JCL Blog

Mr. President: You Lost Me at Bla Bla Bla

Dear Mr. President.  I voted for you, or against Sarah Palin, but either way I decided to have hope -- just like you asked.  However you slice it, it has been a bit bumpy since that day in 2008.  If I had been writing your speech tonight I would have acknowledged that.  You just cannot start the speech with a victory lap.  The facts don't support it.  Any effort to spin it -- just skewers your credibility.  Even the choir has got to be wondering.

Here are a few other reactions:

Minimum Wage:  I have run a small business and I think that like other business owners -- increasing wages by 39% ($7.25 to $10.10) will create all kinds of unintended circumstances.  Most notably, people that get paid $10.10 have different skills than those at $7.25.  The people you are trying to help by imposing this minimum wage, are going to lose their jobs to people possessing $10.10 in skills.  It may take a year or so, but the people on the lowest rungs are going to lose.

Healthcare:  Yes health care is a problem.  I hope your efforts will produce positive results.  So far, all you have done is dig a great big hole -- and if all you do is parade out the cancer and asthma victims -- you are doing us all a disservice.

Wars and the NSA:  I stated that I wanted a president that would keep us out of wars.  If I had been alive back in the day, the first Democrat I would have voted for would have been JFK.  He stood up to the military and that was not easy.  You are doing your best, but you are being out maneuvered on all fronts.  You have expanded the kill lists, failed to close Gitmo, and got humbled in Syria and Libya.  The next president is going to have to be a former general, just to clean this up.  On the NSA, no one believes that you of all people could rein those guys in.  They run the country.  Let's just hope they don't get caught with Angela's mobile number again.

Aid for the Philippines:  It is a miracle that the people of the Philippines still admire the USA.  Our aid to date for our Filipino friends in the wake of typhoon Yolanda is a miserable $86 million.  Just 27 cents for each American.  Just $78 for each of the 1.1 million people impacted.  By contrast, we give $3 Billion to Israel -- every year.  25 times as much -- every year.  How your speech writers decided to herald aid to the Philippines as an American moment is another wonder of west wing management.

The next president that runs on an outsider image is going to lose.  No one is going to fall for that head fake twice.

Let's hope we get back to serious leadership.  We want the straight scoop.  No more bla, bla, bla.


Let's Rein In the American Taliban

I lived in the Philippines during the height of Marcos' power, including the years where he ruled the country with the power of the military instead of the power of the people.  It is true that he did not need martial law to cause his political opponents to disappear, he had been doing that for years already, but he did need it to exceed the term limits imposed by the constitution.

It is interesting to note that the main justification for his declaration of martial law (1972-1981) was the communist rebels in the southern part of the country.  Leaders wishing to implement desperate measures manage to create desperate times for justification and communism was the villain we feared the most then.  Even though we were aware of Maros' tactics, and knew they conflicted with our values, Marcos was supported by the US government.

In 1987, U2 and Amnesty International collaborated to bring attention to the plight of the citizens of many central and south American nations who's life and liberty were under threat from lawless dictators.  The campaign honored the Mothers of the Disappeared, and was critical of the way the US government supported dictators in countries including Chile, Argentina, El Salvador, and Nicaragua that had turned on their own citizens - taking them away in the night to a fate of torture and death.  No one knows the number, but is likely that these dictators captured and killed thousands of people they did not like -- all with the endorsement of the US government, and all without basic legal process.

Today the New York Times reported that in September 2011 we joined those dictators as a country where our president kills citizens he does not like without due process.  

For what was apparently the first time since the Civil War, the United States government had carried out the deliberate killing of an American citizen as a wartime enemy and without a trial.

I fear that this article is the best possible spin we can put on our actions.  Even with the ugliest parts papered over and painted in bright friendly colors, it is a frightening story that we all hope is not the start of our descent into the horrors of Marcos and Pinochet.  

Also in the NY Times today is an editorial calling for the repeal of the military force law.  This law, passed right after 9/11 makes it easier for our president to do the things we do not believe in.  We must repeal this law and make it harder for our president to kill our citizens.

Journalist Jeremy Scahill has been working to expose these actions for several years now and just released his documentary Dirty Wars at Sundance this year.  I was lucky enough to see it and I recommend it highly.  The movie chronicles the work of Scahill and by the time the credits rolled, all of us at the screening were quite fearful that our government would kill him next.  Very scary stuff indeed.  Here is a review of the movie in The Guardian.  Dirty Wars does a very good job of investigating and documenting the work of the "American Taliban"; bearded US Special Forces teams that dispatch people on kill lists with very little regard for collateral damage.  

