The America's Cup Win

At one point in my life I was an avid sailor.  (Certainly not at the level of the America's Cup racers.)   We sailed something called J-Boats which were about 24 feet (about a third the length of the cup boats).   J-Boats were middling in what is called the PHRF standard (which is somewhat analogous to a handicap in golf).  I have no idea what the equivalent rating for this new and radical design but to give you an idea these boats can actually go a lot faster than the wind under the right conditions.

A few weeks ago, in a post about Larry Ellison, I expressed concern about the new design.   I even suggested that it would not have bothered me to see the American team lose.   In the end, after starting out 4 races behind (because of a penalty) and then having a couple of miserable performances - they ran eight races almost perfectly and won the series 9-8.   It was a truly impressive win - after a tactical adjustment in one of the early races- where they declined to do a second race of the day (for which they were widely criticized).

The technology (which you can see something of in the video below) is amazing,  The sails are actually airfoils not traditional sails.   And the design of the boat is to get as much of the multi-hull out of the water so the boat can ride on a foil.   But I wish that they might go back to a more traditional design or have a non-tech version of the America's cup.   Somehow a boat shooting along the water at close to 50 MPH does not seem right.   And yet the Oracle team published the rules on how to design the boat, and after the initial hiccup was able to come back and win the series.  

The cost of each of these new designs excludes all but the most wealthy.  Another criticism of the current rules is that only one of the team members was actually an American citizen.   And yet both of these objections should be overcome.  When Commodore Vanderbilt was racing the cup - it was limited to very wealthy people.  So not much has changed.  What the Cup has done over time is to improve sailing for lots of less capable sailors.   While the air foil is not likely to replace standard sails on smaller boats, it is likely that a lot of the innovations will find their way into more consumer oriented boats.   As to the gripe about the lack of Americans on the team - what was there was American technology.  So it is a great metaphor for larger economic issues.

I ended up watching a couple of days racing on the ESPN channels but did not go down to a race.  Friends that did go down to the Bay to view the races live said, compared to earlier Cups - these were over so fast it was hardly worth the drive.  What I was left with at the end of this series is what big changes are likely in the next series four years hence?

The Value of Expert Commentary (including mine...)

One of the investment blogs I follow is called Seeking Alpha (Alpha is a fancy smantzy way of saying you are looking for better investment performance on a risk adjusted basis).  For the past week, most of the commentary has been how badly Apple is performing after Steve Jobs.

This morning the lead stories on the Apple Seeking Alpha thread included the following:

• Weekend sales of the iPhone were probably close to the bottom of the 5M-6M range he expected, says Piper's Gene Munster. About 95% of those waiting in line were there for the 5S, says Munster, with about 90% upgrading from an older version (83% were upgrading when the 5 was launched, 73% for the 4).
• At least one analyst had expected weekend sales of 7.75M, according to Bloomberg.
• BMO's Keith Bachman hit the malls to find longer lines than last year's iPhone 5 launch, but writes this off as having to do with no pre-orders for the 5S. 5C sales look like a disappointment even to his already-muted expectations for that unit. The gold 5S is a hit, but little supply exists, with one visited store running out in the first 30 minutes.
• The iPhone 5 sold 6M units over its first 10 days last year - a number Bachman doesn't think Apple will be able to match with this year's launch thanks to the lack of enthusiasm for the 5C and fewer selling days. He sees downside risk to his September quarter estimate of 31M units sold.

So what actually happened?   Apple released numbers this morning that showed that the company sold 9 million phones over the weekend (no differentiation between the 5S and the 5C).   That number was far in excess of what anyone projected.   At the same time the company said that 200 million iOS devices had been upgraded to iOS 7.  By any measure both results are huge - consumers did seem to like the new phones AND the adoption curve for the new operating system seems to be very robust.   That is all good news.

But wait.  As I have thought about it there could be some factors that have not been considered.   First, the comparison of sales to sales (last night I spent some time looking at sales figures of phones on opening weekend for three models - the 4S, the 5, and the new 5C/S) what it showed was that over the weekend wait times for the S models (especially the Gold one - which is the most novel on the outside) increased.   At the same time wait times for the C actually decreased over the weekend.   That could be related to lack of amazement over the 5C or it could be that Apple did a much better job this time of figuring out supply chain.   There is a second factor which most analysts have not seemed to consider - that being that this time they offered the new phones in more markets.   That alone could have contributed to the increased volume.  At this point, all we have is raw sales numbers - which make the Seeking Alpha Apple Naysayers look like fools.

Here are four preliminary conclusions from someone who is an Apple fan but genuinely interested in figuring out what all this means.   

First, despite what the natterers said, the new phone has a cool factor that will sell pretty well - both for the 5C and the 5S.  The finish and the internals of my new 5S make it a real upgrade.  The C colors, from discussions with people in the stores, seemed to be of interest to some customers.  The S has a couple of more important features - but the C still has very nice technologies to offer a more budget minded consumer.   The analysts thought the C was not cheap enough - but Apple figured out price and value are related.  Was the Gold phone shortage planned?  I suspect Apple may have assumed that people who really wanted to make a statement on their new phone would rush to the new color (although the finishes for both other phones are different) and that could be a big weekend story.    

Second, the adoption cycle of the new iOS may be as big a story - if not bigger.   Over the weekend I spoke to a lot of people who really like the new operating system additions - I suspect that the addition of parts like the freeing up of iPhoto and the three productivity Apps will make the ecosystem even more valuable.   Phones are a lot more than a device to call and text.   Last night, as we were out at dinner I saw again how useful the camera is to people.   I suspect that the adoption numbers will meet or exceed iOS 6 - which means that a vast majority of Apple phone and tablet users will be using the new iOS very soon.  

Third, it is not clear at this point whether the S or the C sold more units.   Most analysts argued that the C would be a volume leader, I suspect the sales between the two models was more balanced.   That may have been exactly the plan that the company established.   They did not want to compete with the cheapest but they wanted to offer a "value" alternative for price conscious customers.  There have been some early flash estimates that worldwide the mix was 3.7:1 S:C sales - with a slightly lower ratio in the US (3.4:1) but I would wait a bit to see if these numbers hold.   Fortune a graph which may be right from a firm named Localytics.  That means they sold almost 2 million more phones than the last launch with essentially the same margins as the 5 - plus they then sold another 2 million phones with a slightly lower margin.   Somehow, if the Localytics numbers are correct - that does not seem like a bad deal.

