Wednesday, April 28, 2010

Meet The New (Tech) Boss

Remember when Apple was the answer to the 1984-style threat posed by IBM and Microsoft? Well, guess who has just sent the police to raid the home of a journalist?

To be sure, there are good questions to be raised about the conduct of Jason Chen, who works for Gizmodo, a technology blog. He paid $5,000 for an Apple iPhone that one of the company's engineers left in a bar in San Jose, the heart of Silicon Valley. Legally, the phone is stolen merchandise and belongs to Apple, and the so-called shield laws protecting journalists probably don't apply here.

So it's hard to get too weepy for Mr. Chen. But it's even harder to get worked up on behalf of Apple, whose corporate behavior has become increasingly oppressive. This isn't the first time the company has used the all-too-willing apparatus of government, both here and abroad, to intimidate the press and others. Apple's stance toward ordinary customers, hidden behind cool advertising, isn't much better.

Most Apple customers don't notice it, but if the company doesn't approve of a software application, they can't use it on their iPhone. The company regularly intimidates developers, including a Pulitzer-prizewinning journalist whose work was banned from iPhones because it satirized politicians. Apple has refused access to software that does nothing more than compete with other software. Sometimes, Apple refuses access and never tells anyone why.

Is this a problem? Imagine if Microsoft claimed the right to approve of every piece of software you installed on your PC, and banned any application that had a political slant, or that competed with software that already existed. Holy First Amendment, Batman! Holy Sherman Antitrust Act, Robin!

It goes further than that. If you use Apple's iTunes on your computer, you are vulnerable to regular downloads of irrelevant and potentially harmful software. The "music" you "purchase" through iTunes is licensed, not sold, to you. It is digitally coded in a manner that eliminates more than 90% of the data that constitutes the music, essentially turning songs into the sonic equivalent of a McDonald's Happy Meal. Millions of Americans, most of them younger, literally have no idea what actual music sounds like, thanks to iTunes.

Thus the feisty upstart has become the arrogant corporate giant. Not that this ever happens in America. I think we're going to be hearing more about Apple.


Does Jon Stewart read this blog? Later on the day I posted this item, he lampooned Apple in the same terms, right down to the clip from the Super Bowl ad. Great minds think alike, huh?

Tuesday, April 27, 2010

Democrats, Can You Be Surprised?

It looks like the institutional Democratic Party is starting to run scared about what's coming. Core constituents are uninspired, and might sit out this fall's election. There is an enthusiasm gap. Gee, I wonder why.

Could it be that the Democratic leadership, such as it is, forgot the people who put them in office, and why they did it? President Obama, your coolness under attack is a double-edged sword. We appreciate that you don't go screaming into the night, but even the old dogs in your core constituency don't want you to sit there and do nothing as americanus reactionus picks up whatever rock is handy and starts throwing it your way.

Democrats to Obama: It's not just about you. It's about us, too. When they call you a nigger and a socialist, they're insulting all of us and what we stand for. You don't have to be black to be offended. I might even argue that many of your white supporters are even madder about it than a lot of your black ones are. Plenty of black folk might roll their eyes and say, "What else is new?" A bunch of white Democrats are appalled and embarrassed, and want those attacks answered in no uncertain terms.

Congressional Democrats, half of you are too comfortable for your own good, sitting in safe seats that haven't faced a serious challenge in many years. The other half of you are scared of your own shadows, and/or too corrupt or jaded to even notice, much less care. We don't like that, either. Unlike too many of you, we take it seriously all the time. Imagine that.

I'd like to think you'll learn a lesson this fall, but I'm not too sure.

Monday, April 26, 2010

Is the Tea Party A Racist Movement?

Stupid question! Just look at these people. Racism drips from their fangs. Of course they are racists.

Hold on a second. I have a different take.

I see the Tea Party as a reactionary movement. They are against any sort of social progress of any kind. In the 1700s, they led the "Whiskey Rebellion" against federal taxation of alcohol and the East in general. In the 1800s, they were the "Know Nothings" against Catholics, immigration, and federal funding of highways (such as they were), canals, and railroads. Later, they were against the abolition of slavery, and in favor of wiping out the Indians.

In the early 20th Century, they were against women's suffrage, popular election of senators, national parks, Teddy Roosevelt, and immgration. Then they were against the New Deal, and railed against American aid to Britain on the eve of the second world war. After the war, they wanted to dismantle Social Security, find communists everywhere, and ban modern art. They hated birth control, progressive education, the integration of the military, and Medicare.

In the 1980s, after their genial representative, Ronald Reagan, was elected, they actually believed that he wanted to shrink the federal government, and overlooked his rescue of Social Security and gigantic deficits. In the 1990s, they went after Bill Clinton's infidelities, and hated his wife for not being a demure First Lady in the traditional style. And they despised anything having to do with gay people.

Throughout most of American history, americanus reactionus has been virulently anti-Semitic. That changed in the 1980s, when the best-selling "Left Behind" books popularized the rapture heresy, a Christian doctrine that arose in the 19th Century. Suddenly, Jews who had once been hated were embraced, on the belief that the State of Israel's existence is key to the return of Jesus H. Christ. Bagels for everyone!

So, now Barack Obama is president, and the Tea Party is hauling out every racist cliche in the book, while claiming the American flag as their own. But does that make the Tea Party a racist movement? Nope, it makes it a reactionary movement. For sure, racism is a wrench in the tool kit. But there are plenty of others. I don't mean to excuse their racism for a microsecond, but rather to place it in an accurate historical context.

