Nonprofits vs. Jihadis In this excellent Slate article, Lee Smith points out two important facts about jihadi Islam.

1) He points out that jihadi Islam is primarily about local politics. In reference to the recent terrorist attach on the holiday resort of Taba in Egypt:

After all, [Egypt's] most famous episode of Islamist violence, the assassination of President Anwar Sadat, was carried out by rogue elements of the military who killed the "apostate" Muslim leader for making peace with the hated Jewish state.

It's easy to be parochial in one's interpretation of events, and Americans who fixate on America's instigation of jihadi violence ignore the fact that jihadi violence has been going on for quite a while and, in some ways, is best viewed as a civil war within the Islamic world that the US was dragged into on 9/11.

This civil war pits jihadis against dictators. For a long while, America's policies in the Middle East have backed the dictators. Those wishing to bring stability back to the region are arguing that the US should start backing dictators again. Bush has cut this unpleasant Gordian knot by supporting a third faction that has been largely sidelined in the jihadi war to date: regular muslims. To date, the results in Afghanistan have been amazingly successful, while the jury remains out in Iraq (elections there, I beleive, are scheduled for early next year).

2) Lee also points out that

Militant groups have to continue operations or risk losing prestige and funding. Since Israel's security barrier and the targeted assassinations of Islamist leaders have made it very difficult to strike inside Israel, the groups may have no choice but to go outside if they wish to continue their war. (Emphasis mine)

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Slate's own Rob walker cataloged the "trend in using business-world metaphors to describe the operations of Osama Bin Laden and his al-Qaida terrorist network" before discarding it as being unhelpful, but as Lee suggests, there is an organizational operating model al-Qaida and other jihadi organizations follow: nonprofits and NGOs.

Nonprofits and NGOs are on the side of good, and jihadis are on the side of bad, so by pointing out their financial similarities I in no way intend to imply that they are morally similar. I am merely pointing out parallels in their funding structures and cash flow models, and since it's easier to examine nonprofits, doing so could give us operational insights into jihadi networks.

Here are some observations from my time working in the nonprofit field:

1) Nonprofits compete for funding on the basis of visible, observable outputs and activities, ideally with some appropriately photogenic glamour to them. Causes with emotional appeal, either through shock value or prettyness, beat quiet, material improvements.

2) Funders tend to be faddish, always interested in moving to the new cause-du-jour.

3) When funders give money, they give it for some particular program or measurable output. It is very difficult for nonprofits to attract funds for operations--the day to day capacity building that generate organizational depth and resilience.

4) Nonprofits often rely on charismatic leaders.

5) Attractive causes "pull" charismatic leaders out of other fields and into the nonprofit field. These leaders often do not fit well into the non-nonprofit world.

6) It is very difficult for nonprofits to scale, primarily because a successful program is deemed to be less needy than a less successful program, and so finds it harder to get cash.

With the exception of 6, it's clear how a jihadi network is more like a nonprofit than a corporation. Corporations are focused on maximizing profit, a goal which requires serving customers, employees, and shareholders. Nonprofits are focused on fulfilling their mission and raising cash.

Tracking how well a nonprofit is fulfilling its mission is actually very difficult since they have no profit signal that lets them know whether they are helping their constituency or not. Instead, they rely on activity measures which track outputs, not outcomes.

The mission is also the animating feature that attracts employees and makes up for meagre pay. Galvanizing the troops is the only way to make people stay because the cash just isn't there.

Donors want to give cash to things that directly generate outputs, not to activities that build infrastructure, like HR or accounting. In addition, donors are more loyal to the mission in general than any one incarnation of it, and are looking for the group that fulfils their emotional need best. This means that donors are always open to new, more needy causes, and nonprofits compete in generating obvious displays of mission-fulfillment to win those competitions.

One consequence of the above is that nonprofits have tremendous moral hazard. A donor wants to give to the organization that promises most spectacular upside because they are insulated from downside risk. If a nonprofit spends all its money on some activities that do not actually help their mission at all it does not matter to the donor, indeed, the donor probably doesn't know and neither does the nonprofit.

Even nonprofits that are savvy about organizational capacity and the difference between outputs and outcomes still publish the % of donations they consumre in their operations vs the % they give to the needy. The smaller this percentage is (the leaner they are) the better, even though this ignores the fact that nonprofits can add value to their activities instead of just passing money through.

