Actel's Annual Shareholder Meeting (2009)

Actel Corporation (ACTL) held its annual shareholder meeting on June 5, 2009 at a Santa Clara hotel. Although around eighteen people attended the meeting, I was the only non-employee there. The hotel served cinnamon rolls, fruit, pastries, water, and coffee.

CEO and President John East gave a slideshow presentation. It appeared that the presentation had been shown to everyone else in the room the day before. Mr. East is a tall man, more Texas than California in his demeanor--friendly, direct, and unreserved. (In case you're interested, here is a 2008 interview with him.)

The meeting began with Attorney David Foster introducing various Actel employees. As part of the formal portion of the meeting, several directors were nominated, and shareholders increased the number of shares reserved for issuance by two million shares. CEO East then began his presentation.

Before I summarize Mr. East's presentation, I will provide some technical background. Actel makes FPGAs. FPGA stands for "Field Programmable Gate Array." A digital gate is a combination of many transistors to make a function such as an inverter or flip flop. Hundreds, thousands or even more digital (or recently analog) cells make an FPGA. FPGAs are useful because companies can configure their desired circuits to make a system application by pick-and-choose or by cut-and-paste.

RAM stands for Random Access Memory (vs. ROM which is Read Only Memory). There is Static RAM, Dynamic RAM, etc. which are digital (logic) circuits. These are used in the computers and other electronic systems. (Mr. East mentioned several times that Actel was focused on the "static" end of the market, and I assume he was referring to Static RAM.)

Two ways of measuring an FPGA are by reviewing its clock speed and data rate. Actel's FPGA "clock" speeds of 200MHz (its low power design) and 350MHz are very good. However, in many data communication applications, "data" speed (or data rate) of several gigahertz (1000 megahertz) are common now. To get a more complete picture of Actel's FPGAs, I should have also asked questions about data speed, which I did not do; however, in pure digital systems, clock and data speeds tend to be very close.

In contrast, in mixed (digital + analog) systems, such as data communication applications, the data rate is usually many times the clock rate (speed). Actel indicated clock speeds of 40 to 60 MHz in its mixed-signal product.

Getting back to the presentation, Mr. East talked for about forty minutes while explaining the various slides. I will do my best to replicate the main points of the presentation.

No debt: Actel has no debt and 140 million dollars in cash and investments.

Broad customer base: Actel has 3500+ customers. 60% of Actel's revenues come from around 1000 customers. [Note: 10K, page 26: Lockheed is a major customer. "Lockheed Martin accounted for 4% of our net revenues during 2004 compared with 11% during 2003."]

Niche markets: Actel is not "going after what the big guys [Altera (ALTR) and Xilinx (XLNX)] are going after."

Static v. Dynamic: Actel is better when it comes to static power.

Survey says: "Which vendor best addresses power consumption" problems in FPGAs?

Xilinx: 27%; Lattice Semi: 6%; Altera, 22%; Actel, 22%.

Flash: Flash is growing, but at a slower rate than anti-fuse.

Slow but steady?: Actel is "gaining share, but not at a rapid pace."

Long-term customers: Actel has many long-term customers in the military, industrial, and medical markets. At the same time, some of these customers have external complications, such as necessary FDA approval, that prevent immediate sales. As a result, although Actel is actively trying to gain more long-term customers, the time it takes to gain such customers may cancel out any immediate revenue effect.

Vision: CEO East talked about how the "whole world is moving" in the direction of "portable" products, i.e., handheld and battery-powered devices. (The cellphone is an obvious example of this movement.) Mr. East mentioned that he had just seen a portable medical device the size of his thumb. (Quite a change from the days of large, immovable medical equipment.) He mentioned that some restaurants no longer using pen and paper but are taking orders on portable devices. He provided many examples of Actel's ability to grow in the future as more devices become smaller and handheld.

Acquisitions: Mr. East talked about Actel's acquisition of Pigeon Point Systems and the possibility that the TCA (Telecommunications Computing Architecture) standard would become industry standard.

I asked several questions. I mentioned that around 40% of Actel's revenues came from the military and aerospace industries. (See 10K, page 25, "[S]ales of our products to customers in the military and aerospace industries...accounted for 38% of our net revenues in 2008.") I asked how the cancellation of various projects would impact Actel. I mentioned specific projects, like the F-22, which had been scaled back or canceled.

This is where it got a little confusing. All CEOs, including the honest ones, are part-salemen. No CEO wants to admit that problems might arise as a result of government spending cuts. As a taxpayer, I am quite happy President Obama is scaling back some defense programs. (See here for more on this issue.) Actel shareholders, however, probably understand that certain military/aerospace cuts may impact Actel's ability to grow. Mr. East did not mention any particular defense program cut that would impact Actel's revenues. Mr. East seemed to say that Actel's product line was diverse enough so that the "cumulative" effect of defense spending cuts would not be significant. Even so, if I was a mutual fund that owned millions of shares, I'd ask Actel to break down exactly how much money it was expecting from each of its defense projects. That breakdown would give a fund manager a better idea of what to expect from Actel moving forward.

Mr. East did mention that "95%" of American-launched satellites used some Actel product. That's an incredible achievement. Mr. East mentioned that there were many civilian satellites, such as weather satellites, and scientific satellites, such as Pluto explorations. His point was that even if the military cuts back on its defense spending, civilian projects would probably continue to give Actel revenue.

I asked about Actel's efforts to diversify its upper ranks. There were only two females in the entire room, and one of them appeared to be a non-executive employee. If I saw a company with 18 women and 1 male in upper management, I'd be concerned, so I asked Mr. East what he was doing to improve diversity. Mr. East seemed a little uncomfortable with this question and first joked that if I was discriminating against older white men, he was going to call his lawyer to come after me. He then pointed out that Actel had some Egyptian and Lebanese employees in the room, and the overall racial composition of Actel's employees was very, very diverse.

When I pressed him further on why there weren't more women in the room, Mr. East became more serious and indicated that there was a "dearth of American-born female engineers." In probably one of the best comments made by a CEO I've heard, he said he didn't have a company car, he stayed in cheap hotels, and he didn't have an executive jet, but he "liked his engineers." His point was that he hired good engineers, no matter what the ethnicity or gender. As he became increasingly more uncomfortable, the sole female manager piped in. She made some excellent comments about how the company wanted to add diversity naturally, not "artificially." She said that in the nine years she had been with the company, Actel had "never" had a hearing before the OFCCP (the OFFCP ensures that federal contractors do not discriminate). Her response was excellent, and having a female employee save the CEO from his discomfort showed that Mr. East was respected within Actel's upper ranks.

Although I enjoyed the CEO's presentation, I will not be buying more Actel shares. When it comes to technology, you want to go with the leaders, and Xilinx and Altera appear to be the leaders in Actel's field. That doesn't mean Actel won't survive or even thrive, but it appears to have made a conscious decision to move away from competing with Xilinx and Altera. That means Actel will probably focus more on lower-growth areas, where the larger players have exited. To give you an idea of the size difference between Actel, Xilinx and Altera, Actel's market cap is around 300 million dollars; Altera's is around 5 billion dollars; and Xilinx's is around 6 billion dollars. Maybe Actel will eventually decide to play the part of David and slay the Goliaths. Anything's possible in our this topsy-turvy world of ours. Right now, however, Actel does not appear to be able to grow at a high enough rate to justify a massive upside in its stock price.

Miscellany: Actel invested in Lehman Brothers' bonds and only recently wrote off the investment. See 10K, page 49: "The total impairment charge of $0.9 million is included in interest income and other, net on our consolidated statement of operations for the year ended January 4, 2009."

Disclosure: I own an insignificant number of Actel and Xilinx shares.

Awesome video

RIP: Alexis Joy Briski

I recently attended Alexis Joy Briski's service at Calvary Church. You may read Alexis's obituary here:

http://www.losgatosobserver.com/2009/05/27/obituary_alexis_joy_briski

The service was beautiful. The large church was filled to capacity. The materials included a bookmark with a picture of Alexis pitching for her softball team and the "The Lord is my shepherd" prayer inscribed at the bottom; a blank page for the kids to draw on; a written transcript of some of the speeches to be given by Alexis's friends; and an outline of how the service would proceed.

Whenever we think we are having a bad day or life is not going the way we want, we should also remember the children who died before they could reach their full potential. Some people weren't given a chance to have all the options many of us have today. Sometimes, our options may be limited, but at least we have options. It is important to remember that.

Sad and Happy Stories

A sad story:

http://www.mercurynews.com/localnewsheadlines/ci_12530827

Andrew King was arrested for molesting girls on Santa Clara's nationally-renowned San Jose Aquatics swim club. I realize all persons are entitled to a presumption of innocence, but it's hard to believe so many women would come forward now to make false allegations. As a youth basketball coach, I despise people like Andrew King. The whole point of coaching kids is to give them a set of skills that will help them become mature adults. When a youth coach violates the trust his community has placed in him, he fundamentally alters a child's maturation process.