It was an incident in Gardez, Afghanistan that got Scahill started on the trail of the Joint Special Operations Command (JSOC), the terrifying nighttime raiders in the direct control of the White House.

 In Gardez, they interviewed survivors of that violent raid on the night of 12 February 2010. After watching his brother and his wife, his sister and his niece killed by US special forces, Mohammed Sabir was handcuffed on the ground. He watched, helpless, as the US soldiers dug the bullets out of his wife's corpse with a knife. 

The most frightening part of the movie is an interview with a member of the American Taliban (JSOC) where he says that "we have built a hell of a hammer and are out looking for nails".  Even with the scrambled face and voice it is a credible warning from within our military that the ever expanding kill lists are out of control.  We started with a kill list of 7 people right after 9/11, by the time we invaded Iraq the kill list was the 55 people on the deck of cards (I am guessing this is 52 cards, 2 jokers, and Sadam), and now the list numbers over 3,000 -- with some unknown number of Americans included.  

Have we become like those dictators we supported in the 70s and 80s who used fear to justify desperate measures?  Even though I was only ten years old at the time, I remember talking to a Filipino employee of my dad's church about the men that would appear in the middle of the night and take people away.  Marcos used the fear of communist rebels to justify many terrible human rights offenses.  Now, 40 years later, the rebels in the south are not called communists anymore but members of an Islamist group called al Queda -- the very people we are the most afraid of.  Fortunately, the Filipino people overthrew Marcos in 1986 with the people power revolution.  They have not let their leaders use fear to compromise their values and as a result their citizens are safe at night.  

I would like to be safe a night too, so let's rein in the American Taliban.  

American Style (Big) Graft

I recently read Bailout by Neil Barofsky.  I am not going to post a review because I really cannot recommend the book.  It is a rant by a guy trying to counter his fear that the people in DC that he crossed will be successful in making sure he never works again - as they undoubtedly threatened over and over.  I mostly agree with this review in Forbes: don't read it because it is a liberal rant.

Despite this, one part of the book is just stuck in my head.  Treasury a secretary Geithner and sidekick Kashkari said over and over again that the bailout terms could not be changed (made better for the taxpayer) because some of the banks may not take the bailout - and it was very important that all of the banks take the bailout.  Why would we want so badly to push our scarce resources onto banks that don't want the funds? 

Well, clearly I am one of those guys that is the last to realize that the joke is on me.  The Wall Streeters (Geithner Et. Al.) were shoveling money to their buddies and needed a dozen non buddies on the receiving end to make it less obvious.  If they got everyone to take the bailout, no one could cry foul. 

I do some business in developing countries and from time to time get into discussions about corruption.  When I say that they should clean up their corruption, they answer:  so should you!  I used to think that we had a thread of moral authority to hold onto.  In fact we don't. We have so much money that when Paulson/Geithner/Kashkari want to give $50 billion to their buddies, they hide it in a $800 billion dollar bailout!  Yow!

It will be very interesting to see who replaces Geithner. I still maintain this is the most important cabinet appointment Obama has on his plate. 

One last note about Barofksy.  In keeping with my political schizophrenia, I am a fiscal conservative that can't seem to vote for a republican lately.   Based solely on his book, I think that Barofsky is a good guy.  I just hope we have no need for his services anytime soon.

Uncorking Wireless

Not long ago most WiFi routers were open.  People did not bother to secure them because they did not believe they had anything to worry about.  Then came FireSheep, an extension to the FireFox browser, that showed everyone how they were exposed on public and open WiFi connections.

Now most WiFi routers are secure and I bet people like AT&T and Comcast and Verizon think that is a pretty good thing.  After all, they are selling bandwidth in fixed bundles and no one is maximizing the amount they use.  

Enter the OpenWireless movement.  This group has set about to establish new standards through which the vulnerabilities exposed by FireSheep can be addressed and promoting the idea that everyone should share their internet connection.  Quite a few organizations are supporting the initiative including the Electronic Frontier Foundation.  Others including Open Garden are introducing new technologies that make it easier to share bandwidth between devices or people.

This is important because it is yet another way that the Internet can route around obsticles.  The Internet is naturally suited to find the best (easiest / cheapest) way round a blockage and we all need to do what we can to support that kind of thinking.  If the Information Superhighway becomes a toll road, we all lose.

My Favorite Line from Obama's Speech

My favorite line from Obama's acceptance speech is:

I am hopeful tonight because I’ve seen the spirit at work in America. I’ve seen it in the family business whose owners would rather cut their own pay than lay off their neighbors, and in the workers who would rather cut back their hours than see a friend lose a job.

I have had the joy of knowing people that do these things.  They cannot be recognized enough.  At my company we have had people donate vacation hours to a co-worker with cancer, deliver food and clothing to typhoon victims, and collect gifts for less fortunate children during the holidays.  

