD will continue to grow at Intel’s expense.

14) Two thousand five will NOT be the year for UltraWide Band (UWB) networking or Power Line Networking, but both will do really well in 2006.

15) Sony’s PS3 will be delayed yet again, giving a real advantage to xBox2 IF Microsoft can get it out the door this year in volume.

Andy Kessler has cool summary of the iPod business model and its impact on Apple’s financials.

“Over the last year, two things have happened. First, Apple has increased their sales by over a third, almost all of it from increased sales of iPods – those 2 million of them at $265 each last quarter and another 100 million songs sold via their iTunes service. An iPod is just the combination some Apple software, cheap disk drives and a $12 chip a Silicon Valley company named PortalPlayer. I calculated that Apple pays $200 each per iPod to Chinese assembler Inventec to slap it all together. Even with cheap labor, Inventec has almost no profits, I’d bet under $10, probably more like $4. PortalPlayer, by the way, emails their design to Taiwan to be fabricated, with profits of some $5 per chip.

The second change since a year ago is that Apple’s stock has gone from $21 to $64. Pretty cool, capitalism at its best. Why? Because Apple keeps $65 per iPod – money chases profits! If you assume the stock increase is all due to the iPod (it is), then that business is worth some $15 billion. Add in PortalPlayer’s market value of almost $1 billion and you start to get a feel for how the world works.”

A Theory of Power, Jeff Vail’s Critique of Hierarchy & Empire: “‘A Theory of Power’, by Jeff Vail. An exploration of the development and structure of hierarchy and empire through political anthropology, economic theory, evolutionary ontogeny and developmental psychology.”

Here is his post on ’swarming’.

Swarming is the tactical (or, in some cases, operational) maneuver of converging of highly distributed forces at a single point to leverage the military principle of mass. That is, you don’t need to have more powerful forces than your opponent, you just need more powerful forces than they have at the point of conflict. For example, the anarchist “Black Block� in Seattle consisted of a relatively small number of individuals prepared to use violence amongst a sea of peaceful protesters. From this highly dispersed position, using their superior communications capability (in the form of text-messaging), they were able to quickly converge on a single place, overwhelm the localized police presence with brief but intensely violent protest, and then disburse and blend back into the crowds before the police could reallocate forces. They repeated this pulsing nature of swarming forces over and over again, and the police were never able to adapt.

Alexander and the Scythians at Eschate: Defeating Swarming

While fighting to gain control of the province of Bactria, Alexander the Great was confronted by the swarming tactics of Scythian horse-archers. His primary unit—the Macedonian Phalanx—could not cope with the mobile, pulsing, ranged attacks of these units, which would swarm around his fixed formations like wasps, darting in, firing arrows from a standoff range and quickly retreating. Alexander pioneered what remains today the US Army’s counter-swarm (though normally labeled counter-guerrilla) tactic: Find, Fix and Defeat. Initially Alexander used fixed geographical obstacles to corner, or Fix, the Scythian cavalry. But at the battle of Eschate, with characteristic tactical genius, Alexander adapted to the lack of terrain by using a formation of his own forces as an artificial terrain against which to Fix and Defeat the Scythian swarm

Wired writes about “Bram Cohen’s blazing-fast P2P software has turned the Internet into a universal TiVo.”

You could think of BitTorrent as Napster redux – another rumble in the endless copyright wars. But BitTorrent is something deeper and more subtle. It’s a technology that is changing the landscape of broadcast media.

“All hell’s about to break loose,” says Brad Burnham, a venture capitalist with Union Square Ventures in Manhattan, which studies the impact of new technology on traditional media. BitTorrent does not require the wires or airwaves that the cable and network giants have spent billions constructing and buying. And it pounds the final nail into the coffin of must-see, appointment television. BitTorrent transforms the Internet into the world’s largest TiVo.

One example of how the world has already changed: Gary Lerhaupt, a graduate student in computer science at Stanford, became fascinated with Outfoxed, the documentary critical of Fox News, and thought more people should see it. So he convinced the film’s producer to let him put a chunk of it on his Web site for free, as a 500-Mbyte torrent. Within two months, nearly 1,500 people downloaded it. That’s almost 750 gigs of traffic, a heck of a wallop. But to get the ball rolling, Lerhaupt’s site needed to serve up only 5 gigs. After that, the peers took over and hosted it themselves. His bill for that bandwidth? $4. There are drinks at Starbucks that cost more. “It’s amazing – I’m a movie distributor,” he says. “If I had my own content, I’d be a TV station.”

During the last century, movie and TV companies had to be massive to afford distribution. Those economies of scale aren’t needed anymore. Will the future of broadcasting need networks, or even channels?

“Blogs reduced the newspaper to the post. In TV, it’ll go from the network to the show,” says Jeff Jarvis, president of the Internet strategy company Advance.net and founder of Entertainment Weekly. (Advance.net is owned by Advance Magazine Group, which also owns Wired’s parent company, Condé Nast.) Burnham goes one step further. He thinks TV-viewing habits are becoming even more atomized. People won’t watch entire shows; they’ll just watch the parts they care about.

As someone who is trained in Operations Research, I found this paper funny and entertaining. Here is an excerpt:

“Starbucks, like most other businesses is primarily interested in maximizing throughput of orders. More orders equals more revenue. As a result they use asynchronous processing. When you place your order the cashier marks a coffee cup with your order and places it into the queue. The queue is quite literally a queue of coffee cups lined up on top of the espresso machine. This queue decouples cashier and barista and allows the cashier to keep taking orders even if the barista is backed up for a moment. It allows them to deploy multiple baristas in a Competing Consumer scenario if the store gets busy.

By taking advantage of an asynchronous approach Starbucks also has to deal with the same challenges that asynchrony inherently brings. Take for example, correlation. Drink orders are not necessarily completed in the order they were placed. This can happen for two reasons. First, multiple baristas may be processing orders using different equipment. Blended drinks may take longer than a drip coffee. Second, baristas may make multiple drinks in one batch to optimize processing time. As a result, Starbucks has a correlation problem. Drinks are delivered out of sequence and need to be matched up to the correct customer. Starbucks solves the problem with the same “pattern” we use in messaging architectures — they use a Correlation Identifier. In the US, most Starbucks use an explicit correlation identifier by writing your name on the cup and calling it out when the drink is complete. In other countries, you have to correlate by the type of drink.

Exception handling in asynchronous messaging scenarios can be difficult. If the real world writes the best stories maybe we can learn something by watching how Starbucks deals with exceptions. What do they do if you can’t pay? They will toss the drink if it has already been made or otherwise pull your cup from the “queue”. If they deliver you a drink that is incorrect or nonsatisfactory they will remake it. If the machine breaks down and they cannot make your drink they will refund your money. Each of these scenarios describes a different, but common error handling strategy”

Very often people ask themselves the following question:

Am I smart enough?

That’s the wrong question. There is no such thing as “smart enough”.

If you love playing the piano, play it. You don’t expect to be Alfred Brendel

or Vladimir Ashkenazy. But you are doing something productive for yourself and

those around you. If you enjoy doing it, pursue it.