CMS Report has an interesting rant about micropayments, and how they never got off the ground... many people have tried to convince me to pay a quarter or a nickle to view their online content, but I've never done so. Every few years, somebody comes up with some master plan based on the theory that "this time it's different!!!" But sadly -- and totally predictably -- they failed.

Why don't people pay for news? Because the most powerful word in marketing is "Free." No matter how little you charge for "quality" content, if somebody else is offering a reasonable substitute for free, you will always lose.

The latest "big idea" in this history of failures is Rupert Murdoch's attempt to charge for their online content. Some folks see Apple's new iPad as a game changer here, perhaps shaking up the market and getting people to pay for quality content. I'm skeptical... Yes, the iPad is pretty, and yes it is probably the best possible platform that "paid content" could ever hope for... but that doesn't change the economic realities.

Yes... the Wall Street Journal's articles might be exceptional... they might be light years better than what you can find for free on blogs and Bloomberg.com... but how can Murdoch prove to a skeptic that "paid-for" content is worth the extra cost? Unless they give away the whole article for free, nobody can judge it's quality. Also, just because one article was great, does not mean future articles will be great... Finally, if it really is a great article, people will blog about it, or editorialize about it, after which I can find a decent summary elsewhere.

People just don't have much brand loyalty to information sources anymore... Whoever gets it to me in the way I want it, will win my loyalty for today... but once you're boring, or ask me to login, or ask me to pay, then I might take my eyeballs to one of the other bazillion sites out there.

News is a commodity, and therefore subject to the economics of commodities. There is a little bit of profit in their creation, but much more in their distribution. In the past, the newspapers owned their distribution channel: printers, packers, delivery trucks... heck, the New York Times even owns their own forests and paper mills! The majority of their expenses are spent maintaining their distribution channel, not in paying people to write quality content.

Rupert Murdoch whines very loudly that his content is valuable and Google should have to pay to spider it... what he's really saying is that he's mad that the internet has made his distribution channels less profitable. If Fox truly cared about creating "quality content," they'd probably drop half their sitcoms.

Is there a way to save newspapers? Sort of...

Obviously, companies with good content need to get into the new distribution channels if they want to survive. The NBC/Comcast merger is a good example... although as a consumer I'm not a fan of so much power being in one single entity. I hope other companies get into the residential high-speed internet business so we have more competition... I'm happy to see that Google is getting into the residential ISP business, and I hope to see more competition soon...

In other words... The New York Times and the Wall Street Journal will survive... but their distribution channels will not. The sooner they get out of the dead-tree-scattering business, the better!

Yes, the rumors are true... Michelle and I have decided to move from chilly Minneapolis, to the temperate and coffee-infested Northwest.

We've been planning this move for a number of years... the timing made sense because of the housing market crash. This has helped make the Seattle real estate market go from insanely expensive to just laughably expensive...

We'll both be keeping the same jobs, as well. That's the beauty of the interwebs... you can do anything from anywhere, as long as you have the correct technology.

I'm going to miss a lot about Minneapolis: my family, my friends, competent yet non-cocky software developers... but I've always wanted to live somewhere else. Seattle was always one of my top 5 favorite US cities, along with San Francisco, Chicago, Boston, and Minneapolis. I've met some great people out there, so I know I'll be OK.

I'm certain I'll be coming back frequently. I have several clients and business ventures here in Minneapolis, and I'll need to keep an eye on them. But the big question is, will Luke drop my blog from Central Standard Tech because I'm now splitting my time in two cities??? I hope not... ;-)

I've been getting WAAAAAAAAAAY too much comments spam lately, so I'm shutting off the comments feature for a while. I experimented with numerous kinds of CAPTCHAs, all of which failed. I'm not sure if this is human comments spam, or what.

I'm going to experiment with a few other options... If you'd like to leave a comment, register, and send me an email. Only approved registered members can comment at the moment.

Or, you can always link back to my post from your own blog -- or Twitter account -- and leave a message that way...

This photo is of an Iranian protester helping evacuate an injured cop, and get away from an angry mob... As Sullivan said:

How To Tell Who The Good Guys Are? They're the ones who sometimes rescue a beleaguered riot policeman.

Skip the mainstream media... Go to Andrew Sullivan's blog, The Big Picture, or #iranelection on Twitter... something unbelievable is happening...

Man, this has been a hectic few weeks... I just launched one site for a client. It went smoothly, but it was a lot of work and late nights. I've been spending so much time writing documentation that I lost the will to blog. Unfortunate... considering what happened this week.

