An odd definition of leadership

The US Secretary of Education, Margaret Spellings, has been a controversial figure. She was a major architect of No Child Left Behind - which purported to improve performance in K-12 education in the country. There is a good deal of dispute about whether the approach - which links a set of specific performance standards with some increase in federal largess - will actually achieve the goal(of improving our schools). NCLB measures a lot of stuff but as Hayek reminded us in The Counter Revolution of Science - just because you can count it does not mean you are actually measuring anything meaningful. A real issue in NCLB is whether a national set of standards is a good idea. Homogenization may improve milk, but perhaps not education.

When Spellings moved from the White House domestic policy staff to the Department of Education she began to apply the lessons she learned to higher education. The establishment in higher education has had a good long run in improving value of their product, more government money and a relatively free pass at deciding what they should tell the rest of the nation about what they were doing. Spellings first act was to create a commission, headed by a Texan named Charles Miller, who tried to run the commission like a fiefdom. He was guilty of the very sin that he and Spellings accused higher education of. He produced draft reports that had not been read by any other member of the commission. He often spoke without any evidence that he had bothered to look at more than just the most cursory level of data. The final report of the commission had a series of recommendations which ranged between mundane and outrageous. Many of the best were duplicative of current efforts going on in some part of higher education. They yammered, as many political figures have, about "college costs" without thinking carefully about the financial structure of higher education. If one were to grade the quality of their work it might get a C - they did identify some issues that higher education should work on but missed many more. But on process they deserved an F. Trouble was, much of higher education tried to diss the commission's work - and that was a mistake.

I first encountered Secretary Spellings when the report was in progress. She came to a meeting of higher education people who were supposed to advise the Department on data issues. The Secretary's deputy came into the room and told us that she would only speak when all of the luncheon plates had been cleared and would then only accept written questions. I felt like I was in the Education Policy Gulag.

Some members of the leadership in higher education now claim that we should listen to the Secretary because she represents the general public. Just because the Secretary has spoken about issues that concern the public does not in any way imply that she represents their views.

There is real concern about how much a college education costs. And not just a little worry and resignation about the haughtiness of some in the higher education establishment. But why should anyone in higher education listen to a report or to a public figure who so violates the basic principles of public debate? Higher education needs to continue and even increase the initiatives it has begun on transparency - we need to be able to tell others what we do and how we spend the dough we get. We also need to do some conscientious work on our cost structures. Both of those initiatives will have both short and long term elements but they need to continue to build. However, even if Spellings has some things right - should not suggest that we should engage with her. Working toward solutions takes listening on both sides and Spellings clearly has no appreciation for anything but her own pat solutions. That is not leadership. And I find it odd that anyone in higher education would suggest that the way to improvement is to begin where Spellings is. In higher education, homogenization is exactly not what we need. And for Spellings the rich diversity of higher education in this country - which offers students multiple opportunities to enter and grow - would be wiped out were her ideas to become real. As one who has worked with the independent sector for more than three decades that would be a bizarre thing to support.

Links to my past

Yesterday, at the end of the conference we decided to see if we could find the summer home that one of my great aunts once had. She was a New Yorker and for several years in the 1920s and 1930s she had a house outside of Brattleboro called Quiturkare. (Quit your care). My mother went to summer camp near there and my two aunts had loads of stories about the place.

The problem was that all we had was a rough address. My mother, before she died in 1991, was in Vermont and scouted the place out. But literally all we had was the name of the road it was on. The place is outside of the main city and to get there you need to go over some pretty rustic roads. But after about an hour of moving to and fro - we found it. The picture of the front porch is similar to a house that another part of the family had in Allendale, New Jersey. And I think somewhere in our raft of old family photos we probably have one of some members of our family there in Vermont.

It was odd in that although I had never been there, I felt a slight connection. The house is near the top of a hill and so looks out over the valley. It looks like it could be a great summer residence. I wonder who owned it after my great aunt passed away. In any event it was a pleasant drive and a wonderful find. My son the history buff would have probably also enjoyed being there.

Gasoline's Elasticity of Demand

In the middle 1970s I did a short stint in the White House (my second) working with William Simon on the creation of the Federal Energy Office. One of the most important lessons I learned then was about the ultimate price responsiveness of the gasoline market. Within the office, which was several months of helter skelter activity, there was a fierce debate about whether the quick rise in prices (during the initial days of the Arab oil embargo gasoline prices grew by several fold - at a much higher rate than the recent rise from $3-4 per gallon) would dampen consumption in the short or long term.

Simon was a wonderful person to work with. Ed Feulner, the President of Heritage Foundation described Simon as "a mean, nasty, tough bond trader who took no BS from anyone." He was also quick to judge people. Luckily for me he thought I did pretty good work. He was in the office possibly an hour before most of his staff and often stayed later than many of us. He was a demanding boss. The debate about the elasticity of demand was pretty basic. With the jump in prices would consumption of gasoline drop? How much of a jump would cause how much of a drop?

Simon argued that gasoline was an almost infinitely responsive commodity - i.e. as prices rose, demand would dampen - people would drive less. I argued at the time that there was a lot less elasticity because there were some needs for driving that people would not give up. I was wrong. In this cycle SImon's initial thoughts have been reinforced. Through May of this year Americans drove 29.9 million fewer miles than they did a year ago. The May-May decline (2007-2008) was the largest in 66 years. Since December three of the largest month declines have happened since December. That reduction amounts to a bit under 4% - year to year.

Are there allocational effects (does the increase in price hurt people with lower resources more than upper income people)? Of course. But as Simon taught me more than 30 years ago - the market here is pretty responsive.

Can you hear me now....?

Verizon had a guidance call yesterday where they admitted that sales of the new 3G iPhone had "minimally short-term impact" and that the effect was "disproportionally less" than one would expect than the share to share margin would predict. Unfortunately, in the name of transparency, Verizon did not disclose any precise numbers. The Verizon people also did a knock on AT&T saying that they did not have to rely on a single product. (As if that were true.)

AT&T is continuing to roll out their 3G (although as we found in upstate New York they need to do more). From what Verizon released it sound like Steve Ballmer was advising them about transparency.

Hildene

We visited the home of Robert Todd Lincoln yesterday in Manchester. He was the only surviving child of Abraham Lincoln. Lincoln first came to Manchester and stayed at the Equinox in the middle 1860s with his mother. He came back for many summers and then Hildene was built in 1905. The name comes from a combination of the gaelic names for hill and valley.

Lincoln served the government in a couple of administrations in diplomatic and agency posts. But he made his fortune in the Pullman company. When he was at Hildene he did business with the company in Chicago by making daily dispatches on the train to Chicago. When Robert died in 1926 it passed through a couple of other members of the family until it was acquired by a trust who then restored the grounds. Unlike many other historic buildings about 90% of the furnishings of the house are authentic to the time when Lincoln lived there. We went on a formal tour - which was well worth the time - our guide, a retired news guy from NBC, had a wry sense of humor but was filled with facts about both the Lincoln family and the life and times of the house.

He told us about one of the last residents of the house, Peggy Lincoln Beckwith, who drove fast cars and flew planes in a time when few women did that. The diary entry on this page is from her role in christening the the USS Abraham Lincoln. Our guide told us about the real conflicts that the Lincoln descendents had with their legacy. Robert Lincoln would appear at Lincoln commemorations but would not speak. After a lot of prompting Peggy showed up for the christening but her note in the diary reflects the importance of the event to her.

The house has 412 acres around it. It overlooks the Battenkill valley which is absolutely stunning. We were there on a day when there was a bit of mist - it was beautiful. At the back of the house is a formal summer garden. There is one shot of the garden. The interior shot is of Robert Lincoln's study. It is very close to an ideal study for me - roomy, a bit formal and warm.
There are 95 more photos on my Flickr site. Hildene is a wonderful resource, if you are in Manchester, it is well worth the time. If you are not it is well worth the trip.

E Pluribus Unum

When Al Gore got it so wrong several years ago (out of one many) he pointed out a fundamental difference in how some people think about the country. What has struck me on this trip was how different this part of the country is from where I live - and yet there are things about it which I find similar to the West.

