Creating Cities From Scratch

Tuesday, February 2nd, 2010

American real-estate developer Stan Gale is building a South Korean city from scratch:

The Korean government had found his firm on the Internet and made an offer everyone else had refused. The brief: Gale would borrow $35 billion from Korea’s banks and its biggest steel company, and use the money to build from scratch a city the size of downtown Boston, only taller and denser, on a muddy man-made island in the Yellow Sea. When Gale arrived to see the site, it was miles of open water. He signed anyway.

New Songdo City won’t be finished until 2015 at least, but in August, Gale cut the ribbon on the 100-acre “Central Park” modeled, like so much of the city, on Manhattan’s. Climbing on all sides will be a mix of low-rises and sleek spires — condos, offices, even South Korea’s tallest building, the 1,001-foot Northeast Asia Trade Tower. Strolling along the park’s canal, we hear cicadas buzzing, saws whining, and pile drivers pounding down to bedrock. I ask whether he’s stocked the canal with fish yet. “It’s four days old!” he splutters, forgetting he isn’t supposed to rest until the seventh.

As far as playing God (or SimCity) goes, New Songdo is the most ambitious instant city since Brasília 50 years ago. Brasília, of course, was an instant disaster: grandiose, monstrously overscale, and immediately encircled by slums. New Songdo has to be better because there’s a lot more riding on it than whether Gale can repay his loans. It has been hailed since conception as the experimental prototype community of tomorrow.

Experimental prototype community of tomorrow? I feel like I’ve heard that somewhere before.

A green city, it was LEED-certified from the get-go, designed to emit a third of the greenhouse gases of a typical metropolis its size (about 300,000 people during the day). It’s an “international business district” and an “aerotropolis” — a Western-oriented city more focused on the airport and China beyond than on Seoul. And it’s supposed to be a “smart city,” studded with chips talking to one another, designated as such years before IBM found its “Smarter Planet” religion.

It’s not quite clear what a “smart city” offers, but Cisco seems to think it should mean “telepresence”:

No longer content to sell just plumbing, the company is teaming up with Gale, 3M, United Technologies (UTC), and the architects of Kohn Pedersen Fox (KPF) to enter the instant-city business. At a Cisco event near New Songdo last summer, Gale stunned the room by announcing plans to eventually roll out 20 new cities across China and India, using New Songdo as a template. In the spirit of Moore’s Law, he says, each will be done faster, better, cheaper, year after year.

Cisco calls this Smart+Connected Communities initiative a potential $30 billion opportunity, a number based not only on the revenues from installation of the basic infrastructure but also on selling the consumer-facing hardware as well as the services layered on top of that hardware. Picture a Cisco-built digital infrastructure wired to Cisco’s TelePresence videoconferencing screens mounted in every home and office, with engineers listening, learning, and releasing new Cisco-branded bandwidth-hungry services in exchange for modest monthly fees. You’ve heard of software as a service? Well, Cisco intends to offer cities as a service, bundling urban necessities — water, power, traffic, telephony — into a single, Internet-enabled utility, taking a little extra off the top of every resident’s bill.

In case you missed it, Gale announced plans to roll out 20 new cities across China and India, using New Songdo as a template. We’ll see how that works out.

Posted in Business, Policy, Technology, Urbanism | No Comments »

Complexity transforms the simple into the impossible

Thursday, January 28th, 2010

Complexity transforms the simple into the impossible, Scott Adams (Dilbert) explains:

I keep getting unexplained bankcard services fees on my business checking account, somehow related to selling some of my original art a few years ago. I contacted my bank to clear it up. My bank could find no record that I ever had a merchant account with them. Nor could they find any record that I have a current checking account with them. They did acknowledge billing me for the services they say I don’t have.

Allow me to say that again: My bank can’t find any record that I have a checking account with them, searching either by my name or my account number. As I write this, it still isn’t cleared up.