I'm talking specifically about the highly disruptive Google I/O conference. It looks like Google Wave is going to be huge... it will no doubt set the standard for web-based email collaboration.

I'm happy that its using XMPP instead of HTTP behind the scenes... this is a great idea, since XMPP is a high-end instant messaging protocol, whereas HTTP is a freaking dinosaur. I'm hoping this push will mean that browsers might naively support XMPP in the near future... Imagine that! Being able to get data -- like RSS Feeds, new email messages, and bundles of web sites -- pushed to you when they change, instead of having to poll the web site a bazillion times... or use awkward and obtuse asynchronous JavaScript. This technology choice has caused a few folks to predict the downfall of HTTP.

Nothing would make me happier than the death of HTTP, but it's not happening yet... As others have noted, Google Wave is still very dependent on HTTP... it only uses XMPP for server-to-server communication. The web browser still has to poll the server for more data. Although, I'd wager that once this takes off and Google servers are swamped, they might sneak XMPP into Google Gears and use that instead.

It looks like Wave will be easy to integrate with, and its all open-source... You don't need to host it at Google, you can install their server, or just implement the protocol. This is good, considering how many enterprises might want to make Microsoft Exchange more Wave-y. I have a couple of ideas for Wave plug-ins... but I have to wait until Google gets me a user account for testing :-(

Oh well... Its probably for the best. I could probably use one less distraction this month...

Sorry for the lack of blogging, folks... Last week was IOUG Collaborate, and I was usually indisposed. For those who didn't make it, you can check out my presentation on Slideshare. I gave my talk on A Pragmatic Strategy for Oracle ECM, as well as my Top 10 Ways To Integrate With Oracle ECM.

Billy put up some of his talks as well. The How To Be A Rock Star with ECM talk was well received... although the slides don't quite capture the whole presentation.

Overall, I was pleased with the turnout... I was kind of bummed out that there wasn't a bigger Oracle ACE presence there. I saw Dan Norris a few times, but there wasn't an 'official' ACE briefing. Oh well... I guess I'll need to wait for Oracle Open World in the fall. With all the new Sun customers and partners, that place is going to be chaos.

It's been three years since this blog's inaugural post... so I thought I'd reflect on the past. Unlike most folks who take stock on January first, my blog's official "end of fiscal year" is April 29th. So I'll take the opportunity to have new year's in April, and recount my most popular blog posts of the past 12 months:

1. Google Owes Me A Pony: (11,264 hits) my take on how the new economy makes Google a much more powerful player than most people realize.
2. The Idiot Test: (8,480 hits) a fun game that tests your ability to spot the obvious.
3. How to make Vodka Infusions: (6,923 hits) a perenial favorite
4. Empathy Versus Sympathy: (4,932 hits) one that I'm very proud of... as one commenter said, "Dude, you just summed up marriage in one easy little post!"
5. How many hits does your site really get: (4,422 hits) my take on how to analyze data from page popularity metrics (like this!)
6. The Official Guide To The Idiot Test: (3,467 hits) the cheat sheet for the above-mentioned game
7. Why Does Vista Suck: (3,370 hits) a question for the ages...
8. Tell IKEA to bring back the Coolest Desk Ever: (3,168 hits) my petition to bring back the favorite desk of Lifehackers worldwide
9. Why Developers Love BAFFLINGLY Complex Code: (2,995 hits) a take on the psychology of why code will always be complex and brittle
10. I'm Sorry I Invented Object Oriented Programming: (2,339 hits) the title says it all...

Overall, I had 180,516 page views over the year (according to Google Analytics)... so the top 10 articles were about 30% of my traffic. Naturally, several of these posts were written in 2007 or 2006, but they are still going strong! Only four of the top 10 from were written in the past 12 months...

I've lately been trying to focus on "evergreen content", which means blog posts that will be relevant for multiple years. Such posts take longer to write, and too much emphasis can sometimes prevents you from updating your blog as frequently as you should... but on the plus side, your posts from three years ago will still be hot spots on the web ;-)

Pie is feeling reflective... so he tagged a few of us with the question what do you want to do before you die?

I actually covered this back in 2007 in a post about The Buried Life. In case you don't know, The Buried Life is a show about 4 college guys who made a list of 100 "what to do before we die" tasks. Then, after making the list, they asked themselves what the heck are we waiting for?!?! So they rented a motor home, and toured Canada one summer doing as many things as they could. And every time they scratched something off their list, they tried to help a stranger fulfill their dreams as well.