Finally, the increased number of opening day markets  mean two things, not one.   Compared to previous opening weekends there were more potential customers so the Apple to Apple comparison (pun intended) may not be exact.   But those increased markets could also offer the company new opportunities which were not there before - in other words the company is not selling the same phone to the same buyers.

As I have said before, I believe the cellphone market is getting into a mature phase.   If that is true, maintaining a loyal customer base that will stand in line for a new product is not only necessary, it is essential and Apple demonstrated that it can still make that happen.

A crooked path to an upgrade

On Thursday night I stayed up to order a new iPhone.  On the Pacific coast you needed to stay up until midnight.   I've done that with every version of the phone, in part because I like to be at the front of the line for technology and in part because it a way to demonstrate I am competitive (not really much of a challenge).

When the first phone came out, I was traveling on the day of the release.   I had some time in the afternoon and stopped by an Apple store in the city I was in and saw it was virtually impossible to get in the line.   I flew back home and went by an AT&T store right when they were closing.   (Literally the manager of the store was locking the door.)  I asked him if he had any phones left and he said no.   But he did say if I came by right when they opened they would have a new supply.   I came in right at the opening and got my first phone (which is still in use as an alarm clock!)  I have purchased every version of the phone and about three versions ago discovered that I could sell my prior version(s) for cash.   So that is what I will do with my remaining 4S.

On the second version I was in Pasadena and actually got in line and spent a full day waiting to get a phone.   It was an interesting opportunity to speak to all the other people in line about why they would wait in line.   At one point I was a minor celebrity because I asked a kid who had just graduated from college why he would wait all this time and he said he liked the technology AND he had bought the original one because a guy named DRTAXSACTO had written a post responding to a Wharton professor who had argued that the phone was too expensive to sell well.   When I pointed out that I was DRTAXSACTO a couple of people actually said "wow."

About the third version, they allowed you to order the phone in advance and avoid the lines - so since then that is what I've done.   But on this round I screwed up.  I got on the Apple site at midnight and I checked that I wanted a Black phone and 64 gig but mis-checked the carrier and so ordered the wrong phone.   When I rechecked it Friday morning I found I was going to get a T-Mobile phone and so cancelled the order.   I then reordered the right phone and saw that my delivery time moved from the end of September to the middle of October.   I fretted about it for the morning and then decided to go by the AT&T store (the same one where I had been lucky on the first phone) and see if they had any units left.   Apple stores get the most phones but cellular carriers have a fair supply.   I went in about 2 PM and found they had one left - the sales person said a "Black, 64 Gig model" - I said that was what I wanted and got it.

AT&T has a new program called NEXT which allows you to in essence lease the phone (in the case of the 64 gig phone) for $37 per month but at the end of one year you can get a new phone.   At the end of 20 months you own the phone (so the retail price is $740).   I decided to do that.   For the last several years I have had two phones and eventually want to get down to one.   The cost of having two phones means that one of your phones is out of contract about the time the new phone comes out but you pay for an extra line and the cap cost is about half of what a phone would cost retail without a contract.   We'll see if this new plan is a good idea.

After having the phone for two days I have two comments.   First, the new phone's major feature is the fingerprint lock - which is handy and as Walt Mossberg said in his review -
works very well.   This is one of those interim releases so while the outside is a bit nicer than the existing iPhone 5 and the chipset is better - I have not had a real chance to run the phone through its paces.  But all of the reviews have been positive.  It is hard to separate the new features of iOS 7 from the new phone.   iOS 7 is likely to build stickiness in the Apple ecosystem.

The second issue is sales.  On Friday I confirmed that the 5S was selling better than the 5C but as the sales person told me - since the 5C could have been preordered that is not surprising.    The store I was in sold out and evidently the 32 gig model is the most popular and the gold phone sold out first.   I like the new colors of the black phone.   Hard sales numbers have not been released.   There has been a lot of speculation (and depending on whether you are an Apple supporter or not the numbers vary) about initial sales.   As I have said several times I suspect the need to upgrade phones constantly is reaching a smaller and smaller number of users (witness the underwhelming sales of the Galaxy 4).    Based on the sample of looking at other stores, I suspect Apple will meet its numbers.

iOS 7

I downloaded iOS 7 for all my devices this morning - probably right at the most challenging time. It did take a bit of patience and depending on WIFI speed - it may take a try or two.  I was at a eye appointment which has free WIFI - but the downloads at 10:30 were a bit slow.   By early afternoon you could download the system and go through the setup easily.

As you can see from the picture at the left the icons in the operating system have been altered (I think for the most part better) - the look and feel on the devices is attractive.   One thing you notice immediately is that the opening screen looks 100% better - the photos I use for each of my devices look great.

Several of the Apps that I use the most have been substantially redesigned.   Evernote, for instance, has a better user interface and some updating capabilities which will make it even more useful.

The Music App has added iTunes Radio which should give services like Pandora and iHeart radio a run for their money.   Unlike iHeart it does not seem to have the ability to tune into broadcast stations.

The iOS has also been simplified to be able to get down to the notification center  - which in the past I did not use much - but with the simple new swipe gesture I suspect I will use it a lot more.  The new control center allows you to do things like setting airplane mode with one touch.

There are lots of things that you just need to try out.  The changes in iPhoto are impressive and simplify the photo experience.  Airdrop - which allows you to send stuff to other users in the area - is a real addition.   Safari has a series of additions including tabs.   The new system also has a feature to update content in background.   That is very helpful.  Siri has been improved - I will need to try that out a lot more.   My prior experience with Siri was not entirely helpful.  It has added Wolfram and Bing searches.

I use Find My Phone a lot - when I have left my phone around the house.   There is a new feature that if you really lose your phone can lock it down.   When you get it back (if you do) you can reactivate it using your Apple ID.

There is one thing I do not like.   The new Video App has two serious flaws.   First, when you look at the first video screen, it lists all of the videos I have purchased from iTunes. (In my case that is about 400 movies)  Yet, some of those are in the cloud and some are native to the device.   While it is possible to distinguish the movies that are on the device (they do not have a little cloud in the lower right corner of the image) it means that if you have a large video library, it takes some time to go through all the options.   There is a second problem which is equally annoying.   I have used iTunes to archive a number of non-commercially produced videos - things like videos of our kids when they were young (for a number of years we did a highlight reel each year) or the tapes from an appearance I did on C-SPANN when I was on a national commission.  It looks like I cannot access those on my iOS device.

As has happened over the last couple of years, I have noticed that the integration with the cloud has been proceeding apace.  That is a potential problem in at least two areas.   First, for those iOS devices that do not have a constant link to the internet (WIFI only devices) that can leave you without important materials at a key time.   That extends not just to media but also Apps like Evernote.   Second, if you travel outside the country, as I often do to Mexico, where cellular charges are outrageously expensive, you will need to do some better planning.