In the end, it will turn out to be something simple. I probably called the Bankcard Merchant Services department instead of the Merchant Services Bankcard department, and they can only see certain types of accounts, or some such thing. I don’t think my money actually disappeared. The real problem is that the world has become so complex that simple tasks are nearly impossible.

I recently got a video switching device, professionally installed, that lets multiple televisions in the house display what is playing on, for example, a DVD player in another room. We just built our home, so we had the luxury of wiring it for that sort of function. It’s a great idea, except that when I turn on the TV in one room it sometimes randomly turns on a TV in another. A team of very smart and experienced technicians have been trying to solve that bug for a week. In the end, I’ll just live with it, or stop watching television, whichever is easier. Complexity transforms the simple into the impossible.

I went to upgrade a family member’s cell phone the other day. I knew exactly what I wanted. The store even had it in stock. Still, the transaction took 90 minutes. It had something to do with using the upgrade of one family member for the phone of another, which ended up killing the wrong phone, hosing e-mail on my BlackBerry, and a host of other issue before we got it all working. Complexity made the simple nearly impossible.

Lately I’ve been trying to get all of my insurance issues sorted out. I need about seven different types of policies for various car risks, house risks, business risks, and personal risks. So I ask my insurance guy a question, and he passes the question to the carrier, and by the time I get the answer, I forgot what I asked. Worse yet, I have three more questions. Insurance documents keep piling up on my desk. Some want payment, some want inventories, some want data, some need review, and maybe signatures. I don’t even know where to start. The complexity has overwhelmed me. So I just stare at the pile and hope a meteor doesn’t strike the house.

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Academics hate business

Monday, January 25th, 2010

Academics hate business, because they don’t recognize business skills at a high level — and they don’t recognize the lack of skill in themselves:

In any event, what I have noticed is that they lack a couple of key concepts — the first is that simple understanding of a concept does not mean that you can do it. While this is clear and obvious in the realm of sports and entertainment, it is not obvious in business. And that leads me to the other point.

Really successful business executives are rarely, if ever, one-trick ponies. They must not only be successful in whatever their entry level occupation is, otherwise they could never be promoted, but eventually, they must shed whatever self-styled profession they had and embrace ‘business”. In many cases, the person we promoted was not the “best” in their group, but probably in the top 5. What they had was an ability to not only learn a new skill, but to fully embrace it. Somewhere in middle management, you lose your origin. You begin to hear things like, I started out as an accountant, or I came up through sales. But to be really successful, you have to be able to become a generalist at a minimum, and still be able to master new skills, especially political ones. The others are somewhat obvious, they include finance, legal, HR, etc. You never have to be the best, but, at any one time, one of these areas becomes critical to successful outcome.

Failure at a high level comes in many cases when, under extreme pressure, the executive returns to his roots. In the bullfight, after the bull has been severely wounded, he will pick out a location of the ring and return to it, defend it, and die in it. Its called the carencia. I have seen many otherwise successful people fail because under extreme pressure they attempted to solve the problem by doing what made them initially successful. Cost reduction, layoffs, opening new stores or factories; when overwhelmed they return to what brought them success early on.

Not only are academics specialists, rather than generalists, but they don’t recognize performance skills, which differ from academic skills:

They don’t make that connection that they could be lousy sales guys, I mean, they read the book and went to sales training classes! And they refuse to believe that some guy with just a Bachelors degree from a third rate university could not only be their boss but actually be critical of them! But numbers don’t lie. These people don’t understand or accept that the sales director has certain highly developed skills and can probably operate under pressure far more effectively than they can. This is when performance differences usually emerge. And what is really frustrating, is that the skill that the sales director has, he developed because he was the social director of his fraternity, learned to win at drinking games and was actually able to pass his courses with a perpetual hangover. This is highly critical to his job performance and success.

The last point is that they don’t value experience and the judgment that comes with it. So, who would you follow into battle, the 30 year veteran or the smartest guy who just graduated from West Point? Where’s the test in that? I would say survival, but they prefer SAT scores.