We are a complex country of 308 million people with two political parties. Each of them is a fragile coalition of disparate interests. The Tea Party is the crazy aunt in the Republican Party's attic. She's been there forever, but for the past 15 years, she's been running loose on the front lawn, waving her shotgun and screaming her demented head off.

Where are the men in the white coats, holding the nets?

Friday, April 9, 2010

The Coming Democratic Wipeout?

It's bad news, but hardly surprising: The Democrats could lose 50 or more seats this fall.

This is April, and a lot can happen between now and then. And the polling that went into this particular analyst's first take on the elections is biased toward the Republicans. Even he says that the "50-seat" loss would wind up being more like 15 or 20 seats. Or it could be 60 or 70. My own guess is at the low end of the range. Still, the analyst in question, Nate Silver, is one of the best in the business, so his view deserves attention.

Why am I not surprised? For starters, the party in power usually loses some seats in the mid-term elections after a presidential victory. And the economy, while marginally appearing to be improving, is still rotten. But there is another problem: The Democratic Party lost six critical months by dithering on health care legislation that it could have passed last fall. For that, the blame goes mainly to President Obama, who is the leader of his party. It also goes to congressional Democrats, who never met an idea they could stand up for.

There is some poetic justice in this, just as there was poetic justice in Kerry's 2004 loss to George W. Bush. When the going got tough, the tough went windsurfing, and the rest is history. I visited Hood River, Oregon last week and am as big a fan as anyone, but it was not the place for John Kerry to hide out while the Swift Boat Veterans for Truth attacked his war record. And Obama & Co. had no business kowtowing to the corporate funded Tea Party movement while loading up their health care legislation with the usual corrupt side deals.

Politics, like so many other things, is often a matter of balance and timing. Or, as the classic National Lampoon Radio Dinner comedy recording put it: "Know what to kiss -- and when." When it came to health care, the Democrats had solid majority backing from the public, and they frittered it away. Whatever their losses this fall, I hope they will file their complaints in the right place: in front of the nearest mirror.

Sunday, March 28, 2010

Peter Watts Convicted

For some reason I got interested in a border altercation  involving Peter Watts, a Canadian science fiction writer with an over-inflated ego and an underdeveloped capacity for common sense. Last week, he was convicted for resisting and obstructing a Border Patrol officer. The maximum sentence is three years in prison.

Watts is a marine biologist, and has attended various conferences in the United States. As a convicted felon, he faces the probability of being barred from future entry -- after he's served his time, that is. He should have taken the plea bargain.

Monday, March 22, 2010

Health Care Reform: Sound 'n Fury Signifying What?

Last summer, I wrote about A Beta Male's Imminent Health Care Failure, and asked President Obama "to grow a pair."

I predicted that Congress would eventually pass something, but that without a government insurance component the promises of near-universal coverage and cost control would be empty. The Democrats would put lipstick on the pig, and the Republicans would walk away laughing, knowing that health care's grim future would now be universally deemed a Democratic catastrophe for their having passed health care "reform" to begin with.

Well, here we are. Obama and the Democrats are doing the victory dance. The Republicans aren't laughing for the cameras, anyway. I doubt they are laughing in private, either. While I still think it's a weak law that won't adequately address the crisis, it's equally true that the Democrats achieved a crucial political goal: The federal government will forever be visibly planted right in the center of health care.

The "Government Takeover" of Health Care?

In a political sense, the Republican opponents are correct: The feds have taken over health care for all to see. Once in, they won't be back out. Oh, and my prediction that this would lead the Republicans to pin all health care problems on the Democrats? Have a look at this.

But in real life, how different is it? On the day I write this post, with Obama yet to sign the legislation, government is already the 20-ton gorilla in the room, spending half of the health care dollars by means of Medicare and Medicaid, the Veterans Administration, and subsidies for medical research. 

We all had a chuckle at the signs seen last summer reading, "Keep your government hands off my Medicare." Anyone with a quarter of a brain knows that the government requirement for hospitals to open their emergency rooms to everyone established a de facto national entitlement at least to critical care, if at the cost of bankruptcy to anyone without insurance but possessing other assets. The VA is literally socialist: Government owns the hospitals, and employs the doctors and nurses. And if you believe the latest stories, the VA has an enviable record when it comes to both cost control and outcomes.

But for the civilian majority with jobs and insurance, the face of health care has been doctors and insurance companies. From here on out, there's a new sheriff in town, the federal government. Congrats, Democrats.

Responsibility Without Control: Be Careful What You Wish For

At some point, it's always worthwhile to have a look at the reality of a situation. Politicians hate it when people do that. The corporate-funded Tea Party, which has taken over the Republicans, would have people think we're headed for communism and death panels. The Democrats would have you believe that Barack Obama has driven the dragon from the cave's mouth.

Both views are bullshit to the moon and back, of course. The health care bill, for all the sound and fury, is limited in scope.  It symbolically puts Uncle Fed in charge, but the insurance companies will still be at the wheel, charging unregulated rates for the essential service of collecting premiums and denying claims -- and, far more importantly, for paying the outrageous prices charged by doctors, hospitals, and drug companies.

The dirty secret of the U.S. health care system isn't the gigantic bonuses given to insurance company CEOs. I'm as upset about that as anyone, but when analyzing a company or a system, you'd better look for the real money. And here's where the real money is -- in the U.S., doctors charge three times as much as their counterparts in Europe; diagnostic scans cost three times as much; drugs are double, triple or more.

The health care legislation just passed by Congress does nothing to control those prices. Nothing. Zero, nada, zilch. Unless and until anyone grows the stones to take on the real issues, "health insurance reform" will be a shell game. Oh, and without a government-operated "public option," the chances that the federal government will step up to the plate and do that are less than they otherwise would have been.