These people are true American heroes.  I am proud to have had the chance to work with them.  These last four years have been tough for most of us in America and along the way we have had to beat back the looters and other self dealers.  These parasites are not just on Wall Street, but all around us.  Let's not let the shadow of people who would put themselves first take us down.

Here is a link to the full transcript.  No matter your politics, it is worth reading.

Congratulations Mr. President

Tonight is your night to celebrate. You may already have a to do list for tomorrow. If not, let me help you get off on the right foot.

  1. Get a New Treasury Secretary. Nothing has been more damaging to you, or the people of the country than the string of Treasury Secretaries that were self dealing and corrupt. They are hurting the citizens of our country and setting a poor example for the rest of the world. 
  2. End the Red Blue Divide. We have not seen any evidence of any desire to work with Republicans. Getting rid of Rahm Emanuel was a great step. Now do the real work of sharing the process and the credit.
  3. End the Racial Divide. You are the one that can bring the races together. The voting in this election will prove to be more divided racially than ever before. I don't know what to do specifically, but this is very important and we cannot let this moment pass.
There are many more things to do with foreign policy, national debt, china, and of course jobs. Good luck and our prayers are with you.

Getting Scrooged

Charles Dickens did not say how Ebenezer Scrooge got to be so crabby as to deserve to be described like this: "The cold within him froze his old features, nipped his pointed nose, made his eyes red, his thin lips blue, and he spoke out shrewdly in his grating voice ..."

Maybe it had something to do with the election process or the legal system.  This year's run up to the election has been long and it seems even more painful than before.  So I can understand that sentiment.  And our legal system... that is a story for another day.

There are legions of people that have worked very very hard to get initiative 1240 on the ballot this year and even more that have worked night and day to get it passed.  Very few, if any, of those people will benefit directly from the passage of the initiate except in one simple way:  the chances for educational success of lower income students in Washington State will improve -- after all it is just plain improbable that their chances could get worse!

If it fails, everyone who has worked so hard would be justified in turning cold and Scroogie and asking themselves, why on earth do I do these things?

Yes I know that we are likely to win and that is awesome.  Yes I know that being negative is poor form and demoralizing.  Yes I know that I should say that if we fail we will carry the fight forward.

Boy do I hope we win so we can get on to rebooting the school system in our lifetimes.


Tomorrow We Could be the 42nd State to Get Charter Schools

Tomorrow is election day and I am quite interested to see how things are going to work out.  I am always interested in election results, but this year I am heavily invested in our local initiative for charter schools -- initiative 1240.  My interest is not personal in that my kids will be out of school by the time the first charter school goes into operation.  However I am working hard to pass I-1240 because I think it is vital that we figure out how to do a better job educating people in our state.  I have learned some interesting things as I have worked to support I-1240.

  1.  The Importance of Education:  I have been amazed at how many people I talk to are not interested in I-1240 because they don't have school age kids, or their kids already go to a great school.  I fear I never was all that convincing when trying to share my enthusiasm for creating a more competitive Washington State.  I wish I had figured out a better way to explain why I think they are connected.
  2. Philanthropy is Misunderstood:  Opponents have worked to condemn the initiative because it has been supported by rich white guys like the co-founders of Microsoft, and other famous techies.  The idea that these guys actually want to improve our state is hard to accept I guess.  Charter schools mostly serve the people with very few educational options.  The rich philanthropists are already among the 25% of parents in our area that send their kids to private schools.  They will not directly benefit from this initiative.  
  3. Catching Up or Blazing a Trail:  Going into this I thought it would be pretty easy to convince people to vote for the initiative because 41 other states already had charter schools and there are many incredible success stories.  I have been surprised to learn that our voters have no problem blazing a trail on the legalization of marajuana which currently leads 53-44 in the polls.  The approval numbers for charter schools are about the same.

All together I am delighted that the numbers look good for Initiative 1240 and I am greatful to all of you that are going to make sure to vote for the future of our State of Washington.

Washington State Unemployment Insurance Hits 7%

In the period of 2009 to 2013 the Washington State Employment Security Department will have increased our unemployment insurance rate from 3.7% to over 7%.  'Here is our tax rate history displayed on the top of our last statement.

Those of you that have fought this battle know that these insurance rates should reflect our experience rating.  This essentially means that companies that have more people on unemployment pay higher rates.  There are many problems with this system, but here are the two that I think are the biggest.


