Clampett’s John Carter of Mars

Friday, January 20th, 2012

Back when Andrew Stanton confirmed that he was writing John Carter of Mars for Pixar, I walked through the long and twisty history of Edgar Rice Burroughs’ sci-fi classic and all the attempts to bring it to the big screen.

It all started with Bob Clampett, the animator best known for Beany and Cecil, as Jim Korkis explains:

When he graduated high school in 1931, Clampett got a job at the Harman-Ising Studio which was turning out cartoons for Warner Brothers. Clampett even got to work on the very first MERRY MELODIE. For a few years, he was content to learn the craft of animation and to work himself up to a position where he was not only animating, but contributing story ideas for the various cartoons.

However, Clampett was ambitious and wanted to take the next step up into directing animated shorts. At the time, there seemed to be only a slight possibility of this dream occurring at Warners so Clampett decided to use his spare time to develop a project on his own.

In a bold move, he arranged a meeting with Edgar Rice Burroughs himself who lived in a small community named Tarzana (named after his famous jungle king character) in the nearby San Gabriel Valley. “I had been fascinated with the Burroughs books since I was a youngster, especially the Mars books,” Clampett once mentioned in an interview. Years before the Fleischer Studio would consider producing the justly memorable SUPERMAN series of shorts, Clampett realized that animation didn’t need to be just the limited domain of wild slapstick and funny animals.

“An animator can take a pencil and put the city of Rome or a strange planet on a small piece of paper and have a character do anything that comes to his imagination. There is no other medium that allows you to exert such control over every frame of film,” Clampett told me in 1978, “Realizing the potential of a fantasy series of cartoons based around Burroughs’ characters, I went out to Tarzana to see Burroughs himself and tried to convince him that I could film and sell a series of cartoons based on his JOHN CARTER OF MARS stories.”
[...]
For the test reel of footage, Clampett realized he had to have a major conflict that got resolved, introduced the main characters, and established the world of Mars. The basic plotline that Clampett settled on concerned an exotic race of Martians who lived in the mouth of a volcano. Periodically, they would venture out from their hidden lair in rocket ships to attack and plunder the cities of Mars.

Of course, it was up to hero John Carter to stop them. Interestingly, Clampett would later adapt this plot of one of his BEANY AND CECIL puppet shows with the sea sick sea serpent taking the place of Burroughs’ hero.

While it was Clampett’s plan that the series would be composed of nine-minute long cartoons each of which featured a complete story, he decided that six minutes of test footage would be ample to convince any distributor of the viability of the series.

Edgar Rice Burroughs himself had already contacted MGM about buying the animated series. MGM was anxious to keep Burroughs happy since they were enjoying success with their Johnny Weissmuller film version of TARZAN and they were generally dissatisfied with their animated short subjects at the time. So, Clampett was under pressure not only to make test footage that would satisfy Burroughs but also the more pragmatic accountants at MGM.

“I wanted to do something quite imaginative, with tongue-in-cheek humor throughout. Chuck (Jones) helped me animate and Bobe (Robert Cannon) inbetweened. In fact, I filmed Bobe in live-action as the hero; he was very heroically built, all shoulders and no hips. I filmed him in Griffith Park, and we rotoscoped part of it,”Clampett said with a smile.

Robert Cannon, nicknamed “Bobe”, was a “terrific draftsman” according to Tex Avery. When Avery came to Warners to head up his own animation unit, Tom Palmer assigned him Chuck Jones, Bob Clampett and Bobe Cannon. Palmer explained to Avery that “I’ve got some boys here…they’re not renegades, but they don’t get along with the other two crews. They’re not satisfied with the people they’re working with.”

It was the success of this unit that caused Leon Schlessinger to establish the famous Termite Terrace where many classic Warner cartoons were made. In later years, Cannon became a director and animator at U.P.A.

Because Clampett and the others were still working full-time at Warners, the JOHN CARTER work had to be squeezed in at night, on weekends and whenever a spare moment managed to pop up. Even John Coleman Burroughs and his fiancée Jane would sometimes help out by painting some of the cels for the cartoon themselves. Clampett wanted a different look for the animated series and was once again forced to experiment.