Terror networks can only grow to a certain maximum size before the chance of infiltration (and disruption) grow too high. In addition, the competition for ideological purity suggests that they are likely to fracture as they get larger as factions peel off to pursue their more authentic version of the truth.

In addition, terror networks also must display activity continually in order to attract donors. The more dramatic the display, the more likely they are to get money. Note that it does not matter if the display actually helps or hurts the terror network in the long run, they need to get the money now. The fact that Al Qaida has been unable to strike the US since 9/11 reduces their street cred in sympathetic circles, and therefore their ability to raise cash and attract volunteers. In addition, it also means that other groups can (and probably are) competing for that crown by executing their own, even more dramatic, attacks.

Terror networks will also be low on infrastructure, making it impossible for them to make significant capital investments in materiel unless they have a state sponser. The state sponser can either provide a safe harbour for them to build economies of scale and benefit from specialization and division of labor (ie Afghanistan) or the sponsor can simply give them materiel as a way to strike a common foes and maintain plausible deniability. When an anonymous nuke goes off in Times Square, who will the US bomb?
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Media consolidation's evil revealed? Some people claim that Sinclair Broadcasting's decision to play a documentary, Stolen Honor on its stations, reveals the evils of media consolidation. After all, here we have a powerful media player deciding to broadcast propaganda to influence a presidential election for its own ends. The DNC is trying to shut down the broadcast.

I'm sorry but I must have confused this election with some other election. In this other election, I seem to recall a bunch of Vietnam Veterans who did not think Kerry would make a good president playing some ads to that effect, being ignored by broadcast stations, being blogged about to some great degree, being examined by broadcast stations, being rebutted by Kerry officially.

I also seem to recall some guy being taken in by fake memos regarding Bush's service in the National Guard, and some guys online who knew about typography examining the memos and declaring them fake, and this being ignored for a while, but then they wrote about it some more, and then everyone agreed that they were fake after all.

In *that* election there was no shortage of competing media sources, and therefore no shortage of informed eyeballs scouring material for inaccuracy and screaming bloody murder when they found it. In such an environment, Sinclair Broadcasting (I've never heard of them either) can play whatever propaganda they like because the media environment is competitive and diverse, with lots of fact checking and alternatives. Unfortunately, Sinclair does not exist in the world of Swift Boat Vets or Rathergate, it seems to exist in this world of dangerously consolidated media where there are no competing views and their "documentary" will be able to slip through materially uncontested.
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Fever Swamps I made the mistake of going to the once excellent Brad DeLong site to learn more about this year's Nobel Prize in Economics (I don't know much about real business cycles). What a fever swamp it has become.

But there was this good post on economists ranking Bush v Kerry on the economic policy front. The Economist ran a poll, and Kerry did better than Bush (although Brad and I prob differ on the reasons why).

Despite their diverse assessments of today's economy, the professors are overwhelmingly critical of the central plank of Mr Bush's economic policy—tax cuts. More than seven out of ten respondents say the Bush administration's tax cuts were either a bad or a very bad idea, and a similar proportion disapproves of Mr Bush's plans to make his tax cuts permanent. By contrast, Mr Kerry's plan to roll back the tax cuts for people with incomes over $200,000 wins the support of seven in ten of them. (This poll was taken before October 4th, when Mr Bush signed into law his fourth tax cut, which extended several popular components of earlier tax cuts that were due to expire at the end of this year, including the child tax credit.)

The broad condemnation of tax cuts seems to be linked to the professors' worries about America's fiscal health and the looming retirement of the baby-boom generation. Although Americans overall seem relatively unconcerned about the budget deficit, a large majority of the economists rate it as a serious problem for the economy, with almost one in five describing it as a crisis. And they back Mr Kerry by a large margin (79% to 18%) to do more to promote fiscal discipline than Mr Bush.

Health care also seems to be an issue that pushed our economists towards Mr Kerry. More than 70% of the academics reckoned health-care costs were a serious problem for the economy—and they preferred Mr Kerry's plans to control those costs by a margin of 59% to 25% (with the rest ducking the question).

I just don't get it.

Firstly, Bush's tax cuts have primarily focused on reducing taxation on capital. Taxing capital is extremely inefficient and costly, and will get more inefficient and costly as capital markets become larger and more flexible. If you don't beleive me, ask the tax loving, business hating Europeans. Europe in general has much higher consumption taxes than the US because their higher government spending requires more efficient taxation to support it. The only reason the US can have the inefficient tax policy it has is because it doesn't tax that much. As entitlement spending grows (which it will, dramatically), taxes will have to go up, and efficiency will start to matter. So, why not start taxing consumption now. (Yes, I know consumption taxes are regressive. I also support means tested transfers to counter that effect).