We left the Cooperstown area today on the way to Vermont. Most of the trip was from small town New York to small town Vermont (that is, in part, a contradiction of terms - the largest town in Vermont is still very small). About half way through the trip we stopped near Saratoga to visit a friend who I had worked with in California who moved back to his home area after he retired. His house is on the lake in Saratoga and was a family "camp" until he rebuilt it several years ago - it is now a year round residence.

In my mind my friend has constructed an ideal retirement. He spends some time each year working in Africa on a project that he discovered by Googling "Volunteer Africa" - he decided to go there and lend his expertise in community building. He has now done that for several years. Each year he goes back and builds a bit more. He also does tutoring of the track staff at Saratoga Race Track. In both cases he discovered a need and figured out how to fill it. He is less concerned about making a mark than in figuring out a way to add something back to his community. The generosity of his spirit is quite compelling.

We found people on the whole trip who were friendly and helpful - most of the trip was on smaller roads with a lot of turns. The Google Maps were mostly right - so for both parts of the trip we found our way pretty easily. In one case we stopped to take the first picture and almost immediately a guy stopped and asked if we were lost - he then suggested a different way to get to Vermont - which because a bridge was out on the route we were going to take.

Tonight a small group of us saluted a colleague who has taken a job in a related field but outside what I do for a living. She is a good young professional who grew in her role in Vermont who is now working for the University of Vermont. She has a good career ahead of her. When this young lawyer began her career I got to know her because I knew her father. It has been fun to watch her advance.

The three pictures are somewhat representative of our day. The first is a classic house we saw on one of the back roads we drove. The architecture in this part of the country has a lot of these era of housing and also a lot of victorians. But there are also some classic brick houses. My friend in the Saratoga area described the winters as brutal - that seemed to be a common descriptor. The second looks a lot like most of the roads we were on. The third is of an moth that looks a lot like a Hummingbird. Obviously this part is very different from our time in New York City and even Cooperstown - but it shows the rich diversity of what puts us together.

One more item on the National Baseball Hall of Fame

We went yesterday again to the Hall of Fame and the crowds were a lot larger. Yesterday too there were a lot of the hall of famers there on the street signing autographs. One struck us in a particular way. Pete Rose was there, but not on the street. Rose has been barred from being a hall of famer, because Bart Giamatti, the then commissioner chose to enforce a rule. Rose's on the field accomplishments are covered well on the second floor and on the third. His jersey is there. So are all his records. In an NPR interview a few years ago an attorney named John Dowd said "In my judgment, I don't think there are any circumstances that justify his return to the game... If you let Rose back in, then the message to anyone who gambles and gambles on the game is that if you throw enough of a public relations tantrum and admit that you did it, then you ought to be back in the game." Rose, at this point could be considered by the veterans committee but when that became possible (in 2007) his name did not appear on the ballot. To get on the ballot he needs to be taken off the ineligible list. Evidently Rose visits every year and charges for his autographs. That may say something about his financial situation but I think it also says something about him.

I think the ban is right. "Charlie Hustle" was a superb baseball player. He contributed some significant records. But for a long time he also refused to accept responsibility for betting on baseball games - which is not allowed by the rules. There is no way to get around that fact. The Hall of Fame recognizes his achievements in a sound way. Charlie Hustle remains on the same list that Shoeless Joe Jackson does. The Hall of Fame recognizes both players, just not on the first floor.

The Baseball Hall of Fame

We visited the Baseball Hall of Fame on Induction Weekend and found it to be a wonderful place. On Sunday six new inductees will be added - Goose Gossage, Barney Dryfuss, Walter O'Malley, Dick Williams, Bowie Kuhn and Billy Southworth will be added. Oddly only the closing ace Gossage was primarily a player. But each of the others made a contribution to the game. Two managers and three executives are in that group. Dryfuss was a Pirates owner who came to the US in 1885 from Germany. He owned the team when Honus Wagner played on it. Branch Rickey is said to have argued that Dryfuss was "the best judge of players he had ever seen."

I am especially appreciative of O'Malley (naturally) who brought vision to the Dodger organization for a long time. O'Malley helped to bring the Dodgers to LA but his real gift was the management of the team. Dodger stadium which is now almost 50 years old - was one of the first modern stadiums. He understood the value of a farm system. From everything I have read he was also a very gracious man. One quote said the first thing he would have done, were he alive, when finding out about his selection, would have been to call all the people who worked with him to thank them.

Cooperstown is not exactly in the center of an easy to reach venue but it is well worth the trip. The ride to it from NYC is through some farm country which at this time of year is verdant. There are lots of things to do while you are there. The Hall of Fame is laid out to bring you to the plaques first but then there are three floors of exhibits including a good section on the Negro Leagues and the World Series. Outside there is a park which is very pretty. I was particularly struck by the statues of Satchel Paige, Johnny Podres and Roy Campanella.

Business Strategy 101

The Wall Street Journal obtained an internal strategy memo from Microsoft CEO Steve Ballmer. It is an oddly defensive letter. There are three paragraphs that are particularly interesting. Having just been to the Baseball Hall of Fame (to be covered in another post) I would remind Mr. Ballmer of Professor Satchel Paige's advice on competitive strategy - Don't look back. Something might be gaining on you. Microsoft makes some very good products but Ballmer seems obsessed with the competition. Here are the two paragraphs in the memo that caught my eye. (His language is in envious green for obvious reasons.)

Apple: In the competition between PCs and Macs, we outsell Apple 30-to-1. But there is no doubt that Apple is thriving. Why? Because they are good at providing an experience that is narrow but complete, while our commitment to choice often comes with some compromises to the end-to-end experience. Today, we’re changing the way we work with hardware vendors to ensure that we can provide complete experiences with absolutely no compromises. We’ll do the same with phones—providing choice as we work to create great end-to-end experiences.

For the last couple of quarters Apple, as we have covered before, has been batting it out of the park. The 30 to 1 comparison is a hard one to justify. Apple made $1.1 billion in the most recent quarter. Microsoft's most recent quarter pegged their profits at about $4.4 billion. Unit share of sales of personal computers show Apple selling as high as 14% of market share (or when counting profits because Apple sells at a higher margin 25%) of the US market. Ballmer does not mention the music player business. (That is probably a good idea - the Zune, the Microsoft music player - sales may hit 2 million units TOTAL.) When compared to the iPod, Apple sells more in a month than Microsoft has sold since it introduced the player. On phones the sales of the 3G seem to be cutting into Microsoft's share of the Smartphone market. He also does not mention the integration of devices. Apple's push technology has had a rough rollout. But the similarities of the iTunes platform for synching devices and their MobileMe platform cannot be understated. Apple seems to be going after the Exchange model which Microsoft has led on for so long. But they are not trying to copy - rather they are trying to change the game. If Apple is able to move the concept down to the individual - from the more centralized model that exchange relies on - the comparison that Ballmer speaks about on enterprise (especially in what he talks about in his Google comments) maybe out of date - he may be competing in a space where the market has moved on. So his comparisons are fanciful at best.

· Google: We continue to compete with Google on two fronts—in the enterprise, where we lead; and in search, where we trail. In search, our technology has come a long way in a very short time and it’s an area where we’ll continue to invest to be a market leader. Why? Because search is the key to unlocking the enormous market opportunities in advertising, and it is an area that is ripe for innovation. In the coming years, we’ll make progress against Google in search first by upping the ante in R&D through organic innovation and strategic acquisitions. Second, we will out-innovate Google in key areas—we’re already seeing this in our maps and news search. Third, we are going to reinvent the search category through user experience and business model innovation. We’ll introduce new approaches that move beyond a white page with 10 blue links to provide customers with a customized view of their world. This is a long-term battle for our company—and it’s one we’ll continue to fight with persistence and tenacity.

This sounds an awful lot like whistling in a graveyard. I am not sure what he means by enterprise here - Microsoft does not have a competing product to Google Documents - which are an increasingly useful way to do document sharing and creation in workgroups. The search business is morphing very quickly - I believe most people still rely more on Google maps than Microsoft maps (although the Microsoft map function is pretty good.) And the geo-tagging features of Google's products seem to be evolving in positive ways almost daily. As I have used the social networking features of my iPhone, I have begun to think about how the features in Whrrl, or Loopt could be used in enterprises. Microsoft competes in that arena but they are hardly the winner.