“We would oil paint the side shadowing frame-by-frame in an attempt to get away from the typical outlining that took place in normal animated films. In the running sequence, for example, there is a subtle blending of figure and line which eliminated the harsh outline. It is more like a human being in tone. We were working in untested territory at that time. There was no animated film to look at to see how it was done,” Clampett explained.

In 1936, the test footage was completed. It featured John Carter running and leaping around the Martian surface, a Thark riding a thoat in full color, Carter involved in a swordfight and other vivid sequences which were quite unlike anything else being done in animation at the time. There was an opening title sequence of the planet Mars hurtling toward the screen with lettering proclaiming John Carter in the “Warlord of Mars” and title cards announcing future episodes.

It was planned that these scenes would be in the first film if the series sold. Burroughs loved the final work and more importantly, so did MGM. Clampett gave notice to Warners that he was leaving and he started production work on the first episode.

Then disaster struck.

The local sales representatives who were primarily from the Mid-West and the South expressed their concerns to MGM that the project would be a “tough sale”. They felt audiences would not be able to understand nor accept the concept of an Earth man having adventures on Mars. It all just seemed too strange. They pushed for a Burroughs cartoon series featuring Tarzan who was already well-known and well-loved by the public.

“I had already given notice to Warners and was preparing to start on the JOHN CARTER series when MGM’s change in decision came down. The studio said, ‘No, we do not want the JOHN CARTER thing; we want TARZAN’. Aesthetically, Jack Burroughs and I were very inspired by the Mars project. And the idea, as much as I like Tarzan, to do the alternate series was simply not the same. Somehow, I just lost my enthusiasm for the new project,” Clampett told a variety of interviewers over the years.

One of the reasons Clampett’s enthusiasm was crushed was because of the concept of the TARZAN series. The studio wanted funny jungle animals doing silly things and at the end of the cartoon, Tarzan would appear and save these foolish animals from being caught in quicksand or facing a vicious predator.

Fire and Ice

Friday, January 20th, 2012

I’ve mentioned before that Ralph Bakshi’s Wizards is not a good film, but it is an oddly compelling one.

His later Fire and Ice is a better film, but still not quite a good film. It’s hurt by its lackluster opening, which features some of its least attractive animation, of a not-so-glacial glacier, and its least appealing character, an Elric-meets-Freddie Mercury necromancer named — wait for it — Nekron, who’s under his controlling mother’s thumb.

The simplistic story and wooden characters don’t help. The beautiful princess takes the form of a microkini-clad fleshpot, apparently whisked away from some drug lord’s pool party, our male lead hardly seems to notice, and the mysterious stranger, Darkwolf, steals the show.

It’s a bit like Star Wars, but with Leia played by Jayne Mansfield, in an outfit smaller than the infamous Return of the Jedi bikini, and the Death Star taken out by Han Solo.

That said, the film does feature some amazing rotoscoped action sequences atop beautifully lush background paintings — including some by Thomas Kinkade, Painter of Light.

Addendum: The original video I embedded has been pulled from YouTube. Enjoy the trailer:

Adult Swim Art Show

Friday, January 20th, 2012

A recent Cartoon Network Adult Swim art show featured a few Venture Bros. pieces that amused me:

Kerry Conran’s John Carter of Mars

Thursday, January 19th, 2012

Kerry Conran barely got the opportunity to make Sky Captain, and he almost got the opportunity to make John Carter of Mars. Here’s his video pitch, which goes on a bit too long but includes some beautiful art and some preliminary CGI action scenes.

[Apparently the video pitch won't embed for me.]

(Hat tip to io9.)

Why is finance so complex?

Thursday, January 19th, 2012

Why is finance so complex? Steve Randy Waldman offers an explanation:

Finance has always been complex. More precisely it has always been opaque, and complexity is a means of rationalizing opacity in societies that pretend to transparency. Opacity is absolutely essential to modern finance. It is a feature not a bug until we radically change the way we mobilize economic risk-bearing. The core purpose of status quo finance is to coax people into accepting risks that they would not, if fully informed, consent to bear.