Secondly, while the economists are right to point to boomer driven entitlement spending becoming a huge problem, I'm not sure why they see Kerry as being better than Bush about it. As far as I know, his main criticism of Bush's (large) Medicare bill was that it was too small, even though Medicare will far outstrip Social Security in cost. Perhaps they (rightly) beleive that a split Executive and House will be unable to pass bills and so can do less damage. I agree with that argument, but that's not Kerry Policy Good position, that's a Split House Does Less Bad position.

Thirdly, the only thing I've seen people propose to control health-care costs is to reduce new drugs coming onto the market by taking profit out of coming up with new drugs. I understand how this sounds like a good idea to old people, but it sucks for young people who can no longer expect the improvement in healthcare that people born in, say, the 40s enjoy. Yet another transfer from young to old may be politically popular but has no clear merit (to me) beyond that.

On a related but tangential point, today's corporate tax-cut bill is exactly the pork-fest one expects out of such people even outside of an election year. But hey, I don't think corporations should pay taxes at all (think about it--corporate taxes are paid for by capital via shareholders, labor via employees, and consumers via higher retail prices. Capital is an inefficient source of taxes, income tax reduces the incentive to work, and consumption taxes are the most efficient of the bunch. Yes, I know consumption taxes are regressive, but let's help folks in need through transfers, not tax loopholes).
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New great site When I worked at Creative Good, we had this fantastic system developed by Mark Hurst called the "Good Easy" that made computers much easier to use, and more powerful. I've written about it a bunch of times.

That mentality has finally made it to a blog: 43Folders, and Mark's already written an article for it. Well worth bookmarking and visiting repeatedly.
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Verification bias My old buddy, Stumbling Tongue, sent me this good link on verification bias (I know, I know, Rathergate is an old issue). It seems that folks have been trying to decipher this thing called the Voynich manuscript for 400 years, but then this guy came up and proved it was a hoax--there was nothing to decipher. The reason this new guy was successful was because he actually considered the hoax possibility and investigated it.

The article talks in terms of an "expertise gap"--where the expertise needed to solve a problem actually exists *between* well developed expertises--and outlines an approach that systematically works to bridge this gap and produce a solution. And while I agree that this is very real and there is much value in solving that problem, the only verification bias I could find was at the beginning, ie. "hey, maybe this thing is a hoax, let's investigate that instead."

Deliberate contrariness is very valuable, very simple, and remarkably difficult to do in practice. The next time you feel convinced about something, try to come up with four or five reasons why that position is wrong. Feel your brain pretzeling, but once you are done you will have a more, dare I say it, nuanced understanding of the situation. And when I say "reasons", I mean really good, well thought out reasons, not stupid, lazy, or generic reasons. When I ask people now to critique work I've done, I ask them for a list of five reasons why my argument is wrong. I really ought to be doing this myself, but there you go.

I had dinner with some friends last night. These folks are good people, smart people, close buddies, and they invited me to a presidential debate party they are having whenever the next debate is on. Ye Gads. I had not read this bleat at the time, but the images flashing through my mind were frighteningly similar. Here's quote:

I could talk about the blogger party tonight where the luminaries of the Northern Alliance gathered to watch the debate, and peck out snark and insight.... I hate the debates. I have a vision of 65 million undecided Americans tuning in and making a snap judgment for all the wrong reasons. Wow, he pounded the podium to emphasize each word - but the other guy pounded each syllable. What’s this about sealing Fallujer? Is it leaking? Did they have a flood?

But mostly I hate the debates because I simply cannot abide hearing certain statements I’ve been hearing over, and over, and over again. I can’t take any more talk about bringing allies to the table. Which ones? Brazil? Mynmar? Microfrickin’nesia? Are there some incredibly important and powerful nations out there whose existence has hitherto escaped me? Fermany? Gerance? The Galactic Order of the Belgian Dominion? Did we piss off the Vulcans? Who? If we mean “France and Germany,” then please explain to me why the reluctant participation of these two countries somehow bestows the magic kiss of legitimacy.

