Tuesday, November 30, 2010

Best Horror Movies

Turn off those lights if you dare...

1. Wait Until Dark (1967)
2. The Other (1972)
3. Carrie (1976)
4. Stir of Echoes (1999)
5. Night of the Hunter (1955)
6. Psycho (1960); Dial M for Murder (1954); Strangers on a Train (1951)
7. Pan's Labyrinth (2006), The Devil's Backbone (2001)
8. Cape Fear (1991) and (1962)
9. Rosemary's Baby (1968)
10. Thirst (2009, Korean)
11. From Dusk Till Dawn (1996)
12. The Village (2004) [I am in the minority on this one--most people disliked this film.]
13. Nightmare on Elm Street (1984)
14. The Eye (Hong Kong) (2002)
15.  Black Mirror (2011-2016, series)

Monday, November 29, 2010

Interesting Viewpoint on Terrorists

Humberto S., comment on Yahoo, 11/6/10:

Most of these Muslim terrorist leaders were either born in the West, or studied and worked in the West for years.

That's not a coincidence.

For many of them, the cultural shock was too much. Raised in homes where certain values were held as sacred, realizing the society around them held such values as "barbaric" or "backwards" made them bitter.

In a way, it's similar to the story of some KKK and Neo-Nazi leaders, who were young Liberals working with the needy in poor areas. They expected to be treated as saviours, and all they got was mistrust and getting robbed and beaten.

In general, it's the other people's prejudices, when aimed at someone who's idealistic, what turns good intentions into never-ending hatred.

It's nice to see someone make a coherent and interesting comment on a Yahoo message board. Usually, there's nothing there but mind-numbing tripe and name-calling. In case you're interested, my views on locating likely terrorists can be found here.

Saturday, November 27, 2010

Is Netflix Ignoring the Hearing Impaired?

Stan Taylor, bless his heart, nails Netflix (NFLX) for its apathy towards the hearing-impaired community:

"Hearing-impaired get no love from Netflix "

So Netflix will be charging more for mailed movies? However, there is no word that they will fully provide CC and SDH (closed captioning and subtitles for the deaf and hearing impaired) on their downloads.
Nor is there any information suggesting they will waive the increased cost for mailers for the deaf and hearing impaired until they can provide CC and SDH. The Americans with Disabilities Act should protect hearing-impaired people from a company that just doesn't seem to care about them.

(From SJ Mercury News, letters, November 26, 2010)

I have a love-hate relationship with Netflix. I love their DVDs and movie recommendations, but I cannot understand why they won't get their act together when it comes to online captioning. Many online video outlets already offer online captioning, including Hulu. In 2009, Netflix CEO Reed Hastings claimed that Hulu didn't offer captions. His comment really irked me, because Hulu did offer captions, and the fact that he got it wrong indicated online captioning wasn't even on his radar screen. (More here on that particular exchange.)

But Netflix isn't behind just Hulu--it's also behind YouTube, which offers online captioning on many of its videos. If you want to see the difference captioning makes in the lives of the hearing impaired, watch this YouTube video. It's only 1 minute and 28 seconds, but it will give you excellent insight into online captioning. The participants point out that online captioning also exposes content to a foreign audience that wants to learn English. I'd go a step further--Google has amazing translation services and tools, which means that eventually, every single show can be put online and watched by anyone, anywhere. Without captioning, however, most of those shows, including amateur user-made content, will be inaccessible to the majority of viewers. The loss of potential markets aside, why would Netflix choose to exclude the hearing impaired community when Hulu and YouTube are able to be inclusive?

Netflix's preference that its viewers watch films online certainly saves the company money on postage, but at what price to its viewers? Someone like me--severely hearing-impaired since birth--relies heavily on Netflix for entertainment. Since I function best in one-on-one situations where I can focus on a single speaker, I tend to feel lost during common social activities, which are usually group-based. For example, dance clubs and bars, which are noisy anyway, are terrible places for me and other hearing impaired persons who want to socialize. Now that Netflix is moving from DVDs to online streaming without captions, does it realize it is making another form of socialization harder for the hearing impaired?

Making matters worse, ordering a Netflix DVD isn't any guarantee that it will be captioned. You'll notice some Netflix DVDs are colored gray. Those plain gray DVDs are made specifically for Netflix. These DVDs sometimes lack captions, because Netflix doesn't require them. For example, I still haven't seen Clint Eastwood's Gran Torino. I know it's supposed to be a great film, so when my first gray-colored Gran Torino DVD didn't have captions, I ordered another one. The second one had no captions. Being the persistent type, I got another one. Still no captions. I finally tried to watch it without captions, but Clint Eastwood has a very soft voice, and it's impossible for me to hear him without captions.

To be fair, it's not just Netflix that ignores the hearing impaired community. During Cisco's most recent annual meeting, CEO John Chambers indicated that "66 percent of the world's mobile data traffic will be video by 2014." (More here.) He did not mention the issue of online captioning, nor did he seem to consider that its absence might impact web traffic in the future. However, if senior citizens--who tend to lose their hearing over time--cannot fully participate in online activities, wouldn't online retailers and businesses lose a large group of potential customers?

For instance, let's assume that an online commercial has sound and speech--why would the company who paid for the advertisement want to exclude senior citizens from its reach? Even if they don't buy the product for themselves, most senior citizens have children and grandchildren, don't they? Let me give you an example of what Cisco and other online companies are missing. Make sure you have your computer's sound off or your speakers silenced. Now check out this Cisco advertisement. It's not a bad commercial, is it? Now go back and look at the commercial with the sound on. Amazing, isn't it? It's easily one of the best corporate commercials in 2010, if not the best.

Most hearing impaired people have some ability to hear sound (though not all speech). With captioning, hearing impaired people and senior citizens can mentally fill in the parts they miss and enjoy the full experience of television shows and online advertising. But let's set aside our altruistic side for a moment and say you don't care about the disabled, the hearing impaired, the deaf, and senior citizens. Fine. Yet, we all know people who watch videos and surf the web during work. If advertisers made it easier for employees to watch commercials and videos in a way that didn't alert their managers, perhaps productivity would decline, but online exposure would increase. (I said upfront I was ditching the moral choices in this particular argument, and once you've already accepted ditching the disabled and the deaf, time-theft seems almost vanilla.)

Overall, the fact that Netflix can't keep up with Hulu and YouTube should concern not just customers, but any company interested in acquiring Netflix. If Netflix can't handle online captioning, what else can't it handle? And why would any company consciously tarnish its public image by ignoring seniors, the disabled, the hearing impaired, and the deaf?

Disclosure: I currently own fewer than five shares of Netflix (NFLX), but my holdings may change at any time.

Wednesday, November 24, 2010

Accuray's Annual Shareholder Meeting (2010)

[Note: the third paragraph from the end of this article discusses the TSA's full body scan machines from the perspective of a medical doctor and a Ph.D. in radiation physics.]

After I attended Accuray’s (ARAY) annual shareholder meeting, I had a chance to tour its Sunnyvale campus, where I learned more about CyberKnife. CyberKnife is a radiosurgery tool that attacks and destroys cancerous tumor cells using highly precise radiation beams. CyberKnife is much less invasive than “scalpel” surgery. Its high accuracy (hence, the name Accuray) allows patients to minimize exposing their healthy organs and body parts to radiation. I rarely feel optimistic after shareholder meetings during this Great Recession, but Accuray gives me hope not only for its own future, but the future of medicine.

THE ANNUAL MEETING

Accuray’s annual meeting took place in a well-known law firm in Palo Alto. Shareholders were offered orange juice, coffee, various fruits, bagels, and pastries. About 25 people attended the meeting, including founder Dr. John Adler. Prior to the meeting, Dr. Adler seemed well received by most Board members, who engaged him in friendly conversation.

President and CEO Euan Thomson opened the meeting by introducing the Board of Directors. There was one Asian and one female on the Board.

General Counsel Darren Milliken, a Santa Clara Law graduate, set forth the shareholder proposals and asked after each proposal if shareholders had any questions about them. (Some companies make the mistake of not allowing shareholders to ask questions or make comments during the introduction of shareholder proposals, which makes a farce of the voting process. Accuray did not make this mistake and followed best practices.)

After the formal portion of the meeting concluded, Accuray said it would not have an open Q&A session; instead, if shareholders had questions, they were welcome to ask them one-on-one with any executive team members or Directors. I have attended many shareholder meetings, and it’s highly unusual for companies to avoid an open Q&A session. (One notable exception is Cisco (CSCO), which asks shareholders to write down their questions on index cards, but its meeting is much larger and not restricted to shareholders.)

When a shareholder–not me–protested the Q&A format, Accuray said that its 1-on-1 approach was common in some business meetings. Instead of calming the waters, this explanation prompted Dr. Adler to deliver a verbal smackdown. This is the second year in a row that Accuray has attempted to avoid a public Q&A session, only to be trumped by the Adler family. (Last year, it was Mrs. Adler who delivered the fireworks.)