And a happy one:

http://rivals.yahoo.com/ncaa/basketball/news;_ylt=A2KIPHfjfClKJlQBLw85nYcB?slug=jn-laue060509

Kevin Laue, a scholarship athlete...with one full arm.

President Obama in Cairo, Egypt

From LA Times: transcript of President Obama's speech in Cairo, Egypt:

http://latimesblogs.latimes.com/washington/2009/06/barack-obama-muslim-speech-text-egypt.html

Scroll down the page for the transcript.

The Economists' Roundtable

Just a wonderful, wonderful exchange between prominent economists:

http://www.nybooks.com/articles/22756

Nouriel Roubini:

[F]iscal policy cannot resolve problems of credit, and it is not without cost. Over the next few years it's going to add about $9 trillion to the US public debt. Niall Ferguson said it's the end of the age of leverage. It's not really. There is not deleveraging. We have all the liabilities of the household sector, of the banks and financial institutions, of the corporate sectors; and now we've decided to socialize these bad debts and to put them on the balance sheet of the government. That's why the public debt is rising. Instead, when you have an excessive debt problem, you have to convert such debt into equity. That's what you do with corporate restructuring—it converts unsecured debt into equity. That's what you should do with the banks: induce the unsecured creditors to convert their claims into equity. You could do the same thing with the housing market. But we're not doing the debt-into-equity conversion. What we're doing is piling public debt on top of private debt to socialize the losses; and at some point the back of some governments' balance sheet is going to break, and if that happens, it's going to be a disaster.

He makes so much sense, it's almost painful to listen.

Rita Pavone: IL BALLO DEL MATTONE (1963)

Movie: Nine Queens

Just saw the 2000 Argentinian film, Nine Queens (Nueve Reina). I try to remember at least one line from each film I see. This film's memorable line occurs after a character asks someone how much it would take for him to do a particular sexual act, hears rejections, and then increases the price until he sees hesitation:

You see? We're not lacking pillow-biters, just financiers.

Ah, the ongoing issue of morality, sex, and price. Overall, a good film. I give it 4/5 stars.

Guantanamo held a 12 year old boy

Congrats to all the Americans who supported Guantanamo under Bush. You favored locking up a 12 year old indefinitely without a trial:

http://sanfranciscochronicle.info/cgi-bin/article.cgi?f=/n/a/2009/05/25/international/i114756D65.DTL

https://www.washingtonexaminer.com/us-lawyers-ask-afghan-court-to-help-gitmo-inmate 

U.S. military lawyers asked Afghanistan's highest court Monday to demand the release of a Guantanamo prisoner they say was only about 12 years old — not 18, as the military maintains — when he was sent to the detention center in Cuba.

We knew President Bush was relying on secret evidence and refusing to be transparent. These kinds of embarrassments always happen when citizens don't demand government transparency. The government gets away with violating the Constitution and destroys our goodwill in the process.

Many years ago, I attended a speech by an ACLU attorney who was representing some of the Guantanamo Bay detainees. She told everyone, in a public meeting, that America was holding a 12 years old child in Guantanamo without a trial. If I remember correctly, she also said Guantanamo was holding a 75 years old man. Everyone knew. No one listened.

The next time you decide to trust your government, just ask yourself, "Is secrecy worth violating our own Constitution, the rule of law, checks and balances, and our goodwill?"

© Matthew Rafat (2009)

Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety. --Benjamin Franklin

I am willing to know the whole truth; to know the worst, and to provide for it. --Patrick Henry

Core-Mark Annual Shareholder Meeting (2009)

I attended Core-Mark's (CORE) annual shareholder meeting on June 2, 2009. The meeting was held in a small conference room at the Hyatt Regency San Francisco Hotel. The only refreshment offered was Starbucks coffee. I was a little disappointed, because food-related companies sometimes display their own products. I did not get a chance to try Java Street items or other Core-Mark products.

Around eight people sat in the audience. Core-Mark's executive team, except for the CFO, sat in the front. Other than my friend and I, everyone attending the meeting had a business or employment relationship with Core-Mark. The Chairman of the Board handled the formal part of the meeting.

Core-Mark started out as a tobacco storefront in San Francisco. It grew into a major supplier of consumer goods to various retailers and became known as Fleming Companies. In 2003, Fleming Cos filed for Ch 11 bankruptcy/reorganization. In 2004, Core-Mark emerged from the ashes of Fleming Cos. For more information on Core-Mark's history, click on the following link:

http://en.wikipedia.org/wiki/Fleming_Companies,_Inc

Cigarettes and other tobacco products accounted for 74.9% of Core-Mark's net sales in 2008; however, cigarette sales accounted for only 29.2% of Core-Mark's total gross profit in 2008. (See 10K, page 3.) In short, while Core-Mark continues to sell cigarettes, it has revamped itself into a food/consumer kiosk company. Food and non-food (batteries, etc.) products accounted for 71.0% of Core-Mark's gross profit in 2008. (See 10K, page 4.)

Core-Mark supplies convenience stores, such as 7-Eleven, with refrigerated kiosks containing various products. These kiosks contain packaged salads, bakery items, drinks, sandwiches, juices, fruit, and other items. Core-Mark touts its ability to re-stock its kiosks several times a week, which allows customers to select fresh food. In other words, Core-Mark strives not to be like your grandmother's food kiosks, which tended to sell month-old sandwiches, cigarette packs, and stale candy.

I was the only person who asked questions at the meeting. CEO J. Michael Walsh graciously answered all my questions. I asked how the company would deal with declining cigarette sales and higher "sin"/SCHIP taxes. Mr. Walsh answered that cigarette consumption has been declining for a long time, and as a result, Core-Mark had consciously shifted to the new consumer trend, which was selling fresh food products. He said that Core-Mark wanted to become the leader in fresh food products.

Mr. Walsh also said that higher cigarette taxes actually helped Core-Mark's bottom line. He indicated that rising cigarette taxes allowed Core-Mark to get a higher return on its "working capital." This concept is a bit counter-intuitive, but I will explain it as best as I can.

According to the CEO, Core-Mark must buy "stamps" from states before it can purchase cigarette cartons. These state-issued stamps allow Core-Mark to purchase a certain number of cigarette cartons over a certain period of time. Different states levy different taxes per carton. In California, the current carton tax is $8.70; it is higher in New York.

The "stamp" process functions as a VAT, allowing states to ensure they are paid carton taxes up front rather than at the final point of sale. This process helps states keep track of cigarette sales and may reduce the black market for cigarettes. This system is not perfect. Some entrepreneurs buy cartons in states with lower carton taxes and then illegally re-sell them in nearby states that have higher carton taxes.

Higher carton taxes may help Core-Mark, because Core-Mark buys "stamps" at the beginning of the month; however, it does not have to actually pay for the stamps until later--sometimes up to 30 days later. In the meantime, it still receives its allotment of cigarette cartons and the cash from those carton sales/distributions. That regulatory quirk means Core-Mark sometimes gets a "free" money float of up to 30 days, which helps increase its liquidity. In short, the way states issue "stamps" may result in some companies receiving temporarily subsidized cash flow, which minimizes capital costs. (I hope I've explained this correctly--if not, feel free to correct me by adding a comment.)

Mr. Walsh also indicated that Core-Mark was in a position to consolidate deliveries and take market share from less efficient competitors.

I then asked why cigarette companies wouldn't decide to sell directly to customers, thereby eliminating Core-Mark as a middleman. Mr. Walsh replied that doing so would cost cigarette manufacturers "more money." They would have to "build the infrastructure" first and deal with the "administrative burden" of handing 100,000+ billable accounts. In fact, Mr. Walsh said that some cigarette companies, such as Philip Morris (PM), were favoring third parties as distributors to cut costs. Mr. Walsh's explanation makes perfect sense. If Core-Mark has a highly efficient supply/distribution chain, then its advanced inventory management might act as a wide moat. Walmart, for example, is able to cut its costs by having superior inventory management, but its internal tracking system took years to develop.

I then asked about Core-Mark's pension plan, which is underfunded. (See 10K, page 11.) Under ERISA and other laws, different levels of pension underfunding trigger different corporate fiduciary duties. Companies typically indicate pension funding levels by referring to one of three funding categories: "80% and under"; "80% to 60%"; or "60% and under." When a pension plan falls in the "60% and under" category, it may be a sign that pension assets and investments are being poorly managed. Core-Mark's CFO indicated that the pension was at the 60% level.