This anecdote takes that sales-director bit one step further:

I’m sure you know who Lanny Davis is, he was one of the top white house lawyers in the Clinton admin. In any event, he was at Yale with Bush. He was one of the only ones on the left who warned everyone about Bush. He had seen him in action. Apparently Bush was the head cheerleader at Yale. According to Davis, he made the post more important than student council president. The story also goes that Bush was able to perform some very unusual feats of memory at his fraternity (ie, memorizing 40 some odd new recruits, name, home town, etc. after hearing them only once, and in order). While everyone on the left was saying how stupid he was, Davis was telling them he wasn’t. He had made a career out of having people underestimate him — and it apparently worked pretty well.

(Hat tip to David Foster.)

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Jesus Rifles

Friday, January 22nd, 2010

Years ago, while eating at In-N-Out Burger, I picked up my empty drink cup and noticed a reference to a fairly famous Bible verse — John 3:16.

In-N-Out is still a privately held company, and the Snyder family has been printing such references on their wrappers and cups for years.

Now it appears that the privately held Trijicon company has been doing the same thing — with the ACOG sights it sells the US Army and Marine Corps, for use in the counterinsurgencies in Iraq and Afghanistan — Muslim countries, in case you haven’t been paying attention.

If you look carefully — very carefully — you can see that the sight’s model number includes the characters ACOG4X32JN8:12, a not-immediately-obvious reference to John 8:12 — “Whoever follows me will never walk in darkness, but will have the light of life.” — the kind of thing a bored, Christian soldier might notice, but not the kind of thing anyone else would catch in passing.

Ah, but ABC News was there to make sure the people of Islamic world knew that American weapons had “secret Jesus Bible code” inscriptions. How responsible!

Trijicon has agreed to remove the references. I’d like them to change them to AU3:16.

(Hat tip to Todd.)

Posted in Business, Policy, War, Weapons | No Comments »

The Entrepreneurial Personality vs. the Bureacratic Personality

Friday, January 22nd, 2010

Arnold Kling looks at the entrepreneurial personality vs. the bureacratic personality:

The entrepreneur wants to test ideas empirically. The bureaucrat wants to say “no” a priori. Large organizations need bureaucrats, because otherwise they would waste too much organizational capital (human as well as financial) trying out bad ideas. Entrepreneurs start with less organizational capital to lose, so they are the ones that you want to try out risky ideas.

Only in desperate situations will organizations turn to entrepreneurs (I am thinking of wars, when the military will dismiss some of its bureaucratic leaders and elevate some entrepreneurial ones.) Haiti looks like a desperate situation.

Posted in Arnold Kling, Business, Policy | No Comments »

Yelp’s Beginnings

Wednesday, January 20th, 2010

Founded by two young engineers from PayPal — and funded by one of PayPal’s founders — Yelp did not rise from humble beginnings:

The company was, literally, conceived over lunch and funded — to the tune of $1 million — by dinnertime. At the time, Stoppelman and Simmons, who were 26 and 25, respectively, were working in a 10-person incubator created by Levchin. He instructed them to look at a handful of investment ideas, one of which was “the yellow pages for the 21st century.”

As Stoppelman and Simmons ate lunch one afternoon in the fall of 2004, they talked about building a service that would allow you to e-mail a question to your friends — for instance, “Who knows a good doctor in San Francisco?” — and then publish the results online. (The idea of allowing people to publish reviews without being prompted, which is today Yelp’s core offering, was an afterthought.) It was Levchin’s 29th birthday, and about an hour after the lunch ended, Simmons and Stoppelman approached their boss and pitched the concept. They had no PowerPoint presentation and no specific revenue plan; just a sense, Stoppelman says, that they could make something that would appeal to lots of people.

Levchin hesitated. “I wasn’t sure if it would work,” he says. “But the guys were really enthusiastic about it. And in my experience, when you have smart people who work well together, it’s foolish not to invest.” Maybe because it was his birthday — or maybe because he had made tens of millions of dollars on PayPal — Levchin agreed, investing $1 million in the half-baked idea.