The Hope, and the Risk

This legislation is pretty bad, and it's going to have to be changed. For this Democrat, the hope is that, over time, the public will come to see where the real problems are, and will look to the federal government to address them.

In my view, only the government can do that. Big Health Inc. is too big for any one state to do it. The insurance companies? Forget it. Even if they wanted to take on the providers or the drug and device companies, they are too fragmented, and lack important regulatory powers. Bringing to heel the likes of Pfizer, Roche, G.E. Medical, every surgeon charging $1,000 for 15 minutes of his time, and every hospital gouging $2,000 a night for a noisy room -- that's a job for the federal government. The free market has failed abysmally.

The risk for Democrats is their usual timidity and fragmentation, not to mention corruption. The latter will only get worse in light of the recent Supreme Court decision declaring corporations to be "people" for political purposes, able to openly dump unlimited funds into the electoral system. It was hard enough for the Democrats to approve a timid start at health care reform. I won't hold my breath waiting for them to tackle the real issues, although now that federal government is widely seen to be at the center of things, they might find it tougher to hide than before.

As tough as this is for Democrats, I'd hate to be a Republican looking at the future.

The government is now in the game for all to see. All the Tea Party's horses and all the Tea Party's men won't be able to change that. Someone should have noticed along the way that George W. Bush failed to privatize Social Security, i.e., loot it and turn it over to the banks. The Republicans were forced to defend Medicare during the debate on this legislation, and the overtly socialist VA is untouchable.

The most the Republicans can now do is be sideline snipers. They've backed themselves into the "No" corner, a place occupied by only a small minority of Americans. They are no Republican solutions, only invective. From time to time, they'll make short-term gains with health care complaints, but the response (from their viewpoint) will be even worse: More government involvement. There'll be no other alternative, because the Uncle Fed is in it for keeps.

Ultimately, the Republicans will have to do what they did on Social Security in 1952. After two decades out of power, they turned to a popular general named Eisenhower. Along the way, that popular general beat out a Tea Party kinda guy named Taft. At issue was F.D.R.'s New Deal. Taft wanted to repeal it and Eisenhower wanted to keep it. The rest is history. That's what will eventually happen on health care, but it'll take a while to unwind all those wingnuts who they whipped up into such a frenzy. Democrats, being politicians just like the Republicans, will think they are smart and will grow fat and lazy, etc.

A Short-Term Political Note

When you go gunning for the king, better make sure to get him. Now that the Republicans have failed, they're in a pickle, at least for a while.

For the past year, they've allowed the Tea Party to set their agenda. Now the screamin' wingnuts are demanding that Republicans call for repeal. I think that's an electoral loser. The polls showing opposition to "health care reform" reflected public distaste for the messy battle. When it comes to the specific provisions, the public supports them. Moreover, once the "Ts" have been crossed and the "Is" have been dotted, most people are going to want their politicians to calm down and try to make it work.

But not the Tea Party. They'll continue to scream their heads off, and because the Republicans depend on them for votes, they will have to keep calling for repeal. I think that'll be a losing tactic this fall, and in 2012. But internal political realities will force the Republicans to stay in that corner.

Forgive me for feeling a little like the Japanese feudal leader in the James Clavell novel, Shogun, who meditated for a couple nights on the screams of the English sailor being boiled alive. Tea Party, keep wailing. Has anyone told you how beautiful you sound?

Okay, But What Does It Mean In Real Life?

Not a lot's going to change right away. The providers (doctors, drug companies, hospitals, device makers) will stay fat and get fatter. The insurance companies will keep their rakeoffs. If you're poor, you'll get help. If you're in the middle class, maybe you'll get some help but it's not going to feel very good. If you're rich, you'll have one more reason to bitch about your taxes.

Over time, I think the effect of health care reform will be to focus now-diffused complaints about health care onto Washington. The clamor will be to "fix" the legislation. The Republicans, locked into a stance of repeal and denial, will find themselves increasingly locked out of that debate. But, in the long run, it'll all depend on what's done about doctor's fees that are triple those in Europe, about scanner fees triple those in Europe, and drug prices double, triple, or higher than those in Europe.

Can we look those dragons in the face and bring them to heel? Your guess is as good as mine.

Monday, February 8, 2010

The Carp Threat

Today's subject is the monster Chinese carp making their way toward Lake Michigan.

Call them the Burmese pythons of the frozen northland. They weigh 100 pounds or more, eat everything in sight, and jump high out of the water for the sheer joy of it. This is a problem for motorboats, water skiers, and so on. How would you like to explain to the kids that mommy was minding her own business one sunny afternoon, when out of nowhere she decapitated by a flying carp? "Ya don't know whether to laugh or cry."

They started in "containment ponds" in Arkansas. If there's one thing we learned a while back, it's that you can't keep anything with a voracious appetite confined in Arkansas for very long. They escaped, reached the Mississippi River, and swam north. They found the Illinois River, and now they're in the Chicago canals, brooding and plotting. The authorities, caught napping as usual, think they can poison or zap them before they reach Lake Michigan. I beg to differ. I think that particular game is over with. The Chinese carp will be the killer bees of the Great Lakes -- can't live with them, can't get rid of them.

How will they get there? Here's how: A pregnant carp will die in the Chicago canal. Birds will scavenge the carcass. The fish's eggs will stick to the birds' feet, and some of those eggs will wind up in Lake Michigan when the birds fly there. This is an ancient means of pollination, and it's going to put monster carp in the Great Lakes. There is only one question left: Mrs. Paul's, will anyone even notice if you make fish sticks out of those things?