Now, before I tell you about Dr. Adler’s comments, it is important to note that Dr. Adler left Accuray and now works for a competitor, Varian (VAR). Dr. Adler said that he had heard people speak of their “disgust” at the way they had been treated by Accuray’s management. He said that Accuray is a “reflection of me and Marilyn [his wife], who named this company,” and he was “dismayed by [Accuray's] deteriorating business reputation.” Dr. Adler did not mention specific incidents, but lamented what he felt was a general lack of passion on the part of the executive team.

I usually have one or two questions for management, centering on Warren Buffett’s “wide moat” analysis. Accuray allowed me to ask my question, but directed me to the CFO. I read from page 29 of Accuray’s 10K, which lists Accuray’s various competitors, and I asked Accuray about the competitive advantages of its products. I felt a little guilty about asking CFO Derek Bertocci a technical question, but he actually answered it very well. After he was done, CEO Thomson jumped in and explained that Accuray’s CyberKnife uses over 100 different positions and can correct for any patient movement. I asked if other products could do the same thing–he responded, “Not to the extent of the CyberKnife.”

After the meeting, I had a chance to talk to CEO Thomson one-on-one. He said that he had a great deal of respect for Dr. Adler and his achievements. He also informed me that the Board (including CEO Thomson) "unanimously" voted for Dr. Adler to stand for re-election, and Dr. Adler chose to resign. CEO Thomson politely explained that it wasn’t unusual for a founder of a company to feel less involved as time passes. As a company matures, he said, it tends to listen more to its customers and persons with business-oriented perspectives. Consequently, said Mr. Thomson, it’s not unusual for a founder’s “personal vision” to be changed. The trick, CEO Thomson said, is to progress forward “without losing passion.”

You might wonder how Dr. Adler, a genius who has advanced radiosurgery by light years, and CEO Thomson, an accomplished Medical Physicist with a Ph.D. in radiation physics, can both mention passion and yet reach different conclusions about its levels at Accuray. After spending time with both men, my theory is that the difference is cultural. Dr. Adler is a very direct, charismatic man who commands attention wherever he goes; in contrast, CEO Thomson is British and more low-key. While it is hard to get a word in edgewise when Dr. Adler speaks, CEO Thomson encourages others to speak when he sees they have something to say. In short, both men have different communication styles and come from different cultural backgrounds.

CEO Thomson and Dr. Adler are clearly passionate, competent, and knowledgeable, but their personalities could not be more different. Having lived in England and the States, I can see the cultural differences very clearly, but Americans who've never crossed the Atlantic must have also heard of the famous British stiff upper lip, where Brits are expected to handle adversity and pain with stoicism. Such stoicism--generally speaking--tends to promote a culture of outwardly reserved emotions. (Side note: when I was jogging in Hove/Sussex as a teenager, I remember waving at various people and saying hello, only to have all the Brits in my path quite shocked that I was a) crazy enough to be exercising in the cold weather; and b) greeting strangers along the way. No one waved back or said hello.) Some Americans may not know it, but we are some of the friendliest people in the world. Unlike Europe, our ability to avoid years of war on home soil has allowed our culture to be generally more open and friendly.

Yet, it is not surprising that Dr. Adler would see others as less passionate–indeed, almost anyone would appear less passionate when compared to him. Within the field of medicine, Dr. Adler is the closest thing to a rock star. When I posted on my Facebook wall about the CyberKnife, I almost immediately got the following comment: “I actually had the CyberKnife done on a tumor by Dr. Adler himself (the inventor). It is amazing, sci-fi, and scary at the same time. He is AWESOME!” How many doctors can garner such adoring fans?

POST-ANNUAL MEETING

A few days after the annual meeting, CEO Thomson was kind enough to take me on a tour of the company and, along with Dr. Omar Dawood, teach me more about CyberKnife. Before I tell you about my introduction to CyberKnife, I will summarize a meeting I had with Accuray’s general counsel, Darren Milliken.

I have never heard anyone at Accuray speak negatively about Dr. Adler, but Accuray continues to receive major criticism from Dr. and Mrs. Adler. I asked the company’s lawyer, Darren Milliken, to discuss his thoughts on Dr. Adler’s criticism of Accuray.

Mr. Milliken said that Dr. Adler had left Accuray to pursue other interests. Moreover, under SEC and federal rules, when a director resigns, a company and director must disclose any disagreement on issues surrounding the director’s departure. Mr. Milliken said that Dr. Adler not only failed to raise any issues of disagreement with the company’s 8K filing relating to his departure, he actually approved of the 8K in an email to Mr. Milliken. According to Mr. Milliken, “If there was a disagreement with Adler, we would have filed an 8K [as the law requires].” No 8K was filed relating to any disagreement with Dr. Adler by Accuray.

Mr. Milliken also informed me that Accuray’s corporate governance committee and its Board of Directors recommended that Dr. Adler remain with Accuray as a Director. In fact, according to Mr. Milliken, Dr. Adler stood for election as a Director–even though he could have opted out–only to resign shortly after he was elected.

I asked Mr. Milliken about his opinion of Dr. Adler. Mr. Milliken said, “What he invented here is over-the-top incredible, [and] John [Adler] invented that, and that’s amazing to me.”

I then went to meet CEO Thomson and Dr. Dawood to learn about CyberKnife. I have never been so impressed with a medical device in my entire life. Both CEO Thomson and Dr. Dawood were able to explain the CyberKnife to me in about an hour, even though I have no medical training or expertise. The main points I learned are as follows:

1. According to Accuray, competitors’ products rely either on radiation therapy or a Gantry-based system, which is not as focused or accurate as Accuray’s CyberKnife. For example, let’s say you want to treat a cancerous tumor in your prostate. Well, if your body parts around the prostate are still reasonably healthy, you probably want to minimize the level of radiation you receive. According to Accuray, the CyberKnife is able to pinpoint the location of the tumor and deliver hundreds of quick, highly-concentrated doses of radiation directly to the tumor itself--leaving non-infected parts alone.

According to Accuray, other products are not able to move around to the same extent as the CyberKnife; as a result, the company believes that CyberKnife is more accurate than the competition, which minimizes the risk of collateral damage to a patient.

(I said the CyberKnife compared to Gantry-based systems sounded like the difference between a sniper and cluster bombs. They didn’t disagree with me, but they said they preferred not to use military terminology.)

2. What’s amazing about the CyberKnife is that its software is able to locate the tumor automatically. Think about that–there's no one using any levers or buttons to sync up data–the CyberKnife takes the pictures, finds the tumor, and attacks it automatically. (I am still enthralled about the idea that a machine can do that without major and constant human intervention.) Because the process is mostly automated, Accuray believes that using the CyberKnife tends to reduce human error.

3. According to Accuray, the CyberKnife’s higher accuracy allows patients to receive fewer treatments to destroy cancerous tumors. For example, using radiation therapy instead of radiosurgery might require forty separate treatments. According to Accuray, most patients need only one to five CyberKnife treatments. Thus, if someone is working, or is located in an area far away from a hospital, or has other responsibilities to handle, the CyberKnife reduces forty treatments/fractions to perhaps five. The fewer number of treatments may also result in cost-savings for insurance companies and Medicare, which supply approximately 90% of reimbursement for CyberKnife treatments. (According to another person within Accuray, Aetna and Blue Shield of California have already seen the value of CyberKnife.)

I will leave you with an interesting anecdote. The TSA has received a lot of flak for its handling of travelers who “opt out” of its backscatter radiation body scanners. I asked CEO Thomson and Dr. Dawood what they thought about the risk of radiation from the airport full body scanners. Both doctors indicated that there is currently not enough information to make a valid judgment about the safety of the full body scanners. Although we receive radiation in small doses almost every single day, much of it is “non-ionizing.” A cell phone, for example, has non-ionizing radiation; however, the TSA scanners use ionizing radiation. Ionizing radiation can alter a person’s cells to the point where the cells cannot recover. In contrast, non-ionizing radiation will jumble or vibrate your cells but will not permanently alter them. More here. In case you're wondering, I'll be opting out when I travel.

Disclosure: I currently own about 400 shares of Accuray (ARAY); however, my holdings may change at any time. Other than ARAY, I do not own individual shares in the other companies mentioned in this article.

I have emailed Dr. Adler and Mrs. Adler several times and have done an interview with Dr. Adler in the past. The 2010 meeting was the first time I met Dr. Adler in person. I have a tremendous amount of respect for Dr. Adler, and I feel lucky to know him.

Tuesday, November 23, 2010

American Education is Failing our Kids

I criticize teachers and their unions. Both are directly or indirectly responsible for the difficulty in changing our current public education system, which seems designed to harm kids at the top and make sheep of the rest. Yet, some people insist that the problem with public schools is a lack of funding when the facts indicate otherwise:

"Per student, we now spend more than all but three other countries—Luxembourg, Switzerland, and Norway—on elementary and secondary education. And the list of countries that spend the most, notably, has little in common with the outcomes... (The same holds true on the state level, where New York, one of the highest-spending states—it topped the list at $17,000 per pupil in 2008—still comes in behind 15 other states and 30 countries...)"