I then asked about Core-Mark's executive team and board, which appeared to be non-diverse. More specifically, all Board members appeared to be older Caucasian men. I asked what Core-Mark was doing, if anything, to increase its executive team's diversity. Mr. Walsh pointed out that Core-Mark's CFO was obviously not a white male (she is a white female), and the company was open to diversity. He said that Core-Mark was always open to qualified candidates. Mr. Walsh also indicated that the Board was chosen by Core-Mark's unsecured creditors following Core-Mark's Chapter 11 filing. (In other words, the unsecured creditors were responsible for the Board's composition, and they might be the more relevant party to contact on this issue.)

For a company that was in bankruptcy court just five years ago, Core-Mark has done remarkably well. I especially enjoyed CEO J. Michael Walsh's demeanor and responsiveness. Unlike many CEOs, he answered every single question thoroughly. He had no trace of the arrogance so common in upper-level management. It was a pleasure to meet him.

I had only one issue with the meeting. The Chairman interrupted me once when I was in the middle of a question to ask me for my name, how I held my shares, and the number of shares I owned. He asked me these questions after I had already announced my name and shareholder status. I thought it was inappropriate to ask me how many shares I owned. A shareholder is a shareholder, period. Companies should welcome questions from all shareholders, not just major ones. To date, this is the only company I've seen that has requested this kind of information, i.e., the number of shares held. (There was another issue, but it was minor--a shareholder relations representative wanted me to fill out a name-tag and then complained that my handwriting was illegible. Note to all shareholder relations personnel: you get one day a year to make ordinary shareholders feel welcome. Use it wisely.)

I don't have an opinion on Core-Mark's stock. I haven't bought products from their kiosks, and I'm not a smoker, so I don't have sufficient personal knowledge to state an opinion. It does appear, however, that Core-Mark provides a valuable service to many convenience retailers.

Note: the picture above is of Mr. Walsh and myself.

Disclosure: I own an insignificant number of Core-Mark (CORE) shares.

Update on June 5, 2009: The more I think about the sin/stamp tax issue, the more I think I may have reversed the payment schedule. Perhaps CORE has to buy stamps first and then wait a month or more before receiving cartons to distribute. Otherwise, I am still unclear as to why CORE would make more money when the number of smokers decline. Any comments are appreciated.

More Wisdom from Charlie Munger

Charlie Munger on desire:

I had a considerable passion to get rich. Not because I wanted Ferraris - I wanted the independence. I desperately wanted it. I thought it was undignified to have to send invoices to other people. I don’t where I got that notion from, but I had it.

More from Charlie Munger here.

McGovern on the Military

George McGovern had a great op-ed in the WSJ yesterday (June 1, 2009):

http://online.wsj.com/article/SB124381226265170437.html 

He makes a lot of good points. For example, I knew we were still spending billions of dollars per month in Iraq and Afghanistan, but $12 billion month? 

We now spend $12 billion a month on wars in Iraq and Afghanistan -- two mistaken invasions that have increased violence and terrorism in the Middle East... 

There is the terrorist danger, but this is not a military problem. Terrorism is a by-product of military weakness. The terrorist has no battleships, bombers, missiles, tanks, organized armies or heavy artillery. 

The only significant terrorist attack on the U.S., on Sept. 11, 2001, was carried out by 19 young men from Saudi Arabia and Egypt armed only with boxcutters. They used these devices to intimidate the crews of four airplanes into surrendering control of their planes. The terrorists then suicidally flew the planes into buildings. 

This event, which took place nearly a decade ago, dramatized the limitation of a huge military budget in assuring national security. Nonetheless, our military budget is higher than ever -- $515 billion annually, not including the cost of Iraq and Afghanistan. 

This figure is greater than the combined military budgets of the rest of the world. We could defend ourselves with an arms budget half that size. If we directed the $250 billion we could save annually into national health care, improved education, a better environment and restoring our infrastructure, the nation would be more secure, better employed and have a higher standard of life. Or the savings might be used for annual reductions in the national debt. 

McGovern and I seem to think similarly when it comes to this issue. I've voiced similar thoughts in the past:

http://willworkforjustice.blogspot.com/2009/05/susan-faludi-911-and-military.html

Anthony Bourdain Speaks in Cupertino, CA (Flint Center)

I'm an Anthony Bourdain fan. (I've written about him before here.) Bourdain's unique blend of intelligence and devil-may-care attitude leads to searing, funny commentary on everything from poverty to Cinnabons. Bay Area residents were treated to a 45 minute Bourdain speech--an extended rant, really--on May 28, 2009. 

Wearing jeans and a sports jacket, Bourdain showed up on stage to wild cheers. He stayed near the podium in the middle of the stage, but never behind it. He didn't have an outline--he spoke from the gut until he ran out of things to say, and then took questions from the audience. 

Bourdain started off by saying he's a good example of what not to do or say, but his two saving graces are his curiosity and his willingness to concede when he's wrong. After that disclaimer, we were off to the races. Bourdain began lambasting Alice Waters and Berkeley residents, both of whom are known for favoring organic food. His point was that Alice Waters and affluent Berkeley residents can afford to buy organic and local food, which is more expensive than non-organic food. He suggested that real organic food is homegrown, and if Alice Waters wanted to promote organic food for the masses, she should show people how to grow food in backyard gardens. At one point, he asked, "Do you think that the people lining up around Popeye's Chicken for 99 cent day are there because the stuff tastes good? No! They're there because it's cheap!" 

Bourdain then talked about how we're fetishizing our food by focusing on ingredients rather than the actual process of cooking. At one point, he joked that by the time a waiter gets done explaining the food on his plate and where it comes from, he's already finished eating the "damn thing." He compared our focus on ingredients to exotic Japanese porn, by which he probably meant that the actors aren't participating in the spirit of the moment, but are behaving in a detached, grotesque manner. 

Although Bourdain admitted to shopping at Whole Foods, he said that these days, organic generally means luxury, and that's not a good development for cooking. After all, real culinary innovation happens when someone takes the table scraps and makes something good out of it. Bourdain said that "cooking" was really the slaves' way of making something good from their masters' table scraps. He had many examples of poverty leading to innovation, mentioning famous chefs and their background. At one point, he asked, "Do you think a rich person looked at a slimy snail on the ground and thought, 'That looks really good to eat?' Of course not! Some poor person was hungry and probably thought, 'If I put enough butter and garlic on that thing, maybe I can manage to choke it down.'"

This is one reason I love Bourdain--he keeps his audience grounded. He believes that innovation comes from starvation, and he reminds us that more often than not, a poor, unknown person is responsible for the food on our plates. (Bourdain believes "The engine of gastronomy is poverty.") You might even say Bourdain's motif is bringing cooking back to the barrio, which explains why he hates celebrity chefs (he's famous for ranting against Rachel Ray). Bourdain did have kind words for Julia Child, though. He said she became famous by demystifying French food and showing people that with some effort, they, too, could make French food.

Basically, to get on Bourdain's good side, you have to recognize the hard-working, innovative people who are responsible for much of our food. That's not to say that Bourdain praises poverty. He reminded us that poverty might look fun when we go on short vacations, but the people in those "bucolic" places want an SUV and satellite TV just like the rest of us. Bourdain didn't talk talk much about fixing poverty, but he wants us to remember who makes the food that goes on our tables. After all, it's not rich people who pick the tomatoes and slaughter the animals we end up eating. One of Bourdain's themes is to remind people that our food has a cost, and the cost is keeping lots of poor people in poverty so they can continue doing the dirty work for us. Bourdain then ranted against poor food choices, asking, "What the f*ck is a Cinnabon? It's got, like, a pound of sugar on it, and every time I'm in the airport, I have to deal with the smell overpowering all the other food choices." On a more serious note, Bourdain said we need to be more careful about what we're feeding our children. He said studies have shown if you put vegetables in a McDonald's wrapper, kids will eat it and say it tastes better than ordinary vegetables served on a plate. (Whoa.) He said he uses reverse psychology on his daughter, Ariane, bashing McDonald's every time he can, and telling his daughter that Ronald McDonald may be mentally-impaired. (Bourdain, being Bourdain, used different words.)

Bourdain also called vegetarians "rude." He said that food is the "purest expression of who we are," and when someone offers you something to eat, you shouldn't tell them, "That looks good, but can I have a spinach salad instead?"

Someone asked Bourdain to name his favorite food. Bourdain said his favorite comfort food is a Vietnamese pho bowl. (I agree!)

Another person asked which countries had the best culinary cultures. Bourdain mentioned Spain and had many kind words for the Spaniards. He also said if you were looking for a cheap, diverse selection of food, Singapore is where you want to be. (I agree! Singapore's food scene was one reason I fell in love with the country.)