Tuesday, February 2, 2010

Koss Corp.: The Same Old Story, Chap. 43,921

I never know what I'm going to blog about next, and neither do you. So we're even.

Today's subject is Sue Sachdeva, the vice president of finance for Koss Corp., a maker of stereo headphones located in Milwaukee. She's accused of embezzling millions of dollars from her employer between 2004, or 2006, and 2009. We're really not sure how much she took. The minimum seems to be $4.5 million, and the maximum would be $31 million. We'll get to those details in a bit; for the moment, we've got a member of Milwaukee's upper middle class caught red-handed with her hand in the till. The only real question for her right now is how much time she'll do.

As technology companies go, Koss is an afterthought. The company is so small that it has been exempt from standard reporting requirements, and its financial dynamics are simple. That's probably why Koss figured it could get by with a glorified bookkeeper rather than a real chief financial officer. When the bookkeeper was nabbed, the federal government's power landed on her like a ton of bricks. Which is where the latest chapter in modern irony comes in.

Now, I'm not saying that anyone should let Sue off the hook. I'm only pointing out that, as these things go, it was small potatoes. Take Cisco Systems, the gigantic California networking equipment company, as a counter-example. Back in the late '90s and early '00s, Cisco "sold" billions of dollars worth of equipment to startup telephone companies. Actually, they lent the equipment but were able to book it as sales, a bit of fiction integral to sending that company's stock price through the roof during the Internet bubble.

Alas, much of Cisco's stuff didn't work outside of carefully controlled and unrealistic laboratory conditions. The "sales," which were financed with loans, collapsed. Cisco's stock dropped by almost 90%, but not before billions of dollars worth of bonuses, stock options, trading profits, money management commissions, and investment banking fees were paid out. Now that Cisco has been relegated to selling things that work to customers that can pay for it, the stock trades for a little over one-quarter of its peak bubble price.

Sue's Penny-Ante Fraud

Let's have a closer look at the Koss fraud. Sue is charged with taking $31 million, but a look at the company's financial statements doesn't support that number. Or, to put it differently, if Sujata Sachdeva managed to swipe that much from Koss over the four to six years she's alleged to have taken it, someone needs to put her in charge of Citibank. That's how good she'd have to be.

Koss's finances, as reported to the Securities and Exchange Commission, have been stable over the past 12 years. Annual revenues have been $30 million to $50 million; cost of goods sold has run at 60% to 65% of sales; administrative costs, typically 18% to 22% of sales. During the years that Sue supposedly stole $31 million, Koss reported a total of $25 million to $30 million in both net income and operating cash flow.

To have taken $31 million from a company that generated less than $30 million prior to paying $15.5 million in dividends and buying back $9.1 million worth of stock, the clever Sue would've needed to be a juggler worthy of top billing in the Cirque du Soleil. It would have required a degree of falsification and manipulation of revenues, costs, and bank accounts that would have been utterly inescapable even to Grant Thornton, the company's sleepy outside auditor, and to Michael Koss, the class clown and son of the company's founder who held both the CEO and (clearly in name only) CFO titles.

So why is she charged with embezzling $31 million? Either I'm not seeing something in the numbers (unlikely), or the "unauthorized transactions" mentioned in her indictment were largely intracompany transfers intended to hide, at most, three or four million dollars worth of thefts. Maybe a lot less.

What Happened At Cisco?

To start, let's point something out: Cisco is roughly 1,000 times Koss's size, give or take. Last year's revenues round up to $37 billion. Lost in that rounding error would be Koss's revenues of $38 million.

Back in the late 1990s, there was a frenzy to bring high-speed Internet access to the masses. Part of that frenzy involved upgrading telephone lines from carrying voices, a narrowband activity requiring transmission capacity of 64 kilobits (thousands) per second, to data, requiring a transmission capacity measured in the megabits (millions) per second. Along with it, a new federal law required what had been the Bell System to lease their local wires to competitors, and allow them to put their equipment in Bell switching offices around the country.

Cisco, and its financial friends in California and New York, got involved in a big way. They sank money into startup Internet providers, and Cisco started "selling" them equipment. The financiers brought these companies public, with Cisco's involvement prominently mentioned to enhance the speculative appeal of their stock. Why was Cisco so important? Because, before all of this got going, that company had established a solid #1 position in computer networking. It's not too much of an exaggeration to say that, without Cisco's data routers, there'd have never been much of an Internet to begin with.

When it came to upgrading the telephone system to provide Internet access, Cisco seemed like a natural for the job. The reality was very different: Upgrading phone lines is much more complicated than it looks, and Cisco simply didn't know how to do it -- period. But it made a great story for Wall Street, and for a time the story was all that mattered. For a couple of years, not a lot of people cared if the stuff really worked. There was stock to sell, trades to be made, bonuses to be paid. Billions of dollars worth.

It all came crashing down in 2001 and 2002. The equipment that Cisco had "sold" to startup phone companies, on credit that Cisco itself had provided, sat unused, in many cases because it didn't work too well in the field. Customers defaulted on their loans, and most of Cisco's equipment wound up not in the telephone network but in landfills or silicon salvaging operations.  Cisco issued retroactive financial statements that wiped out the "sales," and left the upgrade business. The company's stock dropped from $80 a share to $10 a share, and everyone moved on.