Now I understand the value of people getting together and confirming their bias and prejudice. If shared bias and prejudicial isn't the basis of friendship and loyalty, I don't know what is. And if I create an image of chimps picking ticks out of each others' hides in a big monkey-tick-eating session, it's not because I look down on such events (which I don't) but because I acknowledge their tremendous social value and contribution to group cohesion and feel no need to give them airs beyond that. But other things generate that kind of group warm fuzzies too (autumn bbqs, shared drinks, hell, even apple picking expeditions) without being, you know, annoying to others. Whatever.

Go read this Slate article on why it's rational not to vote. Then read this Times piece on why you should vote anyway. (Here are the reasons: 1) your vote will not make the difference, even in close races, and 2) vote out of Duty, especially if you vote for the Superior candidate. Look, I know 2 is lame, but what do you expect out of the Times?)

On the futility of debating at all, read this excellent Stumbling Tongue article on what works, what doesn't, and what does "work" really mean anyway? An excerpt:

It seems obvious that “debate-style” ways of arguing only antagonize the majority of people, who are offended by all direct contradiction. And when someone is antagonized, they are not receptive to anything new. So, except in very rare cases, debates shut down communication. Witness the blogosphere: except for such paragons as Eddie Thomas, it’s just a mass of people shouting past each other. (The sad thing is, people logon to find like-minded people to shout with, not even oppositely-minded people to shout at — never mind anything as radical as civilized disagreement.)

But what is the alternative to “debate-style” arguments? There is simply something dishonest about spending your energy trying to seduce someone into agreeing with you. For one thing, you are usually hiding the fact that you’re not explaining yourself directly. Seduction isn’t communicating an idea with a person; it’s trying to insert an idea into a foreign mind. Seduction targets the man, not the idea, and so to that degree it is sneaky and manipulative.

Well said.

The closest I got to honesty around debates was in the historic Owl Bar in Baltimore, where a friend agreed that her "not-Bush" vote was based on the belief that there was a way of solving terrorism that did not involve turning the Middle East to glass or replacing totalitarian despotisms with more open, tolerant societies. She did not know what that was, she did not think Kerry knew what that was (or that he was even thinking about the problem) but she felt that circumstances would push him towards that anyway. Personally, I am OK with blind faith being a reasonable motivation, just don't confuse it with anything else.

While we are on the subject (a little tangentially) of cognitive function and dysfunction, I don't think this philosophic take on cognitive fallacy is useful, although I think the fallacies themselves are right on (via AL Daily. Yes it is true that people confuse authority with knowledge/expertise, care too much about motivation rather than argument, etc. etc. I don't want a laundry list, I want a systematic model that probably has its roots in anatomy, is filled with behavioral evolution, and has equations cooked up by economists. I honestly don't think it's complex, I just think that we are too close to the subject to be able to figure it out well.

One last thing. A friend of mine who has been reading political blogs and seeing them become increasingly polarized cites this as the value of traditional "mainstream media": "Yes, they are often wrong, and generally biased, but they don't get so hysterical that they become unreadable by half the country, and having a centralized source of fairly good information is valuable." I acknowledge that the centralization instinct is a natural one in humans, but I also beleive that the chaos produced by shouting (not this informed debate carnard) does more to attentuate bad decisions than anything else.
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Am Back Just returned from vacation. Went up and down the west coast, sailed in Annapolis, and managed to squeeze in a trip to Varekai. If any of you haven't been to the Crique du Soleil, I recommend it highly.
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Going On Vacation Blogging may be light.
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Sokal at CBS As a corrollary to yesterday's post on people not looking for disconfirming information, look at how biases make people suckers.

The recent CBS fraud, where some huckster tricked CBS into publishing fake memos on Bush's National Guard Service, shows how bias makes you vulnerable to cognitive jujitsu where someone takes advantage of your blindness to make you do something you rather would not have.

It seems that either Dan Rather, or CBS, had some liberal bias and/or personal animosity against Bush Jr. Since they all "knew" that Bush shirked his National Guard service, they were easily taken in by a fake memo that supported this "fact". You can see this mental softness in this revealing headline from the liberal New York Times: "Memos on Bush Are Fake but Accurate, Typist Says"

On the other hand, a memo that claimed Bush served exemplarily, for example, would have been scrutinized much more thoroughly.

Right-wing readers were much more skeptical of CBS/Rather's claims, and so had incentive to find something that disconfirmed the memos. Lousy typography, dubious formatting, inarticulate signatures made easy targets. Once people started looking for disconfiming evidence, lots began turning up, and "experts", who had perhaps supported CBS, began to back away from their claims. CBS could have asked the experts to find potential inauthenticities in the documents but they did not, they only asked them to confim authenticy.