Bourdain said he married into a North Italian family, and at home, his wife does much of the cooking. He said he married into the kind of family he always wanted--loud, boisterous, and open.

Bourdain says when he's at home, he's a stay-at-home dad; however, he travels 10 out of 12 months of the year.

Someone asked him about his worst travel experiences. Bourdain named Romania and Uzbekistan. He pilloried Romania's handling of his show, saying that the government did not allow him to go to the backroads to meet with the average residents. He started doing robot-like impersonations of the Romanian government officials on the trip while narrating, "Here is our version of classic Romanian culture..." Bourdain said that after he left, the Romanian papers started calling him a "KGB/Mossad" spy. (I can't wait to see that episode--Bourdain is hilarious when he's snarky.)

Speaking of bad experiences, Bourdain said that he knows his audience likes to see him miserable, but when he travels, he wants to have a good time. He doesn't want to speak badly of anyplace, so when he does become snarky, it's not something that's planned.

If you haven't seen Bourdain's show, "No Reservations" (on the Travel Channel), I highly recommend it. I still haven't read his book, Kitchen Confidential, but I hope to pick it up soon. (A friend loaned me McCarthy's Blood Meridian, but I'm not liking it, so I will probably dump it for Kitchen Confidential.)

All in all, I had a great time hearing Bourdain speak. His genuineness gives Bourdain many loyal fans. One of them even got up on stage to show Bourdain a large tattoo of what appeared to be Bourdain on his leg. Bourdain signed it and hugged him. Not too many celebrities inspire that kind of emotion. Bourdain is an original in a world full of copycats and sycophants. God bless him for being himself.

© Matthew Mehdi Rafat (2009) 

Note: I did the best I could to write down Bourdain's words verbatim, but Bourdain speaks quickly and the auditorium was dark, so some of his quotes may be paraphrased.

Basketball: Orlando and Cleveland

Stat of the Orlando-Cleveland series: Ben Wallace, 22 total rebounds in six games. Remember when that would be his nightly production? I'm not blaming any single player for the loss, but Cleveland needs to give LeBron bigger/taller teammates.

When I look at Cleveland's roster, I see no defensive presence. Wallace is only 6'9''. Gibson, Szczerbiak, and Mo' Williams aren't great defenders. In fact, on many teams, they would be sixth men. I've said it before, and I'll say it again: you can't win an NBA Championship without great defense. If you could, Steve Nash's Phoenix Suns would have three rings now.

My prediction? Orlando in 7 against the Lakers. Orlando's success should not be surprising to fans who followed R. Lewis's career in Seattle. He was putting up 20 points a night regularly. With Turkoglu, Lewis, and Alston, Orlando is always a threat to make a three-pointer, which opens the paint for Howard. As we've seen, that inside-outside threat is difficult to handle. Also, between Pietrus and Howard, Orlando brings enough toughness on defense to win the championship. Pietrus's three-point shooting has been a nice surprise, and if he keeps shooting a high percentage, Orlando will always be in the game.

As for the Lakers, they have Gasol, but he's no Howard. Bynum isn't developed yet to make much of an impact (he scored a whopping 2 points in his most recent game). When you really look at the Lakers' roster, they've got Kobe and Gasol, with the occasional trey from "The Machine." That won't be enough to beat Orlando.

In fact, the only way I see the Lakers winning the championship is if the referees hand them the game. I give Orlando seven games to close out the Lakers, not because I think the talent level is close, but because I think the referees help the Lakers. Orlando is still a young team looking for respect, which hurts them when it comes to getting calls.

For example, did you see the ref call a taunting technical on Howard? On church-going, gospel-listening Dwight Howard?! Meanwhile, Kobe has become much better at handling the referees. Did you see him get Artest tossed? Hands in the air, a look of displeasure on his face, as if to say, "I can't believe I'm in the same room as you." And he still got Artest thrown out. If I'm Stan Van Gundy, I tell my team, "No technicals. I don't care how p*ssed you get. No technicals. We get the ball back and score. Forget the refs. If anyone gets tossed, it'll be me, not you."

Orlando in 7 or fewer.

Sotomayor a Yankees Fan?

The Boston Globe's Ellen Goodman has a great article (May 29, 2009) on Judge Sotomayor:

http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2009/05/29/a_wise_person_for_the_court/

Apparently, Ms. Sotomayor is a Yankees fan. I'm no BoSox fan, but how can she be accused of being pro-underdog when she's cheering on the Yankees? She should have had the good sense to root for the Mets instead, like Julia Stiles.

Best line in the article? Someone describes Justice Roberts as a "relentless champion of the overdog." Hilarious.

Ellen Goodman makes another good point. She reminds us that Justice "O'Connor...praised her successor, John Roberts, saying, 'He's good in every way, except he's not a woman.'"

I talked about Sotomayor before in this post.

Weekend Recap: Book and Film Rec

Last weekend, I saw a great movie and read a good book.

1. The movie, Sin Nombre, is about two immigrants. One is trying to cross the border to get to New Jersey, while the other is trying to escape being killed by his own gang members. The story is about redemption, loss, and perseverance. Catch this one if you can. A review is here.

2. Mohsin Hamid's book, The Reluctant Fundamentalist, is about an immigrant named Changez ("Changez" is Urdu for "Genghis" Khan, the Mongol invader who attacked the Muslim world). Although this story is about a legal immigrant, one wonders if Changez's troubles aren't as woe-inspiring as the two characters in Sin Nombre.

Changez, a Pakistani immigrant, attends Princeton and falls in love with a woman, who, at first glance, appears to be a beautiful "lioness." After 9/11, she changes, trying to burrow herself in the past, which prevents the relationship from moving forward. By this time, she has become an unexcisable part of Changez. In fact, he has willingly given up part of himself to ensure her happiness and acceptance. Despite gaining the trappings of wealth and prestige (and an American Express expense account), Changez eventually returns to his homeland, a fact we are told upfront.

The story begins with Changez telling his story to an American in a cafe in Lahore, Pakistan. Both men are tense and wary of each other, and while Changez tries to reassure his visitor, it is clear the visitor is on guard. Changez is also on guard, something we see as he provides clues about his visitor. For example, he wonders out loud whether a bulge in the visitor's pocket is a gun or a hidden fanny pack commonly used by theft-wary tourists. We do not know who the American is, but the story builds tension bit by bit and leaves us with an ending that will be interpreted by each reader differently. The Reluctant Fundamentalist can be called a foreign policy Rorschach test. Depending on how you interpret the ending, you will know your view of America, the world, and how they interact.

An interview with the author is here.

Netflix's Annual Shareholder Meeting (2009)

[Note: this 2009 post caused an uproar in the online community, leading to a small Facebook revolt and support from star Marlee Matlin. Within a few weeks, Netflix announced it would enable online captioning by 2010 (but didn't provide specific benchmarks). The real surprise? As of November 7, 2009, not a single mainstream media outlet had formally covered either the issue of online captioning or Netflix's response. Finally, on February 24, 2011, Netflix announced 80% of its streaming content would be captioned by the end of 2011. Thank you to everyone who supported the online captioning campaign.]

[Note: A major media outlet did eventually cover the issue of online captioning--a year later. See here for June 20, 2010 NYT story.]

Netflix, Inc. (NFLX) held its annual shareholder meeting yesterday at its headquarters in Los Gatos, California. The meeting lasted less than half an hour and around fifteen non-employees attended. As usual, only cookies, water, and soda were offered.

The meeting consisted of CEO and Founder Reed Hastings answering shareholder questions. There was no presentation.

I like Reed Hastings. He has great ideas on education reform, and he is smart enough to have caught the eye of Microsoft (MSFT), which placed him on its board of directors. When it comes to annual meetings, however, Mr. Hastings seems like he can't wait to get back to work. That's a laudable trait in a CEO, and most mathematicians (he majored in math) aren't known as overly social animals anyway.

Shareholders' comments were generally half-question, half-compliment. One shareholder praised Netflix's compensation factors, also known as "performance factors." (See 2009 proxy statement, pages 14-15: "to attract and retain outstanding performers, it must provide a challenging work environment. To this end, the Company strives to maintain a high-performance culture.")

Netflix also evaluates employee performance based on several factors, including judgment; innovation; impact; curiosity; communication; courage; honesty; selflessness; and passion. It's unusual for a company to openly tell shareholders that it bases compensation partly on goals like "honesty." Netflix rightfully deserves compliments for having a multi-faceted compensation analysis that includes an ethical component.

Another shareholder asked what the company was doing now that more players were entering the streaming video business. Mr. Hastings answered that Netflix "is always having to compete," and businesses like www.hulu.com were changing the competitive landscape. At the same time, he said, "It's a big landscape," and while there will be "more competition in the future," Netflix was continuing to add subscribers at a healthy rate. Mr. Hastings also said that the most competition came from cable and satellite companies.

