I have a bench trial this morning where I'm representing an employee not paid his wages, so I went to the office at 6:30AM to review my notes. I did my usual routine and checked my stocks, and also noticed that oil was selling for $117 a barrel. I immediately sold most of my individual stock holdings, except for MOT (I have only 200 shares, which I bought at around 9 dollars a share), PFE (earnings already released), and SNY (a Buffett holding). I even sold GE, but will buy it back if it dips. I did buy a few shares of SWZ for my Roth, and I continue to have stock holdings in my 401(k) in the form of mutual funds. However, I now have no individual holding worth more than 2,400 dollars.
I sold most of my individual stocks because the market rose too much last week without any fundamental change in the economy. Merely because one company--Google--reported stellar earnings, the Dow almost hit 13,000. But Google is not dependent on oil prices or consumer spending, and most of the economy is dependent on those two factors. With oil priced at $117/barrel and consumer spending projected to be anemic, the case for owning individual stocks becomes harder to support. In addition, with several earning reports coming out this week, the market should be volatile. If you own stocks in a Roth, there is no tax penalty for selling, and the case for being a buy-and-hold investor diminishes with increased volatility.
"And if an epitaph be my story, I'd have a short one ready for my own: I had a lover's quarrel with the world." -- Robert Frost
Monday, April 21, 2008
Sunday, April 20, 2008
Ted Sorenson, JFK's Speechwriter
Ted Sorenson, a former aide to President John F. Kennedy, gave this moving commencement speech at the New School University in New York on May 21, 2004.
"A Time to Weep"
"A Time to Weep"
This is not a speech. Two weeks ago I set aside the speech I prepared. This is a cry from the heart, a lamentation for the loss of this country's goodness and therefore its greatness.
Future historians studying the decline and fall of America will mark this as the time the tide began to turn - toward a mean-spirited mediocrity in place of a noble beacon.
For me the final blow was American guards laughing over the naked, helpless bodies of abused prisoners in Iraq. "There is a time to laugh," the Bible tells us, "and a time to weep." Today I weep for the country I love, the country I proudly served, the country to which my four grandparents sailed over a century ago with hopes for a new land of peace and freedom. I cannot remain silent when that country is in the deepest trouble of my lifetime.
I am not talking only about the prison abuse scandal, that stench will someday subside. Nor am I referring only to the Iraq war - that too will pass - nor to any one political leader or party. This is no time for politics as usual, in which no one responsible admits responsibility, no one genuinely apologizes, no one resigns and everyone else is blamed.
The damage done to this country by its own misconduct in the last few months and years, to its very heart and soul, is far greater and longer lasting than any damage that any terrorist could possibly inflict upon us.
The stain on our credibility, our reputation for decency and integrity, will not quickly wash away.
Last week, a family friend of an accused American guard in Iraq recited the atrocities inflicted by our enemies on Americans, and asked: "Must we be held to a different standard?" My answer is YES. Not only because others expect it. WE must hold ourselves to a different standard. Not only because God demands it, but because it serves our security.
Our greatest strength has long been not merely our military might but our moral authority. Our surest protection against assault from abroad has been not all our guards, gates and guns or even our two oceans, but our essential goodness as a people. Our richest asset has been not our material wealth but our values.
We were world leaders once - helping found the United Nations, the Marshall Plan, NATO, and programs like Food for Peace, international human rights and international environmental standards. The world admired not only the bravery of our Marine Corps but also the idealism of our Peace Corps.
Our word was as good as our gold. At the start of the Cuban Missile Crisis, former Secretary of State Dean Acheson, President Kennedy's special envoy to brief French President de Gaulle, offered to document our case by having the actual pictures of Soviet nuclear missiles in Cuba brought in. "No," shrugged the usually difficult de Gaulle: "The word of the President of the United States is good enough for me."
Eight months later, President Kennedy could say at American University: "The world knows that America will never start a war. This generation of Americans has had enough of war and hate ... we want to build a world of peace where the weak are secure and the strong are just."