A so what chart from the WP.

The WP published the following graph this morning which compares the power consumption in six African countries with the consumption of an energy efficient refrigerator in the US.

The point the Post was trying to make was look how greedy (or fill in other negatives) Americans are.   But my response is so what.   Americans do a lot of things that the rest of the world does not, including working aggressively on making the things they use even more efficient.   The Post's logic is that Americans are piggy.  But why not try to bring standards of consumption in those six nations up to something closer to what the US can afford?  

Consider another chart.   This time compare what a fridge cost to operate and how much it consumed in electricity over time.

Over the last 40 years the average refrigerator in the US has reduced the number of kilowatts consumed by three quarters.  All the while the cost of consuming those KWs has also been reduced.  We've got products that do a better job for cheaper.   Taken from another view, we have actually reduced the disparity between consumption in those six countries because in the 1970s undoubtedly there was most likely less electricity consumed in the African countries and more in the US refrigerators.    Numbers and charts always benefit from looking at a wider range of numbers.

Running for office and from responsibility

On Monday afternoon, after a horrific spectacle at the Washington Navy Yard, the President took the opportunity to tout his economic record before a bunch of hand picked lapdogs on the South Court of the White House. His remarks were designed to "celebrate" the five year anniversary of the financial meltdown - that "anniversary" could have been held at any time. But this president has no sense of proportion. I have taken eight comments out of the President banal yammerings and added some commentary. What Obama seems to fail to get is that compromise takes two sides working together.  The genius of the American political system is the design - it take a broad consensus to move things forward.   In the world of this President he believes that he preempts anything.  All that within a spectacle over the last several weeks - where his indecision on an international issue has worked to make the situation considerably worse.   But again, this President, does not care.  Commentary described the speech thusly - "After the spectacle of indecision and retreat that was his Syria policy in the last month, and a year in which he proved again that he hasn’t the leadership skills to broker a deal with anyone but his sycophants, all Obama has left for us is anger at his political foes and a reflexive need to blame them for all of the country’s woes and his own failures." That is harsh but accurate.

The President's remarks came just a day before the 228th anniversary of the last day of the Constitutional convention. One of the blogs I read posted remarks from President Coolidge on the importance of the Constitution

"It is axiomatic that our country can not stand still. It would seem to be perfectly plain from recent events that it is determined to go forward. But it wants no pretenses, it wants no vagaries. It is determined to advance in an orderly, sound and common-sense way. It does not propose to abandon the theory of the Declaration that the people have inalienable rights which no majority and no power of government can destroy. It does not propose to abandon the practice of the Constitution that provides for the protection of these rights. It believes that within these limitations, which are imposed not by the fiat of man but by the law of the Creator, self-government is just and wise. It is convinced that it will be impossible for the people to provide their own government unless they continue to own their own property. These are the very foundations of America" -
The President began by a hearty back pat -

"By the time I took the oath of office, the economy was shrinking by an annual rate of more than 8 percent. Our businesses were shedding 800,000 jobs each month. It was a perfect storm that would rob millions of Americans of jobs and homes and savings that they had worked a lifetime to build. And it also laid bare the long erosion of a middle class that, for more than a decade, has had to work harder and harder just to keep up."

From my perspective the President fails to consider what the causes of these horrible situations. A good many of them are attributable to governmental policies and as importantly, many of them remain unimproved.   As Coolidge suggested a good part of the role of government is to understand when its actions can be ineffective.
He went on to give the now obligatory "stories" of real people.
And so those are the stories that guided everything we've done.
President Reagan was one of the first to use this technique and at the time many people said it was a way to show the president actually lived in the real world.   But stories like the ones the president used are not a substitute for sound judgment on policy.

Then he offered himself some more back pats....
And what all this means is we've cleared away the rubble from the financial crisis and we've begun to lay a new foundation for economic growth and prosperity. 
If this is recovery I would hate to see what a slowdown is to him.  This recovery still has substantial unemployment and mediocre economic growth.   Many economists would argue that part of the reason for that performance is the policies he adopted, some of which were continuations of the previous administration.

He then goes on to make his pitch -
We need to grow faster.  We need more good-paying jobs.  We need more broad-based prosperity.  We need more ladders of opportunity for people who are currently poor but want to get into the middle class.
Indeed we do.  But he then indicates (as he did during the last campaign) that government is the engine of growth.
The budget Congress passes will determine whether we can hire more workers to upgrade our transportation and communications networks, or fund the kinds of research and development that have always kept America on the cutting edge.  So what happens here in Washington makes a difference.  What happens up on Capitol Hill is going to help determine not only the pace of our growth, but also the quality of jobs, the quality of opportunity for this generation and future generations. 
The logic he uses here is utter nonsense.   By reducing the influence of government in our economy - growth is likely to recover.  But his sole definition of a sound recovery is one where government is allowed to grow significantly.

Then he goes into his deflective mode (what some have called the Bart Simpson theory of political responsibility) -
Up until now, Republicans have argued that these cuts are necessary in the name of fiscal responsibility.  But our deficits are now falling at the fastest rate since the end of World War II.  I want to repeat that.  Our deficits are going down faster than any time since before I was born.  (Applause.)  By the end of this year, we will have cut our deficits by more than half since I took office.

Now, keep in mind, initially, the whole argument was we’re going to do this because we want to reduce our debt.  That doesn’t seem to be the focus now.  Now the focus is on Obamacare. So let’s put this in perspective.  The Affordable Care Act has been the law for three and a half years now.  It passed both houses of Congress.  The Supreme Court ruled it constitutional.  It was an issue in last year’s election and the candidate who called for repeal lost.  (Applause.)  Republicans in the House have tried to repeal or sabotage it about 40 times.  They’ve failed every time.

There are so many things in these two paragraphs it is almost hard to know where to begin.   Deficits are going down not because of economic growth - which is one way to accomplish that - but because of the sequester and because the Congress has wisely (or politically - and I do not think it makes any difference) understood that spending more does not grow the economy.   The ACA is one of those rare instances in policy where no member of the opposition joined in supporting it.   It is beginning to unravel - or why would the President delay its implementation until after the 2014 elections; why would the AFL (one of the President's most loyal allies) ask that the law be significantly revised.   While the House has voted 40 times to repeal Obamacare (I am not sure that the number is correct but for the moment consider that it is true) the Senate has not passed a budget for a number of years.   They have simply bottled up any serious discussion of any issue.   At this point the President's prized enactment is supported by about 4 Americans in 10.