More here.

Year 2010: Americans on the Stock Market

I found two interesting anonymous comments on Yahoo recently:

1. "The U.S. stock market is becoming like the Japanese stock market. If you had $40,000 in the Japanese stock market in 1990, you'd have $10,000 today. [Note: I have no idea if this is true.] There's long term "investing." Expect the U.S. stock market to rally every once in awhile, and continue to fall for the next 20 or 30 years. Wall Street is just a big casino. At least you get free beer in Vegas when they take your money."

2. "How can the small investor participate with any level of confidence in a market controlled by hedge funds and other large institutional investors utilizing program trading capable of manipulating the market? Additionally, small investors make buy and sell decisions with information made available to large investors earlier in the game. Who can they turn to for objective advice and opinions? Standard & Poors? Moodys? Audited financial statements? The events of 2008 made it quite evident these were completely unreliable. How could firms like Bear Stearns and Lehman Brothers, big banks like Wachovia, Washington Mutual and Countrywide go down the drain so quickly when just months, weeks and even days before, these institutions were considered sound investments by the "experts"?

But, first and foremost, how can anyone hold stocks believing they are investments when even the experts refer to that as a gamble or a bet? Long-term investing is dead. And while the pros may lament the departure of the small investor from the stock game, it was them who caused it to happen. This game is not played on a level field. The average person is better advised to keep their money safe. Slow growth is better than no growth or the loss of principal."

Monday, November 22, 2010

Random Thoughts: 2010 Political Edition

1. Almost all conflicts are because of land, money, and/or women, or the protection thereof. Religion, race, etc. are just atavistic proxies that help human beings justify violence and exclusion in order to protect land, money, and/or women.

2. I predict Hilary Clinton will run for President in 2012.

3. I am still sad that Russ Feingold lost the recent Wisconsin election. He was the lone Senator who voted against the Patriot Act in 2001. [Senator Landrieu (D-LA) abstained.]

In 2006, the following Senators voted against the Patriot Act's renewal:

Akaka (D-HI) Bingaman (D-NM) Byrd (D-WV) Feingold (D-WI) Harkin (D-IA) Jeffords (I-VT) Leahy (D-VT) Levin (D-MI) Murray (D-WA) Wyden (D-OR)

3. The more I learn about Tom Harkin (D-IA), the more I respect him. (What is it about Iowa that seems to produce reasonably progressive people instead of the scorch-the-earth-to-change-the-world California types?)

Saturday, November 20, 2010

Ken's Genius on Display

Ken has written many amazing posts, but this one takes the cake:

http://www.popehat.com/2010/10/28/trust-in-the-devil/

Giving the government the power to do things we like tends to give the government the power to do things we don’t like. In a perfect world, conservatives would see that reposing uncritical trust in prosecutors and cops ultimately promotes the government’s power to regulate their businesses and their health care. Liberals would see that trusting regulators and bureaucrats increases the government’s power to jail citizens upon flimsy evidence.

Maybe one day more people will meet in the middle and recognize that the appropriate stance of an informed citizen towards all elements of the government is vigilance, skepticism, and firm support of individual rights against the state. Perhaps more people will agree that the correct response to any government attempt to control the individual is to question: “What evidence do you have to support this? Is it really believable? Can it be trusted? Is it enough?”

Oh, the lucidity.

Thursday, November 18, 2010

RIP Terry Vierra

RIP Terry Vierra, 1966 high school wrestling state champion, Westmont High wrestling coach, all-around great guy, and one of the most amazing, down-to-earth people I've ever met.

My heart goes out to Terry's family and his brother, Mitch.

George Carlin on Manifest Destiny

George Carlin has got to be the most funny, stinging, and subversive comedian in American history:

We were founded on a very basic double standard. This country was founded by slave owners who wanted to be free. Am I right? A group of slave owners who wanted to be free. So they killed a lot of white English people in order to continue owning their black African people, so they could wipe out the rest of the red Indian people and move west and steal the rest of the land from the brown Mexican people, giving them a place to take off and drop their nuclear weapons on the yellow Japanese people.

You know what the motto of this country ought to be? "You give us a color, we’ll wipe it out."

--George Carlin

Wednesday, November 17, 2010

Debate: What is Military Adventurism?

November 11, 2010 was Veterans' Day. Some random thoughts and opinions:

1. Calvin Coolidge, the 30th President: "A Nation that forgets its defenders will itself be forgotten."

2.
I do not consider someone's unquestioning willingness to die for a cause or country to be worthy of respect in and of itself. To be worthy of praise, I need that willingness to die to be tied to self-defense. Otherwise, I'm not sure we are helping our soldiers, our safety, or our worldwide reputation.

I understand that a soldier's willingness to die is a necessary component of self-defense. However, I view such an attitude--the willingness to murder your fellow man--as a necessary evil, and I do not see much sense in praising a necessary evil. Therefore, I neither condemn nor praise necessary evils.

War is sometimes necessary. We need soldiers, and we need to make sure we give them the tools they need to succeed. Today, the U.S. does not have a mandatory draft, so everyone voluntarily chooses military service. 
 
 
3. If you are in charge of American military personnel, you failed us on 9/11; you failed us again after 9/11 by invading the wrong country; and you are failing us now because your agency is designed for wars against countries rather than smaller, more fluid organizations.

Onward to the Facebook debate on military adventurism and the scope of a thinking person's patriotism:

Lawyer: At work in the private sector so the military gets the taxes it needs to exist. Our modern-day military creates no net revenue and causes our country to lose billions of dollars each year. Without the private sector, there would be no military. Thank someone who owns a small business or is working in a non-government job today.

Also, if you fought in WWII or any war prior to Vietnam, thank you. Once we reach the Vietnam era, however, it's unclear whether any war has created safety for Americans on American soil.

Write your government and demand that we bring our soldiers back from Iraq as soon as possible. Why are we leaving so many young Americans in harm's way when it's unclear whether they are increasing our safety?

(I am still undecided about wars in Afghanistan and Pakistan. As far as I know, none of the 9/11 hijackers lived in either country or received training there that helped them attack America. The terrorists came mostly from Germany. It's also unclear why Pakistan and Afghanistan are America's problem rather than India’s and Iran’s. At the same time, whenever I see pictures of what the Taliban has done to innocent Afghani civilians, especially young girls, my trigger-finger gets itchy.)

Hilarious Buddy: Danger, Will Robinson. Danger.

Judah: Government workers pay taxes too. But since you wrote this on Veteran’s Day to be controversial, I don't suppose that will matter.

Lawyer: @Judah: if I give you 100 bucks and you give me back 30 bucks, I'm still out 70 bucks, right? You've basically taken 70 dollars from me, and all you've done is refund me back my own money. So gov workers don't really pay taxes--they refund money paid to them by the private sector. If they're not creating something, gov workers are causing financial losses and taking money out of the private sector whenever the federal gov provides loans to states and/or fails to maintain a balanced budget without increasing taxes.

And by the way, I said military personnel create no revenue. I didn't say they failed to pay taxes. In any case, whether we spend 5 trillion dollars or 1 dollar on the military, it's all irrelevant unless the military keeps us safe here at home. If our commanders fail to keep us safe at home, we are paying money for nothing while losing some of our best and brightest young people.

Judah: Government workers get paid by the government, the government gets its money from taxes on the private sector and some other sources that we can agree to leave out, those taxes come out of your pay, you are paid by your clients, your clients earn money from their businesses, and so on, and it's non-trivial to determine where the money actually comes from. But if your argument is that the military should be thankful to you because you pay taxes, then you need to admit that taxes are taken out of everyone's pay, and no one has any say about how they're spent. It may be government money to start with in some cases, but from the point of view of the person getting the paycheck, it's identical. You haven't done anything extra that a mailman, or a federal judge, or a park ranger hasn't done. From your pay, you contribute to the running of the government, which includes the military.

Lawyer: @Judah: you could not be more wrong. I created a business. In order for my business to survive, I have to create something either new or more effective than existing services or products. The same philosophy applies to almost every private company, especially here in Silicon Valley--either they innovate or die. In contrast, all the government has to do is exist.

Throw in the toxin of government unionization, and we have a financial miasma that is made worse whenever anyone praises non-creative government workers. With respect to the military, I fail to understand how any war since Vietnam has helped Americans on American soil. It seems like we've lost a lot of American lives and killed a lot of civilians for nothing. If you want to praise that as equivalent to creating new services and introducing more efficient products into the marketplace, go right ahead.

Judah: It sounds like you're suggesting that your business *must* contribute something, or it would cease to exist. Why wouldn't that be true of the military?

Lawyer: B/c government workers and entities receive much of their revenue from the act of printing money, which requires no creation or innovation. Again, it's nonsensical to compare someone in the private sector--which has to actively attract money from voluntary exchanges--with government workers, who do not have to actively attract money using intelligence or innovation. In contrast to someone like me, all a gov worker has to do to get paid is a) unionize; and/or b) vote in their preferred politician. Obviously, I can't do that, and neither can most non-banking businesses. It appears both major political parties will continue printing money to give to the military. Thus, we are left with a military that doesn't seem to keep us safe on our own soil while simultaneously costing us trillions of dollars.