Financial systems help us overcome a collective action problem. In a world of investment projects whose costs and risks are perfectly transparent, most individuals would be frightened. Real enterprise is very risky. Further, the probability of success of any one project depends upon the degree to which other projects are simultaneously underway. A budding industrialist in an agrarian society who tries to build a car factory will fail. Her peers will be unable to supply the inputs required to make the thing work. If by some miracle she gets the factory up and running, her customer-base of low capital, low productivity farm workers will be unable to afford the end product. Successful real investment does not occur via isolated projects, but in waves, forward thrusts by cohorts of optimists, most of whom crash and burn, some of whom do great things for the world and make their investors wealthy. But the winners depend upon the existence of the losers: In a world where there was no Qwest overbuilding fiber, there would have been no Amazon losing a nickel on every sale and making it up on volume. Even in the context of an astonishing tech boom, Amazon was a pretty iffy investment in 1997. It would have been an absurd investment without the growth and momentum generated by thousands of peers, some of whom fared well but most of whom did not.

One purpose of a financial system is to ensure that we are, in general, in a high-investment dynamic rather than a low-investment stasis. In the context of an investment boom, individuals can be persuaded to take direct stakes in transparently risky projects. But absent such a boom, risk-averse individuals will rationally abstain. Each project in isolation will be deemed risky and unlikely to succeed. Savers will prefer low risk projects with modest but certain returns, like storing goods and commodities. Even taking stakes in a diversified basket of risky projects will be unattractive, unless an investor believes that many other investors will simultaneously do the same.

This game-theoretic stag hunt explanation seems a bit too clever.

Finance is complex because financiers have a lot to gain by making it complex and making it seem necessarily complex.

If Your Teeth Could Talk

Thursday, January 19th, 2012

If your teeth could talk, they could warn you of health problems outside your mouth:

“We have lots of data showing a direct correlation between inflammation in the mouth and inflammation in the body,” says Anthony Iacopino, director of the International Centre for Oral-Systemic Health, which opened at the University of Manitoba Faculty of Dentistry in Canada in 2008. Recent studies also show that treating gum disease improves circulation, reduces inflammation and can even reduce the need for insulin in people with diabetes.

Such findings are fueling a push for dentists to play a greater role in patients’ overall health. Some 20 million Americans — including 6% of children and 9% of adults — saw a dentist but not a doctor in 2008, according to a study in the American Journal of Public Health this month.

Flying Windmills

Wednesday, January 18th, 2012

Makani Power hopes that its flying windmill will reduce the cost of wind power from from five-to-10 cents per kilowatt-hour down to three cents per kilowatt-hour, below even the cost of coal:

The 120-pound craft has rotors on its wings to lift it into the sky helicopter-style; a thin tether attaches it to a platform. Once in the air, the craft begins to glide like a kite, its 26-foot wingspan tracing circles 250 feet overhead. Now the propellers become generators, spinning freely and generating electricity that flows down the taut tether — and, someday, into the local grid.
[...]
“The magic is in flying crosswind,” says CEO Corwin Hardham, referring to how the vehicle moves perpendicular to the wind like a kite. “We use aerodynamics to move the rotors many times faster than the actual wind speed.”
[...]
Makani’s technology is designed to take advantage of the relatively consistent winds that blow well above the ground. Conventional wind turbines top out at roughly 300 feet, with blade tips reaching 500 feet, beyond which it becomes prohibitively expensive to build stable structures. Researching the potential for wind power, Hardham came across a 1980 paper by Miles Loyd proposing a tethered wing that could elevate the business end of a windmill to any height.

Hugh Glass, Mountain Man, Survivor

Wednesday, January 18th, 2012

Hugh Glass was one tough son of a gun:

In August 1823, old frontiersman Hugh Glass was scouting ahead for a fur trapping expedition in South Dakota when he surprised a grizzly bear mother with her two cubs. The bear charged him immediately, knocking his rifle away and mauling him badly. Glass drew his knife and fought the grizzly hand-to-hand (maybe I should say hand to paw?), stabbing it repeatedly as it clawed and bit him. Hearing his screams, two trapping partners soon arrived and found him laying unconscious on top of the bear in a ghastly mess of human and animal blood. They finished off the dying bear with a rifle shot to the head, then took Glass with them back to their camp. Expedition leader Andrew Henry took a good look at the mangled mess of a man and announced that he would soon die of his injuries. Henry asked two trappers to stay with Glass until he died, give him a good burial, and then rejoin the group.