He then gets to the meat of his argument - 

Meanwhile, the law has already helped millions of Americans -- young people who were able to stay on their parents’ plan up until the age of 26; seniors who are getting additional discounts on their prescription drugs; ordinary families and small businesses that are getting rebates from insurance companies because now insurance companies have to actually spend money on people's care instead of on administrative costs and CEO bonuses.

A lot of the horror stories that were predicted about how this was going to shoot rates way up and there were going to be death panels and all that stuff -- none of that stuff has happened.  And in two weeks, the Affordable Care Act is going to help millions more people.  And there's no serious evidence that the law -- which has helped to keep down the rise in health care costs to their lowest level in 50 years -- is holding back economic growth. 

The claims of the effects of a law, which has not been implemented and which the President himself has arbitrarily moved to not enforce, are not clear.   There may well be some short term effects that may seem to be positive.  At the same time numerous employers are opting to reduce the number of hours for their employees to assure that they are not required to pay for the significant unfunded mandates in the new law. Most commentators suggest that the long term costs of this administrative monstrosity will not be positive for the health care system nor for the economy.

From my perspective there are two takeaways from this speech.   This president, more than any in history, considers his powers to be over the other two branches - he has shown no willingness or even ability to sit down with his opponents on a substantive basis and begin to work the nation out of political gridlock.   Second, with his imperial sense, he does not seem to recognize that on a day when a national tragedy happened within about 20 of blocks of his office that the time for political rhetoric should be delayed.

What is appropriate public behavior?

Yesterday the CEO of Starbucks penned an open letter to the American people which requested, in the spirit of an old Johnny Cash song - to "leave your guns at home."

Schultz says that Starbucks will not ban people, in open carry states, from bringing their weapons to coffee.  He is asking customers in these states to respect the company's wishes.

When I first heard about this I thought "another politically correct CEO" and that may be the case.   But in his public comments Schultz has repeatedly said Starbucks is not a policy organization.  Schultz and some of the news coverage of the story has suggested that gun advocates have used Starbucks to promote their point of view.   And indeed, some gun advocates have had their pictures taken in a store.

I can understand how some people would feel uncomfortable in the presence of a gun toting coffee drinker.

I live in a state where at least a majority of legislators have no appreciation of gun rights - so I have missed scenes like the one at the right.   I am not sure why it is necessary to bring a weapon like the one in the picture into any store. Were I to live in a right to carry state, it is not likely that I would bring a weapon like the one in the picture into any store. (If indeed I owned one.)

I love to fish but would probably not wear my waders into a Starbucks nor would I carry my rod or my net there.   It just does not seem appropriate.

I think Schultz's judgment about whether the store could be successful in establishing an outright ban (which as a private business they should have the right to do) is correct.   But the letter is equally ineffective.  It won't make gun owners happy and because he did not propose an outright ban - it will not make anti-Second Amendment advocates pleased either.  Should Starbucks make a strong statement or establish a strong policy prohibiting  guns in states where there are open carry laws, I would be less likely to patronize their stores. 

As I read the letter, though, I remain concerned that while it is well written, it presents a tremendous opportunity to be misinterpreted.   It just looks to me like he did not think out his options very carefully.

Schultz's Letter is reprinted in full below - 

Tuesday, September 17, 2013

Posted by Howard Schultz, Starbucks chairman, president and chief executive officer

Dear Fellow Americans,

Few topics in America generate a more polarized and emotional debate than guns. In recent months, Starbucks stores and our partners (employees) who work in our stores have been thrust unwillingly into the middle of this debate. That’s why I am writing today with a respectful request that customers no longer bring firearms into our stores or outdoor seating areas.

From the beginning, our vision at Starbucks has been to create a “third place” between home and work where people can come together to enjoy the peace and pleasure of coffee and community. Our values have always centered on building community rather than dividing people, and our stores exist to give every customer a safe and comfortable respite from the concerns of daily life.

We appreciate that there is a highly sensitive balance of rights and responsibilities surrounding America’s gun laws, and we recognize the deep passion for and against the “open carry” laws adopted by many states. (In the United States, “open carry” is the term used for openly carrying a firearm in public.) For years we have listened carefully to input from our customers, partners, community leaders and voices on both sides of this complicated, highly charged issue.

Our company’s longstanding approach to “open carry” has been to follow local laws: we permit it in states where allowed and we prohibit it in states where these laws don’t exist. We have chosen this approach because we believe our store partners should not be put in the uncomfortable position of requiring customers to disarm or leave our stores. We believe that gun policy should be addressed by government and law enforcement—not by Starbucks and our store partners.

Recently, however, we’ve seen the “open carry” debate become increasingly uncivil and, in some cases, even threatening. Pro-gun activists have used our stores as a political stage for media events misleadingly called “Starbucks Appreciation Days” that disingenuously portray Starbucks as a champion of “open carry.” To be clear: we do not want these events in our stores. Some anti-gun activists have also played a role in ratcheting up the rhetoric and friction, including soliciting and confronting our customers and partners.

For these reasons, today we are respectfully requesting that customers no longer bring firearms into our stores or outdoor seating areas—even in states where “open carry” is permitted—unless they are authorized law enforcement personnel.

I would like to clarify two points. First, this is a request and not an outright ban. Why? Because we want to give responsible gun owners the chance to respect our request—and also because enforcing a ban would potentially require our partners to confront armed customers, and that is not a role I am comfortable asking Starbucks partners to take on. Second, we know we cannot satisfy everyone. For those who oppose “open carry,” we believe the legislative and policy-making process is the proper arena for this debate, not our stores. For those who champion “open carry,” please respect that Starbucks stores are places where everyone should feel relaxed and comfortable. The presence of a weapon in our stores is unsettling and upsetting for many of our customers.

I am proud of our country and our heritage of civil discourse and debate. It is in this spirit that we make today’s request. Whatever your view, I encourage you to be responsible and respectful of each other as citizens and neighbors.

Sincerely,

Howard Schultz

Some thoughts on Fishing Guides

Yesterday I spent a very enjoyable day fishing for Salmon on the Sacramento River near Corning.  I caught my limit (2).   But that is not the point of this post.   The picture at the left is of the two monsters I caught.  They each weighed in at about 30+ pounds.

I went with a guide named Bob Sparre who works out of Sacramento but guides around Northern California.   Most of the guides that I have worked with specialize in trout and steelhead.   Bob does that but he also does shad and salmon and stripers.