During its first few months, Yelp was a failure. It attracted few readers or writers beyond the founders’ friends and family, and it did not impress the venture capital investors whom Stoppelman pitched at the end of 2004. After a few weeks of unsuccessful meetings, Stoppelman and Simmons went back to the office and set about trying to improve their product. “We got the doors slammed in our face over and over again,” Stoppelman says. “But that was lucky.” Had Yelp succeeded in raising money, it probably would have attempted a national rollout. But without any additional funding, he and Simmons had to stay local. “We said, ‘You know what? If we just create a cool city guide in San Francisco and it’s worth $10 or $20 million, that would be a win. We don’t care.’ “

The idea of talking about a $20 million exit as a mere “win” betrays a hardheadedness that is one of Stoppelman’s strengths but that can also make him seem strangely cold. Stoppelman’s analytical tendencies make his reviews almost comically dispassionate. Writing on his blog about a book he read recently, The Lives of Ants, he calls it, “an okay survey of the ant species.” A review of the clothing retailer French Connection sums it up as “clothing of medium-level quality.”

Without the cash for a national rollout, Stoppelman decided to focus on making Yelp famous locally. With the help of a buzz-marketing guru he hired on a whim, Stoppelman decided to select a few dozen people — the most active reviewers on the site — and throw them an open-bar party. As a joke, he called the group the Yelp Elite Squad.

Levchin thought the idea was crazy — “I was like, ‘Holy crap: We’re nowhere near profitability; this is ridiculous,’ ” he says — but 100 people showed up, and traffic to the site began to crawl up. Because the parties were reserved for prolific reviewers, they gave casual users a reason to use the site more and nonusers a reason to join Yelp. By June 2005, Yelp had 12,000 reviewers, most of them in the Bay Area. In November, Stoppelman went back to the VCs and bagged $5 million from Bessemer Venture Partners. He used the money to throw more parties and to hire party planners — Yelp calls them community managers — in New York, Chicago, and Boston. The company now employs 40 of these people.

As Yelp’s influence grew, bars and restaurants were increasingly willing to host the parties — which involves giving away drinks, food, and space — in the hope that the crowds would come back and write positive reviews. By the summer of 2006, Yelp had amassed 100,000 reviews and was attracting more than a million users a month. That June, the San Francisco Chronicle called it “San Francisco’s online ‘it’ guide for what’s hot and not.” Around the same time, potential acquirers came calling. Neither Stoppelman nor Levchin will discuss specifics, but they acknowledge that a large technology company offered to buy the then-30-person company in 2006. Yelp turned down the offer. “It was a tough call, and it was contentious at the board level,” says Stoppelman. “Because if we said no, we’d have to build a real company.”

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Multicultural Critical Theory. At Business School?

Thursday, January 14th, 2010

I don’t know if the writer, Lane Wallace, or a New York Times editor came up with the headline — Multicultural Critical Theory. At Business School? — but it’s terribly misleading:

Learning how to think critically — how to imaginatively frame questions and consider multiple perspectives — has historically been associated with a liberal arts education, not a business school curriculum, so this change represents something of a tectonic shift for business school leaders. Mr. Martin even describes his goal as a kind of “liberal arts M.B.A.”

“The liberal arts desire,” he says, is to produce “holistic thinkers who think broadly and make these important moral decisions. I have the same goal.”

Ever since 1959, when two influential studies by the Ford and Carnegie Foundations chastised business schools as being too vocational, most M.B.A. programs have taken anything but a broad approach to their subject matter.

With few exceptions, traditional instruction has involved separate disciplines like finance, marketing and strategy, with an emphasis on quantifiable analyses and methods. While some valued what a liberal arts background could provide, the dominant view was that those elements had no place in professional business schools.

But even before the financial upheaval last year, business executives operating in a fast-changing, global market were beginning to realize the value of managers who could think more nimbly across multiple frameworks, cultures and disciplines. The financial crisis underscored those concerns — at business schools and in the business world itself.