Sue, You Fool, You Didn't Steal Enough Money

What about the ill-gotten bonuses and trading profits generated from the misleading "sales" reported by Cisco and hyped by its management, and its various financial friends? Those stayed securely in the pockets where they had been deposited. Cisco's CEO, John Chambers, a man possessing enough oily charm to coax a smile out of the most hardened Russian hooker, decided he'd better quit charming Wall Street with tales of 35% annual growth as far as the eye could see. Neither he nor anyone else went to jail for theft or fraud. Meanwhile, back at little ol' Koss Corp., Sue isn't going to be so lucky. She won't keep a thing. The feds are going to pick her bones clean, right down to her $800,000 house. In a desperate attempt to win leniency, her lawyers are arguing that she's crazy. Such is life in flyover country when you didn't swipe enough dough to hire yourself a p.r. staff.

No doubt about it, Sue Sachdeva is a thief. So's the poor schmuck who knocks over some banks and finds himself pursued by an entire FBI task force, all while the CEO of the same bank is looting thousands of times more money with a stroke of a pen. What's the use in being outraged? The rich gettin' richer ain't exactly a new story. "Holy Ecclesiastes 1:9, Batman, what did you expect?!" Okay, okay. But you'll have to forgive me if I don't get all that outraged at Sue, or the bank robber. Theirs are ancient stories too. Truly, there is no new thing under the sun.

Wednesday, January 20, 2010

Obama, Lame Duck

How easily the Democrats fold. And just how predictable it all was.

Martha Coakley's election defeat in Massachusetts deprives Democrats of their 60th seat in the Senate. The Republicans can now block Obama's major priority, health care reform. The stimulus was too small, so the economic recovery will soon peter out. There will be big Democratic losses in this fall's off-year elections, and Obama will be rendered a lame duck.

Obama will try to follow Bill Clinton's "triangulation" between liberal Democrats in Congress and right-wingers in Congress. The strategy won't work, because Obama does not have Clinton's moderate credentials. When 2012 rolls around, the front runner will be Mitt Romney, and he'll pick Tim Pawlenty, the governor of Minnesota, as his running mate. Obama won't have a chance.

That's the baseline scenario now, and many people will trace it back to yesterday's Massachusetts senatorial election. Even though that loss was much more a function of a lazy candidate and a complacent and divided Massachusetts Democratic Party, the consequences are much wider.

Coakley and the Massachusetts Democrats: Oil and Water

This scenario was in the cards well before Coakley came along, but it's probably worth pointing out a thing or two about her and her campaign. Or more to the point, her lack of one.

I lived in Massachusetts for 11 years, and recall Coakley as a cipher and a cold fish whose claim to support seemed rooted in her gender. Women staff the middle levels of the Democratic Party; without them, you wouldn't have any phone banks or campaign rallies. Women badly wanted one of their own in a visible position, and Coakley was their vehicle.

I can't blame the Democratic women of Massachusetts for wanting to break the hold of the old boys club, but good intentions aren't enough. Coakley was arrogant, reserved, entitled, and lazy, refusing even to shake hands with voters. Once the Senate race came along, she decided that she had already "earned" it by serving time as the state's attorney general. After handily winning her primary election and looking at polling that gave her a 30-point lead, she literally went on vacation -- a trip to the Cayman Islands. Until the final week of the race, there was no Coakley campaign apparatus at all. Between the primaries and the special election, she made 19 campaign appearances; her opponent made more than 60.

Then there is the Massachusetts Democratic Party, which itself tends toward arrogance, laziness, and factionalism. Coakley was from the western part of the state, and began her career as the district attorney for Middlesex County, which comprises the northwestern suburbs of Boston. The bulk of the party apparatus is controlled by the Irish of Suffolk County, i.e., Boston. They don't get along too well.

When Coakley crushed the Boston faction's candidate, Michael Capuano, in the primary, Boston washed its hands of the race. For example, Boston's mayor, Tom Menino, didn't even endorse Coakley. The Boston Globe noted that, along Blue Hill Avenue, a major arterial through the heart of Jamaica Plain, a heavily Democratic neighborhood, there were only two -- count 'em, two -- Coakley signs to be seen on Election Day. Coakley won the usual big percentages in Boston, but the Democratic organization there did not mobilize to produce a high turnout.

Barack Obama, Meet Jimmy Carter and Bill Clinton

President Carter entered office with 62 Democratic senators to 38 Republicans, and 292 Democrats in the House to 143 Republicans. He should have had clear sailing, but the result was very different. Carter's first act was to clash with Democrats on the issue of water projects in the western United States. He was soon derided within the party for his aloofness and arrogance. Throw in a narrow personal base of popularity, a troubled economy, and a prolonged crisis following the seizure of the U.S. embassy in Iran, and Carter was toast.

So, too, was the Democratic Party's congressional and institutional apparatus, which had failed to adapt to the social, economic, and demographic changes of the 1960s and '70s, and changes in the global economy. Out of ideas and split between its liberal and conservative wings, it was ripe for a well-planned conservative invasion. Ronald Reagan was the vehicle, and thus ended a half-century of Democratic dominance in Washington

All of those conditions pretty much hold today; the Democrats have done little repair work. Democratic presidential victories in 1992, 1996, and 2008 have been narrowly-based flukes, based on popular unease about the economy and the personal appeal of presidential candidates. The Democrats have no unifying ideas to match extraordinary Republican unity behind a mixture of economic fascism and right-wing Christian social reaction.

Democratic presidential candidates are elected not for their ideas, but on their "buzz," their p.r. skills, and on public economic dissatisfaction of the moment. Once in office they sputter, and when they hit a setback they sound a retreat. It happened to Carter and Clinton, and now it's happening to Obama.