Bob has a big boat which can comfortably hold perhaps six people fishing (yesterday we had four).   The best analogue I can think of for a trip with Bob is what I used to do when I went fishing off Redondo Pier in what was called a party boat.  Bob offers some insight into fishing but his real job is to find fish.  And he does that well.

That is in contrast with fishing with a trout guide.   One of my favorites is Confluence Outfitters, I have fished several times with Andrew Harris.   There the emphasis is on individualized fishing.  Every time I go out with Andrew I learn something more about fishing. Andrew is one of the hardest working guides I have ever worked with - he constantly tries to find fish and is a very patient instructor (with my casting skill that is essential!)   You also get a lunch (which is often a deli sandwich).  The difference between Bob and Andrew is the difference between a classroom and a tutor.   But there is another difference - cost - a day with Bob is $200 - a day with Confluence is more than $400. (Both are before tips.)  From my perspective both are worth the value.  I would recommend both - but they are very different experiences.

There is one other difference - at least for this trip.   When I fish for trout, I am a strict catch and release fisherman.   My only memories of each trip come from photos (with the advent of inexpensive digital cameras and smart phones - no fish is real without a picture.   But on the trip yesterday we brought home about 25 pounds of Salmon steaks that had been reduced to filets each of about 4 pounds.

So did Apple blow it?

Last week's announcement from Apple drew a lot of boos and hisses from stock market traders and from the tech commentators.   The two new phones got ho-hum reviews and iOS 7 was barely mentioned.   But as one should often do in market and tech commentary - it is worthwhile to step back for a moment and take a breath to reflect.   Walt Mossberg disagreed the naysayers when his review concluded with "Overall, however, the new iPhone 5S is a delight. Its hardware and software make it the best smartphone on the market."

Before I offer my reflections on these product announcements it is critical to state one reality that I think is fundamental to cellular phones.    For the last year there has been a pretty strong trend that break through innovation in the sector has not been there.   Chips are a little bit faster, screens and cameras are a little bit better, battery life is better and LTE coverage is somewhat better (in many places) but the bang up that caused Blackberry to fade away (brought about in large part by the iPhone one) has been mostly non-existent.   Look back at the announcement of the Galaxy 4 and there was a lot of chatter about how it was really not much of an upgrade.   From my perspective we have moved into a mature market where holding customers is almost as important as gaining new ones.

So here are my reflections (from someone who is admittedly a strongly committed Apple user):

#1 - Is the 5C cheap enough?   A lot of the criticism of the 5C was that it was not cheap enough to crack the Chinese market - where presumably billions of consumers await the chance to have limited use of twitter through China Mobile.  The pre-orders for the phone seem to be very strong.   Who seems to be buying the phone?   Evidently, a lot of people.  The consumer colors are likely to attract a lot of non-users to the platform. We'll have to wait and see about whether the deal when the China Mobile deal is inked.   They evidently have more than 42 million iPhone users at the present time.

#2 - What does the 5S really have to offer? - When I watched the announcement I was intrigued by three things about the phone.   First, I kind of like the fingerprint recognition (assuming that it is reliable).    There has been all sorts of nonsense about how this new security feature will cause problems - from my perspective that is what it is - nonsense.   Second, the A7 chip is, indeed, faster than the prior chipset but more importantly is the M7 chip which controls a lot of the functions that were formerly controlled on the main chip.  From the technical discussions of the new chips the advance here is significant.  That means the main chip (the A7) can concentrate on running the phone - that is a big deal.   Third, the new gold case is cosmetic- but I bet it will attract some users who want to be able to demonstrate they have the new phone.  (I will keep mine in black/grey)

#3 - Ecosystem is a biggie - On a lot of the boards there has been chatter about the Apple and Android ecosystem.  (The ecosystem for phones is all those apps and other things that make the phone smart.)  Here, while Android has made some advances, Apple still is the easiest to use across devices.   So many Apple users also have an iPad and perhaps a linked laptop - and all those devices work well together.   To use a phrase in the drug wars - the phone is just a starter.   One metric to keep in mind- although Android phones outsell Apple's - the revenue for developers (those are the guys who write those handy APPs) was 2.6 times larger than that for developers of Android APPs.   That sounds like a pretty strong enrolled base.

#4 - iOS 7 - The announcement last Spring about the new operating system for phones and tablets has been followed up by what looks to be a very significant upgrade.    Obviously, tomorrow the real test will begin.   When the last operating system for the iDevices came out - a huge majority of users upgraded so that by six months after the introduction most users were on the latest system.  The best estimates on the current setting is that close to 90% of iOS users are on the latest system.

Android has a defect in their system - which is both a strength and a weakness.   Open source means that a bunch of people can tweak the system.   But according to the most recent data only about a third of users are on the latest Android operating system.   In the iOS world one can expect that almost all people can get the same functionality.   I have talked with several Android users who love their phone - but I have also talked with several who switched.   I've spoken with a lot more Windows phone users who did not like their operating system.

Ultimately, what smart phones have done is created a device that is a lot more than just something to call people with.  As an example, yesterday as I was fishing on the Sacramento River I texted photos of the two huge Salmon I caught.   I have one friend who was anti-smart phone until her husband bought her one and now the phone never leaves her side - she has become a Facebookista.    From my perspective, Apple did what it needed to do - produce some products that advance the utility of their products.   I am looking forward to seeing what they will do with the tablet market - which I hope will include an announcement in the next month or so.

Larry Summers drops out

NEWS COVERAGE WITH ANNOTATIONS (Note the picture was specially chosen to show Summers at his best) - Larry Summers, the former Harvard President and current somewhat Washington insider withdrew his name from consideration as Fed Chair today.  In his note to the President he said he had "reluctantly concluded" that the confirmation process would be "acrimonious and not serve the interests of the Federal Reserve, the Administration, or ultimately, the interests of the nation's ongoing economic recovery." (Read he counted the votes or the President's staff did.)  He also is quoted as saying  “This is a complex moment in our national life. I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration, or ultimately, the interests of the nation’s ongoing economic recovery.” (Read again he did not have the votes and the President has lots of other nasty fights to deal with.  Read also that the President's approval rating (on the RCP average) on handling of the economy is just a bit over 40%)  The President responded with "Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom, and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today," the president said in a statement.  (Note the President reads polls too)

"I will always be grateful to Larry for his tireless work and service on behalf of his country, and I look forward to continuing to seek his guidance and counsel in the future," the president added.  The President did not express an opinion about Summers' tireless quest for the Fed job.