FInally, there is his conclusion.(This one is red because that is what "monkey boy" is famous for - screaming to the troops.) Looking ahead, I see an incredibly bright future for our company. As I said at the June 27th Town Hall for Bill, we are the best in the world at doing software and nobody should be confused about this. It doesn’t mean that we can’t improve, but nobody is better than we are. Nobody works harder than we do. Nobody is more tenacious than we are. We’re investing more broadly and more seriously than anybody else. Our opportunities to change the world have never been greater.

Microsoft makes some very good products. But their vision, with Ballmer's leadership, has been limited. If, as many independent observers believe, the computing world is moving to Web based platforms - then it's software model is increasingly outdated. He describes the attempt to acquire Yahoo as a "tactic not a strategy" - I'm not even sure what that means. But it surely is not the reality. A good part of the reason to acquire Yahoo was that Ballmer and his team believed that Yahoo had some capabilities that were better than what Microsoft had in the same space. If this was merely a "tactic, then why spend all that energy which could have been better spent on perfecting the skills internally? Ultimately, if as one other writer on Ballmer's memo described it Microsoft would like to offer an "Apple-like experience" - why bother? Imitation may be the sincerest form of strategy but it is not a very good way to compete in a market where change is the byword.

Evaluating the iPhone Application Store

In the first 10 days of the iPhone Application store 25 million applications were downloaded - 90% of those were priced at $10 or less.

I have downloaded a mix of very useful tools and a couple of games.

Here is what I have so far.

**Baseball - A very useful and free application that contains baseball stats from 1880. Well done and simple
Jirbo Break - a breakout game in two levels (one free, one reasonably priced) - lots of levels and fun but not too demanding
Bubblewrap - an inane app which allows you to pop bubble wrap - fun, free but I probably will not keep it on the phone.
**Enigmo - A very challenging puzzle which asks you to move a bunch of objects around to capture water - the graphics are wonderful and the game is fun.
Hotels.com - an implementation of the popular hotels search site for the phone. Free
**iBeer - a funny program which pours you a glass of beer. I bought the premium version which is still inexpensive.
Jott- A pretty good todo list which includes both written and voice prompts
**Loopt - a social networking tool which I have used a lot - which locates where you are and then finds contacts near you. I looped a couple of people yesterday at the Yankees game.
**Morocco - A free implementation of Reversi - this is well done with a couple of levels - the hard one is a challenge.
Movies.ap - Searches for movies - like movies.com
Remote - allows you to turn the phone into a remote controller for your apple devices.
Shazam - An amazing free application which listens to songs and then tells you what it is in 20 seconds. This is good for some kinds of music - mostly not the kinds I listen to but I have amazed some friends while listening to a radio and picking out a tune.
Tap Tap Revenge - a free game using the touch screen and music titles. I will probably not keep this on the phone.
**Where- Another social networking tool which uses location features to then offer a bunch of tips about things to do where you are. I like this one a lot. For example - want to find gas or a starbucks - this does it pretty well.
**Whrrl - Another social networking tool which locates friends in your area but also allows user reviews of things on your map. As this network grows this will become more useful.

Among those the ones with the stars are my top picks so far. Based on that inadequate survey there is a mix of useful tools and games.

The attraction of the iPhone to AT&T

The release of AT&T's quarterly results offered some insight about how important the iPhone is to their long term wireless strategy. First, compared to last year, the company sold twice the number of iPhones. Most stores are facing backlogs in demand that can stretch to three weeks. CEO Randall Stevenson said "customer response has been everything we had anticipated and more."

Smartphone customers produce about double the average revenue than traditional users - in part because of the added data plans. In an industry which many observers had argued had become commoditized (phones were approaching almost a zero cost and slower growth) this segment is a bright spot.

By the way in Apple's quarterly release, they sold 717,000 phones during the completed quarter which added $419 million to the bottom line (although some of the iPhone revenue is deferred). In the first 10 days of the Application store - 25 million new applications were downloaded (I contributed 15 to that total) which will only increase net traffic.

The Political Gabfest

Slate has had a podcast which in the primary season was a pretty good indication of lefty thinking. They showed a bias toward Obama. But after the primary season they are increasingly so devoted to proving that Obama is a messiah that their commentary has lost interest for me. Any small error of Obama is ignored. Any small error of McCain is amplified. Ultimately, if I wanted my media to reinforce my positions I would stick with Slate - if I wanted to understand what is going on in the election - this would not be a place I would go.

This could be one of the most important elections in recent history - but the Political Gabfest offers people little besides reinforcement of their previously held beliefs. For me, that is useless.

Listening to America - the chatter of my fellow citizens

Over the last two days as we were going across the country, I listened to what my fellow citizens are thinking and talking about. It was a revealing exercise. In Denver we spent a couple of hours with a woman from Boulder named Lisa. She is a hair dresser and is very pessimistic about the country. She hates the war and the economy. I began to engage her about the economy - it is really not that bad - compared to the economy of the last year of Jimmy Carter (the worst president of the 20th Century) inflation was out of control, so was unemployment and so were interest rates - but that does not matter. What looks like a minor recession has become Hoover II (no matter whether the analogy to the 1930s is inaccurate). The war, despite the evidence from the front, is considered a failure.

Today as we were leaving Yankee stadium I heard a more conservative dad talking to his son. He seemed to have a lot of information about the current situation in Iraq and also in the economy - or at least seemed to be a bit more optimistic. But his manner turned me off - he kept asking "Do you know what I mean?" - If he was not clear why is the question useful and if he is same question.

I was brought back to Fareed Zakararia's book discussed a few days ago. He worries about the anxiety of the American people and so do I. We've got some significant problems in the country, including a not very good picture of where we are on some major issues - but across the spectrum we are worried. Anxiety does not help us make better decisions, it makes us think only about change (without a comment about who I favor in the presidential sweepstakes) not about solutions. That is a danger for the American spirit.

Visiting the House that Ruth Built

This afternoon we went to a game at Yankee Stadium. I am not a Yankee fan - indeed, I like Dodger Blue when the Rivercats are not engaged. But I wanted to go to this important national space before it closes for ever. The run on this stadium has been phenomenal. We took the subway from mid-town and then went to a deli before we went into the stadium. The Yankees were playing the Twins.

There were lots of highlights for the afternoon. For me the best was seeing their ace reliever - if only for a couple of pitches. Mariano Rivera came into the game on the last out of the game. This season the tickets are at a premium - everyone wants to get to be there (as you see throughout the stadium it has been around since 1923) for the final few games. This afternoon the countdown clock went from 27 to 26. The Yankees won scoring 2 in the fifth and 3 in the sixth. Mussina threw about a 100 pitches and had a shutout until Hawkins let a run happen.

The field crew, when they did the clean up, danced to YMCA. We had a recorded version of God Bless America by Kate Smith. The stadium observed a moment of silence for our troops. All in all it was a great afternoon. History is great but even better when you can watch a pretty good ballgame.

The purpose of advertising

For the last couple of years Apple has had a series of effective ads which say "I'm a PC and I'm a Mac" - the slightly daft PC guy always is the object of some either subtle or not so subtle jibe. We learned yesterday that Microsoft is planning to strike back.

One of their responses - to the frequent criticism on the vulnerabilities of the Microsoft operating environment will be "Windows Vista has fewer than half the security vulnerabilities of Windows XP," Microsoft said. "It's also 60% less likely to be infected by spyware or malware than Windows XP SP2. And in early 2008, Windows Vista was shown to have 89% fewer vulnerabilities than MacOS X 10.5, making it the most secure Windows release to date."

At an employees conference at Microsoft they said that the company would spend a couple of hundred million dollars on this kind of stuff. Brad Brooks, a Microsoft marketing VP said "You thought the sleeping giant was still sleeping, well we woke it up and it's time to take our message forward. There's a conversation going on in the marketplace today and it's just plain awful. We've got to get back on the front foot." I wonder if the flat earth metaphor actually works. I also wonder with this campaign if Apple needs to spend more of their ad dollars on their campaign.