Another shareholder asked what Netflix would look like in five to ten years. Mr. Hastings answered that he didn't have a crystal ball, but Netflix currently had millions of subscribers and he hoped to to keep increasing its customer base.

I asked two questions. Page 10 of Netflix's 10K states that Netflix had issues with Starz Play service:

Many of the [streaming video] licenses provide for the studios or distributor to withdraw content from our service relatively quickly...For example, in December 2008, certain content associated with our license from the Starz Play service was withdrawn on short notice.

I asked why Starz Play revoked its license in 2008. Mr. Hastings said he didn't know about that (perhaps he didn't understand my question) and said Netflix currently had a good relationship with Starz Play. When I later pointed him to the 10K, Mr. Hastings said he did not want to comment. He reiterated that Netflix currently has licenses for Starz Play. [Update: when I followed up on the Starz Play question, I read out loud the relevant section in the 10K to Mr. Hastings. He appeared to understand my question the second time and immediately said he had no comment.] I was a little stunned, because Mr. Hastings was not willing to answer a question about a publicly disclosed fact. I realize as a small shareholder, Mr. Hastings doesn't owe me answers on every question I ask, but the Starz Play revocation seemed like an important issue, and an issue that might impact the share price. Although I didn't say it, I was thinking, "If Netflix doesn't want to answer reasonable questions about its company, why did it go public?"

I then mentioned Netflix's failure to add captions/subtitles to its online streaming videos. Netflix's "instant play" option doesn't include captions, making its online video option unusable for many users. As a result of not offering captions, Netflix is alienating its hearing-impaired, deaf, and senior citizen customers. According to some estimates, there are 34 million hearing-impaired persons in the United States. One would think Netflix would think better than to alienate such a large customer base.

I asked what Netflix was doing to make its website and online video accessible to everyone. Mr. Hastings said other online streaming sites didn't offer captions, and mentioned hulu.com as one of them. He said as time progresses, captioning technology will become more widespread, and Netflix would then incorporate it into its own technology. He also said that customers can continue to receive DVDs through the mail, and most DVDs contained captions.

Unfortunately for Mr. Hastings, I use hulu.com to watch Simpsons episodes. Except for a few episodes, every Simpsons episode I've watched had captions. Obviously, the technology exists to make online video accessible to everyone, so I wasn't quite ready to let this topic pass. I gave Mr. Hastings another chance to explain how he would make his business accessible to everyone. I mentioned that hulu.com did indeed offer captions, and I said (paraphrased), "It sounds like you're not planning to do anything to add captions to your site. Am I correct in understanding that you don't plan on making your online videos accessible to the disabled?" Mr. Hastings said he would check out hulu.com, but essentially agreed that adding captions wasn't an active agenda item. Now, I don't want to go Kanye West on anyone, but it didn't feel like Mr. Hastings or Netflix cares about deaf people.

Mr. Hastings is making a poor business decision by not maximizing his site's accessibility. First, Netflix has already signed up the "low-hanging fruit." In order to keep growing and to justify its relatively high P/E, it will now have to maximize its customer outreach efforts. By not even trying to make online video accessible to the disabled, Netflix is losing goodwill and a large potential customer base.

Second, although Netflix wants to grow its online video business, it is subject to the whims of the studios and other content providers. Netflix doesn't have much leverage over the studios, who control their online content and may wonder why they should license content to Netflix. The December 2008 Starz Play incident shows just how vulnerable Netflix is to having its access unilaterally cut off. To encourage content providers to grant Netflix licenses on reasonable terms, Netflix needs to add something of value. Providing captions for online content may be one low-cost method of offering value to content providers. (I don't know exactly how much it would cost to create online video captions, but there are plenty of people in English-friendly countries who would be willing to do the work.)

Third, being insensitive to the disabled will harm Netflix's public image. I am surprised that Microsoft's good corporate citizenship in this area hasn't rubbed off on Mr. Hastings. Although Microsoft gets a lot of bad publicity, it is actually at the forefront when it comes to offering tools to assist the disabled. Here is a list of the awards it has received as a result of its work on behalf of the disabled. Here is one relating to the hearing-impaired community:

Microsoft was recognized among 12 companies and two educational institutions for "extraordinary efforts in promoting equal access to telecommunications and media for consumers who are deaf, hard-of-hearing, late-deafened or deaf-blind..." "TDI commends Microsoft for its special commitment and allocation of resources over the years to introduce and offer accessible and usable software applications for all Americans. With this technology, deaf and hard-of-hearing Americans can fulfill their potential as full, active participants in the general mainstream—regardless of differences in culture, language and communication."

Bet you didn't know about Microsoft's good reputation in the disabled community. That reputation has created lots of Microsoft supporters willing to speak up when others bash the company. In short, there is no need for Netflix to alienate an entire community, especially not one that contains millions of potential customers.

I understand that Mr. Hastings founded Netflix, controls much of the stock, and probably feels like he doesn't need to listen to anyone. At the same time, Netflix needs to more carefully manage its reputation so it maximizes its customer base. It already has many loyal fans and will probably keep growing (though its rate of growth may not be as high as some shareholders would like). Despite my criticism, I love Netflix and am a huge fan of the company. The algorithm that recommends movies has pointed me to many wonderful films I might have never found on my own, like Germany's Ali: Fear Eats the Soul, China's Shower, and Iran's Children of Heaven.

Mr. Hastings did shake my hand after the meeting and told me he wished he had better answers for me. He gets points for that gesture. I hope he will actually do something about Netflix's inaccessible features. In the meantime, I will not be adding to my small position in the stock. Absent a buyout, perhaps from Microsoft, Netflix looks fairly valued to me.

Bonus: I also blogged about last year's annual meeting here, calling it one of the strangest meetings I've attended.

Disclosure: I own an insignificant number of Netflix (NFLX) shares.

Update on June 1, 2009: unfortunately, this doesn't apply to online video, but if you have a complaint about a television show not being captioned, the following link shows you how to make an effective complaint:

http://www.hearinglossweb.com/Issues/Access/Captioning/Television/file.htm

Update on June 13, 2009: Netflix finally issued a statement re: captioning:

Captioning is in our development plans but is about a year away...I would expect to deliver subtitles or captions to Silverlight clients sometime in 2010...

It appears Netflix has changed its tune somewhat, but if you read the comments on the Netflix post, many readers are questioning Netflix's explanations and statements.

As of today, the Facebook group, "Netflix Watch-Instantly Needs Closed Captions!" had 983 members--most of whom joined after my review of Netflix's annual meeting was published.

Update on June 18, 2009: Here is my follow-up post to this story. The pro-captioning Facebook group continues to grow--"Netflix Watch" has 1,129 members.

Update on August 29, 2009: "Netflix Watch" now has over 2,000 members.

Update on April 18, 2010: Netflix has finally captioned some online videos, but only 100 so far. More here. Looking at hulu.com's options, which include online captioning and transcripts, I am still not happy with NFLX's slow progress. I guess it's a start, and better than nothing. Thanks to everyone who helped NFLX realize the importance of online captioning.

Sotomayor and Judicial Realism

1. Next time people want to place their faith in a judge, remember this name: Judge Samuel Kent. He was a judge in the Southern District of Texas who was sentenced to almost three years in prison for lying about his assaults on two women who worked for him. (See WSJ, 5/28/09, A5). Judge Kent was a federal judge--which confers a lifetime appointment. Guess who appointed him to the bench? President George Bush the First.

2. And now let's move on to Judge Sotomayor. I don't know her. I don't really care, because she'll be replacing a judge who seems to rule in a similar fashion. I'll get interested when someone replaces Alito, Roberts, Kennedy, Thomas, or Scalia. The idea, though, that she's unqualified to be a Supreme Court Justice is ludicrous. She made a comment indicating that a Latina female would have a different perspective than a white male. I heard Justice Sandra Day O'Connor--a conservative Reagan appointee--talk about the exact same thing in a Santa Clara Law school lecture many years ago (around 2002).

Justice O'Connor was talking about the Gail Atwater case, where a small-town cop hauled a Texas soccer mom to jail because her kids weren't wearing seatbelts. Justice O'Connor dissented in that opinion. See Atwater v. Lago Vista, (2001). Every single justice in the majority opinion was male. Every single female justice dissented. Justice O'Connor mentioned the gender disparity in her speech with a sigh and a shaking of her head. I interpreted her body language to mean that if more women were involved, the case would have been decided differently.

It should go without saying that a person's background will influence his or her personal opinions. For example, growing up female will present someone with a different--not better, not worse--perspective than growing up male. Does a person's ethnicity or gender mean that s/he will not be impartial when applying the law? Of course not.