Summers was a key figure in the early stages of the Clinton Administration and also served a key role with the current one.   He has a well deserved reputation as arrogant. (see an earlier post)  Yellin has more direct bank experience and although she is likely to be more accommodative than ideal - I expressed an opinion earlier that she is a better choice.

The speculation is that the liberals got him in favor of Janet Yellin.  From my perspective that is a bit too simple.   Some polling on the Summers nomination got negative reviews from bankers and others on Wall Street.   A USA Today survey found that 56% of the economists polled preferred Yellin. There may be a third candidate Donald Kohn (who was a Bernanke deputy)- but I would put my money on Yellin (which is indeed what you do when a new Fed Chair is named) 

Neville Obama

It was very hard to think about the President's speech last night because a good deal of it was substantive and made a very good case for the reason that the US might act in response to the Assad regime's use of chemical weapons. Let me state at the outset that I am not convinced that we should be involved militarily in Syria.  But events may have overtaken coming to a sound conclusion in this area in the world.

Here are some quick thoughts on the President's speech -

#1 - The Appropriate Role of Congress - The President commented that "I believe our democracy is stronger when the President acts with the support of Congress. And I believe that America acts more effectively abroad when we stand together. This is especially true after a decade that put more and more war-making power in the hands of the President, and more and more burdens on the shoulders of our troops, while sidelining the people’s representatives from the critical decisions about when we use force." Obama seemed to imply that the actions in Iraq were not conducted with "the support of Congress" - but Public Law 107-243, which was passed and adopted before any actions were taken in Iraq contradicts that assertion. Just how did more power accrue to the President during the last decade?  Well, the best example came in our intervention in Libya where the President (Obama) did not seek any congressional support.  What is odd about the President's statement is his complete avoidance of working with Congress.   About the only congressional ally he has had in this from the GOP has been Senator McCain.

From my perspective his move of a resolution to Congress was in the belief that the GOP might defeat a resolution and thus he could partially shift the blame.   The best presidents understand that working with both sides of congress can be frustrating but rewarding.   This president does not get that.    He seems to take issues with congress as an up or down vote with no understanding of the long term nature of politics.   President Reagan understood that working with congress produces long term benefits.  This president does not get that.

A recent post on the Rothenberg report concluded with "In short, if the president had engaged members of Congress from the beginning of his tenure, even behind closed doors, some of his most challenging political moments could have been an easier lift. Democrats might even still be in the majority in the House if the health care and cap-and-trade bills had been handled differently. And that certainly would have an effect on the legacy that Obama leaves behind."


#2 - Moving Public Opinion - Generating public support for any policy needs to include a wide range of figures from both sides of the aisle on an issue as important as this.   There is no evidence that the President has sought advice or counsel from anyone outside his narrow band of staff and advisors.   I wonder what opinions about this might be had he consulted with people like former Secretaries Rice or Schultz.

#3 - The Role of the UN - Whether the President got backed into his new role or not (and I believe he was backed into this position by his gaffes and Kerry's) he now has to trust that Russia will not work to weaken the resolution against Syria (not likely) and will do everything in its power to encourage expeditious work by the inspectors (the Iraq experience does not offer much promise).  Look at the cat and mouse games that were played in Iraq.   I expect that between Putin and Assad the old ropa-dopa defense will come back to the fore.

#4 - Can we trust Putin? - The Keystone Cops in the White House have seemed to lurch from one gaffe to another.   The President drew a line in the sand and then denied it.  Kerry had a series of stumbles.  All the time Putin acted as he did in the Snowden affair - attempting to reassert Russia's role in world affairs.   The President characterized the developments in the following manner - "over the last few days, we’ve seen some encouraging signs. In part because of the credible threat of U.S. military action, as well as constructive talks that I had with President Putin, the Russian government has indicated a willingness to join with the international community in pushing Assad to give up his chemical weapons. The Assad regime has now admitted that it has these weapons, and even said they’d join the Chemical Weapons Convention, which prohibits their use."   The Russians actively tried to delay any vote in the Security Council which would  assert the need to follow the Chemical Weapons Ban Treaty's requirements.

#5 - Possibly the least gracious administration in history - The old adage - Success has many fathers, failure is an orphan -  seems to apply here.  Part of the justification for moving the vote to congress was to possibly shift blame.   As it became clear that the vote was not going to affirm the President's position, he asked that the resolution be withdrawn.   But then today the White House Press Secretary made the absurd comment in a briefing that Putin now holds some of the responsibility for the success of this issue.  The White house seems hell bent in this and in almost every other activity it engages in to look for scapegoats in advance thinking oddly enough that their failures will not be judged if there is another person/entity to blame.

#6 - Possible Outcomes - It is hard to understand how this can come out positively.  Assad has been a rogue regime for a long time, he has no significantly greater pressure to change his ways and he has the threat of violence against him significantly reduced.   In the near future we will be presented with another rogue regime (Iran) possessing nuclear weapons capability.   Is it likely that the Iranian mullahs will respect any American threat when that situation becomes clear.   Does North Korea have any encouragement to act more nicely?

This is admittedly a complex situation and American interests may not be served by doing some sort of military action in Syria.   If things work out it will be by dumb luck and providence.  Regardless, the President's lack of understanding of the bigger pictures of the American political scene and the international stage have cost the country a lot.

The Onion produced a story this morning that sums up the current state of public opinion - It proclaimed that a majority of Americans support sending Congress to Syria.  Come to think of it - that is not a bad idea.

Knowledge and Power

I've always been fascinated by George Gilder.  At at least three times in my life he has written a book which caused me to rethink basic principles.   The first two were Wealth and Poverty and Microcosm.  The first was the substantive bible of the Supply Side revolution in economics.  It did not make outlandish claims about how tax rate reductions would be always neutral (as Jude Wanniski seemed to do) but it did present a clear case (later affirmed by the results of the 1981 and 1986 tax acts) for reducing and simplifying the tax code.   The second gave a compelling roadmap for much of the technological revolution we have lived with in the last three decades.

I need to admit that I served on a national board with Gilder in the 1970s.   One funny story should explain - this was well before the publication of W&P.   We had a Ripon Society board meeting in New York and on Friday night George called and said he would have to miss dinner because he had gotten on the plane wherever he was and got so absorbed in his work that he failed to get off when the plane landed in NYC.  He promised he would be there on Saturday.   Mid-day Saturday he called from another location and said it had happened again and so he was in yet another city but not NYC.  He never did get to that board meeting.

Several of Gilder's books start with a hero.  So in Microcosm he spent a lot of time on Carter Mead.   Mead was at Caltech and Gilder did a superb job of explaining Mead's thoughts on how things would keep getting smaller and faster.   In his latest book, Knowledge and Power, he latches on to Claude Shannon - the Bell and MIT engineer who built a framework for information theory.