I realized with some surprise that I had already done about a quarter of the things on their list... including:

• skydiving,
• hot air ballooning,
• learning to play a musical instrument,
• swimming with sharks,
• catching something and eating it (not a shark), and
• destroying a computer

That last one can be sooooooooooo fulfilling...

So, what's left? Pie wants us to pick one "bucket item" and explain it. I'm not sure if this means it has to be #1 on the list, or just the one you plan on doing next... In my case, I think they might be the same thing:

I want to invent some physical device that is both popular, and practical.

In my high school and college days I was a bit of a tinkerer... more with electronics than anything. However, my job these days is writing software, which is a tad less fulfilling than inventing a device with actual physical dimensions... I have a few ideas for devices that could save fuel, save money, and even save lives, but I haven't set aside the time to properly implement them. Michelle and I are planning on buying a house soon, and one of my requirements is to have a shed where I could experiment. I'm also going to try to dedicate 10% of my work week to tinkering. Hopefully, its only a matter of time before I invent something useful, or I blow up my shed. One or the other...

I had several others that didn't make the #1 spot:

• Get a degree in economics: since clearly nobody else in the world seems to be using theirs...
• Write a book NOT about computers: I have many other book ideas that I think are great, and I've even started outlining them... but Michelle only wants me to write one book every three years. Apparently, deadlines make me grumpy.
• Build a school: in some poor part of the country, or the world. I think it should be based on the KIPP methodology with a strong emphasis on Non-Violent Communication as well. That's a big project I probably can't get around to it for a few years... but I really want to do it some day.
• Travel lots and lots and lots: my list includes Greece and Turkey because I'm a history nut... Australia because the people there are just plain cool... Galapagos and Antarctica because I'm a science nerd... and Japan because they make 80% of the world's weirdest stuff. I don't know if I can do it all, but I'll certainly try.

I don't feel like tagging anybody else with this meme... These kinds of reflections can be a bit of a bummer for some folks, so I won't subject them to it. However, if you're inspired to write your own "bucket list" because of this post, leave a link in the comments, and I'll retro-tag you ;-)

In case you haven't heard, Oracle bought Sun... after being teased by IBM, and watching its stock price plummet, Oracle began talks with Sun last Thursday about possible acquisition...

If you were surprised, don't feel bad... Neither IBM nor Microsoft had a clue this was going to happen.

First thoughts... holy crap! Oracle sure saved Sun from becoming a part of the IBM beast... and now Oracle (more or less) owns Java, and has access to all those developers who maintain it. This is win-win for them both, in my opinion. Sun gets most of their revenue from hardware, which Oracle avoided doing for decades, so overall there's not much overlap in product offerings -- unlike last year's BEA acquisition.

The hardware-software blend is a compelling story... Imagine getting all your Oracle applications and databases pre-installed on a hardware appliance! Not bad... You could even get one of them data centers in a box, slap a bunch of Coherence nodes on each, and have a plug-and-play "cloud computer" of your very own.

Second thoughts... how the heck is the software integration plan going to work? Sun helps direct a lot of open source projects... including JRuby, Open Office, and the MySQL database... not to mention the OpenSSO identity management solution, and the GlassFish portal/enterprise service bus/web stack. The last two are award winning open-source competitors to existing Oracle Fusion Middleware products. Oracle now owns at least 5 portals, and at least 4 identity management solutions... unlike past acquisitions, existing Oracle product lines are going to have to justify themselves against free competitors. I can foresee a lot of uneasy conversations along the lines of:

So, Product Manager Bob... I notice that your team costs the company a lot of money, but your product line isn't even as profitable as the stuff we give away for free... Can you help me out with the logic here?

There are a lot of open source developers shaking in their boots over this... but I'm being cautiously optimistic. Oracle can't "kill" MySQL: there are too many "forked" versions of MySQL already, any one could thrive if Oracle tried to cripple the major player. Likely they will simply try to profit from those who choose to use a bargain brand database. Case in point, Oracle could sell them their InnoDB product, which allows MySQL to actually perform transactions.

Middleware is the big question mark... but with a huge injection of open source developers, products, and ideas, I'm again cautiously optimistic that -- after an inevitable shake-up -- the Middleware offerings would improve tremendously.

And Open World 2009 is going to be a lot more crowded...

I was just watching Ford's CEO Alan Mulally on CNN... Ford is actually doing fairly well, and doesn't need much of the bailout money, so a lot of people were confused about why he would stick up for GM or Chrysler went bankrupt. At first glance, you think it would be great if your competition went bankrupt, because then you could gobble up their market share... but Ford was actually very concerned.