  1. Insurance should spread risk over the pool.  The idea that the State of Washington should make money on each unemployment insurance premium -- is counter to the idea of insurance.  The government regulates the insurance industry to protect consumers from insurance companies that want to make a profit on every policy holder.  The government should apply that measure to itself.
  2. The structure of the system raises costs to businesses during an economic recovery.  We do not have access to the data that drives our experience rating.  In fact, we believe that our experience rating has improved at the same time that our rates have doubled.  The more corrosive thing is that if the current system was properly implemented, it would dampen every recovery by increasing tax rates that apply directly to hiring -- right when the economy needs employers to hire the most badly -- during a recovery.  We now have to pay over $2,000 per employee per year to have employees in Washington State.  And that money does not go to employees -- it goes to the Employment Security Department.


Some communities in our state depend very heavily on state assistance to exist and a good deal of that assistance is delivered by the Employment Security Department.  Those communities need jobs.  Unfortunately, the more a community depends on government assistance, the less that community will be able to attract new employers.  The simple reason is that no employer can compete with unemployment benefits that exceed its ability to pay wages.  We have closed facilities in small Washington communities for this very reason.  No rational person would choose to work for a living if the state will pay them more to not work. I am sure I don't have to carry this scenario out to the extreme to make the sustainability point.

Every time we hire for new positions, we advertise in all of our locations and hire the best people we can find.  This dramatic increase in the cost of operating in the State of Washington is going to push us to hire more in other locations.  The net result will be that the cost of unemployment insurance will have to be borne by fewer and fewer employees.  One must wonder where the tipping point is - 10%?  

I hope someone starts working to turn this around.

Romney Says: No Taxes for Me!

I know it is not fair to hold a presidential candidate to what he says in the debates, but it is nice to dream.  Last night Mitt Romney said:

...there’ll be no taxes for anybody making $200,000 per year and less, on your interest, dividends and capital gains.

Awesome! All I have to do is switch my pay to a dividend and presto - no taxes! Anyone like me with a small business will be able to do the same.

Hey, anyone with a spouse could file seperately and get another $200,000 tax free.  Sweet!  $400,000 in income without any taxes at all.

I  am pretty sure our government needs taxes to run.  We can borrow a trillion here  and a trillion there, but somebody has to be paying some taxes eventually.  Also, if we iinvade Iran, someone is going to have to pay the bill for that.  I know they have oil, but using the spoils of war to pay for the war is an idea that hasn't worked for over a hundred years.  

So even though no taxes would be great for me, I am going to vote for Obama.  He has just as much of a challenge with the truth as Romney does, but I think we are less likely to invade Iran with him in office.  Along the way he may even get past these silly antics about most of the nation getting away without paying taxes.

Later:  I did not see any mention in the WSJ or the NYT about this zero tax on dividends issue, but I did find this article on AcccountingToday.com.  Good thing too because I was starting to think I had imagined it.

Atlas Shrugged Part 2

Atlas Shrugged was one of my favorite books in high school and it was fun to think about those days this week as I watched both Part 1 (on Netflix) and Part 2 in the theater.  

No matter your politics, these are good movies worth watching.  The writing and the acting and the production value are all good enough -- and the content is interesting to think about given the choice we have approaching on November 6th.  

I find these movies even more interesting because I am just now in the middle of Ken Follett's newest book Winter of the World -- about the rise of Nazi Germany and WWII.  Patriotism and its extreme cousin nationalism have been used to implement policies that have not just destroyed wealth and prosperity, but millions of souls.  

Even though I do not subscribe to Ayn Rand's philosophy entirely, I do believe that a capable person cannot be compelled to carry the people that are not capable of carrying themselves.  I do believe that at times people with means will choose to help others.  But there is a very wide gulf between choosing to help and being forced to help.  I think this even applies to taxes.  It is much easier to pay taxes when the money is being put to good use.  When it is not, everyone puts the maximum effort into avoiding the payment of taxes.  

Another of my favorite themes is that absolute power corrupts absolutely.  This is plain in the movie as the role of the socialist government expands and the aptly named Wesley Mouch rises to take over everything.  Quite similar to stories of unbridled power of the secret police in many other stories.  I also thought it was interesting to compare to the way conservatives often make the same mistake.  There was a good story in today's NY Times about the potential self destruction of the 1%.

Even though these seem like opposites - the arc of each story is really the same. 

My Voting Checklist

With the election under four weeks away I am still undecided.  Readers of this blog know that I voted for Obama last time, and that I think peace is the most important pursuit.  So here are my three top items and how I think the candidates stack up.


I think Obama has the lead here.  It seems that most first term presidents are itching to go to war because it help their re-election chances.  Even though it is deplorable to put our citizens in harms way just to improve the president's chances at the polls -- I do think it happens.  The fact that Obama has gotten us out of Iraq and has not invaded anyone else (like Iran) is a check mark in his favor.  Also, following this line of reasoning, he is going to be less likely to start a war in his second term than any first term president.