The book is divided into three sections - the first on information theory where he establishes that communications systems, including economic systems, can be divided into content (knowledge and information) and power (the conduit).   Content is messy and unpredictable; the conduit is opaque but predictable.  For conduit to be successful in economic transactions one needs to have things like property rights, stable exchange rates, etc.   In economics it is an old argument advanced by many of the Austrian economists.   You do not need to know why a dollar can be exchanged for something but you do need to have some certainty that the value of the dollar is not subject to constant negotiation.   Hayek raised similar points in his writing on knowledge.  I found this section dense, but worth the slog. The key part of the content layer is that it is infused with surprise(s).  One other idea is that content and conduit are linked.

The second section of the book then applies the theory to real world examples.  Mess up the conduit with inordinate regulation or other distortions and the knowledge benefits soon become less robust.   The second section is almost a practical implications discussion of the theory section.  It is quick and simple and I think mostly on target.

The third section has a series of responses those that might be in opposition to Gilder's thoughts on the relationships between knowledge and power.  Four are presented below as examples.

He begins by taking on a group of economists that do not understand the power of entrepreneurial spirits.   He chooses David Stockman and Paul Samuelson for special consideration.   Ultimately, economics is not just about transactions but about the ability to be what Smith called the "bull headed brewer" going forward with an idea despite what others think.   But this kind of thing cannot be planned.  After WWII Paul Samuelson and others in his camp argued that the demobilization would present us with a pretty severe downturn.   In the 1946 elections, Congress switched hands.   In a very short period of time the percentage of GDP devoted to the federal sector went from 46% to 14%.   But growth happened.   He seems a lot less concerned about debt to GDP ratios and even deficits, if those things allow the entrepreneur to thrive.   As Hayek argued in the Fatal Conceit, planners can never get it right because they cannot understand the "knowledge of time and place" that each of us carries on our own.   He does a good brief review of the tenuous position of American tax policy pointing out that ours is the highest corporate tax structure in the world.  He pokes fun at California and its tax follies.   Neither is productive for encouraging explorations into entrepreneurial growth.   You could add in Robert Reich or Paul Krugman - all seem to think that there is no cost to moving more and more into government.   

A somewhat opposite point of view was first presented in two books by Nicholas Taleb (Fooled by Randomness and The Black Swan).  Gilder argues that Taleb is interesting but ultimately wrong in his conclusion that unexpected and serious events will come in increasing frequency.  Included in Gilder's critique are the "random walk" theorists that argue it is impossible to beat the market.  Inherent in markets is the ability of a person who understands a detail that others do not - to exploit that knowledge - it is certainly present in the process of innovation and likely as present in the financial markets.

The third group might be called the apostles of the machine.   He reviews  the writings of George Dyson and Ray Kurzweil (and a couple of others like Kevin Kelly).   Several years ago Kurzweil wrote a long book called the Singularity which argues that computers will somehow become human or that humans will become anthro-robotic.   He suggests that computer intelligence will soon dwarf human intelligence.   Gilder rejects the notion in part because one cannot separate intelligence and creativity.  One of my favorite lines in the book is his dismissal of much of modern science which he suggests has devolved into "politics, panics and cartels."

Arnold Kling and Peter Theil are the next targets.   Kling wrote a book called the Great Stagnation which was written about in this blog about the time it came out.   It is a pessimistic tract that posits that we've taken all the low hanging innovation fruit off the table and will be stuck with low economic growth in the future.   Theil takes a slightly different tack to the argument by positing that big things (like teleportation) are not going to happen.   Gilder, ever the optimist, says neither idea is correct.   We do not know where the next good idea will come from - but he asserts unless the conduit level gets too oppressive (from regulation or unsound tax policy) that things will happen.  He points out that the risk of stagnation is always present - witness that the US in 2010 began to export talent back to countries like Israel - where the entrepreneurial spirit is in better shape.

I originally got the book as an Audible presentation.  But I was so intrigued with it that I also got  the electronic version from Amazon.   Forbes has a review of it that calls it his best work, and I think that is probably true.   The Forbes review quotes one of Gilder's conclusions - “The ultimate strength and crucial weakness of both capitalism and democracy are their reliance on individual creation.  But there is no alternative except mediocrity and stagnation.  Demand-based systems can never flourish in a world where events are shaped by millions of human beings, acting unknowably, in fathomless interplay and complexity, in the darkness of time.”

One more thing on Syria

The WP published a Whip count for both houses this morning which shows one thing positive about the President's Syria policy - it seems to have generated genuine bipartisan response.

Godot's in Syria

I've hesitated in writing a post on Syria, not because I do not have some thoughts about the issues but more because I am thoroughly disgusted with the political elites behavior - that is without regard to political party although I think the Administration's behavior has been well below par.

Let's get something straight.  International relations does not always involve people of goodwill but one principle seems to be eternal.   When you say something, especially something that is relatively clear, you better be prepared to follow through - or you will become chump of the globe pretty quickly.

One other opening comment - It looks like one side or both used chemical weapons in Syria.  And in an ideal world we would figure out how to spank those that did use the weapons - but a response would be more effective if we acted when we established the fact.  Waiting here is not really good- especially when we have made a threat.  We are not necessarily obligated to respond to every tin horn dictator's outrageous actions; but there are times when we should respond.

So here are my thoughts -

#1 - It really is 3AM -  During the 2008 campaign Hillary Clinton campaigned against the President by wondering if he was the guy to answer a crisis phone call at 3 AM.   This administration has demonstrated throughout this crisis manifest incompetence.  He seems to think he can control the story as well as he controlled the news around his campaign.  The President cannot take back his original (seemingly unscheduled) "redline" comment. He made a threat.   His record here has been one of almost constant political rather than strategic actions.   In 2006, while he was ramping up his campaign he said to the Boston Globe - "The president does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation."  Having written a Master's Thesis on the War Powers Resolution, I have some sympathy to that position.   But his "first you say you can then you say you can't" public indecision on the power of the president, hardly gives the American people a sense that he is in any way thoughtful about the situation.