The difference between the private sector and the public sector is that non-banking businesses need to create something or provide something more efficiently to get paid. From this creative destruction comes almost all progress, including Google, eBay, or any small business. In the case of gov entities, because politicians are in charge of a massive amount of money, and the fed gov can print money when it runs a deficit, the normal requirement to be useful does not apply. They just need to vote once a year to keep their jobs. And that's exactly what they have done in California.

But don't listen to me--read David Walker's book, Comeback America. He has an entire chapter on the military that is a must-read.

TX Buddy: Geez, way to ruin Veteran's Day :-P

Lawyer: @TX Buddy, hope you're doing well now that Texas has In N’ Out :-) I'm just trying to introduce a different viewpoint. I despise conformity, and holidays tend to bring out the worst cases of unthinking herd mentality on Facebook.

It's always sad to see people base their opinions on propaganda instead of logic and facts. Logically, if we're anti-war and view the military as a necessary evil (not heroic), our soldiers get to stay safer and live longer. All this changes if there is a direct threat to Americans on American soil, and almost all such threats come from domestic residents, not foreigners who are poor, who cannot speak English, or who cannot blend into American society.

Judah: I don't understand your assertion that the military has failed to keep us safe on our own soil, but I never intended to challenge your assertion that the benefit of military action in recent years is difficult to quantify at best.

Today is Veteran’s Day, and what we're honoring today isn't the military, it is the men and women who have served in it. You don't think the military has provided us much benefit in recent years, and you don't think that the individual members of the military have contributed much. They aren't attracting money, they aren't growing the economy, and whatever they're doing on a day to day basis is done in service of a mission you find questionable.

You say that it's nonsensical to compare private sector employees to government workers. In the case of the military, you're spot on. A soldier, airman, sailor, or marine may not be creating wealth, and your taxes pay at least part of their salary, but they also fight and die in their jobs, when they are ordered to.

You and I, and all the creative private sector employees you champion, we don't have to do that. And we don't get a federal holiday, but we're celebrated every day of the year. Your assertion that what matters is creating money-- growing the economy, generating the revenue that pays the salary of the military--is a celebration of the private sector.

No one should have to thank you.

Lawyer: @Judah: if keeping us safe on American soil involved only killing people and dying when ordered to do so, then your statement would be correct. But safety is multifaceted, and it usually includes a thriving economy. For example, the more men who are unemployed, esp young men, the higher the risk of domestic crime. Long story short, without a thriving private sector, we risk higher domestic crime and unrest, which sometimes leads to coups and pogroms. Thus, when someone in the private sector goes to work, s/he is helping keep us safe at home. It's unclear why we shouldn't thank people who maintain our way of life and who keep us safe here at home.

Moreover, it is unclear whether military operations abroad protect us from collapse from within. Indeed, history tells us that pro-military countries tend to collapse. If true, when we praise any part of the military that is not directly useful to domestic security, or when we view military members as always heroic (and therefore unworthy of any criticism, especially towards higher level military leaders), we plant the seeds of our own downfall.

You focus on death, and you view a soldier's willingness to die as deserving of thanks, but a country can die, too, and death can come in many different forms. For instance, one way to destroy a country is to destroy its economy by providing too much money or printing too much money to give to non-useful government workers. Another way is to implement poor fiscal policies, such as excessive or non-useful military spending. It is unclear why anyone who is part of an inefficient machinery of military adventurism deserves thanks, unless--like private sector workers--they are keeping Americans safe here at home. I do not believe our military is focused on keeping us safe here at home, because I believe that our biggest threats come from English-speakers who can blend into society, not foreigners. Richard Reid, Vincent Padilla, the NY car bomber, and almost all recent terrorism attempts against America support my belief.

Americans ought to consider Veteran's Day as a period of sadness or stoicism rather than a time to praise or thank our soldiers for their military adventurism. When that attitude shift happens--as it has in countries such as modern-day Germany--we will have a safer country as well as safer soldiers and young men and women.

Judah: And you focus only on the economy. When I focus on fighting and dying in the context of the military, I am focusing on the job that they are asked to do. When you focus on the economy, you are focusing on a job that is someone else’s to do and decrying the military's failure to do it. If you think the military is overfunded, the blame for that lies with the organization that sets the funding. If you think the military mission diverts attention and resources from economic problems, the blame lies in the hands of the politicians that set the agenda (I will concede here that at the top levels, the military has some power in setting its agenda).

The military is not the entire government, and if the economy becomes the death of the country, there will be others far more responsible for it than veterans.

Lawyer: @Judah: you may be correct, but unlike you, I do not consider the willingness to die in an era of military adventurism as heroic or deserving of praise.

Pointing to corrupt politicians--who also deserve blame--is a diversion. Can’t one condemn corrupt politicians while refusing to plant the cultural seeds for further military adventurism? I believe that when you praise the military or any part of it during a time of wars that do not help keep Americans safe on American soil, you do not help soldiers, civilians, the economy, or the cause of peace. In fact, it is more reasonable to argue that your praise helps maintain America’s cultural ease towards war.

You end your comment with statements that are true, but hyperbolic. Of course the "military is not the entire government." However, when the military is between 20% to 30% (when including black ops, foreign military assistance, and the CIA) of our federal budget, it should not be immune from criticism or responsibility for our current economic woes. It is also not a valid argument to say that b/c "X" is not the primary factor of a problem, we must focus on other contributing factors.

At the end of the day, our country is safer now because of our private sector workers’ diligence and dedication to improving the economy, not because of our military commanders. Today, I praise all of the private sector workers who have not rioted or acted violently against others and who have diligently continued looking for work, paying their bills, and taking care of their families. Thank you. Keep your chin high. You are the people who are holding up this country, and if we lose you, we will collapse from within.

Eric: The military is expensive and, it can be argued successfully, I think, that we have too many military obligations overseas. You would be surprised how many countries we have some form of military involvement in. The other day, I heard it was over 100 different countries. Is that really necessary? Well, that's arguable. One might suggest that, if it weren't for us, the world we be a much less stable place. Much less stable for trade, so that small and large businesses in the United States and elsewhere would not be able to do business.

Certainly, the military kept us safe during the cold war. If we had been week and had no military, would not the Soviets have taken us over? Since the fall of the USSR, one can argue that it was not as necessary to keep a strong military. Or is it?

Was Iraq necessary? No. It was expensive and achieved nothing. Afghanistan? I suppose it did send potential terrorists (who do have money to commit acts of terror internationally) running for cover, so that war is arguable.

But having a military in general protects us and stabilizes us. It doesn't seem like we need the military when we sit in our safe offices and homes and grouse about taxes. Nobody is breaking down our doors with guns and tanks. But that's because the world knows that if someone did try to come at us, we would utterly destroy them. Knowing that everyone knows we would utterly destroy them if they came at us is a comforting thought, because it allows us to have our businesses and our homes and know they won't go away. We can even type on Facebook about how we dislike government and wish that taxes could be lower (which in some countries would get you thrown in a gulag). We are free and stable, because of the military. Is it expensive? Yes. Is it worth the expense? Absolutely!

Lawyer: we do not need to thank our modern military for being a deterrent, b/c it is not clear that they are in fact deterring anything right now. In fact, the military may be causing Americans on American soil to be less safe by their actions.

Also, plenty of countries don't spend trillions on war and manage to do business and not get invaded. Consider Switzerland or modern-day Germany.

Now, take a look at countries that go to war or engage in war, and there is usually one very clear commonality: inflation, high unemployment, or a lack of a strong private sector economy. Look at wars/invasions in Africa; Bosnia/Serbia; Cambodia; old Germany; Iraq; perhaps even Ecuador now, etc. All of them had a weak or nonexistent private sector economy. A strong military wouldn't have protected the average citizen from war. It would have only caused a military coup and a probable military dictatorship.

P.S. the Cold War is over. You might want to get that memo over to the Pentagon and the Dept of Defense, who are still spending our money on weapons more suited to the Cold War instead of domestic threats and smaller, fluid groups of terrorists.

Eric: I agree that war is a bad thing and that having a military can lead to a military dictatorship without a strong civilian government and a private sector. For whatever reason, our country has been spared a military dictatorship and wars on our own soil (for the last 135 years anyway). I think that our brand of military, strong, but loyal to the civilian government, is owed a lot of the credit.

I'm not saying that military incursions and having a very strong military is always a good thing everywhere. I'm just saying it worked here. I don't think you can compare the United States to Africa, the Balkans, Cambodia, etc., Iraq, and other countries you mentioned. The United States went down a different path. I don't know why. I cannot explain it. Perhaps it was the sheer vastness of the country. It's resources. None of the countries/continents you mention are stable in any sense of the word. Not militarily. Not economically. Not legally.

Besides, I'm not talking about going to war. I'm talking about having a military that is so big and so powerful that anyone would be stupid to invade us. With our Navy, we can have huge warships anywhere in the world in just a few days, etc.