Jim Bridger and John Fitzgerald volunteered to stay behind with Glass and began to dig his grave. What happened next is uncertain. The two men later claimed that they fled for their lives after hostile Arikaree Indians discovered them, but there is no evidence of that. They soon caught up to the rest of the group heading to Yellowstone and reported that Hugh Glass was dead. However, the old mountain man did not die—after an unknown period of time he woke up in his shallow grave, under a thin layer of dirt and leaves. All his weapons, equipment, and protective clothing were gone, taken by the two men responsible for his burial. His leg was broken, and the rest of him was hardly better off. The bear attack had cut him so badly it exposed rib bones on his backside. He had lost a lot of blood, and his wounds were festering. Alone and defenseless, he was more than 200 miles away from the nearest settlement, Fort Kiowa. He set his own broken leg, wrapped himself in the bear hide that had covered him in the grave, and started crawling.

It took Glass six weeks of crawling on his hands and knees to reach the Cheyenne River, 100 miles away from his grave. The bear had nearly torn off his scalp. He suffered from fever and advanced stages of infection. To prevent gangrene from progressing in his wounds he lay back on rotting logs and let the maggots eat his dead flesh away. Too weak to hunt or fish, he survived mostly on wild berries, roots, and other edible plants. Once he was able to scare a couple of wolves away from a bison they had killed. He ate some of the bison’s raw meat himself, still alone, dragging his broken leg along with him. When he finally reached the Cheyenne river, he built a raft from a large fallen tree and floated down the river. Along the way he encountered friendly Sioux who fed him and helped tend his wounds. Eventually he succeeded in floating in his dead tree all the way to Fort Kiowa.

Hugh Glass later admitted that he was motivated to survive only by revenge.

His story doesn’t quite end there.

Magic Bullets

Tuesday, January 17th, 2012

The Economist looks at the US Army’s new XM25 smart grenade launcher and its “magic bullets“:

Each rifle bullet is programmed, before it is fired, by a second computer in the rifle itself. To determine the distance to the target, the gunman shines a laser rangefinder attached to the rifle at whatever is shielding the enemy. If that enemy is in a ditch, a nearby object — a tree trunk behind or to the side of the ditch, perhaps — will do. Looking through the rifle’s telescopic sight, the gunman then estimates the distance from this object to the target. He presses a button near the trigger to add that value to (or subtract it from) the distance determined by the rangefinder.

When the round is fired, the internal computer counts the number of rotations it makes, to calculate the distance flown. The rifle’s muzzle velocity is 210 metres a second, which is the starting point for the calculation. When the computer calculates that the round has flown the requisite distance, it issues the instruction to detonate. The explosion creates a burst of shrapnel that is lethal within a radius of several metres (exact details are classified). And the whole process takes less than five seconds.

Just how the turn-counting fuse works is an even more closely guarded secret than the lethal radius — though judging by the number of failed attempts to hack into computers that might be expected to hold information about it, many people would dearly like to know. Certainly, the trick is not easy. An alternative design developed in South Korea, which clocks flight time rather than number of rotations, seems plagued by problems. Last year South Korea’s Agency of Defence Development halted production of trial versions of the K-11, as this rifle is called, and announced a redesign, following serious malfunctions.

The XM25, in contrast, appears to work well. It is accurate at ranges of up to 500 metres. That is almost as far as America’s main assault rifle, the M-16, can shoot conventional bullets with accuracy. More pertinently, it is nearly double the range of the AK-47, a rifle of Soviet design that is used by many insurgent groups. And according to Sergeant-Major Bernard McPherson, part of the XM25’s development programme in Virginia, it is receiving rave reviews from soldiers in the field.