Why, then, should we care about diversity on the bench? First, judges hold so much power over Americans--a non-homogeneous group of people--that diversity on the bench is a laudable goal, as long as excellence is not sacrificed. Second, most of us would probably recoil at the idea of a Supreme Court that is 100% African-American, 100% homosexual, 100% Hispanic, or 100% Muslim--why is that the case, if someone's background is irrelevant? I think it's because a lack of diversity indicates that the system for selecting powerful people is flawed. Assuming there are many people qualified to be on the Supreme Court, we should be able to draw from a wide pool of applicants, not just people from one particular ethnicity or gender.

Here, Judge Sotomayor's most relevant characteristic--the diversity of her work experience--is outstanding. She has been a criminal prosecutor (government lawyer); a civil litigator (private lawyer); and even a solo practitioner.

In any case, if Judge Sotomayor is a radical judicial activist, then so is Justice O'Connor.

Battle of the Sexes

Classic line, from Elia Kazan's A Face in the Crowd (1957): 

You cold-fish respectable girls...inside, you crave the same thing as the rest of 'em. 

The single most regressive piece of American culture is our attitude towards sex. Because we can't address it in an adult fashion, Americans only seem to accept sex when it's watered or dumbed down. Even in Hollywood--hardly a bedrock of decency or morality--Paris Hilton gets attacked by comedians for being sexually promiscuous. Meanwhile, to paraphrase anthropologist Helen Fisher, "If you think men are more promiscuous than women, who do think the men are sleeping with?" (Another one of her gems is, "We were built for reproduction, not happiness.") 

 I am not sure where I was going with this, except to say that gender stereotypes are as alive as ever. We've progressed from burning witches at the stake, but until women fully harness their sexual power by becoming comfortable with their bodies, it seems they will never attain full power in America. That's a shame. At the end of the day, although men and women are surely different, it makes no sense to use a naturally connecting activity to drive them apart. 

A memorable exchange from Kazan's film: 

 -For a mild man, you sound vicious. 

 -Didn't you know? All mild men are vicious. They hate themselves for being mild and hate the extroverts whose violence seems to have an attraction for nice girls who should know better.

Helen Fisher on Love

California Supreme Court on Prop 8

There's been a lot of confusion about Prop 8. The California Supreme Court held that the amendment (i.e., Prop 8, which defines marriage as between a man and a woman) does not prevent gay persons from actually raising kids, choosing the partner of their choice, or "entering into an officially recognized and protected family relationship with the person of one's choice." As a result, Prop 8 does not interfere with "substantive" rights and may be lawfully upheld.

The Court, through Justice George, contends that Prop 8 is a semantics issue, because all it does is prevent a particular word, "marriage," from attaching to a particular relationship. Since there's no "inalienable" right to call a relationship by any particular word, the Court reasons that Prop 8 does not infringe upon anyone's state Constitutional rights.

In addition, California has passed other laws protecting civil unions and guaranteeing similar rights to gay persons, so there's little evidence of widespread state discrimination against gay persons on the issue of fundamental rights. [Justice Moreno disagrees, saying the Court already found gay persons to be a suspect class previously, which requires them to use a "strict scrutiny" analysis. A "strict scrutiny" analysis means the Court has to strike down a law unless it is necessary to achieve an end result.]

Justice Werdegar concurs in the opinion, but makes a point of saying that laws actually discriminating on the basis of sexual orientation must "survive the highest level of scrutiny" (she seems to agree with Justice Moreno in spirit). Although she doesn't quite say it, Justice Werdegar apparently doesn't think this particular amendment actually discriminates on the basis of sexual orientation because civil unions provide the same protections as opposite-sex marriage. [She really should have written the opinion--she has a more balanced writing style than Justice George, who is thorough, but pedantic.]

Justice Moreno, the only dissenter, says that once you enact a law, you must treat everyone equally under it. He says that the whole point of the state Constitution is to protect all, not some, individuals from arbitrary government power. Once you overturn that framework, you alter the state Constitution, and the Court has the power to prevent a fundamental alteration to the Constitution. He starts with a great quote from a recent Iowa case:

The absolute equality of all persons before the law [is] the very foundation principle of our government. -- Varnum v. Brien (Iowa 2009)


So it comes down to this: is being able to call your relationship a "marriage" an "inalienable right"? The Court seems to say that "a rose by any other name would smell as sweet."

Personally, I don't think courts can change anyone's personal beliefs, so I am not outraged by the opinion. If anything, I hope this shows the public that the law is generally toothless when it comes to advancing progressive civil liberties. Why is that? Well, the Court decided the issue correctly, at least from a legal standpoint. All but one Justice agreed, which shows you this was an "easy" case to decide. That's just my point: the law isn't designed to change anything--it's designed to provide stability and predictability--the exact opposite of change. Of course, it is also supposed to protect minorities, but here, the Court saw the presence of civil unions as sufficient legal protection. Ironically, if the state had failed to enact civil unions, this case might/should have gone the other way.

The real problem is that the entire institution of marriage is failing. Instead of trying to fix the relatively high divorce rate, marriage proponents have fixated on strengthening the marriage "club" by excluding others from it. Exclusivity is indeed one way of adding value--anyone who belongs to a country club knows that--but it's certainly not the best way. The fact that pro-marriage types have to resort to Prop 8 shows that marriage itself is failing. As a result, this decision isn't a victory for marriage--it's a sign that marriage is so frayed, so weak, that it now relies on negative traits--i.e., excluding others--not positive ones, to bolster itself.

People keep asking how this could happen in California when supposedly more conservative Iowa allows greater protection for same-sex couples. I bet Iowans are more secure in their marriages than Californians and don't mind other people getting married. Gay marriage is a "threat" if you think your own marriage is falling apart and need an external boost to prop it up. On the other hand, if your marriage is fine, and your friends' marriages are doing well, you probably don't feel the need to butt your nose in anyone else's business. Iowans--who basically gave President Obama the Democratic presidential nomination and therefore his eventual election--are probably on the right side of history again.

I interpret the court's decision as a narrow one. The Court held that there is no "inalienable" right under the state Constitution for anyone--opposite-sex or same-sex--to call themselves "married." There is, however, a fundamental right to choose your own partner and raise the kids of your choice. In some ways, this decision might help gay persons get better access to adoption agencies, which I've heard discriminate against gay couples. There is another silver lining: the Court ruled that the 18,000 gay couples who got married before Prop 8 was enacted are still "married" because taking away their marriage would violate due process.

Update: here is Family Code 297.5, which establishes equality between same-sex and opposite-sex unions:

297.5. (a) Registered domestic partners shall have the same rights, protections, and benefits, and shall be subject to the same responsibilities, obligations, and duties under law, whether they derive from statutes, administrative regulations, court rules, government policies, common law, or any other provisions or sources of law, as are granted to and imposed upon spouses.

The California Court's ruling applies only within the state of California. A state supreme court cannot decide federal issues or issues relating to other states' substantive rights.

All of the comments I've heard against the decision--immigration, tax issues, and cross-border rights--relate to federal issues that are unreachable by a state supreme court. Again, state courts cannot interfere or decide federally pre-empted issues. Why not? Because then Californians might be subject to what Mississippi courts decide, and vice-versa. That potential for conflict is why we have a federal government to step in when these kinds of conflicts occur. Unfortunately, our federal legislative body, Congress, is not progressive when it comes to same-sex civil unions. As a result, the issue of same-sex civil unions will probably be resolved by the U.S. Supreme Court. Once you understand the limits of state courts, you should understand that California's state supreme Court decided the case properly and rendered a decision that is pro-gay-rights within the boundaries of its jurisdiction.

How could the United States Supreme Court protect same-sex couples and their ability to enter into state-sanctioned unions? The answer is that the Court must first determine whether gay persons are a protected class, thereby requiring a "strict scrutiny" analysis. The Court might use the passage of the "Defense of Marriage Act" to show governmental animus and bias against gay persons, but that might be a stretch, given that President Clinton signed the bill.

Still, as Justice Moreno points out, there is much supporting evidence that allows a finding of a protected class, such as "Don't Ask, Don't Tell" (i.e., military service discrimination); use of sexual-orientation-based epithets by government officials (see criticism of Barney Frank and the now-discredited belief that gay government employees posed security risks); previous criminalization of gay behavior; and horrific hate crimes committed against gay persons, including but not limited to Matthew Shepard.

There may be a more unorthodox way for the United States Supreme Court to decide these issues. The U.S. Supreme Court could rely on existing case law, which establishes that all persons have a Constitutional right to privacy. Following that principle, the government has no business invading the privacy of persons who wish to marry. Thus, to the extent that any law requires the government to extend a right based on analyzing an individual's sexual relations, then the government is violating an individual's privacy rights. Therefore, if the government chooses to be involved in granting rights based on marriage, it must extend such rights without regard to sexual behavior--which includes sexual orientation.