Initially, I suspected something of an old-boys-network thing. Mulally is sticking up for other Detroit car companies, simply because they need to stick together if one of them needs to go to Washington to ask for help against Japanese or German car companies... so it might be just cynical, political self interest.

Mulally's explanation was oddly different...

He stated that the majority of the auto industry is in the suppliers, not the auto makers. Since all auto companies use the same suppliers, and suppliers are hurting as well, then one bad company puts the whole thing at risk.

For example, if GM goes bankrupt, then Delphi might go bankrupt, and not be able to supply parts to Toyota, Ford, or Volkswagen. That puts them all at risk if a company as large as GM goes bankrupt.

What shocked me was that during the interview, Mulally called his own company an "original equipment manufacturer!" This is a common term in both software and manufacturing, usually shortened to just OEM. It basically means Ford doesn't manufacture anything; it wraps pre-manufactured products with its own brand. They don't make engines, doors, wheels, brakes, transmissions, or pretty much anything anymore... they just slap together other people's stuff, put the word "Ford" on it, then sell it through their distribution channels.

I was wondering how long it would take them to admit this... and how folks would react... The CNN guy just brushed it off as "auto company speak," so I don't think they actually understood what Mulally meant.

Cringely brought this up a few weeks ago in his article What if Steve Jobs ran one of the Big Three auto companies? He suggested the same thing... Car companies should act more like Apple: let other companies do the dirty work of creating the "parts," then focus the big 3 on design, sales, marketing, and customer services. The whole article is very good, I recommend reading it.

Hearing Mulally openly admit that Ford is nothing but an OEM is very telling... and it gives me hope that some folks in Detroit "get it," and might actually be able to turn around the industry... but it might take a while longer for the folks at CNN to "get it."

I had no idea...

Some of my fellow bloggers have said who they intend to votes for... about 2 years ago I had very few strong opinions on the matter. My personal motto is "never vote for an incumbent," so I was leaning Democratic. Although I had no strong dislike of either of the Republican front runners. McCain was decent, Romney was a bit odd but proved himself a competent administrator, and Ron Paul was a hoot.

Two things made me eventually side with Obama. First, was a 2007 article by (gay Republican and 2-time Bush voter) Andrew Sullivan. He made the very strong case that Obama genuinely would help us move past the culture wars of the 60s, since by his very birth (date, race, country, age) it was impossible for him to take sides on the most divisive issues. He also made the strong case that nothing would improve relations abroad more than Obama -- both with former allies, and amongst states leaning towards "rogue" status... As Sullivan says:

Consider this hypothetical. It’s November 2008. A young Pakistani Muslim is watching television and sees that this man—Barack Hussein Obama—is the new face of America. In one simple image, America’s soft power has been ratcheted up not a notch, but a logarithm. A brown-skinned man whose father was an African, who grew up in Indonesia and Hawaii, who attended a majority-Muslim school as a boy, is now the alleged enemy. If you wanted the crudest but most effective weapon against the demonization of America that fuels Islamist ideology, Obama’s face gets close. It proves them wrong about what America is in ways no words can.

Talk about cognitive dissonance...

That made me lean Obama... but the thing that really cinched it was his Yes We Can speech... although the remix was better. The line that hit home was this:

This union may never be perfect, but generation after generation has shown that it can always be perfected.

This was the central argument behind pretty much every one of the Founding Fathers... if you've read as many books on the subject as I have, you'd realize that the history of the USA is highly unlikely... and those who talk about inevitability, superiority, or destiny, just don't get it. The only thing that ever held us together was the drive forward, the American Dream, to make a "more perfect union." Those who make demands just because "America is #1" will only lead us to lose touch with that dream, and lead us to chaos.

Does Obama lie? Yes; he's a politician, and lies are his weapons. Are his ideas so different than anybody else? No; he surrounds himself with the same advisers as other politicians. The difference is his temperament, and his unique perspective. He views the world in a totally different way than most people do... And I think that's exactly what we need right now.

But that's just my opinion, maybe I'm wrong.

Author and entrepreneur Tim Ferris has been contemplating how to invest his millions... he put together a pretty nice post on rethinking "common sense" investment rules. He even quoted some advice I gave him a while back... Happy to be useful, Tim ;-)

Since he's looking for still more input from the lunatic fringe on the 'net, and he's a bit risk-averse, I thought I'd share the most important piece of advice to new investors: THE STOCK MARKET IS COMPLETELY RIGGED.