Special Interests and Deficit Reduction

This is a tie.  And when I say special interests I mostly think of industries getting bail out money, and not so much who is getting payback for campaign contributions.  I have it as a tie because I think Obama has proven incapable of stopping the flow of money from the US Treasury to Goldman Sachs (I think  oldman Sachs is a good label for all things evil on Wall Street even though I do recognize that there are plenty of bad actors in other firms too).  I don't think Romney has any intention of stopping the flow of our money to these bad guys.  So incapable vs. uninterested equals a tie.  This same thinking also applies to deficit reduction.  Obama can't get it done and Romney does not want to.

Managing the Unions

On this one I am undecided.  Of course the Democrats have been in the pocket of the unions for all of my lifetime.  But Obama has done some good stuff to manage their influence.  I am quite involved in education reform and I think the Race to the Top effort was a well crafted plan to reduce the union's efforts to block progress in education reform.  The Republicans have always been in an all out war with the unions.  Sometimes I think that much antagonism is not going to get us to where we want to go.  It could even strenghten the unions. The public union problem is going to be front and center in the next four years as minicipalities try to figure out how to stay solvent in the face of liabilities that have been passed forward for decades.  

It will be very intersting to see how the remaining debates illumnate the candidate's approaches to these three issues.



Making Victims As Opportunity Slips Away

Imagine a father and son talking about a poor report card.  The son says the teacher doesn't like him.  The father says that is just not fair.  So the son doesn't learn and improve from the report card experience and the next report card is worse.  The teacher or the system is blamed again and soon the son drops out.  

This scenario is repeated many times in our education system.  In our state about 1 in 4 students that start high school never finish.  I propose that a meaningful number don't finish because of this negative reinforcement loop.  Clearly, even if the father is right and the teacher has treated the student unfairly, the victim is the student.  We cannot blame this failure on the student.  By the time we get done with that he has already dropped out and is well on his way to a low income future.

Michael Lewis wrote a book a few years back about how this can happen at the other end of the economic spectrum.  He went back to his privileged New Orleans high school to interview the baseball coach, because, like many coaches, this one was tough on the kids.  In the 70's, when Michael Lewis was there, that was how it worked, these days, the parents were trying to have the coach removed.

If they could not get the coach removed, these lawyers and doctors wanted to intimidate the coach into telling their sons that they were better athletes than they were.  They wanted the coach to give more playing time, not run the guys so hard, you know the drill.

Those student athletes are the victims just like the high school drop outs.  Sure those rich kids are probably going to be just fine, but think of the missed opportunity for life shaping lessons.

Lawyers are particularly good at making victims like this.  In the now famous McDonald's vs Liebeck case, where Liebeck was awarded over $3 million to compensate for burns she suffered when she spilled her coffee in her lap.  I think it is a shame that she was burned by her coffee spill.  However, the real damage came later when she was persuaded to sue McDonalds.  The case went on for two and a half years, and then was negotiated down after the award to something less than $600,000.  Sure that is a lot of money, but Leibeck was 79 years old at the time of the incident.  She came to believe that she was a victim and she turned two or three years of her life over to that way of thinking.  

Imagine all of the people that choose to enter into the aggravation of such a fight and lose years of their lives and in the end, many don't even win any money!

Next lawyers will be telling their sons not to worry about their schoolwork because they can just sue the school instead.  

Here is the book Coach by Michael Lewis should you be interested in reading it.

Peace Gets My Vote

Every day the front page of the newspaper is dominated by campaign news or Iran/War news or both – and the election is still 8 months away!  I don’t know who I am voting for yet.  You may recall that Obama was the first Democrat I ever voted for.  I can say that a very large part of my decision, possibly the entire decision, will be based on the chances that the candidate will be able to keep us from entering yet another war.  Just about everyone seems to want to start another war in the middle east – so it is going to take some kind of a (enter favorite adjective here – strong, smart, resolute…) president to keep us out of the war.  It seems silly to make an argument against war, but if I have to I would say war is bad because people die and we spend our time and energy focused on the war and not on other problems at home – oh yeah, and it makes most everyone in the world hate us.