It is also inspiring imitation. Though several European countries are planning to buy the XM25, some of them, including Germany, are working on weapons that operate in the same way, but fire 40mm rounds. Such bullets are easier (and less expensive) to make than 25mm rounds. But starting with a smaller design increases the usefulness of the technology. It is easier to enlarge components than to shrink them, so the XM25 bullet design could, without too much trouble, be made to fit ammunition intended for weapons with larger-bore barrels. ATK has already begun modifying the technology to fit in the shells fired by marine-corps artillery pieces, according to Jeff Janey, the firm’s vice-president of business development.

None of this is cheap. An XM25 with a thermal sight and a four-round magazine is reckoned by informed observers of the field to cost about $35,000. The bullets, which have to be made by hand at the moment, clock in at several hundred dollars each. But the price of a bullet could fall to as low as $25 when ATK switches to automated production. And even at its current price, both gun and ammunition compare favourably with alternative methods of dealing with dug-in gunmen.

The XM25 seems to hit the sweet spot, where its small projectile can be launched at high enough velocity for accurate more-or-less direct fire, but the payload is big enough to kill nearby gunmen with a not-quite-direct hit.

A rifle bullet is, of course, totally ineffective if it misses by inches, and only true marksmen shoot within inches of their target.

(Hat tip to Nyrath.)

The Truth about Cheeta[h]

Tuesday, January 17th, 2012

The Suncoast Primate Sanctuary in Florida recently announced that Cheetah, the chimpanzee “star” of the Tarzan movies from the 1930s, had finally died of kidney failure at age 80.

This re-raises some old questions though. A few years ago R.D. Rosen looked into the truth about Cheeta [sic] the Chimpanzee:

In the fall of 2007, I had been working for several months on a proposal for the authorized biography of Cheeta, Johnny Weissmuller’s sidekick in MGM’s Tarzan movies of the 1930s and ’40s. Against all odds, Cheeta was still alive at the age of 75, 20 years older than a captive chimp’s normal life span. When the agent for Cheeta and his owner, Dan Westfall, had first approached me about writing the biography, I was astonished that a fixture of not just my own childhood, but my parents’, as well, one of the most celebrated animals in movie history, was retired in Palm Springs, Calif., selling his paintings for $135 donations to thousands of far-flung admirers. His birthday parties were now covered by national, and even international, media. At Cheeta’s 75th birthday party, his owner, who runs a non-profit primate sanctuary, had played a video of Jane Goodall attempting to sing “Happy Birthday” to him in the pant-hooting language of the wild chimps she had first observed in Tanzania in the early 1960s. Could there be higher tribute to a chimp than that?
[...]
But one oft-repeated fact about the chimp’s life nagged at me. It was one of the standard stories in Cheeta’s biography — repeated in Newsweek and other magazines, recited by Cheeta’s current owner and many Cheeta admirers — that the first of his two owners, animal trainer Tony Gentry, had gotten him in Liberia as a baby and smuggled him under his overcoat aboard a Pan Am flight home in 1932. During the long flight, the diapered Cheeta escaped from under Gentry’s coat, mischievously scampered up and down the aisle, and had to be subdued by hysterical stewardesses with a bottle of warm milk.

After four months of research and writing, I decided to ask a question that, in retrospect, was so obvious that it was curious that no journalist before me had bothered to ask it: In 1932, were there any transatlantic flights for Gentry to smuggle Cheeta onto? The answer, I wasn’t surprised to learn, was no. Transatlantic commercial airline service wasn’t inaugurated until 1939.

Early on, I had raised the issue of documenting Cheeta’s age. Obviously, I had to be protected against the possibility that, if I published a biography of the world’s oldest chimpanzee, someone would make a fool out of me, my reputation, my publisher, Cheeta, his owner, and the agent by proving he was not 75. But at that early stage, it seemed a mere formality, and I had no idea even what such documentation would consist of. It was unclear if Tony Gentry, who had given Cheeta to his distant cousin Dan Westfall two years before his death in 1993, had left any papers. I’d questioned both Westfall, and his agent about the file of documents that persuaded Guinness World Records in 2001 to award Cheeta a certificate for being “the world’s oldest living primate, aged 69 years and one month.” But it didn’t seem urgent, and it certainly wasn’t desirable, to question the entire premise of the book I had just agreed to write.