This is basic human nature. Any time there is a financial incentive to cheat, people will cheat... and insiders know both how to cheat, and how to stay out of jail. I've read a fair share of books about how hedge-fund managers make their millions... It goes something like this: barely legal bribes for barely legal insider information. Most of our current financial woes are because of Wall Street cons that outlived their usefulness, or went too far.

Does that mean its hopeless? Nope... you just need to know how to make money on a rigged game. This means you need to take a hard look at anything that is currently making money (even index funds), figure out how somebody could rig them, then invest in such a way to minimize the rigging. Don't expect a money manager to give you this advice: that would force him to admit that he's involved in a totally crooked industry.

For example... take Warren Buffet's standard advice to people who want to invest, but don't have the time to monitor individual investments: "buy an index fund, and get back to work!"

Not a bad idea... index funds make a lot of money, especially if you have the cash to invest right now. But first think how could an index fund be rigged? This is simple. Consider the most common index, the Standard & Poor's 500. Next, imagine you're a big company, but the S&P committee judges that you lie just outside the top 500 companies. If only you could do a tiny bit better, you'd be in the index. Why should you care? Well, because if your company makes it to number 500, then suddenly a bazillion computerized 'buy' orders will go through, because your stock is now on the S&P 500 index!

Therefore... the leaders of this company have a strong incentive to engage in sketchy -- if not downright ILLEGAL -- accounting practices to make that happen. This doesn't meant that they would, but there is a strong incentive to do so... if the CFO indeed cooks the books, then the company appears on paper to be healthier than it really is, which pollutes the value of the index... Likewise, company #499 has even MORE reason to cheat... if they had a bad quarter, they fall off the index, a bunch of computerized managers sell the stock, and the stock plummets further. Those who have been on the index for a long time have an even larger incentive to lie, cheat, and steal to stay on that index!

Instead, be like Goldilocks! Have a nice blend of the 400 (or so) companies that have been there for long enough that you know they're OK, but not so long that they have to worry about dropping off. Others have run the numbers, and its true that an index like the Goldilocks 400 makes significantly more than the S&P 500, and could be managed with a very small shell script. Naturally, this advice only works if not many people follow it... luckily nobody reads this blog.

Investors, please line up to the right ;-)

I came across this video on the mortgage crisis... it does a better job of explaining the credit derivatives market than I did last week. I said credit derivatives are a fine idea, provided you do the math right... but they didn't do the math right... and everything fell apart. Here's how:

(Hat tip Cordell)

I'm gonna put in my 2 cents about this economic meltdown... I've been following it since 2004, mainly on The Big Picture and The Agonist. There are good reasons why I started saving a majority of my income as cash way back in 2006, and avoided the stock market... one of them is that I came to realize that the game was rigged, and I didn't want to get caught in the inevitable crash.

I've read a lot on the subject... I'm not an economist, but I'm going to try to put this into my own words.

Why the hell did this happen?!?!

Essentially, both Washington and Wall Street starting acting like a rabid pack of free-market fundamentalists instead of pragmatic capitalists. The deregulation and tax cuts that spurred the economy back in the Regan era were a pragmatic reaction to the sluggish, over-regulated economy. But, tax breaks and deregulation are neither necessary nor sufficient for economic growth. Don't believe me? Then please explain this evidence: in 1990, we had more regulation and higher taxes, and the economy BOOMED... but in the 2000s we had less regulation and lower taxes, and the economy CRASHED.

No matter how you look at it, tax breaks and deregulation are merely tactics to be used when appropriate. Saying that they are always good is woefully ignorant... Only a fool keeps using the same tactics over and over, especially when it comes to something as complex as the economy. If you still don't believe me, ask arch conservative Francis Fukuyama for more reasons on why Republicans who merely coasted on Regan's achievements have only succeeded in destroying them. Our banks are becoming nationalized, and we're effectively socialists, all thanks to those dense dittoheads.

Some industries -- like technology -- don't need much regulation... whereas others -- like banking -- need LOTS of regulation.

Blame The Poor!

Its popular amongst free market fundamentalists to blame this problem on the poor... especially for the Fannie May / Freddie Mac meltdown. They blame Clinton for lowering lending standards, so lower income people could be home owners. Now... I have minor technical objections to Clinton's plan, but according to the mortgage brokers I know, this was never the problem. Low income lenders paid back their loans faster than anybody else. Besides, even if Clinton's plan had bad side effects, Washington had plenty of time to fix it if they were actually paying attention... Blaming Clinton for the current mess based on something he did 10 years ago is as pathetic as blaming your parents because you hate your job. It might make you feel better, but its a whiny cop-out, and doesn't solve the problem.