The Logic of Lou Dobbs and other economic fallacies

Lou Dobbs constantly harps about the loss in American manufacturing jobs. I came across some data today that Mr. Dobbs should look at.

According to the Bureau of Labor Statistics manufacturing jobs are projected to face continued reductions in the coming years. From their high in 1997 at 17.4 million they dropped to 15.3 in 2002 and 13.9 million in 2007. They are projected to lose another 1.3 million jobs between 2007 and 2017. In 2017 we will have but 12.5 million manufacturing jobs. Dobbs would attribute this to outsourcing.

But if you look at jobs in government they are projected to continue to rise; from 19.7 million in 1997, to 21.5 million in 2002, to 22.2 million in 2007 and to finally grow to 23.5 million in 2017. Notice the strange convergence? Government jobs increased over the period in the same proportion that manufacturing jobs reduced. It must not be the outsourcing, it must be the growth in government. Makes about as much sense as Dobbs does.

In reality if you look at the loss of farm jobs over the period (from 1.3 million in 1997 to 1 million in 2017) there is not the same weltschmerzing. Ultimately in both the farm sector and manufacturing jobs are moving away because of productivity enhancements. Manufacturing output in the US is actually increasing but more robots and automation are helping make us better at it.

Nonsense

One of the applications on the new iPhone Ap store is a reference tool for fans of baseball. Mark Knopper, who is a Detroit Tigers fan, put together an application called Baseball (available on iTunes) which lists stats on most teams from 1880-2007. It is a handy little reference tool that allows you to find individual and team statistics in a flash. Major League Baseball has accused him of violating MLBs trademarks by including the logos from the teams. Note photos of the Ap are all over the web but I chose not to upload one. Knopper has said he will strip the logos out of the ap.

I was one of the people who downloaded the ap and have found it very useful. There is no intent for commercial use here - this is a statistical reference which will enhance fan interest but MLB seems to think they know better.

Phil Gramm and Reality

Time's Mark Halperin asked the following question on the AOL poll - McCain advisor Phil Gramm's crack that America is a "nation of whiners" Correct or incorrect

Of the more than 18,000 people who responded more than 61% believe the former senator is correct. (Obviously, this is not a scientific poll, but the results are interesting none-the-less.)

iPhone Sales

As of tomorrow there are three Apple stores in the country with any iPhones. New Hampshire and New York have 16 gig White and California has 16 gig Blacks. That did not happen with the first generation iphones. The British phone company 02 had one spokesman who said "Demand is really high. In some of our stores we have been selling 40 iPhones an hour - the same level of sales those stores usually do in a day."

It is interesting to me that Apple seems to have planned for a big run on the new device - all of the press reports suggested that they shipped a large number of phones into the US but they still are experiencing shortages.

One could have seen this coming. In April Google recorded 6.9 million searches on the iPhone. That traffic continued in subsequent months. The chatter also heightened with the developer's conference held in June. One wonders when the second wave of product will arrive.

An interesting game for the Cats

In last night's game I sat with some friends on the third base line (the shot is from the seats during the National Anthem). For some reason the Cats have had a problem with the 51s this season. In Friday's game they lost by one run but even with the result one had the feeling that they could not pull it out.

Last night the team looked very good. There were three oddities in the game. First, there were four close calls at the plate where runs scored, although two of the calls (one against the Cats and one against the 51s) looked from my vantage point looked like they went the wrong way. It is rare to have that many calls at the plate. Second, Chris Denorfia had a stunning night from center field. In the top of the first, he pegged a long shot from almost the warning track to stop a run. Later in the game a 51s runner chickened out in running toward home after a fly ball catch by Denorfia simply because of how good his peg had been in the first. FInally, the 51s were not served well by their relievers. In two thirds of an inning Miller, who faced seven batters, threw 9 or 10 balls in a row (he ended up with 10 strikes on 34 pitches).

The Cats scored in all the odd innings and won the game 10-1.

Impressions of a Future Mayor

KJ at the Game
Originally uploaded by drtaxsacto

At Saturday night's Rivercats game I was in back of a seat where mayoral candidate Kevin Johnson came and sat with two people for several innings. I did not know the people he sat with, nor did I speak to Johnson except to say hello. But from almost 40 years experience with politicians and from watching how he engaged with these two people - I think he will make a great mayor. He listened well. He was low key. And as opposed to many politicians of the day he did not seem to want to impress anyone with who he is. Obviously, a great mayor requires a lot of skills - but on these impressionist personal qualities - I would vote for him. When you combine that with his record of public accomplishments - he seems like a great candidate.

Supersize Me

Yesterday we took our older grandson to Burger King - they had a kid's meal with a particular toy in it. I found when we got there that they now offer a double cheese burger in their Kid's meal - what an innovation. Today, I went to our market for a sandwich (they have a great deli) - the sandwich was offered with a medium drink. The medium is 32 ounces. With these two examples is there any wonder about the growing girth of Americans?

Thousands Standing Around

I am standing in a security line at LAX - the TSA has shut down
screening for the last 20 minutes or more without an explanation. The
TSA should have some incentive to inform us at least what is happening but
like the Selective Service which isn't and doesn't perform one - the TSA
impedes both transportation and security.

It gives new meaning to the phrase "I'm from the federal government
and I'm here to help."

The Post American World

At almost the end of his excellent The Post American World, Fareed Zakaria asks an interesting, but seeming non-foreign policy related, question. In 1982, there were 78 seeds in the US Open Tournament who were Americans. In 2007 there were only 20. He asks the very pertinent question - were American tennis players getting worse? The answer is NO, there were new areas where good tennis players were coming from. The analogy in that question extends to what he describes as the Post American World.

Zakaria presents some interesting chapters on China and India but also on the decline of the British realm in the 19th Century. He argues that Americans have faced not a decline in their own situation, but like the tennis players in the Open, an increase in the number of competitors - in his words "the rise of everyone else." Unlike the decline in the British empire our problem is not economic, it is fundamentally political. How do we transition from a world where we are the dominant force to one where we are important but not dominant?

He then offers six prescriptions - They are #1 - Choose (too often American foreign policy answers yes to all options rather than making explicit choices. #2 - Build Broad Rules not Narrow Interests - we need to think intelligently about how to coordinate on issues like customs and immigration. His argument is that our customs and visa policies for example are hurtful to our long term interests. #3 - Be Bismark, not Britain - Ultimately the solution here is a rule from legendary British PM Lord Palmerston - No permanent friends, no permanent enemies, only permanent interests. Bismark was strategic. #4 Order a la carte - here pick the options from the range - what Richard Haass (the former State Department person) called a la carte multilateralism. #5 - Think asymmetrically - don't get drawn into traps. Finally, #6 - Legitimacy is Power - the preciousness of conquering anxiety is critical.

Zakaria is not a raging collaborationist but he looks a lot like the old time realists. Ultimately, he thinks we should look at options. The devils from the GOP and the Democrats, as well as for people like Lou Dobbs are simply not going to be useful if the US is to maintain its prominence. Palmerston, was right for the British in the 19th Century and right for us in the 20th. This book is a refreshing analysis that should be widely read.

Pearls of Sales

Needham, the techie based investment bank, downgraded Research in Motion today their conclusion attributed the change in rating directly to the iPhone 3G. The downgrade was based on the device as well as the software platform.

I would add another reason for the downgrade. The Pearl, which has been the hottest Blackberry, is not what it should be. My son, before he went to the Gen 1 iPhone had two Pearls. Both suffered from a problem related to the battery. AT&T replaced the phone when it happened after only a week's use (the phone went out and when the AT&T repair person looked at it said there was water in the phone although my son had not been near any water). But when it happened to the second model the AT&T repair facility said they no longer would warranty the phone. My son has now had an iPhone for three months and has had no problems.

Technology and Passion

Yesterday on Techdirt there was a post on "Putting iPhone sales in perspective." It suggested that the million units of sales in the first three days of the iPhone were not that impressive. The author quoted one Carl Longino who argued that Nokia sells 1.28 million phones a day and that the total phone sales market was 282 million phones in the first quarter. He also asks what the mix of applications was between paid and free and whether the 10 million applications actually enhances developer revenues.