Historically, a liberal arts education was the education proper to a free man — grammar, rhetoric, logic, etc. — not an education in liberal political thought — like the multicultural critical theory of the headline.

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On the Pharma Gravy Train

Thursday, January 14th, 2010

Megan McArdle is now on the Pharma gravy train:

Today, I became a big beneficiary of the enormous marketing budgets of pharmaceutical companies. I know many of y’all suspected it all along. But sadly, there was no massive check waiting for me in the mail today. No, what happened is, I went to the pulmonologist for a lung function test, because my asthma has been steadily getting worse for months.

The bad news is what I already knew — I am no longer well controlled enough with Singulair and a rescue inhaler, and I need to go on inhaled steroids. The good news is that I left with an armful of free samples, so that I can figure out which inhaled steroid works for me most cost-effectively. That’s courtesy of those bloated marketing budgets you hear so many complaints about, more than half of which go to free samples.

This isn’t such a great deal for the pharmaceutical industry, since otherwise I’d be paying full freight for one of their products. All it does for the pharma firms is buy them a seat at the table — a chance to win my business. But it’s a great deal for me, and millions of consumers like me who get a chance to try multiple products before we commit to one.

One of the things that bugs activists about this practice is that the pharmaceutical companies record the cost of the marketing as the full price of the product, not the cost of producing it. But this is actually the right accounting rule, precisely because of what I outlined above: the samples cost them a full price sale. One could argue that it should be slightly lower, because I might have insurance which would pay a discounted rate for the product. But whatever the exact right price is, it’s closer to the market price of the product than to the production cost. Keep that in mind the next time you hear someone complaining that pharma spends more on marketing than development; if it weren’t for all those free samples, and the reps who bring them to the doctors, they’d spend considerably less.

She makes some interesting points, but, no, I don’t think that is the right accounting rule. Commenter Tim H. explains:

If a customer has four competing products to choose from, all else being equal each firm is only losing a 25% chance of a full price sale. The value of a 25% chance at a sale is obviously not the same as an actual sale.

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The Courage Necessary for Tyranny

Thursday, January 14th, 2010

“But it seemed to her that he wanted to be a tyrant without having the courage necessary for tyranny.”
— Trollope

Neofusionist adds:

This problem has been rampant in my working experience. If you are in charge, you need to make decisions, and you will therefore be wrong sometimes. Being afraid to be wrong means you won’t be decisive, which makes you a bad leader. Not deciding is itself a decision to be ineffective.

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John Stossel’s Show on Atlas Shrugged

Monday, January 11th, 2010

I find it difficult to watch popular commentary shows, even in the rare case, like John Stossel’s show on Atlas Shrugged, where I don’t despise both sides of the debate:

If you’re going to make the case for Rand’s ideas, to a popular audience feeling betrayed by Wall Street, I think you need to clarify that the heroes of Atlas Shrugged aren’t “the rich” — the Paris Hiltons of the world — but the productive. The villains of the work are wealthy businessmen too — businessmen who use government to their own ends.

Posted in Business, Media, Policy | No Comments »

Credit Checks vs. Security Checks

Monday, January 11th, 2010

Contrast these three situations, Cringely suggests:

  1. you are sitting in a hotel bar in Mongolia and want to use your Visa card to buy a round of drinks for your friends, and;

  2. your Mom is at the check-out counter at a Sears store when the clerk asks her if she wants to apply for a Sears credit card and save 10 percent on her order, and

  3. a possible terrorist with a dubious travel record and suspected al-Qaeda connections is standing in line at a European airport waiting to board a flight to the U.S. that leaves in an hour.

What happens in each of these cases?

In Mongolia the bartender takes your card and authorizes it in seconds across a 12,000-mile round-trip. At the Sears store the transaction is not only authorized in less than a minute, but a new account is created and both your Mom’s identity and her creditworthiness are established and calculated on the spot, along with her discount. Meanwhile the airline, airport, local security, European police, Interpol, Transportation Security Administration, Department of Homeland Security, Customs Service, FBI, CIA, and NSA can’t between them figure out in an hour whether this guy standing in line in Holland should be allowed on the plane or not.