The 2012 Election Should Be Strictly Economic, Right? Maybe Not.

Ever since 1948, it's been possible to call presidential elections by observing the direction of the national unemployment rate in the second quarter of a presidential election year.

If unemployment rises between March and June, as it did in 1952, 1976, 1980, 1992, and 2008, the incumbent party will lose decisively. If it stays level, as it did in 1960, 1968, and 2000, the incumbent party will lose narrowly. If it falls, as it did in 1964, 1972, 1984, 1988, 1996, and 2004, the incumbent party will win. Only in 1956, when unemployment rose in the second quarter, did the incumbent win anyway. And that's only because, unlike in other years, the change was small and did not represent an overall direction.

Obama's only hope is that the economy begins a real recovery by early 2012. Even then, however, I wonder whether the rule will hold. In 2008, the 0.5% rise in unemployment was very large by historical standards, but Obama won by only 7 percentage points. I think his race shaved about 5 points from his margin, and will do the same again. It's going to take a major economic upswing in early 2012 to save Obama.

But Is Obama Worth Saving?

What change have we seen from this president? The U.S. is engaged in two wars, like it was before. Health care reform will collapse, and the next act in the play will be the radical scaling back -- if not outright destruction -- of Medicare. Various Democratic constituencies will lose on the so-called "values" issues, such as gay rights and abortion. The Supreme Court will move to the right, as the emerging de facto Republican control of the Senate forces Obama to appoint conservatives to fill vacancies.

It's not an encouraging picture. I'd like to imagine that the Democrats will rally, but what is there to rally to? What do Democrats believe? Half of the party clings to the New Deal and the social liberalism of the 1970s. The other half of the party appears to be essentially Republican. There is little underlying consensus about what defines Democrats, something that the Republicans have no trouble doing.

Some will trace Obama's fall to the Massachusetts election, but I trace it to the spring and summer of 2009, when both the White House and the congressional Democrats refused to respond to the Republican Party's scorched-earth opposition to the stimulus and to health care reform. It was plain to see, but Obama and the congressional Democrats did nothing. I think it's because they didn't really know what they believe. That's a fatal problem in today's American politics.

Bottom line: Democrats, what do you believe in? Anything? Is it time to think about replacing the Democratic Party, and if so, with what?

Thursday, January 7, 2010

Electric Car Costs

As the p.r. campaign for the Nissan Leaf starts to heat up, we're going to be hearing about cost comparisons between electric vehicles (EVs) and existing types.

Here in Seattle, electricity costs 9.14 cents per kilowatt hour (kWh). The Leaf will use 24 kWh to go 100 miles, which works out to a fuel cost of $2.20 for 100 miles, or 2.2 cents per mile. Gas is on the expensive side here, at $3 a gallon for regular. For a gas-fueled Japanese compact of Leaf's size, I'd estimate 30 miles per gallon, which is $10 for 100 miles or 10 cents a mile. The new diesels get 50 miles a gallon, and hybrids range from 40 mpg to 50 mpg, making their cost per mile 5 cents to 6 cents.

So, the Leaf kicks ass, right?

Not so fast. The Leaf's "gas tank" is a lithium-ion battery, and they wear out. Nissan says it will lease the batteries separately. It's reasonable to include those leasing charges in the fuel costs. Nissan hasn't said what the lease rate will be. In Seattle, the break-even point relative to a gas car would be $78 a month in typical use (12,000 miles a year), and $28 a month relative to a diesel.

Hybrids Use Batteries Too

Even though hybrid batteries aren't leased, their replacement cost is properly included in fuel costs. How much are those costs? Hard to say. A new one from the dealer costs $3,500 including installation, but no one knows how long they last. Toyota warranties the Prius battery for 8 years/100,000 miles, and the word seems to be that in normal use they last quite a bit longer.

There are a few ways to skin that cat. One would be to assume that a typical buyer of a new Prius would never have to replace a battery, and therefore the Leaf's battery leasing break-even point relative to a hybrid would be the same $28/month relative to a diesel. Some other hybrids get closer to 40 mpg, so the Leaf battery lease break-even points relative to them would be $50 or $55 a month. Another method would be to add a penny or two a mile to hybrid fuel costs (and therefore $10 or $20 a month to Leaf break-even battery leasing rates relative to hybrids) to reflect the reduced value of a used hybrid emanating from the buyer's realization that he will be on the hook to swap out the battery.

In the real world, the battery cost issue doesn't look like much of a problem for the hybrids. All of this might be cause for Nissan to forget about battery leasing and grant the same warranty that Toyota does. In that case, there'd be no leasing charge to add onto fuel costs and the fuel cost comparisons would look great. Could it be that the leasing idea is just a security blanket for customers worried about battery life? If so, then Nissan's leasing fee should be nominal, no more than $5 or $10 a month.

The alternative might lie in the nature of a true EV's battery versus a hybrid's battery. As the sole power source, an EV's battery is larger, heavier, and more expensive than a hybrid's. What about its longevity? The gas engine in a hybrid could mask battery run-down in a way that would be impossible in a true EV.  Nissan will have a pretty good idea along those lines, so to the extent that battery leasing charges are more than nominal, the message will be that EV batteries won't last very long.

Other Gas/Diesel Costs

Anyone who thinks that the price of gas at the pump reflects its full cost is either blind, crazy, or Dick Cheney. Some time ago, I calculated the cost of the wars in Iraq and Afghanistan at 60 cents a gallon, or 2 cents a mile for gas cars and 1 cent for diesels. You'd probably have to double that cost in real life, to reflect opportunity costs, i.e., the benefits lost by not deploying the same resources in the productive economy.