There are plenty of ‘people’ (I use the air quotes here because we now consider corporations as people) that feel it is in their best interest to start another war.  Here is my list of those beating the war drum:


  1. Politicians:  Sure seems patriotic to be over the top for the war
  2. Israelis:  It is clearly in their interest for the USA to fight the war for them
  3. Bomb Makers:  Anyone who makes a profit from war would clearly want war
  4. Newspapers:  Nothing like a good war to drive up interest in the news
  5. Anyone who hates the USA:  What better way to drive support for your anti USA organization (al-Qaeda) than to get the USA to drop a bunch of bombs (hopefully on the neighbors, but really, anywhere will do)


In what is a historic irony, our military is not all that wild about starting another war.  Normally, the US military would be leading the charge for war, but maybe lately those guys have seen too many brave young people march to their death for no reason and they now think the promotions and unlimited budgets are being paid for with too precious a currency.

So that is my measure.  The candidate that convinces me that he will do his best to keep us out of war will win my vote.

For those of you that think the threat of Iran getting nukes justifies war, The Economist recently did this piece that does a very good job of outlining the argument against going to war to prevent Iran from getting the bomb.

For those of you that think we should pre-emptively defend Israel, try this one from CNN.

For those of you that want a general background, try this one from The American Interest.

Conditions for Real Change

David Brooks posted an interesting piece this week showing how we are in an unusual situation with both parties losing favor with the voters.

We can see our nation getting more polarized every day, but this is the first time I have thought about how the polarization is hurting both sides.

Here is an interesting poll showing one example of how the people fueling the fire are impacting their constituents:  Fox News viewers less informed than people that consume no news at all.

Add to this the way the the Occupiers are shining a bright light on inequality and the growing number of people that are giving up hope of earning a living, and we could be approaching a time where real change could happen.  I am not talking about the kind of real change that is easy, measured, and pleasant.  

I am talking about the kind of change that Michael Lewis chronicles in his new book Boomerang.  Here is the part about what is happening in Vallejo CA, and could happen to other parts of our country.

Meanwhile those jokers in DC are arguing over who is to blame for the demise of the Supercommittee...brother.

Golden Age of the Internet (ending now?)

About a year ago I argued in this post that the Internet would eventually be regulated and we should work to regulate it in a way that works.  I still think that someday the government will get its hands on the Internet and the outcome will most likely be bad.  For that reason I propose that we are currently watching the sun set on the golden age of the internet.  Soon government regulation will be added to the ever suffocating weight of security issues and we will no longer be able to have free access to all web sites or the pace of innovation that we have enjoyed over the past 15 years.

I site the Protect IP bill currently working its way through the halls of Conress as support for my argument.  If passed, this bill will allow the government broad powers to prevent citizens from accessing certain web sites. This affront to free speech would undoubtedly be used by rights holders (entrenched businesses) to prevent innovation.  If you are interested in this subject at all, please visit:  www.demandprogress.org.

Leo Laporte and his guests on TWIT had a great segment at the end of the show on Sunday about this.  Go to the last 7 minutes of the show.  Soon we could be saying: Remember when we used to be able to [your favorite online activity here] on the Internet?

I happen to think that if an Internet dark ages does come about, the overriding maxim of information wants to be free will eventually prevail.  Maybe we would have another round of offshore pirates like we did in the '60s as depicted in the movie Pirate Radio.  A new Internet, located in the ocean and not in any country, beaming its signal directly to the users without government interference.


Bigger Was Better Until Now

The Factors of Production Disassemble and Big Business Dissembles

Companies have been citing economies of scale as reason to acquire, merge, or grow ever since the beginning of industrialization.  It is not hard to grasp the idea that the cost of each additional unit will drop as more units are produced.  There are every day examples of this from ordering business cards to getting the next bigger bag of popcorn at the theater.  Doubling the size of the order rarely doubles the cost.  In addition to increasing competitiveness by lowering production cost, manufacturers have also been heavily incented to acquire their suppliers to secure raw materials consistently.  In addition, when significant research and development investment is required - large scale is required to justify that investment.  Bringing a new drug, airplane, or car to market can only happen when large scale production is the likely outcome.

Natural monopolies are sometimes formed when new technologies are discovered and more so when large initial investments are required.  The first railroad, telegraph, and electrical grid are good examples of natural monopolies.  Once the track was laid down, the cost of running the train was so much less than the next competitor (who still had to build their track) that protecting the monopoly and remaining profitable was not only conceivable by likely.  In the case of the telegraph, the network effect rewarded the first to market because the usefulness of the network increased as more people were connected to it, further securing the monopoly.

For all of these reasons we have lived our entire lives in a world where bigger was better.  Until now.

Over the past 30 years just about every part of business has been disassembled and the parts can now be purchased as needed, when needed, and for cheap.  Big time computing infrastructure is available for rent.  Enterprise quality business process systems from the mundane (travel expense management) to the exotic (advanced materials management) can be provisioned in a matter of days and delivered economically to large and small teams alike.  Anyone with an idea, some know how, and a credit card can bring it to life and to market faster and cheaper than ever before, and tomorrow it will be even faster and even cheaper. 