One reader on Longino's Blog points out that the total market for smart phones globally is 32.2 million, with the North American share at 7.3 million - and with those numbers the weekend share is pretty big.In part Longino's comparison is not Apples to Apples. The market share that the iPhone is going after is the smart phone market and in that sub market they are doing pretty well. (Considerably better than most of the critics thought they would when the iPhone launched a year ago.) All of those were good issues to consider.

The Guardian (British Newspaper) described the sales of the iPhone in this round as "gigantically faster this time round", but went on to say that was driven by two factors " 1) international availablilty in 21 countries, and 2) a 60% lower entry-level price point." Ultimately, all of this to this point is something that should fascinate both technobuffs and economists. From the best data that is available two things seem clear - Apple sold a lot more phones this year than last, some of it was from previous owners upgrading (showing brand stickiness) and some was from new buyers switching phones and markets (showing some share growth).

What surprised me was the 55 comments that followed in Techdirt. Some added personal invectives about how horrible either PC or Mac users were - making allusions to the other user's parentage, ability with the opposite sex and the like. I am not sure what arouses that kind of passion. But even though I was an original Mac Evangelista I am not sure I understand why either the PC or Mac people would get so excited. Technology here is a tool.

Objective Sources in Electoral Politics

Getting to the real candidates in this election is tough. They are shielded more than any previous election and the semblance of a campaign is really a set of manufactured events. One source which claims to be objective and thus get to the facts is FactCheck.Org ,which is a project of the University of Pennsylvania's Annenberg Center.

In a post published yesterday the supposedly objective center took a shot at Senator McCain's claim that under an Obama tax policy "23 million small business owners would pay higher taxes." Fact Check concludes that McCain's figure is " a false and preposterously inflated figure." It then goes on to "analyze" the figure of how many small businesses would be affected. The claim rests, in part, on the number of businesses that file as individual taxpayers (which one of McCain's speeches actually stated) but the larger issue is whether the sum total of the proposals that Senator Obama has offered will raise taxes on a large number of individual proprietorships. The Fact Check post quibbles whether an increase in costs, especially related to health care proposals by Senator Obama, amounts to a "tax increase" because Senator McCain was addressing tax rates. McCain's comments addressed rates but an objective analysis of his comments on Obama's proposals would also raise issues about other elements in his tax plans such as the idea to create a new "donut" rate for higher income taxpayers for social security taxes.

Ultimately if you read the Tax Policy Center's excellent brief comparing the presidential candidate's tax proposals you come away with the distinct impression that Senator Obama's proposals would raise taxes on a number of Americans when compared to Senator McCain. But the distributional effects of the changes offered by both candidates depend on a lot of different factors besides rates. What is clear from my reading of both candidate's proposals is all of the following:

1) McCain continues a strong GOP tradition of understanding that rates matter on personal income tax and capital gains. The Fact Check "analysis" makes no statement about whether the increase in capital gains rates proposed by Senator Obama would raise taxes on small business owners and it undoubtedly would.
2) Depending on how income is received by small business owners the proposal to create the "donut" rate on social security taxes could also raise rates on many small business owners.
3) Obama proposes to use the tax code to implement many of his policies including his health care proposals. The net effect of those ideas might or might not produce a net increase for small business owners, depending on how the proposed credits are implemented.
4) The combination of his estate tax and capital gains proposals would raise the tax rates on capital and depending on where the threshold for the estate tax wound up, that would increase taxes on small proprietorships including farms.

What bothers me here is not whether McCain made a claim which could be considered false. Indeed, both candidates have told a bunch of whoppers throughout the campaign. That is part of the current state of campaigns. It is also clear that the net effect of Senator Obama's proposals would increase the percentage of Gross Domestic Product taken from taxes when compared to Senator McCain's. The distributional effects of those changes are relatively clear, although not entirely.

What is more important here is not whether the figure used by Senator McCain is an accurate one (undoubtedly it is probably wrong) but whether the analysis that a large number of small business owners would pay higher taxes is correct under an Obama administration. The answer here is absolutely. The even more important question for the voters is whether the sum total of proposals from Senator Obama will help or hinder economic growth. From my perspective that is a lot more important than whether the number of small business owners who would pay more is one figure or another.

Piper Jaffrey's Survey and My Own - on the 3G

On Appleinsider today a Piper Jaffrey survey taken on launch day offered a number of observations about who the market for the 3G iPhone was. I did a similar survey (although obviously much more informally) in my crowd on Friday and came up with similar results. (Verifying either that PJ's survey was excellent or that the crowds in Pasadena were similar to New York.)

Over the course of the day my survey was considerably smaller but since I was there for more than five hours I had a lot of time to ask questions. Part of the reason I choose to stay in line was because it presented such a wonderful opportunity to look at this as an economist. I spoke with perhaps 50 people in line. (I overheard comments from perhaps another 25 people.) The PJ survey was almost 4 times that at 283. In the Pasadena line the predominant phone desired was the larger model - although compared to the opening group for the original phone - the spread was considerably closer. I found few if any people who wanted the 4G version 1 but about 25% of the people I spoke with wanted the 8 G version of the 3G.

The split between people who would use this as a iPod and not - was about even in the PJ survey. As I spoke with people in line a good percentage of them were going to continue to use their iPod - that is perhaps 60-40. The PJ survey found that AT&T customers made up about 62% of the buyers, in my line the percentage of current AT&T users was less than 50%. The switchers were primarily from Verizon. Finally, the PJ Survey looked at phones - they found that Samsung and Motorola were the primary phones being switched out. As I talked to phone switchers in line or as I looked at the people in line there were a lot of RAZRs and Samsungs but LGs also seemed to be in evidence. I did not take a count but I suspect that they were about a third each.

Obviously, the PJ survey was pretty formal and mine was initiated because of boredom in line. The most surprising finding of the day was the knowledge about push technology. As I have noted in other posts, I like the idea of push technology to coordinate my digital devices. In the people I spoke with in line the recognition about a lot of the features, especially the Applications, was very high, but the understanding of the potential for push technology was relatively low - even with the people who understood technology. One couple I spoke with were emblematic. He was a Christian musician who bought one phone at AT&T and was in line for another. His girlfriend was a youth minister. I asked them about the phone and why they were choosing to buy another iPhone. They talked about applications and GPS but when I asked them about MobileMe they were unsure. When I told them about how it would work they were excited.

Mr Bull and Mr Bear

The American Association of Individual Investors (If you are interested in investing and haven't joined - you should!) published its bull bear ratings. The current rating is 55.17% bearish - which means that more than half the investors think we are in a bear (down) market situation. That compares to 22.17% who believe we are in a bullish period. In 2000, right at the crest of the Tech Bubble the Bullish sentiment was at 75%. The average bullish sentiment indicator over the life of the survey is 39%.

AAII is all about improving the level of information that individual investors have for pursuing their own goals. They offer a wide range of reasonably priced services to help individuals hone their skills and capabilities. But this particular indicator is very close to what Warren Buffett called the Mr Market syndrome - the financial markets often work to extremes. Thus, the best time to sell is when everyone else is buying.

With numbers this bad it might be a real buying opportunity in the financial markets.

More on the 3G iPhone

As I thought about it overnight the sales channel that Apple established had some other good features when compared to the rollout of the first phone. In the first version, there was limited product in the channel. Very little mention was made of AT&T. WIth this rollout there seem to be fewer shortages although at the end of the weekend there seemed to be some shortages on the Apple store site. The 16gig model seems to be a lot more popular and from a quick review black seems to outsell white. The computer tie up was a flub but one which they seem to have recovered from.

There were 10 million downloads from the Application store and as I browsed the list last night I found several big applications and many smaller ones which I thought could be very useful. On Saturday, when we were at Disneyland, my son-in-law and I thought of another application. Disneyland has a way to manage crowds on its most popular rides called FastPass. You check in to this and then return at a slightly later time to go to the head of the line. A great ap would allow a person at the entrance, using WIFI, to plan out their day and then calendar it into your phone, with a kiosk to print out the passes or even better with a bluetooth device at each location to "stamp" the pass.