If I was a betting man, I'd bet that the Supreme Court would prefer to rely on privacy rights to render a decision rather than creating a new protected class. I don't think the Supreme Court would use my exact logic above, but it's important to note that Justice Kennedy, the swing vote, was the writer of the Lawrence v. Texas (2003) opinion. Here is the opening paragraph of that opinion:

Liberty protects the person from unwarranted government intrusions into a dwelling or other private places. In our tradition the State is not omnipresent in the home. And there are other spheres of our lives and existence, outside the home, where the State should not be a dominant presence. Freedom extends beyond spatial bounds. Liberty presumes an autonomy of self that includes freedom of thought, belief, expression, and certain intimate conduct. The instant case involves liberty of the person both in its spatial and more transcendent dimensions. [Emphasis added.]

I am hopeful that the U.S. Supreme Court will decide these issues correctly. But insofar as the California Supreme Court is concerned, it made a legally-defensible decision within the boundaries of its limited jurisdiction.

Update 2: here are some comments I posted on Facebook on this issue:

Do you believe people can invent any term to define a relationship and then force that definition on others? If so, then at what point may a Court step in and say that a particular relationship is invalid and undeserving of tax breaks, the ability to adopt, the ability to inherit money, etc.? The Court's answer is that it must step in when discrimination against "substantive" rights occurs between opposite-sex unions and same-sex unions. Here, in California, the substantive rights--all the ones I just mentioned above--of gay persons are the exact same as non-gay persons because of the state's option of civil unions. The Court had to draw the line somewhere and seems to have chosen a legally-defensible place to draw it by choosing substance over form...

All the court did was rule that the majority of the people can choose to call a particular relationship a "marriage," as long as the state doesn't create "substantive" differences in rights between marriages and civil unions. Thus, as long as "civil unions" confer the same substantive rights as "marriages," people can choose to call one of them a "marriage." In time, most scholars will see the decision as pro-gay rights, b/c the Court strives to ensure that "substantive" rights are protected for all persons, including gay persons...

I agree it would be "separate but equal," except that the Court did not deal with any ongoing government services like schools, water access, or transportation. The Court talked about one word, "marriage." It did not deny anyone's right to have a ceremony, to love a particular person, or to raise kids with that person. The Court saw the issue as pure semantics, i.e., you say tomato (marriage), we say tomatoe (civil unions).

It's also a huge leap--and almost insulting to the Civil Rights movement--to compare Jim Crow's lynchings, police dogs, and separate schools to the current status of gay life in California. I am being very deliberate when I say "California," and not "Wyoming," "Mississippi," or "Maine." It makes me sad to say this, but perhaps the Court and California voters need to see more Matthew Shepards and Charles Howards before they see the denial of gay marriage as a moral issue deserving of legal redress rather than a purely semantic issue.

Funny: Ellen's Commencement Speech

Ellen has given many commencement speeches, and the consistency varies greatly. In my opinion, her 2009 speech at Tulane is her best one. 

More here: https://youtu.be/0e8ToRVOtRo 

[FYI: This post was changed because the original link no longer worked.] 

Random Thought: Kazan's Face in the Crowd

I'm going to start calling Rush Limbaugh "Lonesome Rhodes." It's amazing how similar he is to the character in the 1957 Kazan film, A Face in the Crowd.

In Kazan's film, a hillbilly named Rhodes rises up and becomes the voice of the common man in America. Later on, drunk on his own power, he loses his audience.

History Will See this as One of America's Best Speeches

Senator Richard "Dick" Durbin (D-IL): FLOOR STATEMENT: Treatment of Detainees at Guantanamo Bay