Cringely has previously noted how the U. S. Government has no idea how many illegal aliens there are in America, but the big credit reporting agencies know exactly how many:

The credit reporting agencies have a handle on total numbers and have a lot of information on specific individuals. So members of the gray economy are, for the most part, not invisible at all, just difficult to identify as individuals. But thanks to data mining down at the credit bureau, it is getting harder and harder to hide.

A lot of this sleuthing comes down to a surprising artifact, the Social Security number. One would think that surprising for an economic class of people best known for not having Social Security numbers. Ah, but they do have Social Security numbers, just not their own. You need a Social Security number to sign up for utility services, for example. No Social Security number, no electricity, gas, phone, or satellite TV. So what’s a poor alien to do? They go down to some local hangout and buy a Social Security number to give to the utility. This has to be a legitimate number or it won’t fly with utility computer systems, but does it have to be the customer’s own number? Good question.

Here’s where we have an interesting business ethics issue. Say you are the electric company and someone tries to set up service using a Social Security number that already exists in your database and is clearly borrowed, bought, or stolen. What do you do? Most utilities go ahead and set up the account, because to them what counts is whether the new customer will actually pay that bill and it turns out that people operating on such borrowed numbers are more reliable bill payers than the rest of us. They can’t afford to get in trouble with the electric company because that would draw attention to them. So there is a tacit agreement between the parties that a Social Security number must be provided because that’s the rule, but if it happens to be someone else’s Social Security number, well that’s okay.

The funny thing about this is the impact it has to have on the person who was originally assigned that Social Security number by the U. S. government. Rather than hurt their credit it actually helps because there is so much evidence that they are good at paying their bills!

Of course the credit bureau notices something and that’s why they are so able to estimate numbers in the first place. They know what Social Security numbers are being overused and can probably even trace the genealogy of that number as it makes its way across the country. Here’s an amazing fact: some individual Social Security numbers are in use right now by up to 3,000 people and it isn’t at all unusual for a borrowed number to be used by 200–1,000 people at the same time.

Cringely got a phone call about this from the U. S. Department of Homeland Security:

“The credit bureaus can really do that?” Mr. Homeland Security asked. “Do they really have that kind of data? Who can tell us more about this?”

I am not making this up.

That was in 2007 — six years after 9/11 and the people who had already spent billions of dollars making us safer by gathering information had no idea at all what kind of information was already being gathered.

I don’t know what happened after that but I can make a good guess. My guess is that the folks at Homeland Security if they actually bothered to follow-up on the contacts I gave them probably decided they needed to spend more billions and build a similar information system for their own use — yet another fiefdom — and that system will be operational sometime this decade.

Cringely’s “better” idea? Outsource the whole screening process to the credit agencies. What’s the worst that could happen?

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Battery Costs Aren’t Dropping Fast Enough

Saturday, January 9th, 2010

BCG has released a study concluding that the long-term cost target for electric-car batteries — $250 per kilowatt-hour (kWh) — is unlikely to be achieved in the next decade without a breakthrough:

Most electric cars in the new decade will use lithium-ion batteries, which are lighter and more powerful than the nickel-metal hydride (NiMH) batteries used today in hybrids like the Toyota Prius. Citing the current cost of similar lithium-ion batteries used in consumer electronics (about $250 to $400 per kWh), many original-equipment manufacturers (OEMs) hope that the cost of an automotive lithium-ion battery pack will fall from its current price of between $1,000 and $1,200 per kWh to between $250 and $500 per kWh at scaled production. BCG, however, points out that consumer batteries are simpler than car batteries and must meet significantly less demanding requirements, especially regarding safety and life span. So actual battery costs will likely be higher than what carmakers predict.