No... the true problem was the middle class overextending their credit with complex, hybrid mortgages. Suddenly, individual lenders were incented for making bad loans!

For a long time, the banking industry wanted mortgage brokers to be more regulated... because these brokers kept hiding the real risks of the loans. Mortgage brokers eventually started doing NINJA Loans. This means No Income, No Job or Assets Loans... and making tons of money on fees and closing costs. People didn't have to prove they owned anything in order to get a loan. Eventually, after Washington refused to regulate, many normally sane banks decided to get in on the action. The ones that didn't are the ones that are currently still solvent...

As one former mortgage broker told me, "it was like a competition between the brokers and the bankers about who could make the stupidest loan!"

The poor could not have caused all of this problem on their own: there simply aren't enough of them. Yet.

Eventually, people weren't able to repay their loans... and the money that the banks expected to get in monthly payments simply didn't arrive... which means less capital to work with. Banks get skittish, and the ones that don't fail want to hang on to their cash for longer and make fewer loans.

When foreclosures increased, then the bloggers started screaming about what was going to happen next: the derivatives market was going to crash and burn...

Blame Derivatives!

Now we get into crazy land... What is a derivative? The Week has a good was to describe it: legalized gambling.

Now, this isn't a bad thing... probably the most common derivatives are stock options and commodities futures. The former is pretty common for tech people: they bet that their company stock will rise, so they hang around at a job they hate, for the "option" of selling their stock at a higher value. Commodities futures allow farmers to sell crops now when they don't have them, so they can get quick cash to improve the productivity of their farm. These are both fine...

The bad boys of the derivatives market are credit derivatives. In essence, this is simply "insurance" that you will get money back if a stock goes down, a bond goes down, or somebody doesn't pay back their mortgage.

Offhand, these sound like a great idea... and they are! But only if you do the math correctly... which they didn't!

Part of the problem was that a lot of these credit derivatives promised to pay insurance money if somebody didn't pay back their home loan. But, instead of individual loans, they made promises on mortgage-backed securities... which are thousands of loans bunched together as one. Again, these aren't a bad thing... as long as you do the math right. Which again, they didn't!

The idea behind these securities is that if any one person defaults on the loan, the security is still mostly OK... Even if everybody in the security defaulted on the loan, the security would still be valuable, because you bought "insurance" to guarantee its value! But there were problems... Since a mortgage-backed security is a mystery bundle of mystery loans, its nearly impossible to measure the actual risk! In most cases, the people measuring risk did a decent job of accounting for market risk, but they completely neglected capital risk. Basically, this is the fact that capital can sometimes get more expensive when the economy is bad, and banks are hesitant to lend.

In effect, they didn't charge enough money for the insurance they sold, because they measured the risk incorrectly.

Well... so what? As we all know, there is only a finite amount of capital in the world... and if you are a bank that lost money on a bunch of bad loans, and you also have to pay insurance money for people who bought your mortgage backed securities, where will that money come from? And because you sliced up all those loans into a million pieces, not you have a million creditors for each bad loan... so negotiating with your creditors in a bankruptcy court is an impossibility.

In short, these big, bad, financial geniuses never anticipated how the entire economy -- mortgage banks, investment banks, hedge funds, and insurance companies -- would completely collapse if a very small minority of people couldn't pay their mortgages on time... and then they proceeded to make loans that they knew people would not be able to pay back.

Whoops!

There's a reason why Warren Buffet called these credit derivatives financial weapons of mass destruction back in frigging 2003. They are a decent idea, but very poorly implemented, and completely unregulated... one bank failure will almost always cause another. Back in 2000, the market for credit derivatives was under $100 billion dollars... which is essentially $100 billion in promises to pay back money, if something bad happens to the economy. By 2007, this unregulated market has ballooned to $44 TRILLION dollars... which is approximately the amount of money on the entire frigging planet. Nobody knows how big it is today.

This market produces nothing, feeds nobody, and doesn't foster industry one bit... Its just insurance payable when something bad happens. The only way you can make money in this market is by making huge bets... so again, these geniuses decided that nothing bad would ever happen, so they collectively bet all the money in the world!

And they lost...

How Should We Fix This?!?