The falsehood about 1932 gave me pause, but I reasoned that anyone can get a memory wrong. In the first of what were to be several acts of denial, I simply ignored my discovery and proceeded with my research. But my subconscious, already on notice, soon prompted me to verify another routine biographical “fact” about Cheeta’s life. Westfall had mentioned that Cheeta had come out of retirement in 1966 at the age of 34 to play the role of Chee-Chee the chimp in 1967′s “Doctor Dolittle” with Rex Harrison. Even People magazine (Cheeta’s “last film hurrah was 1967′s ‘Doctor Dolittle’ “) and Newsweek (“You laughed at him in ‘Doctor Doolittle’ “) said so. Numerous Web sites concurred. So I watched a DVD of “Dr. Doolittle,” a movie in which Chee-Chee is played by a juvenile chimp no older than 7 or possibly 8; after that age, a chimp’s physical appearance changes dramatically. That was it. Cheeta was not in that film. Whatever Cheeta was doing in 1966, he wasn’t making a movie with Rex Harrison.

The same Newsweek also reported, “Only once did Cheeta walk off the set — reportedly when Ronald Reagan kept forgetting his lines in ‘Bedtime for Bonzo.’ ” “Bedtime for Bonzo!” If Cheeta had actually been Reagan’s as well as Tarzan’s sidekick, that would make him the Zelig of primates, turning up wherever entertainment history was being made. I sent 1951s “Bedtime for Bonzo” to the head of my Netflix queue and wasn’t shocked to discover that Cheeta, by then a full-grown 19-year-old, is not in that movie, either. Bonzo was played by another, infant or juvenile chimp.

As Cheeta’s claims to fame were springing leaks, I began spending hours in front of my television, freeze-framing on close-ups of various Cheetas in MGM Tarzan movies I had rented. I would take an 8-by-10 glossy of Westfall’s Palm Springs Cheeta, approach the television and compare the two images. Chimpanzees’ faces change quite a bit as they age, not unlike most human ones, but the contours and configuration of an ear change very little. I would freeze on a frame of Cheeta in three-quarters or full profile and try to find a match. In each Tarzan movie, the Cheeta role had been played by more than one chimp, depending on what talents the scene called for. (In fact, there was another, less well publicized Cheeta in Palm Harbor, Fla., who was also said to be in his 70s and a veteran of Weissmuller movies. But that’s another story.) The trick was to look at all the scenes and positively identify Westfall’s Cheeta in at least one. But none of the movie chimps’ ears was an adequate match for the Palm Springs Cheeta’s.

We can all rest easy knowining someone‘s looking into this for us.

Copying Trader Joe’s

Tuesday, January 17th, 2012

Copying Trader Joe’s isn’t as easy as it might sound:

Only Walmart comes close to approaching Aldi in size if not global reach, and the efficiency, popularity, and profits of Trader Joe’s have not gone unnoticed by the Walton family. You can’t dash in for a good bottle of chardonnay and a package of fresh chicken enchiladas at Walmart. Aisles stretch the length of a football field, and on entering, one panics like a jungle primate discovering the Serengeti; a sharp longing for the crowded warrens and easy pickings of Trader Joe’s can seize the mind.

In 2009, Walmart tried to duplicate the Trader Joe’s experience. Its homespun prototype was named Marketside by Walmart. Four stores opened in the Phoenix area, each averaging 16,000 square feet—large for a Trader Joe’s but postage-stamp size for Walmart. Marketside turned out to be a failure. Stores reportedly took in less than $70,000 a week, a fraction of what a single Trader Joe’s can earn, and last year Walmart ended its small-scale experiment, shutting down the Arizona quartet.

Fresh & Easy has enjoyed better luck chasing Trader Joe’s. The British-owned company runs 168 stores (more are slated), but Fresh & Easy has encountered setbacks, too. In the past year 13 stores have been closed for underperforming and, making matters embarrassing, Human Rights Watch has issued a 104-page report detailing violations of workers’ rights at Fresh & Easy and at its parent company, Tesco. Aggressive campaigns to avoid complying with U.S. labor laws were cited.