Weight is also an issue. Randall Parker notes that the 400+ lb battery in the Chevy Volt provides 40 miles of range on electric power. That doesn’t scale well:

To go 200 miles in electric power would require 2000 lb just for the battery. Forget about the typical car’s 400+ mile range until battery energy density goes up by some multiple.

If current prices are $1,000 to $1,200 per kWh, what does that mean?

To put that in perspective a compact or midsize car might use a quarter of a kWh per mile. So at current prices a 100 mile range will require 25 kWh or at least $25,000. The cost is worse than that since batteries are not typically allowed to run all the way down.

And, again, that 100-mile ranges doesn’t simply cost $25,000; it also mean lugging 1,000 pounds of batteries along for the ride. That doesn’t help mileage.

Batteries are extremely expensive, not just in dollars per kWh, but also in pounds per kWh, even if the electricity they store is fairly inexpensive per kWh. Gasoline stores tremendous energy for its weight.

Thus, if you’re going to include both a gasoline generator and batteries, as in a Chevy Volt, you should only carry enough electricity in battery form to get you to work (and maybe back, if you can’t charge there). Any storage you don’t need on a more-or-less daily basis is a waste of money and a waste of energy, because those extra batteries don’t carry themselves.

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Fiddy’s Machiavelli

Thursday, January 7th, 2010

Curzon is shocked to recommend The 50th Law:

At first glance, the book looks like a practical joke or an act of tremendous chutzpah. The cover is made of imitation leather, embossed with gold lettering in a thick Gothic font, sporting pages that are edged with gold like a Holy Bible found in a church pew. The book is unreal in its confidence — co-authors Robert Greene and 50 Cent review the lessons taught by history’s great thinkers and leaders — Sun Tzu, Machiavelli, Napoleon, Lincoln, Clausewitz, Franklin Delano Roosevelt, and many more — and then apply those lessons… to the life of 50 Cent! Can you think of anything more audacious?


The book opens with Robert Greene, who has authored books that are somewhat like the self-help version of Robert D. Kaplan’s Warrior Politics, explaining how Greene met 50 Cent in 2007 and was enthralled that, despite having no academic education, he instinctively understood the laws of power that Greene had been trying to teach in his books such as The 48 Laws of Power. He then tells how he spent a year with 50 Cent, witnessing him in action as he ran his music business and career as a performer, and wrote the book using the inspiration of 50 Cent’s career success, concluding that the famous rapper has something extra, a panache that Greene did not cover in his book on the 48 laws — fearlessness.

That is the key theme of the book — the dehabilitating nature of fear and the importance of overcoming it in order to succeed. Fearlessness allow a person to take advantages of opportunities and rise to challenges by taking initiative. It’s hard — fear is the most primitive and basic human emotion — but as Greene wrote in his blog post:

The truth is that a fearless approach is the necessary starting point of almost any successful or creative action in this world. The 50th is in fact the ultimate law of power, the key to the castle.

Greene met and spent time with 50 Cent well before the rapper’s success as one of the richest hip-hop artists was recognized by Forbes magazine and his financial success became open public knowledge.

I am almost shocked to find myself writing that I strong recommend this book. Greene trumpets the values of realism and dismisses idealism, praises the benefits of adversity, the importance of innovation over tradition, and the book really does have the readability of Robert D. Kaplan’s writings and quickly draw you in to believing the material. Like Kaplan, it applies the laws of the ancients to very modern situations that make the material easy to grasp and understand. It is also jaw-droppingly audacious — Greene writes that, “Fifty could serve as my Cesare Borgia, and I as his Machiavelli.”

The problem with fearlessness is that some get rich, and some die tryin’.