We don't know who fed these documents to CBS. It may have been cooked up by Kerry partisans who just want Bush to look bad. It could have been cooked up by Bush partisans who preyed on Democrat (and mainstream media) cognitive weaknesses and fed them the memos as bait. If it was Democrats, they have committed fraud. If it was Republicans, they've executed a hoax.

This reminds me of the Sokal hoax, where he feeds a humanities journal an "article" that was just a mix of mumbo jumbo and far-left platitudes. It was published.
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Real on Slashdot Rob Glaser, the CEO of RealNetworks, has a good Q&A; on /.. The most interesting response (to a question about pricing):

Based on the data we've seen, we think, long-term, the pricing that will result in the biggest overall market for music will involve some kind of tiered pricing new mainstream songs for 99 cents retail, and up-and-coming artists and back catalog artists at a lower price.

Differentiated pricing indeed. My biggest issue with all the plans to introduce mandatory licensing etc. is that they would eliminate price competition at the mp3 level, which is exactly where it needs to be. Some songs should, legitimately, be available for download for free.
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The Wisdom of Crowds I just finished reading Suriweicki's book on how aggregate decision making is better than individual decision making. Riffing off Charles MacKay's "The Madness of Crowds"--which discusses how mob mentality leads to market bubbles, riots, and other forms of badness--Suriweicki goes through all the cases where group behavior, aggregated, do better than individual behavior.

It's a good book and touched on many topics I've been thinking about for the past year or so. He begins by stating that group averages of estimates, such as the number of jelly beans in a jar, are usually much better than most, if not all, individual estimates. He also goes through the markets, democracies, teams, behavioral finance, and the dangers of group think.

I don't feel he went far enough, though, into why groups make better decisions than individuals, and therefore what goes wrong when they start making worse decisions (such as market bubbles).

Often, when people want to take a swing at Markets, they trot out some behavioral finance experiment that shows people are not perfectly rational. This is a poor choice of argument, firstly because people do not need to be perfectly rational for markets to be efficienct, and secondly because it's much more straightforward to simply point out asset price bubbles instead as examples of gross market inefficiency. Whenever the opponent resorts to talking about "animal spirits", you know they are on the defensive.

To me, the behavioral economics helps explain the value of markets, not undermine then. Individual cognition is a weak and biased thing, it's brittleness easily revealed in simple experiments where smart people can be reliably made to make dumb choices. Markets limit, or actively work against humans' natural cognitive limits, and reward those who overcome these limitations best. Humans are just as cognitively flawed in committees, or by themselves, and only the anonymity and abstractness of the market gets them to try and manage these frailties.

For example, individuals over value stuff they have and undervalue stuff they do not have. So, people will not part with a coffee mug they have been given for $5, but will refuse to buy it for $3. Markets abstract away the feeling of ownership (when you buy some Coca-Cola stock, do you really feel a part of the whole Coca-Cola family) so people make better decisions about what the real value is. This disinterested abstract anonymity is one of the many things that the anti-globo mob, but it is instead a real strength.

Creating procedures that debias or rebias our natural cognitive weaknesses is also central to science. Humans, for example, do not seek out disconfirming evidence. When asked to guess the rule behind a number sequence, and allowed to test other number sequences to see if they follow the rule, most people do something like this:

Tester: The sequence is "2, 4, 6". What's the rule?
Subject: Does "6, 8, 10" follow the rule?
Tester: Yes.
Subject: How about "20, 22, 24"?
Tester: Sure.
Subject: OK [Things hard] What about "1000, 1002, 1004"?
Tester: Yes, that follow's the rule too.
Subject: The rule is that the numbers have to go up by 2 each time.
Tester: Wrong.

The subject usually never tries to disconfirm his initial hypothesis. He never tried "1, 2, 3" (which would follow the rule) or "1, 2, 100" (which would also follow the rule) or even "3, 6, 9" (still OK). By now you've probably guessed what the rule is, but please note how the process of actively seeking out disconfirming evidence is contrary to human nature, and then think how the scientific approach, which is to "come up with a hypothesis and then try to disprove it" actively takles that fallibility. Popper and Kuhn were quite right to point out how Science often happens in very unscientific ways, but in light of the above I think they totally miss the point. Nothing can stop humans being human, all you can do is try to build on your strengths and limit your weaknesses.