First we must recognize the truth: there is no room for fundamentalism in good fiscal policy. We'll need a blend of free market ideas, some tax hikes, some tax breaks, some government control, and basically a return to pragmatic capitalism.

The best options I heard thus far came from The Agonist. The fundamental problem is a lack of transparency. In the past, banks would loan each other billions and billions every hour, but these days they don't know who they can trust... so the Fed is forced to step in and make loans. This can't go on forever, so the banks need to step up, ask for the regulations they need to safely lend to each other, then get to it. Its what some people call a shot of adrenaline, and it goes like this:

1. Give the FDIC an injection of cash to buy out banks that are too insolvent to lend. "Too sick to lend is too sick to live." You would be amazed at how many will start lending in preference to working for their Uncle Sam.
2. Sell short term bonds and give these to the Fed to extend lines of credit. About 150 billion in addition to the Fed's already eased credit will do.
3. Back the bonds long term with "fat cat taxes," which include taxing wall street for every trade they make, and additional taxes to the top 2% of American earners.
4. Signal that the policy of allowing banks to be bought up cheaply is over

If Wall Street wants a bailout, they are going to pay dearly for it. They are going to have to take some risk, a lot of regulation, and accept the long-term consequences for their actions.

And the fundamentalists should be chased back to their caves...

I got these via a Boston.com article on the Olympics. Apparently, the Chinese military is doing all kinds of anti-terror drills prior to the Olympics. Not a bad idea, but a lot of critics claim its an unnecessary show-of-force just to intimidate those non-violent Tibetans, and make them stop walking around and asking for their country back. Some really good photos there, but this one is my favorite:

Clamped knees, elbow pads, and tiny, tiny guns.

dude... what's the goal here? Make the battle-hardened monks laugh hysterically until you run them over on your Segway? You had better hope that they don't thwart your plans by stepping up on a curb or something... The only thing more absurd would be backing up your police force with scary, autonomous, Anime robots.

whoops... spoke too soon...

I love of energy... I always thought environmentalists got it wrong about energy. The problem isn't overconsumption, its unsustainability. So, go ahead and drive your Hummer, as long as it runs biodiesel from sources like algae or bacteria. If Big Oil was sharp, they would stop denying global warming, and embrace new carbon-negative oil technologies before the high tech venture capitalists steal all their business...

To add insult to injury, it seems that some prominent scientists want to put Big Oil on trial for global warming. At first, I believed that these kinds of trials would go exactly nowhere. Until I found out about one case backed by a dream team of trial lawyers: Steve Berman and Steve Susman.

The former was the lead lawyer representing 13 states against Big Tobacco in their historic defeat in the 1990s. The latter was the man who defended Big Tobacco. Now, they have teamed up and are taking on Big Oil, with pretty much the same strategy...

The Atlantic outlines the logic of the case quite well. There have been dozens of lawsuits against Big Tobacco, dating as far back as the 1950s. The plaintiffs were all the same -- people who got addicted to cigarettes, and got health problems, and were now suing the tobacco industry for selling an unsafe product. Early anti-tobacco lawsuits all ended the same way: the judge would declare that every consumer product has some danger, but its not the judge's responsibility to decided an acceptable level of safety.

Defining what is an "acceptable level of safety" is up to Congress... who are always on top of things...

This of course led Big Tobacco in the past -- just like Big Oil right now -- to funnel millions of dollars to "skeptical" scientists, and use them to pass off PR as genuine research... and use that to influence congress and the media into inaction. Not to mention the millions in campaign contributions, free trips, lobbyist jobs, etc. etc. etc.

Unfortunately, Big Tobacco finally realized the flaw in that plan:

• When you pass of PR as genuine scientific research, it is a lie.
• When you lie about consumer products you sell, it is fraud.
• When you defraud consumers, class action lawsuits are not far behind.
• When you get sued, you have to produce old memos, emails, and data relevant to the case... which are usually very incriminating

The Steves' plan is not to claim that oil is causing "too much harm." The plan is to prove that Big Oil used both licit and illicit means to downplay the actual harm of their product, whatever that harm may be. Essentially, when companies engage in fraud, they make it impossible for a consumer to make a reasonable choice about whether or not to use their product... and congress has a long list of laws against that...

Essentially, even if oil is 90% safe, if the Steves can prove that Big Oil claimed it was 95% safe, and that Big Oil downplayed evidence to the contrary, then Big Oil is guilty of both fraud, and conspiracy to commit fraud. That exact tactic brought down Big Tobacco, and it seems like it would be pretty easy to do the same to Big Oil...