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Kodak, Bill Gates and efficient markets

Wednesday, December 30th, 2009

John Hempton shares a story of Kodak, Bill Gates, and efficient markets:

Warren Buffett has a group of his best investing friends get together once a year. He originally called it the Graham group in honour of his mentor Ben Graham who presented at the first annual meeting in 1968. By 1991 the group had expanded somewhat to include not only the original fabulous stock pickers but some business luminaries who could help enlighten the group on the nitty-gritty of their industries. One regular attendee was Bill Gates of Microsoft fame. From here I will quote Alice Schroder:
After a while Buffett asked everyone to pick their favourite stock. “What about Kodak?” asked Bill Ruane. He looked back at Gates to see what he would say.

“Kodak is toast,” said Gates. Nobody else in the Buffett Group knew that the internet and digital technology would make film cameras toast. In 1991, even Kodak didn’t know it was toast.

Gates was right of course – and since 1991 Kodak has been a terrible stock – and I would have counted Bill Gate’s comments as “knowledge” in as much as a statement about markets and technology could be knowledge. But it would be an awful long time before that “knowledge” would be reflected in stock prices. Here is a graph of the stock price since 1 Jan 1990.


If you had taken Gates to heart in 1991 and shorted the stock then for almost ten years you looked like toast. If you sold the stock because of something Bill Gates said then you looked silly for six or more years unless you purchased something better.

Indeed if you had the “knowledge” probably the best thing to do with it was to use it just to avoid the photography sector altogether. That would mean you might outperform the market – but that outperformance was slight. [If avoiding that sort of catastrophe was your mechanism of making money you probably needed an enormous amount of “knowledge”.]

Anyway there is little question that if you understood the implications of digital photography in 1991 you were – at least on that item – the smartest guy in almost any room. And it did not help you make (much) money.

“The market can stay irrational longer than you can stay solvent.”

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Programmer Conned CIA, Pentagon Into Buying Bogus Anti-Terror Code

Tuesday, December 29th, 2009

Double-crossing the CIA sounds like risky business, but a programmer did just that. Dennis Montgomery conned both the CIA and the Pentagon into buying bogus anti-terror code:

In December 2003, DHS secretary Tom Ridge announced a terror alert based on intelligence from “credible sources” about imminent attacks that “could either rival or exceed what we experienced on September 11.” Dozens of French, British and Mexican commercial “flights of interest” were canceled, and news agencies were reporting that the threats extended to “power plants, dams and even oil facilities in Alaska.”

Playboy says the source of the intelligence was never revealed publicly. But the evidence points to Dennis Montgomery, who had convinced the government that Al Jazeera — the Qatari-owned TV network — was unwittingly transmitting attack orders to Al Qaeda sleeper cells concealed in video it broadcast.

Montgomery claimed he decoded the orders using a program developed by his four-year-old Las Vegas firm, eTreppid Technologies. The software found hidden bar codes in Al Jazeera videos that contained latitudes, longitudes, flight numbers and dates for planes being targeted for attacks, he reportedly claimed. He fed the information to a CIA employee at the agency’s Directorate of Science and Technology, who passed it up to CIA Director George Tenet, who in turn passed it to the White House.

“[Tom] Ridge’s announcement, the canceled flights and the holiday disruptions were all the results of Montgomery’s mysterious doings,” the Playboy article asserts.

Over the next few years Montgomery’s intelligence wound its way through the Department of Homeland Security, the Pentagon, the Senate Intelligence Committee and even Vice President Dick Cheney’s office.

But aside from Tenet and a few others, Playboy reports, no one actually knew the information was supposedly gleaned from messages hidden in video broadcasts.

In the aftermath of the 9/11 attacks, the government was searching feverishly for any information or tools that would help deter additional attacks, and was willing to throw millions of dollars at any prospector who asserted he had a solution. It was this environment that helped Montgomery convince officials at DHS and elsewhere that he was able to detect hidden messages in video that no one else was able to see.

When one CIA officer finally learned the source of the information his agency was being fed, he says he was livid.

“I was told to shut up,” he told Playboy. “I was saying, ‘This is crazy. This is embarrassing.’. . . I said, ‘Give us the algorithms that allowed you to come up with this stuff.’ They wouldn’t even do that. And I was screaming, ‘You gave these people fucking money?’”

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