Firstly, in a market prices are determined by the marginal buyer, who may be rational (or at least, expert), and secondly because it's much easier The best refutation of efficient markets is price bubbles, and Chicago certainly does not have a good answer into why these occur.

The book also did not touch on Arrow's Incompleteness theorm, which reveals the inherent arbitrariness of *any* political process, and which I consider central to a non-stupid discussion of politics in general. But I thought the ending was right on--democracies don't make good decisions, but the decision to have one is very wise indeed. Squabbling and mudslinging are ugly, but they are better than insular decision making.
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Straight talk from Odlyzko Everyone's favorite telco guru, Andrew Odlyzko, has a good little post on how 3G cellular telephony will succeed even though the TV on your cellphone vision it once promised will never materialize.

He makes a distinction between penetration (what % of a population has a cell phone) and usage intensity (how much the average cell phone is used). Even though cell phone penetration is very high, usage intensity remains quite low--certainly when compared to landline usage intensity.

Flat rate pricing does most to increase usage intensity, and the prevalence of block minute plans in the US goes some way to explaining why usage intensity is high here and rising, as penetration continues to approach European levels. In Europe, although the penetration is higher, usage intensity is much lower, and falling. I don't know what's happening to prices there, but as more and more marginal customers become cell phone owners, one would expect the average usage intensity to fall.

In the US, cellular pricing is moving towards flat rate all-you-can-eat. Right now, most plans have early mornings, nights, weekends, and in-network calls for free. It's easier to list what's not free, which is simply business hours for out-of-network calls. Sprint's recent Fair and Flexible plan goes against this flat-rate pricing trend, and offers a genuinely new pricing product. Time will tell if it's successful.

UpdateIt's been pointed out to me that TV phones are already here. This is true, but WAP is already here as well, and I would not consider that a success either.
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Usability and Community Joel has a very nice post on usability in software. One, he claims that webpages are now so usable in general, that there are entire categories of websites (such as content sites) where further investment in usability is unneccessary.

I used to think the web was easy to use wayback in '98, but some time with Creative Good convinced me that, infact, websites are very complicated for the average user and lose lots of money as a result. At any rate, I'm sure that things are better now, but I'm not willing to say there are now worthwhile improvements to be made.

Two, Joel also talks about how interface design impacts the use (or lack thereof) of software that facilitates group interaction in some way. Getting the social interfaces correct make tremendous differences where end-user adoption is critical to success. In a lot of business software, end-user adoption is unimportant since the purchase decision was made by some manager who never actually has to use the damn thing, and employees are largely free to sabotage any management plan at will, including software implementations. But where the purchaser is the user, at home or in a smaller business, ease of use really really matters, and getting a good UI is the difference between getting the benefit of having the software, or not. When the software's primary output is interaction between humans, you must take human instincts into account (curses! not humans!)

(For a very interesting list of well considered design conditions, read this article by Joel where he goes through why his own discussion board is designed the way it is.)

I did a little online community work a while ago and stumbled upon Amy Jo Kim of Naima. I read her book, Community Building On the Web and found it to be lousy. She seemed to be way too taken with fancy gimmicks like avatars and virtual worlds while ignoring the more down-to-earth and meaningful observations like Joel's "I don't let people quote because then they quote too much". Since UI guides (but does not drive) behavior, and you have *some* sort of UI no matter what, you are driving particular behaviors even if you don't mean to. Best be concious about your choices and pick good ones.
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That which cannot continue... Social Security and Medicare (especially Medicare) are transfer programs that take money from young people and give it to old people. As the ratio of young people to old people greys, young people are going to have to be much more productive than before to continue giving money to the old people at the rate the old people have been promised. Or they are just going to have to give more of their income in % terms. Most likely both.

It's worth thinking, for a moment, about what other transfers may kick into place, transfers that will take money from old people and move it to the overtaxed young. Some places, such as Japan, are well down this road already, and it's interesting to see how they have been coping to date.

On obvious-in-hindsight tactic is that young people stay with their parents for longer. As the parent does not charge the child rent, this is essentially a transfer from old to young, and helps to balance out the payments going the other way. Another is the rising cost of education -- old people invest in the human capital of young people, capital that they then put to work throughout their lives. Young people can also ask the old people to donate their labor -- through cooking meals, doing laundry, taking care of the kids, etc.