Does it deter people from being stupid? I think it does. I suppose that is debatable. But I'm not willing to take the deterrent away for any period of time to test your theory.

Lawyer: in an age of nuclear weapons, it's unclear whether we need to spend trillions of dollars on military adventurism to create a deterrent. In any case, you miss my point. I am not against a well-funded or strong military. I am against praising the military or its members during times of military adventurism, which helps support a pro-war culture.

Eric: So strong military good. Military adventurism and excessive military spending bad. I'm okay with that. We could spend a little less on the military right now. Perhaps a lot less. I'm not sure I an in sync with your definition of military adventurism. I might put the Iraq war in that definition, but I'm not sure we do that a lot. Other than Iraq, what else is included in the definition of military adventurism?

Lawyer: @Erik: see Pakistan, Afghanistan, and Iraq. (Are we fighting wars in other countries?) Unless you can directly link our military’s activities in those three countries with more safety here at home, we are engaging in military adventurism.

Also, have you noticed the kind of people who have been attacking us here at home? (NY car bomb, Padilla, Reid, 9/11 terrorists, etc.) They are almost always domestic or European residents who speak English, not foreigners who live in the Middle East. It's unclear whether blowing up two foreign terrorists and three civilians (I'm estimating a high civilian death count as a result of our military operations in Iraq, Afghanistan, and Pakistan) makes us safer. A foreigner who cannot integrate at least superficially into Western culture cannot effectively deliver a bomb close to American soil. I do not believe the people we are blowing up in the Middle East can effectively deliver a bomb on American soil without being easily detected. Therefore, I call our wars there military adventurism because they do not seem to support a viable self-defense strategy.

Sean: I am all for pulling out of Germany, Japan, the Middle East etc...but at the same time I thank those who are willing to risk their lives for me. Note that I did not include those that decide what those men and women in uniform will risk their lives for, but those who actually are willing to risk their lives...I do not expect soldiers to be policy makers, I oppose the policies, including military policies, of the policy makers, while being thankful for the soldiers.

Without a strong military someone else will want to set you policies for you...

Lawyer:
@Sean: thank you for your comment. You've made the only comment so far that may cause me to shift my position. At the same time, I do not believe that praising a person's willingness to die for his country is a positive action during times of military adventurism. Condemning or praising a military member is different from taking a neutral position towards him/her.

Also, I never said we shouldn't have a strong military. Being against military adventurism and excessive military spending are not inconsistent with supporting a strong military.


If we want to be the world's policeman, that's fine. I just don't know how we're going to pay for it. With the money we save on reducing military obligations, we can support a stronger dollar and our position as the world's reserve currency. I'd rather exert power through trade and tariffs than hard military power. Since we're a consumer-based economy and other countries rely on us to buy their exports, it's unclear why we can't maintain our influence by using trade incentives and disincentives.

I will let Matthew Hoh have the last word. See here.

Bonus: from Slawek: "thank god for the new wars we still got going for us, otherwise we would run out of veterans pretty soon. and how silly would we feel come veteran’s day then? pretty f*cking silly."

Sunday, November 14, 2010

Electronic Arts: John Riccitiello's Reign of Pain

I usually like CEOs, but some of them rub me the wrong way. One CEO in particular–Electronic Arts’ CEO John Riccitiello–is particularly disappointing to me. Why? EA has the potential to be a great company, if not the coolest company in the Bay Area. In addition to making popular games, it has great employees, a nice enough Board of Directors (who are perhaps too nice), and a wonderful campus. Thus, it's not unreasonable to say that EA has underperformed when it comes to cachet and stature. Such under-performance might be forgiven if the company was rewarding shareholders financially, but that's not the case.

John Riccitiello has served as Electronic Arts' (ERTS) CEO since May 2007. On May 7, 2007, ERTS shares were selling for $50.07. Today, after three years of John Riccitiello's "magic," they sell for around $16.18--almost a 70% decline. In contrast, Activision Blizzard (ATVI) shares sold for $9.785 on May 7, 2007 and recently closed around $11.82/share--a 20% gain. Today, ATVI pays a dividend; ERTS does not. Recently, ATVI's popular game, Call of Duty, broke sales records.

At this year’s annual meeting, when asked to justify his salary in the wake of ERTS’s terrible stock performance, Riccitiello responded that EA’s executive team members had also suffered because the value of their options and shares had declined. According to Yahoo Finance, Riccitiello owns over 150,000 shares. If these shares are a fraction of his overall net worth, his financial position seems different from a middle class shareholder who uses his/her disposable income to invest in a company while hoping it won’t be run into the ground.

Even if Riccitiello has lost money as a result of EA's stock performance, he may have made up his stock losses elsewhere. Another website raised questions about possible ethical violations--see VentureBeat.com interview (2007):

VB: I never heard what you have said to those people who say there was too much conflict of interest for you on the BioWare/Pandemic deal, since EA was buying a company from your former firm and you made a lot of money on it. What is your answer?

JR: No comment. It’s not a conflict of interest.

Personally, I have no opinion or information about possible ethical violations relating to John Riccitiello. I just find it interesting that others have raised questions about possible self-dealing at EA. In any case, at the annual meeting, Riccitiello gave no real apology for EA’s poor stock performance and seemed to exhibit no remorse. He also had the audacity to say his company’s stock performance should not be compared against Activision or Chinese-based gaming companies, because EA was a different kind of company. (Yahoo Finance lists Activision as one of EA’s competitors.)

There have been rumors that Disney (DIS) might want to take over EA. I asked Riccitiello what he thought about Disney. He responded that his kids liked the park and then smirked, perhaps thinking my question was irrelevant. (I made my question deliberately vague to gauge his response.) His failure to immediately link Disney to a potential buyout makes me think Disney has not approached EA about a buyout.

After the meeting, I tried to approach Riccitiello to thank him for answering my questions, but a beefy, unsmiling man put his hand on my shoulder and stopped me, telling me in a stern voice that Riccitiello had someplace else to be. The beefy man turned out to be a security guard in civilian attire. (Before I could say anything, someone came up to him and must have told him to back off, because he immediately turned away.) Get this: Riccitiello or EA was so concerned about security at this year's meeting, they had several plainclothes security guards attend. Now, these weren't the guys most companies clearly post at the door or who are dressed in black, which usually identifies them as security personnel. These guys were trying to be incognito, emphasis on "trying."

Even though EA attempted to hide the presence of its plainclothes security guards, I was able to identify some of them before the meeting. First, the security people I identified never signed in. They just went to the shareholder table and picked up a name tag. No attempt was made to show shareholder papers or ownership. Second, they immediately demonstrated through their body language that they were very familiar with the employees manning the EA shareholder table. Third, some of the guards sat down at a table instead of walking around and acting like they didn't spend every single day at the company. Later, I wondered how concerned EA really was about Riccitiello's safety, because EA's inability to mask the identities of all their security personnel bordered on incompetence. If you're going to go through the trouble of passing off security personnel as shareholders, at least don't make it look so obvious. I don't expect James Bond, but I also don't expect Mr. Magoo.

I will say this: EA had the courtesy to play a video this year highlighting their various games, and they provided a complimentary game to shareholders who attended. Last year, EA didn't show its usually fantastic annual video, which basically sanitized its normally fun meeting. (Under the previous CEO, some executives demonstrated video games for shareholders. One year, an EA executive played a cool skateboarding videogame at the annual meeting.) After I complained to the Board of Directors that EA was missing out on an opportunity for free publicity, EA reinstated the video.

At the end of the day, I still don't understand how John Riccitiello continues to keep his job. What other CEO has been able to stay employed when a competitor's stock price goes up 20% while his own company's stock price declines by around 80%?

Disclosure: I own only one share of ERTS. I don't plan on buying any more shares as long as John Riccitiello has any substantial authority at Electronic Arts. It's possible that if EA doesn't get a new CEO and the stock continues to decline, the company might go private at some point.

Friday, November 12, 2010

Jerry Tsai on the Stock Market

Jerry Tsai, former Fidelity fund manager, on why he likes the stock market:

"It's interesting. Things are changing all the time. And whether you're black, white, Chinese, or Italian, if you buy GM and the stock goes up, you make money."

Thursday, November 11, 2010

KLA Tencor Annual Shareholder Meeting (2010)

I attended KLA-Tencor’s (KLAC) annual meeting on November 3, 2010. The company offered shareholders coffee, hot tea, and pitchers of iced tea (which were surprisingly delicious). About 30 people attended the meeting. This year, the people attending the meeting were much more diverse. In fact, KLA-Tencor appointed a new director, Emiko Higashi. Kudos to KLA-Tencor for bringing her on board. President and CEO Richard Wallace led the applause when she was introduced.

President and CEO Richard "Rick" Wallace, a Santa Clara University graduate, is impressive. I don’t tend to use that word when referring to executives, but Mr. Wallace deserves every accolade he gets. He answers question directly, anticipates questions before they’re asked, has both broad and specific knowledge of KLA-Tencor’s industry and finances, and is a very effective speaker. While some CEOs are condescending and arrogant, Mr. Wallace inspires people with his down-to-earth style and substantive knowledge.