Tuesday, June 14, 2005

Mr. President, there has been a lot of discussion in recent days about whether to close the detention center at Guantanamo Bay. This debate misses the point. It is not a question of whether detainees are held at Guantanamo Bay or some other location. The question is how we should treat those who have been detained there. Whether we treat them according to the law or not does not depend on their address. It depends on our policy as a nation. How should we treat them? This is not a new question. We are not writing on a blank slate. We have entered into treaties over the years, saying this is how we will treat wartime detainees. The United States has ratified these treaties. They are the law of the land as much as any statute we passed. They have served our country well in past wars. We have held ourselves to be a civilized country, willing to play by the rules, even in time of war. Unfortunately, without even consulting Congress, the Bush administration unilaterally decided to set aside these treaties and create their own rules about the treatment of prisoners. Frankly, this Congress has failed to hold the administration accountable for its failure to follow the law of the land when it comes to the torture and mistreatment of prisoners and detainees. I am a member of the Judiciary Committee. For two years, I have asked for hearings on this issue. I am glad Chairman Specter will hold a hearing on wartime detention policies tomorrow. I thank him for taking this step. I wish other members of his party would be willing to hold this administration accountable as well. It is worth reflecting for a moment about how we have reached this point. Many people who read history remember, as World War II began with the attack on Pearl Harbor, a country in fear after being attacked decided one way to protect America was to gather together Japanese Americans and literally imprison them, put them in internment camps for fear they would be traitors and turn on the United States. We did that. Thousands of lives were changed. Thousands of businesses destroyed. Thousands of people, good American citizens, who happened to be of Japanese ancestry, were treated like common criminals. It took almost 40 years for us to acknowledge that we were wrong, to admit that these people should never have been imprisoned. It was a shameful period in American history and one that very few, if any, try to defend today. I believe the torture techniques that have been used at Abu Ghraib and Guantanamo and other places fall into that same category. I am confident, sadly confident, as I stand here, that decades from now people will look back and say: What were they thinking? America, this great, kind leader of a nation, treated people who were detained and imprisoned, interrogated people in the crudest way? I am afraid this is going to be one of the bitter legacies of the invasion of Iraq. We were attacked on September 11, 2001. We were clearly at war. We have held prisoners in every armed conflict in which we have engaged. The law was clear, but some of the President's top advisers questioned whether we should follow it or whether we should write new standards. Alberto Gonzales, then-White House chief counsel, recommended to the President the Geneva Convention should not apply to the war on terrorism. Colin Powell, who was then Secretary of State, objected strenuously to Alberto Gonzales' conclusions. I give him credit. Colin Powell argued that we could effectively fight the war on terrorism and still follow the law, still comply with the Geneva Conventions. In a memo to Alberto Gonzales, Secretary Powell pointed out the Geneva Conventions would not limit our ability to question the detainees or hold them even indefinitely. He pointed out that under Geneva Conventions, members of al-Qaida and other terrorists would not be considered prisoners of war. There is a lot of confusion about that so let me repeat it. The Geneva Conventions do not give POW status to terrorists. In his memo to Gonzales, Secretary Powell went on to say setting aside the Geneva Conventions "will reverse over a century of U.S. policy and practice... and undermine the protections of the law of war for our own troops... It will undermine public support among critical allies, making military cooperation more difficult to sustain." When you look at the negative publicity about Guantanamo, Secretary Colin Powell was prophetic. Unfortunately, the President rejected Secretary Powell's wise counsel, and instead accepted Alberto Gonzales' recommendation, issuing a memo setting aside the Geneva Conventions and concluding that we needed "new thinking in the law of war." After the President decided to ignore Geneva Conventions, the administration unilaterally created a new detention policy. They claim the right to seize anyone, including even American citizens, anywhere in the world, including in the United States, and hold them until the end of the war on terrorism, whenever that may be. For example, they have even argued in court they have the right to indefinitely detain an elderly lady from Switzerland who writes checks to what she thinks is a charity that helps orphans but actually is a front that finances terrorism. They claim a person detained in the war on terrorism has no legal rights -- no right to a lawyer, no right to see the evidence against them, no right to challenge their detention. In fact, the Government has claimed detainees have no right to challenge their detention, even if they claim they were being tortured or executed. This violates the Geneva Conventions, which protect everyone captured during wartime. The official commentary on the convention states: "Nobody in enemy hands can fall outside the law." That is clear as it can be. But it was clearly rejected by the Bush administration when Alberto Gonzales as White House counsel recommended otherwise. U.S. military lawyers called this detention system "a legal black hole." The Red Cross concluded, "U.S. authorities have placed the internees in Guantanamo beyond the law." Using their new detention policy, the administration has detained thousands of individuals in secret detention centers all around the world, some of them unknown to Members of Congress. While it is the most well-known, Guantanamo Bay is only one of them. Most have been captured in Afghanistan and Iraq, but some people who never raised arms against us have been taken prisoner far from the battlefield. Who are the Guantanamo detainees? Back in 2002, Secretary Rumsfeld described them as "the hardest of the hard core." However, the administration has since released many of them, and it has now become clear that Secretary Rumsfeld's assertion was not completely true. Military sources, according to the media, indicate that many detainees have no connection to al-Qaida or the Taliban and were sent to Guantanamo over the objections of intelligence personnel who recommended their release. One military officer said: "We're basically condemning these guys to a long-term imprisonment. If they weren't terrorists before, they certainly could be now." Last year, in two landmark decisions, the Supreme Court rejected the administration's detention policy. The Court held that the detainees' claims that they were detained for over two years without charge and without access to counsel "unquestionably describe custody in violation of the Constitution, or laws or treaties of the United States." The Court also held that an American citizen held as an enemy combatant must be told the basis for his detention and have a fair opportunity to challenge the Government's claims. Justice Sandra Day O'Connor wrote for the majority: "A state of war is not a blank check for the President when it comes to the rights of the Nation's citizens." You would think that would be obvious, wouldn't you? But yet, this administration, in this war, has viewed it much differently. I had hoped the Supreme Court decision would change the administration policy. Unfortunately, the administration has resisted complying with the Supreme Court's decision. The administration acknowledges detainees can challenge their detention in court, but it still claims that once they get to court, they have no legal rights. In other words, the administration believes a detainee can get to the courthouse door but cannot come inside. A Federal court has already held the administration has failed to comply with the Supreme Court's rulings. The court concluded that the detainees do have legal rights, and the administration's policies "deprive the detainees of sufficient notice of the factual bases for their detention and deny them a fair opportunity to challenge their incarceration." The administration also established a new interrogation policy that allows cruel and inhuman interrogation techniques. Remember what Secretary of State Colin Powell said? It is not a matter of following the law because we said we would, it is a matter of how our troops will be treated in the future. That is something often overlooked here. If we want standards of civilized conduct to be applied to Americans captured in a warlike situation, we have to extend the same manner and type of treatment to those whom we detain, our prisoners. Secretary Rumsfeld approved numerous abusive interrogation tactics against prisoners in Guantanamo. The Red Cross concluded that the use of those methods was "a form of torture." The United States, which each year issues a human rights report, holding the world accountable for outrageous conduct, is engaged in the same outrageous conduct when it comes to these prisoners. Numerous FBI agents who observed interrogations at Guantanamo Bay complained to their supervisors. In one e-mail that has been made public, an FBI agent complained that interrogators were using "torture techniques." That phrase did not come from a reporter or politician. It came from an FBI agent describing what Americans were doing to these prisoners. With no input from Congress, the administration set aside our treaty obligations and secretly created new rules for detention and interrogation. They claim the courts have no right to review these rules. But under our Constitution, it is Congress's job to make the laws, and the court's job to judge whether they are constitutional. This administration wants all the power: legislator, executive, and judge. Our founding father were warned us about the dangers of the Executive Branch violating the separation of powers during wartime. James Madison wrote: "The accumulation of all powers, legislative, executive, and judiciary, in the same hands may justly be pronounced the very definition of tyranny." Other Presidents have overreached during times of war, claiming legislative powers, but the courts have reined them back in. During the Korean war, President Truman, faced with a steel strike, issued an Executive order to seize and operate the Nation's steel mills. The Supreme Court found that the seizure was an unconstitutional infringement on the Congress's lawmaking power. Justice Hugo Black, writing for the majority, said: "The Constitution is neither silent nor equivocal about who shall make the laws which the President is to execute ... The Founders of this Nation entrusted the lawmaking power to the Congress alone in both good times and bad." To win the war on terrorism, we must remain true to the principles upon which our country was founded. This Administration's detention and interrogation policies are placing our troops at risk and making it harder to combat terrorism. Former Congressman Pete Peterson of Florida, a man I call a good friend and a man I served with in the House of Representatives, is a unique individual. He is one of the most cheerful people you would ever want to meet. You would never know, when you meet him, he was an Air Force pilot taken prisoner of war in Vietnam and spent 6 1/2 years in a Vietnamese prison. Here is what he said about this issue in a letter that he sent to me. Pete Peterson wrote: From my 6 1/2 years of captivity in Vietnam, I know what life in a foreign prison is like. To a large degree, I credit the Geneva Conventions for my survival....This is one reason the United States has led the world in upholding treaties governing the status and care of enemy prisoners: because these standards also protect us....We need absolute clarity that America will continue to set the gold standard in the treatment of prisoners in wartime. Abusive detention and interrogation policies make it much more difficult to win the support of people around the world, particularly those in the Muslim world. The war on terrorism is not a popularity contest, but anti-American sentiment breeds sympathy for anti-American terrorist organizations and makes it far easier for them to recruit young terrorists. Polls show that Muslims have positive attitudes toward the American people and our values. However, overall, favorable ratings toward the United States and its Government are very low. This is driven largely by the negative attitudes toward the policies of this administration. Muslims respect our values, but we must convince them that our actions reflect these values. That's why the 9/11 Commission recommended: "We should offer an example of moral leadership in the world, committed to treat people humanely, abide by the rule of law, and be generous and caring to our neighbors." What should we do? Imagine if the President had followed Colin Powell's advice and respected our treaty obligations. How would things have been different? We still would have the ability to hold detainees and to interrogate them aggressively. Members of al-Qaida would not be prisoners of war. We would be able to do everything we need to do to keep our country safe. The difference is, we would not have damaged our reputation in the international community in the process. When you read some of the graphic descriptions of what has occurred here -- I almost hesitate to put them in the record, and yet they have to be added to this debate. Let me read to you what one FBI agent saw. And I quote from his report: On a couple of occasions, I entered interview rooms to find a detainee chained hand and foot in a fetal position to the floor, with no chair, food or water. Most times they urinated or defecated on themselves, and had been left there for 18-24 hours or more. On one occasion, the air conditioning had been turned down so far and the temperature was so cold in the room, that the barefooted detainee was shaking with cold....On another occasion, the [air conditioner] had been turned off, making the temperature in the unventilated room well over 100 degrees. The detainee was almost unconscious on the floor, with a pile of hair next to him. He had apparently been literally pulling his hair out throughout the night. On another occasion, not only was the temperature unbearably hot, but extremely loud rap music was being played in the room, and had been since the day before, with the detainee chained hand and foot in the fetal position on the tile floor. If I read this to you and did not tell you that it was an FBI agent describing what Americans had done to prisoners in their control, you would most certainly believe this must have been done by Nazis, Soviets in their gulags, or some mad regime -- Pol Pot or others -- that had no concern for human beings. Sadly, that is not the case. This was the action of Americans in the treatment of their prisoners. It is not too late. I hope we will learn from history. I hope we will change course. The President could declare the United States will apply the Geneva Conventions to the war on terrorism. He could declare, as he should, that the United States will not, under any circumstances, subject any detainee to torture, or cruel, inhuman, or degrading treatment. The administration could give all detainees a meaningful opportunity to challenge their detention before a neutral decisionmaker. Such a change of course would dramatically improve our image and it would make us safer. I hope this administration will choose that course. If they do not, Congress must step in. The issue debated in the press today misses the point. The issue is not about closing Guantanamo Bay. It is not a question of the address of these prisoners. It is a question of how we treat these prisoners. To close down Guantanamo and ship these prisoners off to undisclosed locations in other countries, beyond the reach of publicity, beyond the reach of any surveillance, is to give up on the most basic and fundamental commitment to justice and fairness, a commitment we made when we signed the Geneva Convention and said the United States accepts it as the law of the land, a commitment which we have made over and over again when it comes to the issue of torture. To criticize the rest of the world for using torture and to turn a blind eye to what we are doing in this war is wrong, and it is not American. During the Civil War, President Lincoln, one of our greatest presidents, suspended habeas corpus, which gives prisoners the right to challenge their detention. The Supreme Court stood up to the President and said prisoners have the right to judicial review even during war. Let me read what that Court said: The Constitution of the United States is a law for rulers and people, equally in war and in peace, and covers with the shield of its protection all classes of men, at all times, and under all circumstances. No doctrine, involving more pernicious consequences, was ever invented by the wit of man than that any of its provisions could be suspended during any of the great exigencies of government. Such a doctrine leads directly to anarchy or despotism. Mr. President, those words still ring true today. The Constitution is a law for this administration, equally in war and in peace. If the Constitution could withstand the Civil War, when our nation was literally divided against itself, surely it will withstand the war on terrorism. I yield the floor.

Mark Cuban on the Stock Market

Mark Cuban on the stock market and misaligned incentives:

http://blogmaverick.com/2009/05/06/the-problem-with-the-stock-market

We give far more money to people who play games with financial instruments than we give to people who come up with ideas for the next big thing. That needs to change if we want to remain a leader in this world.

Makes sense, doesn't it?

Ali G and the NBA (2006)