Last night I went into MobileMe to take a better look. One of the major reasons I was interested in this upgrade was MobileMe. The Web based applications of Contacts, Mail, Photos and Calendar are integrated with website storage to work like an exchange server. All of that seems to work - thus, when you implement push technology on your phone - all of those sets of activities are coordinated on all of your devices - Phone, Laptop and Desktop. As importantly, if you have access to the net and no devices you can still use the applications. The tool bar is simple and easy to use.

In addition to all of the other things MobileMe can do it will allow you to create a personal domain (your own website). I will migrate a lot of my personal webpages over to that area quickly. It will allow me to edit the page(s) on the fly with iWeb.

One of the annoyances I have had with the Calendar function has been the inability of my administrative assistant to get into my calendar and change it. Now she can.

MobileMe relies on an understanding of the "cloud" (remote storage) and its possibilities and then assures that all of the ways you access the cloud are coordinated. That has the possibility of being a remarkable gift to users like me who understand how HTML works but don't want to do it.

The Right Way to See a Movie

At the end of a very fun weekend with our grandson and his aunt Emily (and her husband Mike/ Mason is my son's son but he and Emily have always had a special bond - so his parents sent us and him down to LA to see Mike and Emily) we went to the El Capitan Theater in Hollywood to see Wall-E. The El-Capitan dates from the 1920s and is a grand theater, restored to its original grandeur. The interior plaster work is the price of admission. It was the theater that premiered Citizen Kane (and a bunch of other movies) But there is more.

Before the performance a theater organist did about 20 minutes on a magnificent instrument - reprises of all Disney movie songs (this is a Disney owned theater). He disappears into the floor and then they do some previews of coming attractions. Before that there is a pretty good light show on the curtains. Then there was a 20 minute stage show of Disney characters.

Then the movie came on - which the audience - children and adults thoroughly enjoyed. It is a creative feature with remarkable animation. My wife, who normally does not like animation, thought the movie was great.

My son in law thought that our grandson would enjoy this special kind of movie venue. Mason did indeed. He liked the organist - which reminded me of an Assemblyman early in my career who rescued one of these organs from a demolition of a theater in LA and then had it installed into his house! And he seemed particularly intrigued with the stage show. Then came the movie (which my wife and I had already seen but is worth seeing twice) and he enjoyed that too.

After the movie I wondered out loud why movie theaters of that era are particularly magnificent and why play houses of the same era are relatively bland. My mother in law suggested that the performance houses were a bit smaller and if the architects had been as elaborate the features would overwhelm the place - that makes sense to me.

Evidently, Disney redoes the theater for each attraction. The pictures give you some sense of the place - from the Marquee, to the organist, to the architectural details, to one of the opening curtains - but they do not give you the full sense. The tickets are a bit more than the cineplex - but they are well worth it. Inside the concessions are actually a bit cheaper than one would expect in a cineplex. For kids who have never been to anything but the cineplex - this could give them a whole new idea about the magic of movies.

Even in Disneyland

On July 1, a new law took effect in California which requires drivers to use hands free devices when using their cellular phones. An adult can still text messages or any one of a number of other things but you can't now drive with a cellphone in your hand. It seems that my grandson seems to have gotten the message. One wonders whether this is a necessary law - but there are an awful lot of drivers who seem to think that phoning and cars go together.

Day 2 of the 3G iPhone

The post yesterday got a response from an Anonymous writer who said the launch was a disaster and that anyone who could not see that was mentally deficient. I am not sure what prompted that response but can think of several possible explanations. #1 - - The writer has an old phone and is locked into a 5 year contract and thus cannot consider a new phone. #2 - - The commenter tried to buy an iPhone but was turned down on the credit check. #3- - The scribbler is just angry about something else. #4 - The scrawler has a Zune (one of the legendary but unsold Mp3 players - which may reach a million sales in a couple of months) and is embarrased. #5 - The commenter's mom won't drive him to the Apple store because he was grounded for writing rude comments on the Internet. I am not sure what the explanation is - none of those, however plausible, are entirely satisfying.

There are two things to think about the launch - the immediate- where Apple did not do well - although did a number of things to help mitigate the problem - and the long term. Ultimately the product's success depends not on the first day but on how well it sells. On Saturday and again this morning the Apple stores had tons up people lined up to buy. If the product is a disaster then I guess I don't know what that means in the concept of the blog-graffiti artist who graced my site. Best estimates are that in the first weekend Apple may have sold more than a million phones. That is pretty good for a disaster. One other estimator thought the number in the US alone was 800,000. In the store I bought in there were at least 1000 sales on the first day. AT&T down the street also sold out. That seems to have been common - despite the snafu on the authorization process - which as I said by the time I got through the line took less than 15 minutes.

But now that I have used the phone for two days, here are my impressions. The software, especially managing email, is significantly improved. You can now easily dump a series of messages. It has integrated search functions. The map feature is useful and very helpful and with a couple of the Free applications it allows a whole series of networking possibilities. The web browser is faster although results vary. I did a side by side of a common page and it took about 5X for the original phone in terms of load time for a site with photos. But later in the day the Edge was a bit faster and the 3G is not uniform even in California. The calendar also seems to be better integrated between my laptop and my phone. I have not yet checked out MobileMe which I will do when I get back to Sacramento but it looks good. Finally, yesterday, I used some of the new features and they do eat battery a bit more than the first phone but my charge was not out by the end of the day. (That was with moderate web surfing, mail and light phone calls.) We'll see as I use it in business this week.

The 3-G - Experiencing the new iPhone

Today was the first day for the 3G iPhone. Not surprisingly I wanted to upgrade. Not because I did not like my current phone but because the new features of the phone are so overwhelming that I wanted to get them from the start. I had a free day so I spent 6 1/2 hours waiting to purchase. The Pasadena Apple store, when I got there about 11 AM had a line of about 250 people. I got into line thinking it would take 2 hours at most - when it became clear it would take a lot longer, I decided to stay. It turned out to be a pretty good day. (The photo is four hours into my wait on Friday).

There were good points and bad of this day. The bad is relatively short. Evidently the Apple people did not think carefully about how to put the things they needed to do to make sure that the new authorization process could be accomplished in a reasonable amount of time. When I got through the line, my salesperson told me that in the early part of the day it was taking an hour per person to get people through. Appleinsider thought the process was 30-40 minutes. Activation, by the time I got there was pretty flawless. The WEB applications, which I believe are a major part of this new push - are still "in progress."

The good is relatively long. I think I was one of the oldest people in line. The group around me averaged under 20 years old. They were all excited. Four of them were going to be frosh in local colleges (a film student from the Art Institute, a political science student who was going to UC Riverside, a nursing student at Azusa Pacific and a theater student at CSU Fullerton). As a group they were remarkably patient. We took care of each other - we held places as one or another decided to go for drinks, food or bio-breaks. We were interested enough in each other to talk about why we were in line and what each of the young people wanted to do in college, but I never offered a name.

One of the students had read my post from last year which criticized the comments of a Wharton marketing professor who argued that the iPhone would be a bust. How wrong was this professor. The young student understood something the Wharton person did not - branding matters.

The phone actually does what Apple said it would do. The Internet connection is quicker. The GPS is fine and useful. The Applications offered are diverse and useful. I downloaded three of the free ones and am likely to do several more soon.

The news accounts of the first day of the 3G used words like debacle - but I disagree. Apple was able to go into a second cycle of a phone which, in my discussions with my linemates is very popular and useful. The new phone does more and costs less.

POSTNOTE: On Saturday morning we drove by the Pasadena store and there was a long line in front of the store. I waited until the line was green, opened my window and honked my horn while waving the phone. (Childish but satisfying)

Explaining Terrorism

This morning we are taking our grandson to visit his Aunt Emily and her husband Michael and to go to Disneyland tomorrow. As we found with our own kids Mason wanted to take some favorite toys with him on the trip. So we got a separate bag to carry all the junk. But before we got to the airport we had to look through the bag to make sure that everything would pass TSA muster. We had to judge which things would make it through the X-rays. We left the Batman small sword and his weapon - although I am pretty sure they would have gotten through.