I, for one, am curious to see how all this pans out...

I had an odd day today... It started with me taking a small sledgehammer to my kitchen walls...

I'm doing some demolition this week to prepare for a kitchen remodel, and I absolutely love my new hammer. Boy oh boy... its called a FUBAR, and its a wonderful combination of crowbar, sledgehammer, and all-purpose destroyer. I can grab 2x4 wood planks in its toothy maw, and rip 'em straight out of the wall with my bare hands!

I was a little sad when I ran out of wood planks...

Then -- at the crack of noon -- I shook the dust out of my hair, and started a teleconference. I gave a demonstration of how Oracle ECM works to a division of a multi-billion dollar Japanese conglomerate. UCM, IRM, URM, WCM, you name it. They seemed to like it, and hopefully the sales folks can continue the process from here.

Then I went back to demolition... and now I'm blogging about it all.

It suddenly dawned on me that I'm one of those cliches from an MCI commercial about how the internet will change how we work in the future... I'm going to have to send them an irate letter for spying on me.

Right after I check my Technorati rank.

God I hate email chain letters... but I got blog tagged by Billy, so I'm going to be a good sport... so I'll share eight things about me that most people don't know:

1. In my career as a computer geek, I have implemented projects in 15 different languages: FORTRAN, Pascal, BASIC, Visual Basic, JavaScript, IdocScript, Perl, Python, Ruby, PHP, Java, JEE, C, C++, C#
2. I have a Bachelor's degree in Physics, a Master degree in Civil Engineering, with minors in Math, Philosophy, and Computer Science.
3. Thanks to my mad Google skilz, I've uncovered the meaning of life. Twice. I'm working on a third... stay tuned.
4. I'm fascinated with neurobiology, and love taking personality tests.
5. I've taken the Myers-Briggs personality test several times, and it always says I'm an ENFP: Extroverted, iNtuitive, Feeler, Perceiver. That's unusual for a software geek, who are normally introverted, thinkers, and judgers... PersonalityPage.com describes my personality type rather accurately...
6. I took a left-brain/right-brain dominance test, and I failed! It claimed I have perfect hemispherical balance, meaning I solve problems with both hemispheres simultaneously. Its kind of cool: I can jump from big-picture to nitty-gritty details in a flash, but there are negatives...
7. I really dislike fiction... I usually don't read anything unless its well regarded after 50 years. I tend to read non-fiction: science, technology, economics, and history -- especially the American Revolution
8. I really hate String Theory, Social Anthropology, and Alexander Hamilton. I'm willing to rethink my dislike of the last two, but I'm pretty unshakable on that first one...

Still reading? Too bad! Just for that, I'm going to keep this thing going by tagging 100% Minneapolis-based bloggers: Dan Grigsby, Garrick Van Buren, Luke Francl, Ed Kohler, Graeme Thickins, John McDarris, Cordell Melgaard, and Rick Wren the Ninja. If you don't like it, blame Jake. He started it.

Feel free to join the narcissist meme, boys!

This is an interesting meme... make "this year in review" of your blog, by taking just the first complete sentence each month. I had about 260 posts in 2007, below are a select dozen:

January: Continuing on the green theme, I came across a top-10 list from Newsweek about how easy it is to be green.

February: Wired news is reporting on another interesting innovation in wind energy...

March: Michelle had a great idea the other day...

April: Google Maps has just unveiled a new feature called My Maps, which is a new tab in the left sidebar of the standard maps interface.

May: Slate Magazine has a pretty good list of the top 5 brain-related news stories of 2007.

June: Derrick sent me a link to a great site, Lumosity.com, which helps improve your brain by playing specially designed games.

July: Since I posted the Nerd Test a while back, I guess the time is right to post The Idiot Test now.

August: Just a (mildly) shameless plug...

September: I was always fascinated by economics... but every time I tried to study it I was put off by the sheer idiocy of it all.

October: I was never much a fan of hybrids... having two engines instead of one just seemed to make things expensive and complicated...

November: I made mention a while back that identity management will destroy Facebook... well, this is the next best thing.

December: When I hear people talking about Web 2.0, I'm constantly surprised how few people really "get it."

Interesting... some observations: first, I talk about the environment a lot. Second, I seem to like my brain. Third, I use elipses a lot... and finally, I should probably spend a bit more time talking about "technology and lifehacks", as opposed to just "all that good stuff".

Happy 2008!

(Hat tip: Barry Hess)