The railroad company may still have a monopoly on the use of its tracks, but the customer can pick from any of dozens of carriers that are putting containers on the train, so businesses large and small are able to ship their products anywhere for no initial investment, and very low cost.  Amazon.com may own all of the distribution centers, but anyone can sell their products through Amazon.com.  Apple may own the iPhone, but just about anyone can put an app in the app store.  Google may have the biggest search engine, but anyone can buy an ad.

However, before we get too excited about this new world of entrepreneurship we must look at the remaining barriers.  There are still two large hurdles: government regulation and selling cost.  Any large firm not offering access to its railroad tracks is doomed unless government regulators can be deployed to prevent competition. Also, in selling, some large businesses can prevent their customers from being exposed to new entrants by blanketing the market with salespeople.  Oracle and its mini-me Salesforce.com, dedicate $5B (20% of revenue) and $700M (50% of revenue) respectively to sales and marketing.  They have the reach to simply shout down any competition for customer mindshare. 

These government and selling advantages are significant because to date they have overcome the many large firm disadvantages.  Poor performing employees have many places to hide in big firms, even top performers spend an inordinate amount of time fighting internal battles, and real live feedback from the marketplace rarely makes it through the ranks to the top decision makers.  For these reasons top talent gravitates to smaller firms where the opportunities for advancement and the big payday are greater and there is just plain less brain damage.  The small firms have the smartest people, whose motivations are more closely aligned with business success, who are closer to the customer, and who have access to all of the tools and infrastructure previously only available to the big players. 

Both of these problems are self-correcting. 

Government protection may benefit a business but it kills the market.  More people every day make their residential location decisions based on access to high speed internet.  Taken to the extreme, these decisions may not be between one part of a city and another, but instead over an international border.  People went to Canada to escape Nixon’s draft, why not Australia to escape the reach of Genachowski’s FCC?  It is not hard to imagine a young software engineer with school age children attracted to Australia by fiber to the home and good schools.  Comcast and its lobbyists win in the short term, but even they lose in the end as they ride their shrinking market into the ground.

WikiLeaks may offer a middle ground to the all or nothing proposition of killing the entire economy.  They have announced plans to release documents targeting big business starting with the big banks.  It is suspected that the first target is going to be Bank of America.  This will expose the tactics large enterprises use to protect their positions.  In banking it is likely the manipulation of the bank regulators and deceiving their government and shareholders about their financial condition.  In technology it will probably be the anti-competitive behavior associated with patent trolls, mergers, and the implementation of standards.

In Selling, the small firms need to push forward while gravity does its work.  Salesforce.com spends fifty cents of every dollar of revenue on sales and marketing because they can.  With 95% gross margins, they have the money.  The increased competition from the many small businesses offering sales process automation tools will drive gross margins down. Each bee sting may not seem like much to worry about, but even Microsoft expects its margins to drop from over 80% now to 40% as their customers move to a cloud computing model.  This is happening to the entire industry and the big spenders on sales and marketing are going to either get crushed, or adapt.  Either way, there will be much more oxygen available for the little guy at the customer’s table.

As the disassembly of business offers opportunity to small up starts, the big established firms will dissemble.  Watch for support of entrepreneurial activity while absorbing potential competitors, claims of working with the government to open markets while increasing regulatory burden, and ever increasing attorney headcounts.  Change is hard for anyone and really hard for the big guys.  

Post 272

Well it has been a year and this is my 272nd post.  I set out to write a blog entry every day and even though I came up a few short, I have enjoyed organizing my thoughts and working on my writing in 2010.  

Thinking about why I do what I do, or what I plan to do in the future is unavoidable (for me anyway) as the calendar changes to a new year.  The blog posts I wrote this year were adequate notes to myself about what I was thinking at the time, and the fact that 4,000 other people found my posts interesting enough to read is flattering.  

So what to do in 2011?  I have no plans to become a journalist, so I am not looking for a scoop or to break a story.  I do think I could put more effort into some bigger writing pieces that further organize my thinking into actual arguments.  So in the weeks ahead I am going to pick a few main themes and start to develop them into longer essays that argue a particular point.

Here are some possible subjects based on the number of entries I made this year organized into broad categories:

Tech Marketing (113 entries):  I write a lot about this because my company helps large tech companies with sales and marketing.  I think the changing role of the salesperson is worth spending time thinking about with Google and Facebook on one end of the spectrum because they really have no salespeople, and Salesforce.com on the other end spending 50% of revenue on salespeople.  I don't know how this is going to work out but it sure will be interesting to watch.