What was most interesting was to try to explain why these rules were necessary. Mason asked "Can't we just explain to them that all my toys are just toys?" We said, "No there are rules here." He said "Why can't they think a bit more carefully?" (This is a very verbal kid) In the end that one is impossible to explain - bureaucracies run on standardization. But we did try to say that the rules came about because some bad people did some bad things on airplanes. He concluded that was sad. I think he meant both because of their behavior but also because of the consequences for the rest of us.

Almost Heaven

Think of a city where a big event is happening soon and where Fried Food will be banned. Think of a city where the 3900 identified homeless will be swept off the streets with bus tokens and free tickets to movies and the zoo. In essence, out of sight out of mind.

Is this Bejing? No? Denver. How democratic.

Cool and Fun

There were a couple of different things about tonight's game with the Rivercats. First, it was still smoky but the temperature was pleasant. There was a delta breeze tonight and so that cleared at least some of the smoke from the valley fires out. Second, while we went ahead early we needed to get it back in the eighth and that came from two unexpected sources. Justin Knoedler has been struggling for most of the season but when he came up he got a solid double which also got him two RBIs. But then newcomer Eric Patterson (who had been hitless since joining the club) got a double and a RBI. That had him ending the game in his first five at bats (because of a walk) at .317. All in all it was a fun game.

The Cats now move to Salt Lake for a four game set before the all star break.

More on Online Hell in WAMU land

On Tuesday night I discovered that WAMU had charged me for a periodic debit on my account as a result of their inability to transfer the charge to our new account. When we first began to encounter a problem more than two weeks ago, we were advised to close our two joint accounts and to set up a new account which could then be secure but which would for a transitional period accept debits and credits from the two prior accounts. I was assured by a branch manager that this could happen. That did not happen.

I called the 800 number and spoke to a person named Brian (Team 400) who said, he would do all of the following: First, he said they would as a courtesy (even though this seems to be their fault) reverse the debit on our account which was generated because they were unable to discover that the periodic debit on the earlier account should have been transfered to our new joint account. (which has plenty of funds in it) I thanked him. Second, he said that after a periodic deposit that I was expecting on July 10 had been deposited that he would transfer the funds from the deposit and then close the legacy (or penny) account.

On Wednesday I tried to access my account (to make sure that what I had been promised would actually come true) and found it had again been locked. I asked my wife to call the 800 number to reset the password and she was told that after the reset that we would be able to log in. That was also false, a lie. Late this afternoon, I logged in using my user name and my temporary password.(Copied from the original email) The system would not accept it. I was again found the account was locked. The screen which said it was locked also says "You can unlock your profile online or you can call customer service for help at (800) 788-7000." That is not true. See how helpful the people at the 800 number are below.

I got back from an all day meeting and called the WAMU 800 line to see if I could get the account unlocked. I first spoke to a customer service agent named Melissa. I asked if we could either reset our password or if there was a way that I could verify whether the deposit had been received and properly transfered. She indicated the account had been locked. She was either unwilling or unable to verify that my instructions with Brian the night before had been carried out. I asked to speak with her supervisor, a person named Laurie, I made the same request and she indicated that the "risk operations" department was only open during "normal" business hours and that I could call them in the morning. I told her that I wanted to solve the problem now. I have already spent an inordinate amount of time trying to correct a set of problems that for the most part were created by an inane set of rules. She was unable and unwilling to help me and so I asked to speak to her supervisor. Laurie told me that the supervisor was "unavailable" and that if I wanted the person could call me back in 24-48 hours. She repeatedly advised me to call risk operations during normal business hours. As you may remember from the earlier post, I fell for that one two weeks ago and after 48 hours was called by a senior person in that division who said basically "I can't help you."

Interestingly on Thursday morning I went online and discovered that the 800 number screen on the website clearly states that one should call that number (not risk operations) to get an account unlocked. So what Laurie told me was incorrect, I spent more than 30 minutes on the phone with her last night. On Thursday I called and spoke to a person named Pat who was able to get the account unlocked (without going to risk operations) and then talked to her supervisor named Wendy who was able to get the erroneous charge reversed.

Ultimately any customer service business, and that is the business that WAMU should be in, has a responsibility to allow their telephone service people to be able to have some ability to solve problems. My job is not to try to figure out how to navigate their bureaucratic rules. (In the last three weeks I have probably spent more than two full work days trying to resolve the issues on my WAMU accounts.) Neither Melissa nor Laurie seemed to be willing to try to work through this problem which was (and should have been) frustrating. I was prepared to present any information about the accounts (including all of the security passwords, social security numbers, account numbers and other linked information) but this supervisor (without any seeming authority) continued to ask me to either call risk operations in the morning or to have her supervisor call me back in the next few days. Based on my previous experience, I was skeptical.

I am not sure whether I have had a unique experience with WAMU or not. I suspect I am not alone. I work with a number of financial institutions including brokerage houses and other banks and at this point have not found any organization that has less attention to trying to solve consumer problems than WAMU. They set a series of rules and seem unable or unwilling to try to work with the customer. In each of the other accounts, I have been able to find someone in the organization who is able to solve my issue (none have been as prolonged as this one). I realize I can be a demanding customer but I also realize that when the system works reasonably well that compared to other customers (who do not use online deposits, who rarely interact with branches and who do not need statements or checks) that if the system can be made to work reasonably efficiently that I represent a cost savings to the company (no mailing costs, no check processing costs, etc.) But WAMU seems unable or unwilling to understand the economics of our relationship. If you want to use online banking at WAMU, based on my experience from the last few weeks, I would recommend against it.

One of the realities of online services is the necessity to provide service in a reasonable manner - often 24/7 - evidently someone on the WAMU management team does not understand that basic principle. But without it, the service part of online banking is worthless. In this case "FREE CHECKING" based on my experiences over the last several weeks, is not free.

Sultry but Superb

The Cats came to play tonight. They ended up after a couple of terrific hits (including Danny Putnam's Grand Slam) and catches with 14 hits and 11 runs. That was part of a 7 inning fourth. Dan Meyer had a two hit game and eight strikeouts. He had to be taken out because of 109 pitches. But it was a superb game. This is a photo of Dan from last season's team lunch. The only difference is that he is a year older and tonight was about a zillion degrees. But he and the team had a great game against the Sky Sox.

One final comment on Gulliver

The concluding chapter in Gulliver's Travels is an interesting one. He recounts how he left the land of the Houyhnhnms and then recounts he he got home through the kindness of strangers. Gulliver makes two points in this chapter which are interesting. First he comments that he would prefer to live in the land of the Houyhnhnms but because of the politics there and his comparison to the Yahoos (which the Houyhnhnms see as inferior beings) he is forced to leave. He spends a lot of time explaining why he would have preferred not to re-associate with humans which he now sees as Yahoos. The captain who rescues him is incredibly charitable to him but in the end when he returns to England he lives his life as a recluse separated from his wife and family and willing to spend hours in a day talking to horses, who he believes to be related to the Houyhnhnms.

Second he makes some biting comments about how other travel books have a tendency to exaggerate and how he told nothing but the truth. Obviously he was making a point here. The commentaries on the book suggest that he wrote the book as an Anti-Whig commentary but also as a spoof at the genre of writing. The political part of the manuscript is partially lost because some of his characterizations are lost on people who are not completely up on the politics of the time. Regardless of its intent - the book was an instant classic, and as I said in the first post according to some sources it has never been out of print since the first edition in 1726.

Merit Goods Usually Do Not Have, Nor Produce Any

Representative Louise Slaughter seems to have renewed a cause which I find odd - she wants to reintroduce the "fairness" doctrine. When the broadcast spectrum was limited to a couple of stations the argument was made that the government had the obligation to regulate content to assure it was balanced. The argument was that if this limited resource was not regulated that one side of opinion would predominate and somehow stifle the public discourse. This nonsense did not apply to print media - because the bar to entry into the realm was pretty low - there were lots of options and if you choose a paper with narrow views, so be it.