How Yoga Can Wreck Your Body

Monday, January 16th, 2012

In a piece on how yoga can wreck your body, the New York Times notes that emergency-room admissions related to yoga went from 13 in 2000 to 20 in 2001.

Clearly yoga-cripplings are doubling every two years, and soon we’ll all be painfully contorted.

What MIT Did Not Teach

Monday, January 16th, 2012

Bloomberg News paints a rosy picture of MIT economics grad school life during the period when many of the Ph.D.s now in top policy slots were there:

Its emphasis on solving policy problems instead of perfecting theories… “We turned out students who were actually interested in macroeconomic policy and understanding daily events and not in showing off.” [quote from Robert Solow]… the emphasis at the university was on trying to understand “real phenomena and how the world works” rather than seeking to come up with elaborate theories or better techniques.

Arnold Kling was there, too, at the time, and says, Oh, barf.

Or, to put it more politely, these passages struck a false note. In reality, the MIT training was all about the math. All about the math. Abstract mathematical methods were known as “tools” and graduate education was about “adding tools to your tool kit.”

I think that Solow really was focused on useful economics as opposed to pure math, but he was already being shoved aside by the young mathematical theorists. The main message you learned in graduate school was that more difficult math equated to better economics.

I failed to accumulate an impressive tool kit. Writing my dissertation under Solow was not a good career move, because Dornbusch and Fischer controlled the placement of macro students.

With no attractive academic offer, I ended up spending my career in organizations. Along the way, I learned some things that you don’t learn in graduate school. In an actual business, you are not given a demand curve and a cost function; instead, you grope. The internal alignment of an organization cannot be taken for granted; instead, a lot of time and effort goes into just trying to keep people focused on common goals. Day-to-day life in a organization is a soap opera, with individuals and departments often working at cross-purposes. No one, including the CEO, has full knowledge or control.

When I came to think of every organization is a dysfunctional family, it affected my mental model of markets and government. I don’t assume that organizational units know what they are doing. Instead, I ask: what institutional pressures exist that ensure that more effective units survive and less effective units disappear? That in turn leads me to be relatively pessimistic about government as an institution, because I see the tools of voice (elections and representative democracy) as less effective than the tools of exit (consumer choice, leading to profit and loss).

MIT’s contribution to producing technocrats was what it did not teach. It did not teach humility. It did not teach that the world is too complex for technocrats to control.

Al Qaeda on the Ropes

Monday, January 16th, 2012

When Newsweek went back to its al-Qaeda insider, Hafiz Hanif, he reported that his old friends are on the ropes:

When Newsweek interviewed Hanif (his nom de guerre) for our Sept. 13, 2010, cover story, “Inside Al Qaeda,” he estimated that the group had roughly 130 Arabs in Waziristan, along with dozens more Chechens, Turks, Tajiks, even recruits from Western Europe. But little more than a year later, he estimates there are no more than 40 to 60 al Qaeda operatives of any nationality on either side of the border. “Al Qaeda was once full of great jihadis, but no one is active and planning opera-tions anymore,” he complains. “Those who remain are just trying to survive.”

The son of longtime Afghan war refugees living in Pakistan, Hanif had just turned 15 when (against his parents’ strenuous objections) he ran away to join the war against the U.S. forces in his home country. That was in early 2009, and for the next year and more, the bright but impressionable boy lived among al Qaeda fighters in the isolated wilds of North Waziristan. His parents finally persuaded him to return home in June 2010, but he headed out again this past June in hope of reconnecting with his old unit. He was shocked by what he found. “The flower is wilting,” he told a Newsweek correspondent who met with him in December in a Taliban safe house near the Afghan town of Khost. “I think the once-glorious chapter of al Qaeda is being closed.”
[...]
“As long as the Sheik [Osama] was alive, our leaders were strong and were determined to fight. But his death and the drones have sucked the blood out of our leadership. Now leaders seem to spend all their time moving from one place to another for their safety.” Lying low didn’t save Sheik Ayatullah; the drones got him soon after Hanif’s return to Waziristan.