In any case, back to KLA-Tencor’s shareholder meeting. The company’s general counsel handled the formal portion of the meeting. Another employee used a fingerprinting identification module on the laptop to grant him access to the shareholder presentation. (Very nifty technology.)

CEO Wallace handled the informal shareholder presentation. The highlights:

1. KLAC retains about 95% of its employees. The most important goals are to have “fully engaged” employees as well as happy employees.

2. KLAC invested 18% of its revenues on R&D in Fiscal 2010.

3. KLAC’s large backlog provides resiliency and drives its business model. Due to the high backlog, KLAC is “well-positioned” for Fiscal 2011.

4. KLAC derives most of its revenue from its IC Foundry, Memory, and Logic end markets.

5. KLAC may use its cash flow to acquire other companies; do share buybacks; or increase dividend payouts. KLAC was the first company in its field to introduce a dividend in 2005.

6. 80% of KLAC’s customers are in Asia; it has no customers with fabs located in Silicon Valley.

7. Customer satisfaction has become a key area of focus for the company.

During the Q&A session, someone asked whether KLAC would use its cash flow to pay down debt, more specifically a $750 million bond. CEO Wallace said the terms of the bond were favorable, and he did not anticipate paying it off early.

Another shareholder asked whether R&D would continue to increase in Fiscal Year 2012. (To maintain its market share, KLAC must invest a lot of its cash flow into R&D, but it may not see tangible results until three to four years out.) CEO Wallace was pleased with this question and said he did anticipate KLAC increasing R&D in FY 2012, and the real issue was FY 2013 and how much more KLAC could increase R&D while also controlling costs. The major decisions revolve around making the right “architectural design choices.”

I asked what challenges KLAC anticipated in the future. CEO Wallace talked technological innovation and maintaining market share. (My take is that unlike Coke, which doesn’t have to innovate much, tech companies either innovate or die. The key challenge is to invest enough in R&D to prosper, but not so much to kill margins or the bottom line.)

I mentioned that Applied Materials’ CEO seems to be focusing on solar power, and I hadn’t seen a similar emphasis coming from KLAC. CEO Wallace said that as a percentage of overall revenues, he anticipated solar power product sales would be fairly small. Also, he questioned the profitability of solar power products once government subsidies are removed. (Most people don’t realize that China now manufactures most of America’s solar panels, so when the U.S. government promotes “green jobs,” it is helping to subsidize Chinese solar companies.)

After the meeting, I asked CEO Wallace what we could do to wean ourselves off of OPEC, and he said Americans would have to collectively reduce our overall energy use. He said he’s doing his part by biking to work at least 3 times a week. He also advocated insulating homes. (CEO Wallace is ahead of the curve. Several years ago, his home was built by a “green” builder who utilized recycled materials, radiant heat, a solar water heater, etc.–before green was “cool.”) America has been trying to reduce its reliance on foreign petroleum since the Carter administration, but I am beginning to think that as long as we are one of the world’s largest economies, we will continue to be one of the world’s largest consumers of foreign oil.

After the shareholder meeting, I took a short tour of the campus. Although Google gets raves about its campus and employee perks, KLAC also has a decent corporate campus. First, the place is massive–over 700,000 square feet, all owned by KLAC. Second, I saw basketball courts, volleyball courts, and other indicators that KLAC heavily promotes physical fitness (CEO Wallace rides his bike to work). Third, believe it or not, KLAC once gave its employees free iPads.

I learned later that KLA-Tencor is one of the few companies in Silicon Valley that still has manufacturing facilities in the Bay Area. KLAC handles over half of its manufacturing right here in Silicon Valley.

I will leave you with an anecdote. When I posted on my Facebook wall that I had met KLA-Tencor’s CEO, several of my friends in the technology industry hit the “Like” button. One even said, “Oh a big name from my past customer list!” KLA-Tencor appears to have a well-deserved positive reputation, and much of that is probably due to CEO Rick Wallace.

Disclosure: I own an insignificant number of KLAC shares. My holdings may change at any time.

Bonus: I was recently in San Francisco, CA, and I happened to see the Skechers USA (SKX) store. I've been intrigued with the Karl Malone and Kareem Abdul-Jabbar ads for Skechers Shape-Ups, and I wanted to check them out. I tried on the Shape-Ups, and they felt strange. The design forces you to walk from heel to toe, which promotes posture and calf muscle build-up. I would buy them for 40 or 45 dollars, but they were retailing for 110 dollars. Most of the time I was there, I was the only person in the store. I had bought a little bit of SKX stock after the recent drop in price, but after seeing the lack of foot traffic in the S.F. store, I sold all but one of my shares.

Bonus II: click on the following hyperlinks for my reviews of Applied Materials' 2008 shareholder meeting and KLA-Tencor's 2009 shareholder meeting.

Disclosure II (update on November 14, 2010): a KLAC employee invited me to the Milpitas campus after the annual meeting and bought me lunch from the company's cafeteria. (That day, I was so busy with my usual work, I did not have anything except a banana and water until around 1:30PM at KLAC.) I had two sandwiches from a self-help sandwich bar and one soda. I estimate the value of the lunch to be under ten dollars. By the time I visited KLAC's campus, I had already written the article that was eventually published. After the meeting, I changed a few sentences, primarily relating to my misuse of the term, "fabs." The correct term was "manufacturing facilities." I also removed and expanded a "Bonus" section relating to EA (a different company) and made it into a new article, which can be found here.

Wednesday, November 10, 2010

Dealing with Gov Corruption and Santa Clara County

I appear to have written this in 2010 or 2012.  I am publishing it on November 10, 2015.

Here is a hilarious and useful article on dealing with government shakedowns:

http://killingbatteries.com/2008/05/how-to-escape-a-bribe-shakedown-perpetrated-by-greedy-moldovan-swine/

All governments seem to have corrupt members, although differences exist in the degree and type of corruption. Why do governments have such difficulty eliminating corruption? Because government officials are backed by laws; laws confer power; and power tends to corrupt on some level.

Power Should be Limited when Objective Measures of Performance are also Limited

When I was younger, I believed judges and other government officials were uniformly intelligent and moral beings. Unfortunately, experience has taught me otherwise. Courts, police departments, and other government agencies are still subject to the rule of averages--there will be many people who are average, a few who are very good, and a few who are very bad.

Government agencies tend to have more bad employees because it is hard to judge someone who produces nothing tangible. You can judge a salesperson, surgeon, taxi driver or lawyer using many objective metrics--sales, financial well-being, customer satisfaction, number of accidents, etc. But how do you evaluate a police officer, government lawyer, teacher, or judge? It's much more complicated, because there isn't an obvious objective metric. For example, a good teacher could have terrible students, a bad teacher could have wonderful students, Cop A could have fewer complaints than Cop B but Cop B could still be better, etc. Remembering that power tends to corrupt, the general idea is to minimize power where possible, especially when performance is difficult to measure. (Unfortunately--or perhaps fortunately--most Americans haven't had sufficient contact with government officials to truly understand the aforementioned principle.)

Yet another problem with government officials--besides the power and objective evaluation issues--is that they are used to deference. Spending your day-to-day life being deferred to must have some effect on people. From what I've seen, receiving constant compliments and deference results in a gradual and permanent aversion to people who fail to genuflect socially. Such a result is not optimal, because the more government officials rely on deference, the more likely it is that kowtowing becomes the pathway to success, not merit. We will revisit this idea later on.

Santa Clara County might be a good example of the "Compliments Over Merit" principle. First, the level of inbreeding--i.e., family relations--is astounding. Several judges are married to each other or other county/city employees. This inbreeding means the entire family unit experiences constant deference and virtually no criticism. Is a societal/class/professional bubble welcome when judges have so much power and deal with diverse parties? After all, so much law turns on credibility. When judges are surrounded by sycophants and non-diverse coworkers, what is the result? When weighing testimony, are judges going to disfavor someone with an accent? Will judges be able to understand that an older Filipino person will probably agree with every single statement offered by them, regardless of actual veracity? Does being surrounded by zero African-American, Pakistani, and Filipino persons in power create a subconscious bias? Is one race or class unintentionally favored over others? We don't really know, because the level of transparency in the court system is essentially non-existent. (When I tried to increase transparency as a County Commissioner, the Presiding Judge apparently shot down my idea, claiming it would take up too much time and resources. My idea would have taken only a few minutes a day to implement.) In any case, it's fair to contend that the Santa Clara County Superior Court has a higher-than-average level of inbreeding in its upper ranks and little racial diversity. Why should we care?