So, we ought to raise the cost of gas to 14 cents a mile and diesel to 7 cents a mile. Which does not include the cost of the tears from the families of the dead in those wars, the agony of the wounded, the stress of division at home, or the irritation of having to learn about why Sunnis and Shiites hate each other and the Pashtuns hate us.

Then there is pollution, both smog that aggravates heart disease and asthma, and carbon dioxide that causes global warming. Gas and diesel are culprits, but so are the coal-fired power plants that will make electric cars go. My strong gut feeling is that internal combustion engines, in the aggregate, are worse for the environment than coal fired plants, but I don't know the numbers.

Of course, if we had good leadership, a reasonably clean government, and clear vision, we'd erect windmills to provide the fuel for EVs. But that is almost certainly an impossible dream, given the sorry state that we're in. Alas, for the foreseeable future, just about everyone outside of hydro-powered Seattle is going to have to assume that EVs will add to pollution generated by coal-fired power plants, and waste from nuclear plants.

The Bottom Line

Nissan has said that the cost of battery leases will not bring fuel costs for its Leaf above that of gas-powered cars. Nevertheless, I expect that the first Leaf will not be a value proposition. It'll cost more than a conventional car, and I expect that fully-loaded fuel costs will be higher than a diesel and close to those of a gas-powered model, if not higher.

But that's not unusual for the first version of a new technology. Over time, I expect the comparison to move inexorably in favor EVs, as gasoline gets more expensive and volume production of EVs and components brings costs down. EV mechanics are radically simpler than gas and diesel vehicles, and hybrid batteries are already getting cheaper. Alternative forms of electricity storage -- larger-scale capacitors -- are on the drawing boards, and they'll be cheaper and offer much better range.

You can expect the oil companies to mount a stealth p.r. blitz against EVs soon. All kinds of numbers will be thrown around. Whopping lies will be told, and the stenographers of the media will be all too happy to pass 'em along under the guise of "reporting" on the "controversy behind the numbers." But from what I now know, I'll be in the EV camp.

Addendum: "Miles Per Gallon"

EVs face an issue when making fuel economy comparisons with conventional vehicles. Because a true EV doesn't use any gas, any "miles per gallon" figure is theoretical, based solely on comparing the costs of electricity and gasoline. And then there is the battery cost issue; should that be included in an "mpg" figure, or not?

At 2.2 cents a mile for electricity, and gas at $3 a gallon, and without battery leasing or replacement included, the Nissan Leaf gets "136 mpg." If gas goes to $4 a gallon and electricity stays the same, then the Leaf gets "181 mpg." In the summer of 2007, I paid $5 a gallon for regular at a station near L.A. That year, the Leaf would have gotten "227 mpg." All without using a drop of gasoline.

The point: Beware of "MPG" claims for pure EVs. Think "fuel cost per mile" instead.

Tuesday, January 5, 2010

Advice To An Aspiring Journalist

An old friend's niece wanted advice on a future career in journalism, including whether or not she should pursue the editorship of the University of Illinois' Daily Illini. I sent two replies, one a brief note urging her to try for the job, and later the one below.

I decided to put down some thoughts about the crisis in journalism. In doing so I risk the sort of pedantry that begins to afflict people once they hit the age of 40 or so, and typically keeps growing over time. I'll try to steer as clear of it as I can, but some of it is inevitable.

Newspapers have been the heart and soul of journalism for a couple hundred years, and they are dying. It's not simply a shift of publishing technology. The Internet, which is misunderstood, has made it possible for everyone to be an unfiltered publisher, and censor, and more importantly it has steadily eroded the financial base that makes newspapers possible. I doubt newspapers as we know them will exist in 20 years, and maybe not even in 10 years.

A side note about the Internet. There is no “Internet,” per se. Rather, it is a label applied to the family of technologies that allow access to data libraries stored on computers connected to the telecommunications network. What once existed to carry voices between two points now carries digital codes that evoke sounds and visual images. The telecom network itself has been a series of computers since the 1970s, and the peripheral devices connected to that network have been computers since the 1990s.

In the last 15 years or so, the peripherals have envolved to facilitate very cheap mass storage of coded data, high-capacity transmission all the way to the endpoints, and easy manipulation and transformation of data to allow its presentation as sounds and images. The effect has been to critically undermine a publisher's ability to control what information he possesses, and to create alternative means of delivering it.

It Started With The Loss of Classified Advertising

Before E-Bay and Craig's List existed, I created a business plan for computerized classified ads. I did it as a business school exercise in 1989. I noted that 40% of newspaper revenue consisted of classified advertising broken down into four categories: employment, housing, automobiles, and general merchandise. Classified ads were ripe for the picking. Newsprint rubs off on readers' hands; space limitations prevent full descriptions and pictures; searches and comparisons were tedious; rates were expensive; distribution of information was local and therefore inefficient.

Today, Ebay and Craig's List dominate the advertising of general merchandise. Auto dominates the advertising of used cars. Housing is a mixed bag, with the newspapers hanging on mainly because all real estate is local and they've gone on-line themselves. Employment is also an area of strength for newspapers, because it lends itself to centralization yet is local. The alternative press, which once rested heavily on personal ads, many of them explicit, has been decimated by the growth of online personals, including but by no means limited to Craig's List.