If you put all that together, it seems that there are many mechanisms young people can use to help defray the looming old-people bills.
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Easy, fun games In the spirit of expanding the increasingly hardcore gamer-dominated gaming market, Nintendo has created a game where players play bongo drums. Neat, and less socially marginal than Dance Dance Revolution.
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Sun blogs Reader DD sent in a note to this piece on the economics of software from a Sun kernel engineer.

It is quite correct, although I think it overstates a little bit the pain of big corporations at the mercy of evil software vendors. For example, while it is true that once a company has purchased a platform and built on it, they are now locked in (and can get price gouged), it is also true that a company can anticipate this and negotiate a big discount upfront, eliminating the price gouging that's coming down the pipe. Upfront competition (like after market competition) is important in creating substitutes, and thus lowering available economics rents, but often goes unconsidered. Hal Varian's "Information Rules" continues to be the best treatment of how all this stuff shakes out.

To me, the real people feeling pain are the poor schmucks left with trying to use the software that their company just installed. The CFO bought on price (check), the CEO bought on CYA (big name vendor? check), and the CTO bought on a laundry list of acronoym features (check check check). No one bought on usability, and hence, true business value. Couple this with your average business, riddled with complex and imprecise rules, and you get failed implementation, and failed operation. And frustrated users.

It's interesting, and neat, that Sun seems to have so many smart, open bloggers.
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Even more on Gmail This is a nice write up on how Gmail is design to help certain sorts of email-relatd behavior, and hinder others. It's always risky to support some behaviors over others, because you will upset at least a few users, and if you pick the wrong ones, then your application is hard to use and people will avoid it.

The alternative though--not picking which behaviors to support best--is worse. You're left with a highly customizable piece of "architecture" riddled with terrible defaults. No one customizes much, so they are stuck with a program that is very hard to use. Until they leave. Exhibit A: Lotus Notes vs. Outlook.
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A Random Walk to the White House If you turn on any business oriented news show, or pick through the money section of a paper, you will see folks prognosticating on why a particular stock went up or down yesterday, and why it will go up (or down) today. None of these people are right, or if they are right, they are right by luck, because stock movement is random in the short term, and tied to earnings growth in the medium-to-long term.

This means, among other things, that it is pointless to try and make money off short term price fluctuations. It also means that short term dips and rises don't tell you very much about the broader underlying economy. Actually, even medium term stock activity may not tell you very much about the underlying economy, because the stock market and the economy as a whole are different, though related, things.

This good New Yorker article discusses how much of a similar sort of randomness decides elections. Here is a nice para discussing how informed voters actually are:

Converse claimed that only around ten per cent of the public has what can be called, even generously, a political belief system. He named these people "ideologues," by which he meant not that they are fanatics but that they have a reasonable grasp of "what goes with what"-of how a set of opinions adds up to a coherent political philosophy. Non-ideologues may use terms like "liberal" and "conservative," but Converse thought that they basically don't know what they're talking about, and that their beliefs are characterized by what he termed a lack of "constraint": they can't see how one opinion (that taxes should be lower, for example) logically ought to rule out other opinions (such as the belief that there should be more government programs). About forty-two per cent of voters, according to Converse's interpretation of surveys of the 1956 electorate, vote on the basis not of ideology but of perceived self-interest. The rest form political preferences either from their sense of whether times are good or bad (about twenty-five per cent) or from factors that have no discernible "issue content" whatever. Converse put twenty-two per cent of the electorate in this last category. In other words, about twice as many people have no political views as have a coherent political belief system.

They can, however, dash something off the top of their head if asked, or pull some lever if they stumble into a voting booth. And just like people wandering up to the bar to order a drink, "five per cent, enough to swing most elections, decided the day they voted".

The assertion in the next section, I find naive:

All political systems make their claim to legitimacy by some theory, whether it?s the divine right of kings or the iron law of history. Divine rights and iron laws are not subject to empirical confirmation, which is one reason that democracy?s claims have always seemed superior. What polls and surveys suggest, though, is that the belief that elections express the true preferences of the people may be nearly as imaginary

It is impossible to select true preferences through an election because of Arrow's Incompleteness Theory that shows how polled preferences are, among other things, necessarily transitive. In practice, elections introduce competition into ruling and channel those competitive emotions in the relatively benign practice of running for office. The enable a strong state (by conferring legitimacy and sublimating violence) but, with a strong constitution, also restrict its size.