Kerry has done nothing to improve the situation. When Secretary Kerry was in the Senate he did some arm chair diplomacy with Assad and told us how the younger Assad was really different from his horrible despotic dad. Kerry has been a ruthless self promoter since his days of heading the Vietnam Veterans Against the War. He has been an almost consistent pacifist on international engagements - so it is odd to seem him as a Jingoist Secretary of State. From my perspective his current rhetoric is a bit odd. Kerry commented in one place about the quality of the intelligence - "With high confidence, our intelligence community tells us that after the strike the regime issued orders to stop and then fretted openly — we know — about the possibility of U.N. inspectors discovering evidence. So then they began to systematically try to destroy it." From my perspective that sounds a lot like what the Bush Administration (pick one) used to intervene in earlier conflicts - although in both of those Kerry was a bit more skeptical.

The oddest thing about the President's behavior comes down to an eventual result which I suspect will happen.   One or both houses will reject the resolution authorizing use of force.  Then what is the President to do?  He may think he can justify not doing anything (which will not be convincing to anyone but the chattering classes in DC).   Or he may strike without the authorization, which will make him look foolish domestically.   In any event his delays in doing anything means that Assad has had plenty of chances to move his stuff to places where it will be harder to strike.   These guys look like they have never had a serious discussion about strategy on this very important issue.

In this instance, while I am not sure he has made the right decision, one leader that I have appreciated is the much maligned Speaker John Boehner.   He has decided that he will support the President on his resolution I think following the notion that "politics ends at the border."  I wish some others might consider that - although there may be a very good reason to reject the President's confused strategy.

#2 - The Marv Esch Standard - One of the members of congress that I worked for used to tell prospective candidates his three rules for politics, which applies equally to international relations.   #1 - Be for everything that is good.  #2 - Be against everything that is bad.   #3 (and he would add - most important) Be able to tell the difference between the two.   In this case there are a series of bad choices - there were even before Assad or who ever did the dirty deed.   From the best news coverage of the current situation there may not be any good choices.   The "moderates" in the rebels may not be anything of the sort.  The history of the region has been complex for many decades because the generation of elites after WWI thought they could as Adam Smith suggested in the Wealth of Nations - arrange people like pieces on a chess board.   But as Smith cautioned - those chess pieces do not always react in expected ways.   The lines which created many of these countries ignored historic ethnic and religious distinctions which in turn generated new types of hatreds.

#3 - John McCain is becoming Nero - He seems to love the cameras but yesterday they betrayed him - he was caught on one of the news services playing video poker on his phone during one of the hearings; his response, when outed,  was to complain that he was losing the game.  If the Senator still had any sense he would resign in disgrace immediately.

#4 - A Basic Principle - you do not treat your enemies better than you allies - The Administration's dithering has put Israel into a very complex position.  I think it has also brought into question other areas where we have problems like Korea - I wonder how our allies there will feel when North Korea takes license from the President's idiotic responses and begins to rattle their sabers at the south.  The implications for this situation go well beyond the Middle East.

#5 - Instant Replays in the Middle East -   Much of the discussion in Washington reminds me a lot of the discussion in our previous short term engagements in the Middle East.  The players are different, but the words are the same.   Rep. John Shimkus (R-Ill.) voted to authorize force in Iraq, but he is now leaning toward opposing action in Syria. In his statement explaining his views, he specifically cited the broken promises of Iraq.

"I trusted their assessment, our president, and the secretary of state as he made the case before the UN," he said. "I supported the president’s request and voted yes.  The search for weapons of mass destruction came up empty, and cost our nation lives and money. We are being asked again by the chief executive to authorize the use of force against Syria. ... I am not convinced that a limited strike against Syria at this time is warranted."  I think there are a lot of members on both sides who feel once burned twice learned.

We are presented with a series of bad choices and all the while many of our leaders on both sides are treating this as a time to make political points.

The Broiler

For a good part of the last 30 years I was a regular at a restaurant in downtown Sacramento called the Broiler.   I first went there when it was on J street which was a small place with perhaps 30 seats.   About fifteen years ago it moved to 12th and K to a larger and more modern space.   The inspirations for the place came from a couple named Marilou and Larry Lords.  Marilou had been the Executive Chef at the old location but became the hostess in the new one.  Marilou died last year.

At one point, the restaurant had a 36 OZ Porterhouse on the menu - an item I never tried.   For a while they did a superb anniversary menu which had a great Beef Wellington for a ridiculous (inexpensive) price (inexpensive).

I probably ate at the restaurant about 1000 times.   Service and food were consistently good.   While it was a steakhouse as times evolved so did the menu.  I can't count the number of times when I needed to host something downtown and called late and Larry or Marilou figured out a way to make things work; of even better to make things memorable.   The last review of the place in the Bee was in 2012.

One particularly memorable dinner was with the Mayor of Aguascalientes and a group of friends from that city.   The Broiler had a night manager who was from Mexico and at the end of the evening we spent an hour or so talking his life after coming to the US.   Like many immigrants he had both good and bad experiences - he went to UCLA - but he was the Maitre d at the restaurant.   I learned a lot that night about the importance of families in Mexico.

On Monday, the place simply closed without an explanation.  The BEE published an article yesterday and today without any explanation of why the abrupt closure.   They said they would follow up to see if they could find out why the change.   Even though I have not been a regular since I retired, I will miss this great place.

Ronald Coase

On Monday, Ronald Coase, a 1991 Nobel Laureate in Economics died four months short of his 102d birthday.   There are a lot of intriguing things about Coase.    Coase was most celebrated for discussions of social cost and a theory of the firm.   The WP did a summary of five of the branches of theory for which he should be remembered.   That is both a pretty good list and a short summary of some pretty elegant work.  

I want to note two things about Professor Coase.    First, comes from the last paper cited in the Post article - the Lighthouse in Economics.  As the theory of public goods developed, especially in books like Paul Samuelson's Economics - lighthouses were often cited as good examples of public goods.   The traditional definition of public goods are those things in society which are non rival and non exclusionary.   Writers like Samuelson argued that the consumption of what a lighthouse produces does not diminish the ability of more than one ship to consume and at the same time because they helped ships at sea - it was impossible to exclude ships that did not pay.   In the article Coase said he was bothered by the logic and thus went back and did the empirical research and found that for British shipping there was indeed a way to get ships passing a point to pay for the service.  

The second issue came about as a result of an Econtalk podcast in May 2012.  Russ Roberts interviewed Coase a bit more than a year ago.  At the time Professor Coase was frail in body but not in thought.   The hour is well worth listening to - to hear him describe his thoughts on all sorts of issues as well as to explain that at 102 he had just finished a book on the Chinese economy.   He was an active scholar throughout his life.   Throughout his life Coase emphasized two important concepts for any scholar - he was rarely content to sit idly by.   At the same time he was remarkably willing to listen and discuss theory (even his own) and to be informed of other points of view.