In economics the arguments for things like the fairness doctrine are called Merit Goods. Public Goods are those things which are produced for all of us and which cannot exclude consumers - our defense system is a good example. If you live in the US, whether you want to be or not, you are protected by our level of military preparedness. But then some economists like Paul Samuelson argued that there are also a group of social activities where we don't do enough of something so all of us should participate. Sounds a lot like your mother's explanation for castor oil. The fairness doctrine is a Merit Good. If the government does not regulate content in the broadcast spectrum there will not be balance.

The trouble with Representative Slaughter's commentary about balance is technology. When we had three channels of TV or only a few radio channels it could possibly have made sense. But now we have hundreds of TV channels and with satellite radio and the internet possibly thousands of radio channels. The wealth of options is mind-boggling. Ms. Slaughter, if you don't like Rush Limbaugh, turn to another channel. I don't watch CNN because I dislike its bias (but then I don't watch Fox either, same reason). As the title suggests there are two problems with Merit Goods. Most of the ideas under this category have little merit and ultimately don't produce any good.

Surviving Online Banking Hell - Two weeks with WAMU

About two weeks ago I began to have a problem with my bank of many years. I am, as you would not be surprised to find out, an electronic kind of guy. I have not written a check for more than seven years. I also travel a lot, so being able to access my bills and pay them from anywhere is important to me.

It began with a deposit of a cashier’s check from a joint investment account to a bank account, which happened to be with WAMU. Both accounts have the same name on them but the check was pretty large. The bank put a 10 day hold on the check. I wrote them and asked why that was necessary. But in the next day two more things happened. First, they disallowed the signature on the check – I had endorsed it but my wife had not. Most banks, because it was a known customer with a check going from a joint account to a joint account would have honored the endorsement or sought a clarification. But WAMU simply disallowed the check.

Second, they claimed that my account had been invaded or phished. There was only one incident but when I discovered it I spoke with their “consumer” service (more on how inapt that title is later) and was informed that the only way we could unlock the account was to a) create a new account and close that one or b) have me ask to unlock the account and then take full responsibility for ANY future invasion of the account. Obviously, I was unwilling to do the latter, especially when I re-read their online banking guarantee.

WAMU is pretty explicit about their online banking guarantee – the first sentence in the website explanation (displayed prominently) says “For any fraudulent or unauthorized transaction that has been initiated during an online banking session at wamu.com, WAMU will provide 100% reimbursement of the transaction amount plus any related account charges imposed by WAMU or lost account interest resulting from such transaction.” The guarantee also requires customers to take some responsibility. You have to create a password which would be “hard for others to detect.” (Although their level of security is alphanumeric and does not include the possibilities for control characters AND has no periodic suggestions to change your password, as many other financial institutions do. Thus, the level of security for the password is not very stringent and they don't take the notion of changing passwords to stop intrusions seriously. Both of those things tell me WAMU is not serious enough about that “hard for others to detect” standard. You also have to report suspected fraudulent transactions “within 60 days.” The “guarantee” then says that WAMU will provide a full reimbursement for the amount of any fraudulent or unauthorized transaction which occurs on your account during an online banking session at wamu.com. That means $0 liability for fraudulent or unauthorized activity on your account.” That sure does not seem to be what they said to me.

I soon discovered that WAMU had locked down all of our accounts including ones which do not use online bill pay. That meant that not only could I not get into the specific account which had been allegedly compromised but I could not use my ATM card nor my wife’s account (because her and my accounts are linked) was also locked down. I went to a nearby branch bank and asked how we could fix the problem. The young manager advised me to keep the account (s) locked and start a new account. I specifically asked if all of my payees would transfer over to the new account and I was assured that would be done. I soon discovered that was false.

One of the other key assertions made by that manager was that, after I had called my wife, all of the uncleared checks on her account would be honored. At the end of this week we discovered that even that was false. They returned a check to our market. Since then several others of the listed checks have been returned. That has required my wife to go into the branch and got that corrected and the bank did that but the inconvenience was still annoying.

When I discovered the online banking profile was locked and seemingly immovable I called the online banking help desk and was told two different things. First, I was told that nothing could be done to get my “profile” and at the same time I was told that it could be gotten to me by speaking with the fraud department. (Which I did.) For a couple of days, nothing happened.

On about the third day of this travesty, I wrote a friend of my daughter’s who works for another division of WAMU, explained my situation and asked if she knew who the right person to call was. She graciously offered to help with the “excellence” team. I was then contacted a day or so later by a team member from that group who left a number for me to call and despite four or five calls and voicemails I was never able to get the problem solver to call me back. So much for excellence.

I tried again to use their electronic comment section. But the responses I got from those people show they are very poorly trained. For example, I asked in an email on June 22 “Could you please restore my payee list or give me a printout of the billers?” The response I got said in part “Thank you for your email. I apologize for any inconvenience that caused to you. Please be advised, you may not change the account number.” The email went on to say that I could change the account which I designated as my primary account for bill paying. I did that, but still could not retrieve my payees. The quality of the online help was either inaccurate or off the mark.

Three days later I went into another branch and spoke to another manager, who like my daughter’s friend, was very gracious. She looked at the account and said “let me escalate this” and immediately called somebody in the technical part of the online banking group and I then spoke to a guy who said he would resolve my problem with two business days. On the third day he called me near the close of the day to inform me that it was not possible to get my list of payees. That wasted another two days and I am reasonably sure he did little to look into whether it was possible to generate a printout of the billers. WAMU truncates the information about the payees (presumably as a security measure (although other banks I deal with do not do this). So even if I went through the transaction history (which did) I could not restore the information on my payees. The locked account allows me to see transactions, I just cannot get into my payee list or transfer it.

I have a several comments. First, although they were not able help solve the problems, I am appreciative of the efforts by the second manager and my daughter’s friend to try to help. They did their best but the WAMU organization was not up to trying to serve their customers. It is too bad that WAMU does not have more people like that. Second, it seems to me that an entrepreneur could produce something very useful for those of us who use electronic banking to keep all of our payees in a secure environment so that in the event we move from one bank to another or in the event that an account gets compromised we are not forced to re-enter all the account information. Third, from my dozen or more calls to the 1-800 number, I would conclude that the staff for that operation runs between incompetent and surly. WAMU’s service training lacks both the appropriate level of consumer attention and a decent understanding of their products. That has not been my wife’s experience with the telephone bankers but it certainly was reinforced by my attempts to work with the online banking people. Fourth, if WAMU were really concerned about security they would increase the complexity of their passwords. Most of the other financial institutions that I work with take two precautions. They remind users to periodically change their passwords and they offer a security indicator which shows how secure the potential password will be. To my knowledge security is enhanced by increasing the number and type of characters (alpha is less secure than alpha-numeric and alpha-numeric with control characters(#$%&) is even more secure. Fifth, in the end I took the large check back and had it wired to them. That resulted in a $10 charge. The bank seems inclined to ignore that as an electronic client once my systems are set up they send me no statements, they process no checks - all transactions on this account are in 1s and 0s. That saves them a boatload of dough. Ditto for the wire transfer. Until this transaction, compared to their average customer, the costs I generated from my use of their services were minimal. I took care of establishing and verifying the payee list. I hooked in on a periodic basis to do bills - most of which are sent electronically and none of which are processed back to me. But this bank seems to have treated me as a nuisance.

Ultimately, I realize I am a demanding customer. But there is a tradeoff. When an electronic account works well and can actually solve problems, I have reduced the net cost of servicing me as a customer. Since it has been available, I have not had a statement sent to me (Postage Savings), all of my transactions including most deposits and all withdrawals have been electronic (reducing staff time and demands on branch personnel).

Changing banks is annoying, but I was left with no other choice. In the next few day I will close my account with WAMU (after all the remaining EFTs have cleared.) We are still considered whether to completely sever our relationship with WAMU. My wife likes the convenience of the branch (she is completely non-electronic and writes a number of small checks). She also frequently uses the telephone banker. Both of those choices generate costs for WAMU that are undoubtedly greater than for an account that uses electronic deposit and electronic transactions and ATMs. WAMU talks about its commitment to to service - indeed one of the mottos is "Making you happy makes us happy." I guess that is not true either.