The author wants to believe that some sort of quality decision making is at play in elections, and puts forward the notion that the great unwashed (when they bother to vote at all) look to the elite for which way to go. The "elite" in this case are those who care and have consistent, well thought out ideological positions.

The elite, the article argues, have become polarized.

?The simple truth is that there is no culture war in the United States?no battle for the soul of America rages, at least none that most Americans are aware of," he says in his short book "Culture War? The Myth of a Polarized America" (Longman; $14.95). Public-opinion polls, he argues, show that on most hot-button issues voters in so-called red states do not differ significantly from voters in so-called blue states. Most people identify themselves as moderates, and their responses to survey questions seem to substantiate this self-description. What has become polarized, Fiorina argues, is the élite. The chatter among political activists, commentators, lobbyists, movie stars, and so on has become highly ideological. It's a non-stop 'Crossfire,' and this means that the candidates themselves come wrapped in more extreme ideological coloring [even if they themselves are no more ideological than before]

Are the elite more polarized? Maybe. Is this a good or bad thing? Unclear -- diversity of opinion may help people make better decisions, and a unanimous "elite" opinion may reflect delusional groupthink as much as a well-informed consensus. Most importantly, I think a polarized elite should put paid to the notion that simply educating and informing people will reduce difference in views, by definition the "elite" are educated and they still don't agree.

The core decision in the US 2004 election may be "do you or do you not believe that the US is at war against Islamic terror?" Those who do not may (sadly) be given an opportunity to reassess their position. In any event, the 2004 result will be the toss of a coin regardless.

(And lastly, enjoy the rantings of a man who clearly has not been laughed at enough, at least, not to his face. While we shared a school, I enjoyed his snappy dressing and avoided his classes. I'm sure he dresses just as well at Princeton -- they're welcome to his threads.)
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VoiP vs the Past Telco is heavily, and inefficiently, regulated. Phone companies must, by government mandate, support a laundry list of people at a loss. In order for them to do this, they hike up the charges on everyone else (through taxes, rates, etc) and use this money to make up the shortfall elsewhere. Major redistributions of wealth include corporate (ie. worker) calls to residential (ie. workers at home), people in (expensive) cities to people in (cheap) country, etc. This form of redistribution, btw, is very expensive compared to general taxes.

While these regulations are also burdensome, they also create tremendous barriers of entry into the telco business. If an entrant is required to support all of these loss-making activities as well, it is likely they may quit as they see their profits dwindle away. If an entrant is allowed to ignore these burdens, incumbents will (reasonably) complain that they are being treated unfairly and may sue.

Voice-over-IP enables communications far beyond straight phone calls, but it runs the risk of being regulated out of existance before it can even begin because, well, it could be construed as a telco. The alternative is reducing the regulatory burden on incumbent telcos and reduce the web of subsidies that 1) increaes their costs and 2) dissuading competitors.

I find it promising that early VoiP applications are very distinct from what we think of as phone calls.
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More on Google James Surowiecki is blogging on Marginal Revolution. I think the Surowiecki is the best business/econ journalist out there, and I'm not sure why he's currently writing for the New Yorker, not exactly known for the size of its readership or insight into business/economic matters, or why he's writing for free, but I'm glad to have more of his stuff to read. (I also can't see how he could beleive that The Crow is a good movie).

He has a good post on the Google IPO, and seems to think it did better than I did (he calculates cost per dollar raised, which is, I think, the correct metric).

Also, gmail seems to have type-ahead address completion. How they managed this in a regular web browser I do not know, but it's great.
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Lessig + Posner Posner and Lessig are two of my favorite law profs. How wonderful that Posner is writing on Lessig's blog. The topic: intellectual property, something that I had discussed with both individuals.

One of the nice things about Posner is that he's been at this game for a long time, both on the academic side but also on the practical side (on the 7th Circuit). He is fully aware of the folly inherent in laws, lawyers, legal academics, courts, and judges. How else do you characterize someone who creates an entire field of law ("Law and Economics") but now sums up the idea judicial posture as "be reasonable"? One of the reasons copyright has been revealed as so out of control is because the costs of the bad laws only rose recently, with the Internet, and the incentives on legislation, persecution, and interpretation have been made unbalanced because of the low coordination cost between publishers vs the high coordination costs between consumers.

I also look forward to Posner's upcoming book on risk. Risk is something that humans are pretty awful at thinking about, but which impacts large amounts of our legislative impulses. His thoughts on the 9/11 report (which I thought was a pretty amateur effort) are interesting, and I look forward to more.
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