None of this will change, and the result has been the gutting of newspaper budgets and staffs. There has been a downward spiral in which there is less and less of interest in the newspaper, because there aren't the staff members to produce original content. Meanwhile, the Internet's facilitation of easy, unfiltered publishing alternatives has created a thriving competitive threat among the blogs. None of this has been helped by the newspaper industry's general lack of management vision and talent, as exemplified by the inability of virtually every one of them to charge their readers for online access.

I think that readers eventually will pay for online access, but by the time it happens newspapers will be dead and their content will be changed forever. As an old guy, I find this lamentable, and worry that we will lose some critical benefits newspaper journalism has delivered over the years, most notably the detailed scrutiny of government, and their function as a shared reality tying communities together. If I were younger, I might be more inclined to see the great opportunities ahead. You're in college and an aspiring journalist, which means that you are heading straight into a tornado. I hope you're a storm chaser is all I can say, because this is one hell of a storm.

The Traditional Journalism Career Path Is Dying, or Dead

The old model of attending journalism school and then getting a job at a small market newspaper, and then climbing the ladder toward the major metros, is dying fast and in fact may well already be dead. The major metros are getting rid of people, and soon enough I think we'll start to see some major cities without even a single newspaper. At or near the top of my list would be San Diego, but maybe it'll be a different place. I'm not sure that it really matters.

So, if you still want to be a journalist, what do you do? For starters, I don't think it's possible to make any fixed plans in that industry past college. What you can do, though, is take advantage of the opportunities within the college environment to think about what's happening and prepare yourself for what's coming in your life.

The economic underpinnings of newspapers, and their function in society, are vanishing, but where they still exist you should be involved. The opportunity to be the editor of the Daily Illini is not to be passed up. The only way to learn about journalism is to practice it, and the campus paper is an excellent vehicle for that. Also, as I noted in a prior e-mail, it is an executive, leadership position that will augment your appeal to any potential employer in any field. Of all the decisions you face, that one is the easiest.

Beyond that, I think you'd do well to explore the elements that go into journalism. Study the history of journalism. I don't think you need a full course in the subject; instead, ask a professor for a book or two. Basically, you need to understand where journalism came from to begin with, so you can understand its essential appeal over time. It started as travel writing, including specialized reports from diplomats, traders, spies, and military forces. Journalism was in demand by people who needed reliable information.

From there, it grew into political activism. All of the American newspapers prior to the Civil War were controlled by political factions. The first amendment says nothing about accuracy or objectivity; it was assumed that out of the cacaphony, people would glean the truth. Today's blogs are pre-Civil War journalism, with all of the same warts. The next phase was introduced by the Civil War; people wanted reliable, truthful battle accounts. Objectivity was a creature of the marketplace, and it was facilitated by technological advances that permitted wide, cheap distribution of the product. It was supported by paid advertising from businesses who also had a commercial interest in a credible product that would be widely read.

The Timeless Elements of Journalism

What's relevant about all of that is that people have a hunger for reliable information. Newspapers will die, but the demand for reliable information will not. That's the key here. It is enduring and timeless.

In considering what's reliable, a journalist needs to be able to separate fact from opinion. Even if the objective model that predominated after the Civil War, and especially after World War II, goes away for a time, those who present slanted viewpoints need to grasp and accommodate objective reality. There are eventually limits on what level of propaganda readers and/or viewers will accept. So, if you have the time left to do it, I'd recommend an introductory philosophy class, and if it's offered, a logic class.

Journalism has always been a rapidly spoiling product, so I think there is only limited utility in detailed study of great journalism of the past for its own sake. To the extent you do study past journalists, do it as a means of getting to the timeless essentials. There, I'd recommend Mark Twain and H.L. Mencken for their descriptions and commentaries on their times. I think they were the greatest we had, and that their critical methods go to the heart of what journalism will always be.

As for writing itself, most journalism is forgettable, hackneyed crap. People rarely have the time to do it any other way. Two exceptions that I know of were the Kansas City Star of the 1950s, and the New York Times of the 1980s and 1990s. The Star of that era produced something akin to daily poetry, using an economical, unvarnished, factual, direct style that was also wryly humorous (often hilarious) and somehow left enough room for the reader to do some thinking on his own. The New York Times, at its peak, was complete yet concise and occasionally even lyrical, and got to the essence of the matter. Even today, albeit diminished, the Times has moments of greatness. In any case, it is worth finding and reading archives of the Star from the '50s and the Times from the '80s and '90s as models for great daily exposition. 

Campus Journalism: Look Past Student Government

If you wind up as the editor of the Illini, latch onto anyone who has a passion for telling stories in a clear, concise, economical, relevant, and interesting way. In college newspapers, the prize goes to those who show up. One thing I would point out (and tried to point out to others when I worked on my college paper) is that a university is a treasure of interesting people and topics. The average college paper spends way too much time on the student government, and far too little time on the amazing things happening in the various academic departments.

Find yourself a Mark Twain, or better yet two of three of them, and send them into the biochemistry department to see what diseases they are getting ready to loose upon the world, or cure, or both. Ask the history department what parallels they see between now and then. Explain why so many English majors want to kill themselves. Are football players really that stupid, or do they just inhabit a non-Euclidean alternate universe? The list is endless, and just about all of it is ignored by the average college paper. Report it with style, grace, verve, passion, acceptance, some mercy, and a great sense of humor, and you'll be shocked at how many people will be clamoring for what you produce.

I've gone too far already, so I'll wrap this up with my sincere and heartfelt best wishes. I hope you apply for that editorship, win the job, and then run with it. I don't think you'll regret it. I tell my nieces that nothing they read is ever wasted, and I pretty much think the same about anything you write, as long as you care about the subject, respect your reader's intelligence, and value his time. Good luck!