For one thing, Santa Clara County Superior Court has so few minority judges, you have to wonder what it's like to be a minority in a place that resembles an Orange County country club. As of June 8, 2010, in the main civil courthouse, only two out of the seventeen judges were non-white (another three are Jewish). Also, of the seventeen main civil judges, only four are female. You might think such non-diversity is shameful in a county that is around 40% immigrant and presumably at least 48% female, but it turns out that the white male Irish-American judges--all of them--are the hardest-working, most predictable judges (I'm not saying they are the best judges, but they are consistent, work hard, and follow the law, which means a lawyer can tell his/her client whether it is cost-effective to do x or y). Moreover, the Caucasian/white judges are, by and large, quite good. The following judge is retired, so I will mention him by name--Judge Alden E. Danner, for example, went out of his way to assist me when I submitted an accommodation request for my hearing impairment. He didn't have to do anything for me, and if you believe new age liberals, you wouldn't think that a conservative white male would be overly helpful to someone like me, but Judge Danner was instrumental in my ability to practice law.

In contrast, the two most pompous and unprepared judges I've encountered happen to be non-white males. I have struggled to discover the reasons behind this phenomenon, and I think I've finally figured it out: basically, affirmative action has failed because affirmative action allows the majority to elevate minorities based on charisma or some other social factor, not merit. Meanwhile, the majority race--lacking an approved legal path to elevate members based on factors external to merit--elevates their own members using merit and intelligence, creating a gap in quality between racial minorities and racial majorities. [Note: I've noticed that local Latino judges tend to be independent and intelligent. There's one particularly cool, smart judge I've nicknamed, "The Messiah." I attribute this phenomenon to the fact that Latinos have sizable numbers and political representation in San Jose and Santa Clara County. As such, they may be racial minorities, but not necessarily powerless minorities, which creates a welcome exception to everything I'm writing in this post.]

Affirmative Action Results in Cloning Different Colors of the Same Culture

Why does affirmative action tend to work against independent, extremely intelligent minorities? A minority who works hard and shows an independent streak may show up his/her colleagues, which places him/her at a disadvantage when it comes to being hired. Who wants to hire someone who might show him up? In contrast, a minority who sucks up to the majority will be favored by the majority, even if s/he has fewer credentials. Thus, rather than help the best minorities get ahead, affirmative action seems to help undeserving, compliant minorities at the expense of hard-working, independent minorities. If my theory is correct, then affirmative action represents the worst of all possible worlds--it punishes hard-working minorities and elevates undeserving minorities, which causes all racial groups to be resentful.

Of course, there are exceptions to my theory, but even these exceptions prove that when the majority uses affirmative action to hire someone, they opt for a clone, not real diversity. For example, regardless of how you view him, Clarence Thomas is an example of an independent minority because his views differ from the majority of his own race. At the same time, his views are a clone of the person who nominated him, i.e., President George H. W. Bush. Thus, even when affirmative action results in the hiring of an independent racial minority, such independence tends to have a caveat: conformation to the racial-majority's views and culture.

[By the way, law clerks are a different breed--they have to produce something--accurate legal briefs and decisions--and so the above generalizations don't apply to them. Also, I've noticed that some of the best law clerks in Santa Clara County Superior Court happen to be Asian, which makes it strange to see so few Asian judges here. (As of June 16, 2010, only one of the main civil courthouse judges is Asian).]

To understand why affirmative action might be a terrible idea, we must think about how racial minorities function when they are surrounded by a single racial majority. A minority surrounded by a majority will automatically stand out, so s/he has to be non-threatening to succeed. One way to do that is to make jokes, have a sense of humor, and adapt as much as possible. It shouldn't be surprising then, that several judges may have shimmied their way to the top through charisma and playing the clown with colleagues. These judges tend to believe in kowtowing--that's how they've survived in their own jobs, and they probably believe what's good for the goose is good for the gander. In short, when racial minorities are placed in a non-diverse environment, they favor survival over everything else. As such, they tend to try to avoid a situation where they lose face, because while a majority-race judge will get the benefit of the doubt, it's possible the minority-race judge will not. Thus, to many minority-race judges, anyone who fails to show deference is viewed as a threat. You can almost hear the internal subconscious dialogue: "Who does this person think he is? I had to kowtow (or fit in) for years and conform to get to this position, and now he's challenging me?"

When I've seen lawyers fight for clients--which sometimes means disagreeing with a judge--the majority-race judges tend to take this opposition in stride. One judge--we'll call him the "Scandinavian Stud"--even tries to help out younger, more aggressive lawyers who disagree with him by starting out sentences with, "As you know, I can't give you legal advice, but..." However, two minority judges--both of whom are married to current or former government employees--tend to take any opposition as an insult. A failure to suck up tends to trigger the following subconscious response: "All right, you want to oppose me, I'll show you who's boss..."

I'm not saying some majority-race (i.e., white) judges don't have the same response. In one case, when I made a comment about African-American Oscar Grant, a white pro-police judge immediately got red-faced and combative. (More on this police-judicial connection later, but you can click on this LINK if you're interested in how this connection can affect justice in the court system.) Overall, though, I tend to notice race-minority judges being more prickly and demanding of deference.

Now, why should a subconscious, unintentional, and systemic issue of deference be a problem? Doesn't deference promote workplace harmony? First, all societies and systems do better when some criticism is encouraged. People improve through criticism, not false deference. (Didn't we all read the fable of "The Emperor's New Clothes"?)

Second, the kowtowing system disfavors hard-working minorities. If you're a minority who doesn't want to kowtow to the government or your colleagues, and you care more about working harder than fitting in, then you're out of luck. The majority-race judges are used to minorities who will adapt and fit into their culture, and God help the minority-race person who tries to do things differently.

Third, the whole point of affirmative action (AA) is to increase diversity and make minorities feel comfortable despite their lack of political representation and power. In theory, the majority benefits by showing its tolerance and also by gaining alternative viewpoints and experiences. However, if I am correct--that affirmative action favors charismatic and social minorities over more hard-working and independent minorities--then the aforementioned benefits do not exist, because AA produces under-performing clones of the majority. Under my theory, we could put some black makeup on a few majority-race employees and get the same result as our current AA programs. In short, as long as the majority is choosing who is hired or promoted based on AA, the benefits of AA are dubious.

Citizens Should Favor Ideological Diversity over Race-Based Diversity

Don't get me wrong--we shouldn't completely disavow AA. If AA leads to useful diversity, not cloning, then it makes sense. As it stands, many judges are elected by special interest groups--thereby reducing ideological diversity--which means residents and voters should seek useful diversity. In Santa Clara County, the county sheriffs and city police have tremendous influence over judicial elections. Remember our recent election? Almost every winning judicial candidate mentioned an endorsement from some public safety officer union. Since most residents are unfamiliar with the local court system and its members, they tend to rely on endorsements when voting, which provides police officers with disproportionate influence over judicial selection. As a result, the state judicial branch--which is supposed to check the executive branch, i.e., the police--no longer has the sufficient diversity to challenge the police. In fact, the public safety unions--the police officers, firefighters, and prison guards--have so much power in Sacramento, they have even affected the independence of the legislative branch. From an ideological perspective, real diversity in government seems to diminish with each passing day. If AA promotes independent thinkers and outsiders--a term that can sometimes be equated with minorities, though not always--then it serves a useful function. If, however, AA produces clones of the majority, it is not helpful to anyone and serves merely to reinforce the existing culture and majority.

You want one obvious example that AA doesn't promote the best minorities? The only African-American federal judge in San Jose, California  [as of 2010] may have lied about his brother being targeted during civil rights strife in the South. Even though the judge's lie was discovered, [as of 2010] he is still on the bench, and until a few weeks ago, he was surrounded by no other local judicial minorities--all of his colleagues in federal and bankruptcy court were part of the racial majority power structure (or look like part of the racial majority or power structure), and all of them are really good judges. (One of them, a white male judge, is probably one of the best judges in the entire country. I refer, of course, to Judge Jeremy Fogel.) Of course, the federal bench has several white judges who do "interesting" things and manage not to be singled out.  Clearly, the "prickliness" factor is not limited to racial minorities, but because racial minorities stand out more, their behavior gets noticed more, which reinforces an awful cycle of "respect ma authoritah!" (You may think I am being hard on racial minorities, but if you read carefully, you will notice I am not being hard on minorities--just affirmative action. All entities have good, average, and bad employees.)

What makes the AA selection process even more problematic is that hired minorities harm other minorities by promoting a culture of deference and the status quo, not true diversity. As such, if the majority gets out of hand due to a lack of cultural knowledge, there is little luck that minority co-workers will be able to rein in the majority. If anything, minority co-workers promoted via affirmative action may lead the charge against independent minorities in an effort to fit in and promote the status quo. As Shelby Steele states, "Such policies have the effect of transforming whites from victimizers into patrons and keeping [minorities] where they have always been--dependent on the largesse of whites." What then, is the use of having racial diversity if it is being achieved in a way that discourages useful diversity?

Are Social and Subconscious Racial Preferences Inevitable?

One judge has commented that lawyers are more social than other professions, implying that lawyers should understand that social activities and connections do not impact decisions and culture in the courthouse. I call shenanigans. When I see a judge hugging a lawyer in Starbucks, I get upset. When I see more experienced lawyers--who lack civility but get respect from the judges based on tenure--I get upset. When I see a judge being Facebook friends with active lawyers who may appear in front of him, it makes me upset. This web of social ties causes some judges to rely on reputation rather than the papers/briefs when it comes to evaluating testimony and deciding whether to overturn a law clerk's draft.