New Media (51 entries):  My second most written about topic is new media.  To me New Media is the decline of the newspaper, publishing, and TV we grew up with and the rise of blogging, micro blogging, social media, and streaming media over the Internet.  We live in a very interesting time and the creative destruction of this sector is one of the things that makes it so interesting.

Politics (47 entries):  Next in line is politics - mostly in the US, but invariably overlapping with the rise of China as a world power.  The big question of course is whether or not the US will stay on top and how many wars will we start as we struggle with our identity.

Economics (44 entries): Finally economics.   In the world I want to live in, those that create the most value get the most rewards.  It does not take long to see that right now getting rewarded is often disconnected from value creation.  Will my pollyannaish view of the world find its way into reality, or will Goldman Sachs continue to gobble up everything for themselves?

There is one other subject that I find very interesting and that weaves throughout all of this: demographics.  We often define people in groups and evaluate the relationships between the groups based on our understanding of the average within that group.  This tendency prevents us from seeing the real picture.  The growth rate of a nation's GDP or even the GDP per capita does not tell us very much.  The unemployment rate in the US is around 10% -- but some sectors cannot find enough workers and others have 25% unemployment.  If you are interested in this subject, read this from Foreign Affairs.  Sure there are well over a billion people in China, but half of them are subsistence farmers who do not participate in the economy.  

I am looking forward to digging in on these topics during 2011.  As always, your comments and thoughts are appreciated.

Looking up in 2011

I have had the chance to catch up on some reading this week and overall my sentiment about our prospects in the US has turned a corner.  Over the past couple of months I have been finding more and more reasons to be bullish on America and some of those thoughts seemed to have crystallized in the last week.  Here is my attempt at a list:

Attention on Education:  I have been involved in non profit initiatives to improve education in the US for 20 years and I have never seen the kind of focus and awareness on the education problem as we saw in 2010.  There were always a few high profile people working on this -- now there are dozens.  2011 is the year we will start our climb back up.  We have a long way to go, but not going down further is a great victory.  

Realism in the White House:  We may not like the state of things, but just accurately assessing the problems is a big victory.  In the past we had leaders that just made things up -- it is hard to address issues when no one wants to talk about them.

International Humility:  We have said it over and again enough times that the world community is starting to believe that we are not going to solve everyone's problems.  We said we would get out of Iraq and we are actually starting to do that.  There was a great line I heard the other day (not sure of the source):  Saudi Arabia is willing to fight Iran to the last dead American.  We don't seem likely to get sucked into that game.

No Need for a New War:  Yes Assange should have been on the cover of Time Magazine.  I am glad he was not because that one event has jinxed many other people, and the WikiLeaks story is just getting started.  Here is a great post on The New Republic about how WikiLeaks could end big business and big government.  I don't know if that is true, but we do need a way to reduce the influence of big organizations before they drive us into a new war.  Uncontrolled power always gets diffused somehow, and quite often it is a war that does it.  Perpetually bad economic times also promotes war.  We have very powerful big organizations and bad economic times -- a tough combo.  WikiLeaks, or something like it, could be just the thing to pull the rug out from under the oil companies, bankers and the warmongers, and just in time too.

In America we know that we have the most adaptable form of governance on the planet.  I know that once we wake up and view our problems in the light of day -- we will prevail.  I think 2010 could have been the year we accurately assessed things, and 2011 could be the year we start doing something about it.

If you have some time this week and want to read some great background material, check out David Brook's Sydney awards for best essays of 2010.  

6 Years That Were Worse for the US Than Now

it is funny how current experiences can randomly conspire to focus our attention on particular times of the past.  The Wikileaks story reminds me of the Pentagon Papers, and I am also reading Keith Richards biography that reflects a lot on that same late '60s early '70s period.  

These days it is easier than ever to think the USA is worse off than ever before.  Here is a list of five times since WWII that I would argue were even worse:

1947:  House Un American Activities Committee creates the Hollywood 10 Blacklist

1954:  Joseph McCarthey reaches the height of his power 

1968:  The Assassinations of Martin Luther King Jr and Sen. Robert Kennedy

1970:  The Kent State Shootings

1974:  Nixon Resignation

1980:  Iran Hostage Crisis

Through these were broader ongoing negative narratives like the Civil Rights movement, the Vietnam War and the 70s oil crisis.  

Sure things are bad now -- but I would argue that we are a long way from the worst time ever.  The one thing that makes our current situation seem so dire is another year:  1989.  The difference between all of those bad years listed and now is that back then we did not view ourselves as the undisputed sole superpower.  

Could it be that the fall of the Soviet Union and our ascendance to the top of the heap has put us at an altitude where the thought of a fall is more than we can bear?