New recruits have stopped coming, Hanif says. “When new people came they brought new blood, enthusiasm, and money. All that has been lost.” The money may be a bigger problem than the manpower, he says. Al Qaeda used to receive millions of dollars a year from Arabian Gulf contributors, but Hanif’s uncle says his contacts tell him the donations have dried up. Instead, he believes, the money is going to the more productive and generally nonviolent Arab Spring movements in North Africa, Syria, and Yemen. “I think Arab people now think the fight should be political at home and not terrorism aimed at the West,” says the uncle. “The peaceful struggle on Arab streets has accomplished more than bin Laden and Zawahiri ever have.”
[...]
Hanif says he spent the next five months with [the Taliban-allied Pashtun army led by Sirajuddin Haqqani] and took part in several cross-border raids into Afghanistan — “picnics,” his fellow fighters called them. “We’d cross the border on operations of one, two, or three days; make short, sharp attacks; and then return,” he says. “Crossing into Afghanistan is easier than ever. There’s no one to stop us.” When Haqqani fighters run into Pakistani troops, they just keep going, Hanif says; they’re never challenged. “I think there’s an understanding,” he says.

How Private Equity Works

Monday, January 16th, 2012

The recent attacks on private equity are anticapitalist claptrap, Jonathan Macey — professor of corporate law, corporate finance and securities law at Yale Law School — says:

Private-equity firms make significant investments in companies, mainly U.S. companies. Most of their investments are in companies that underperform industry peers. Frequently these firms are on the brink of failure.

Because private-equity firms are, by definition, equity investors, they make money only if they improve the performance of their companies. Private equity is last in line to be paid in case of insolvency. Private-equity firms don’t make a profit unless their companies can meet their obligations to workers and other creditors.

The companies in which private-equity investors are able to turn a profit generally grow, rather than shrink. This is because the preferred “exit strategy” by which private-equity firms profit is to take the private companies in which they invest and enable them to go public and sell shares that will help the company grow even stronger. As for turnaround success stories, Continental Airlines, Orbitz and Snapple have all benefitted at some time from private-equity investment.

Or take Hertz. Ford sold Hertz to private-equity investors in 2009 for $14 billion. These investors were able to take the company public less than a year later at an equity valuation of $17 billion. The Hertz success story is consistent with the empirical data that indicate companies owned by private-equity firms typically outperform similar companies that do not have a private-equity investor (as measured by profitability, innovation and the returns to investors in initial public offerings).

Private-equity firms not only help corporate performance, but in the long run they lead to more employment and higher wages as well. The alternative to the leaner, smaller firms created by private equity are bankrupt firms that do not employ anybody. And private-equity firms tend to use more incentive-based pay than other firms. A 2008 Government Accountability Office (GAO) report shows that the companies in which private-equity firms invested had low employment growth relative to their peers, and their employment growth rose after they were acquired by a private-equity firm.

All more-or-less true — but not entirely, as commenter Constantine Gonatas notes:

“Equity investors do not get paid until the creditors do. ”
This is true in bankruptcy, but not necessarily in private equity because what happens is often the private equity owners take on additional debt then dividend the proceeds – frequently paying back their initial equity investment and far more. His statement is technically true but applies only to a particular circumstance (bankruptcy). The implication that it may be generally true appears to be misleading.

Furthermore, his conclusion that private equity owners would never pay dividends if that would put their investment into insolvency, because it’s both illegal and they would get sued, is only really applicable to a situation where the company would become immediately insolvent. It does not apply to the many cases where after the dividend, the company still had enough cash to pay its immediate bills but not enough to cover interest and principal repayments in less than rosy scenarios where the company doesn’t “turn around” as the new owners hoped. This happens very often during recessions. In fact, one banker mentioned to me once that if private equity owners’ holdings don’t go bankrupt a fair percentage of the time, “they are not taking enough risk. (ie. leverage)”

What we have here is a governance and agency problem because the private equity owners are never taking risks with their own money. Heads they win, keeping 20% of the profits (their compensation being taxed preferentially at capital gains rates, unlike the incomes of the poor slobs who toil to make their holdings succeed), tails the employees and debt holders lose. In fact, the debt holders almost always lose because the value of the debt goes down when the company is leveraged – even if the new debt is mezzanine, it still deprives the company of cash to meet future obligations.