Think about it: social ties and inbreeding lead to gossip, and gossip relies on hearsay, which is usually unreliable and which corrodes the "fairness for all" legal system. Why read the briefs if you know the lawyer from your days in law school? Why bother checking the case citations if most cases settle anyway? Are you really going to contest a lawyer's interpretation of the law if you know he plays poker with a friend?

Social ties are fine for private sector workers who need to sell things and make things, but government employees cannot help but favor people they see on a regular basis. Most government workers don't produce anything tangible or measurable, so their success is measured primarily by reputation. Naturally, then, as in the private sector, someone who smiles and sucks up to them will be favored over someone less social. The solution isn't to blame an introverted lawyer or a non-conformist lawyer, but to work harder to rely on objective data when making decisions about courtroom culture and to increase transparency. Do certain judges rule against minorities more than other judges? Do certain judges favor corporations over individuals? We don't know. No statistics are kept on such issues. Useful transparency doesn't exist in the local court system. (Why do written pleadings even have the name of the lawyer or firm on them? Can't a system be developed to track the papers based on numbers or some other non-identifying status? Most legal opinions at the trial court level are written before lawyers appear at court hearings.)

Diversity can be excellent in terms of production and innovation, but it also creates challenges and leads to volatility. Legal systems ought to ensure that government employees, especially judges, do not attack or disfavor non-conformists, especially when such non-conformists are not part of the majority-race.

Our current legal system in Santa Clara County is flawed for many reasons, including a culture that crushes non-conformity. When a non-conformist understands the legal system is flawed, the natural response is to avoid the system--not to suck up to it. Also, when one judge physically intimidates a lawyer, and another judge lies to his face--and both of these judges allow unfair speculation to run rampant and allow their colleagues to unfairly suffer collective punishment--more social ties aren't the answer. Lawyers and residents should be able to rely on judges being fair and impartial, regardless of social ties. Oftentimes, the best people to expose cracks within the system are part of the system and cannot openly speak out; consequently, government entities should implement self-correcting measures before problems affect an entity's or person's reputation. As we all know, courts rely on their reputation to maximize compliance with judicial orders and judgments.

If Santa Clara County Superior Court fails to recognize its lack of useful, consumer-based transparency; its inbreeding problems; and its absence of independent minorities, the court's reputation will suffer. Once lost, a reputation is difficult to regain. One can only hope that the Presiding Judge and her colleagues understand such concepts.

Immigration Statistics

The right-wing Center for Immigrant Studies has a very interesting 2007 study here. Some excerpts:

"The vast majority of working-age illegals work. In fact, we estimate that 92 percent of illegal-alien households have at least one person working. This compares to 73 percent of native-headed households. "

"The primary reason for the high rates of immigrant poverty, lack of health insurance, and welfare use is their low education levels, not their legal status or an unwillingness to work."

"While immigrants overall are not more entrepreneurial than natives, immigrants from such countries as Korea, Iran, Italy, and Vietnam [and Poland] are significantly more likely than natives to be self-employed."

Tuesday, November 9, 2010

Critical Factors in a Child's Academic Success

If we want children to succeed academically, we should focus on the most critical factors in a child's environment:

1. Low child poverty rates (as measured by school lunch subsidies).
2. Low divorce rates, i.e. stable homes.
3. Healthy kids (adequate access to health care).
4. Educated adult populations (which usually leads to higher income levels)

(More here.)

None of the above factors has anything to do with teacher salaries, education funding, testing, evaluation methods, or anything else on the teachers' union's agenda. I'm just sayin'.

Bonus: "For more than 40 years, ever since the publication of the Coleman Report, the key variable when it comes to educational achievement is parental involvement; all other factors--money, class size, choice and competition--are peripheral. Over those same forty years, parents have had to work harder to get by--two, three jobs in many cases--as good paying manufacturing jobs vanished. And, over that same period of time, the impact of crap culture--the Jersey Shore-ization of American Society--has increased exponentially." -- Joe Klein, "School Shock," Time magazine, November 9, 2010

Monday, November 8, 2010

Major City Hell?

This blogger sums up the reasons Gen Y has a harder time reaching the "adult" benchmarks of previous generations:

Boyfriend & I have had many discussions about the fact that New York is a short-term place to live. It's for young singles who like to party. It's for businessmen in their 20s who want to drink and bone and work on Wall Street 14 hours a day. It's for liberal women who have sworn off marriage and kids and simply want to make sweet love to their professions. But as you approach your 30s, you may begin to see New York in a different light. Most people start to see the city as an abusive boyfriend: It treats you like sh*t, steals all your money & wears you down to a little nubbin, but you keep running back because you love it and believe it will change.

More here. When houses in average school districts cost 500K+, it's very, very difficult to think about starting a family. Throw in the fact that money woes are the primary cause of breakups, and we have a perfect recipe for delayed childrearing.

Sunday, November 7, 2010

Politics (Total Speculation Edition)

Marco Rubio and Robert Gates. Are they the GOP Dream Team for 2012's Presidential Election?

Total speculation, bonus round: I think Hilary Clinton will be running as the 2012 Democratic nominee for President. One deal might be that if she wins, she would nominate President Obama for the Supreme Court.

Saturday, November 6, 2010

Review of SCU Broncos v. CSU Maritime (11/5/10)

I saw the SCU basketball team play an exhibition game against CSU Maritime on November 5, 2010. Here is my review/scouting report:

1. #24 (Julian Clarke) can shoot treys very well; however, like most gifted shooters, he seems too trigger-happy. He also needs to move more on offense instead of setting up in the same spot. Once opposing teams learn about him, his usual moves may not be enough to get him open.

2. #12 (Robert Smith) is an excellent PG, and we are lucky to have him. He is clearly the most talented player on the roster.

3. #3 (Chris Cunningham) is a great inside presence, but SCU's style of play is more up-tempo compared to recent years. As a result, the team had difficulty feeding the ball inside. The failure to utilize #3's skill set was very, very disappointing.

4. Unless #13 was injured or sick, the coach should think about reducing his minutes. He didn't seem comfortable on the floor, and #0 (Evan Roquemore) should be getting his minutes.

5. #10 (Ben Dowdell) hustles. His energetic play, including diving out of bounds for loose balls, seemed to turn things around for SCU.

6. #21 (Kevin Foster) will be the x-factor. He is blessed with an excellent wingspan and incredible athleticism, but seems a little raw.

Overall, we have a good chance of beating Gonzaga this year, as long as we learn to feed the ball inside to the big men, especially #3.

My preferred line-up:

PG Smith (sub: #0 Roquemore)
SG Foster (sub: #24 Clarke)
C Cunningham (sub: #25 McArthur)
PF Trasolini (sub: #10 Dowdell)
SF Troy Payne (sub: #44 Atanga)

Friday, November 5, 2010

California Post-Election Summary

The LA Times' Cathleen Decker writes an excellent post-election summary for California. I've been telling everyone that the GOP cannot appear to be anti-Latino and win any presidential election or any other election that counts California votes. Ms. Decker lays out why the GOP is doomed unless it changes its whitebread ways:

California in 1994 was more white and proportionately less Democratic than it is today, thus more similar to the country today. Nationally, non-whites made up only 22% of the Tuesday electorate; in California they made up 38%. Latinos nationally represented 8% of the national electorate, just shy of a third of their power in California. The California and national exit polls were conducted by Edison Research for a consortium of news organizations, including television news networks and the Associated Press.

Tellingly, Latinos in California had a far more negative view of the GOP than other voters — almost 3 in 4 had an unfavorable impression, to 22% favorable. Among all California voters the view of Republicans was negative, but at a closer 61% negative and 32% positive. Latinos had a strongly positive view of Democrats, 58% to 37%, whereas all voters were closely split, 49% to 45%.

The best part? State Republican Party Chairman Ron Nehring: "The reality is that Democrats have strong relationships with urban and immigration communities that Republicans have not had, and that must change," he said. "It is not only a matter of politics; it is a matter of mathematics." More here.

Bonus: Ken's take on the elections here. An excerpt:

On Russ Feingold: To paraphrase Homer Simpson, I like my beer cold, my TV loud, and my Democrats FLAMING. Democrats ought to distinguish themselves from Republicans by supporting the rights of the accused, opposing military adventurism, and resisting the encroachment of the post-9/11 security state. If they don’t, they are just sh*tty second-rate Republicans with less of a pretense of fiscal responsibility.

On Oklahoma's Sharia Law Stupidity: Oklahomans took a strong stand against having Sharia law imposed upon them. As far as I can figure, the only way you can have Sharia law imposed on you is if at some point you consented contractually to having it imposed on you. Meanwhile, my plaintiff-side clients still routinely get binding arbitration imposed on them, which makes Sharia law look like an appearance before Judge Harry of Night Court. Maybe the idea is you can contract away your right to anything resembling due process only if it’s in front of irritable retired judges in really expensive office suits, not if it involves weird robes and ululating and stuff.