Our founding fathers believed this country could be a beacon of light to the world, a model of democratic and humanitarian progress. We were. We prevailed in the Cold War because we inspired millions struggling for freedom in far corners of the Soviet empire. I have been in countries where children and avenues were named for Lincoln, Jefferson, Franklin Roosevelt and John F. Kennedy. We were respected, not reviled, because we respected man's aspirations for peace and justice. This was the country to which foreign leaders sent not only their goods to be sold but their sons and daughters to be educated. In the 1930's, when Jewish and other scholars were driven out of Europe, their preferred destination - even for those on the far left - was not the Communist citadel in Moscow but the New School here in New York.
What has happened to our country? We have been in wars before, without resorting to sexual humiliation as torture, without blocking the Red Cross, without insulting and deceiving our allies and the U.N., without betraying our traditional values, without imitating our adversaries, without blackening our name around the world.
Last year when asked on short notice to speak to a European audience, and inquiring what topic I should address, the Chairman said: "Tell us about the good America, the America when Kennedy was in the White House." "It is still a good America," I replied. "The American people still believe in peace, human rights and justice; they are still a generous, fair-minded, open-minded people."
Today some political figures argue that merely to report, much less to protest, the crimes against humanity committed by a few of our own inadequately trained forces in the fog of war, is to aid the enemy or excuse its atrocities. But Americans know that such self-censorship does not enhance our security. Attempts to justify or defend our illegal acts as nothing more than pranks or no worse than the crimes of our enemies, only further muddies our moral image. 30 years ago, America's war in Vietnam became a hopeless military quagmire; today our war in Iraq has become a senseless moral swamp.
No military victory can endure unless the victor occupies the high moral ground. Surely America, the land of the free, could not lose the high moral ground invading Iraq, a country ruled by terror, torture and tyranny - but we did.
Instead of isolating Saddam Hussein - politically, economically, diplomatically, much as we succeeded in isolating Khadafy, Marcos, Mobutu and a host of other dictators over the years, we have isolated ourselves. We are increasingly alone in a dangerous world in which millions who once respected us now hate us.
Not only Muslims. Every international survey shows our global standing at an all-time low. Even our transatlantic alliance has not yet recovered from its worst crisis in history. Our friends in Western Europe were willing to accept Uncle Sam as class president, but not as class bully, once he forgot JFK's advice that "Civility is not a sign of weakness."
All this is rationalized as part of the war on terror. But abusing prisoners in Iraq, denying detainees their legal rights in Guantanamo, even American citizens, misleading the world at large about Saddam's ready stockpiles of mass destruction and involvement with al Qaeda at 9/11, did not advance by one millimeter our efforts to end the threat of another terrorist attack upon us. On the contrary, our conduct invites and incites new attacks and new recruits to attack us.
The decline in our reputation adds to the decline in our security. We keep losing old friends and making new enemies - not a formula for success. We have not yet rounded up Osama bin Laden or most of the al Qaeda and Taliban leaders or the anthrax mailer. "The world is large," wrote John Boyle O'Reilly, in one of President Kennedy's favorite poems, "when its weary leagues two loving hearts divide, but the world is small when your enemy is loose on the other side." Today our enemies are still loose on the other side of the world, and we are still vulnerable to attack.
True, we have not lost either war we chose or lost too much of our wealth. But we have lost something worse - our good name for truth and justice. To paraphrase Shakespeare: "He who steals our nation's purse, steals trash. T'was ours, tis his, and has been slave to thousands. But he that filches our good name ... makes us poor indeed."
No American wants us to lose a war. Among our enemies are those who, if they could, would fundamentally change our way of life, restricting our freedom of religion by exalting one faith over others, ignoring international law and the opinions of mankind; and trampling on the rights of those who are different, deprived or disliked. To the extent that our nation voluntarily trods those same paths in the name of security, the terrorists win and we are the losers.
We are no longer the world's leaders on matters of international law and peace. After we stopped listening to others, they stopped listening to us. A nation without credibility and moral authority cannot lead, because no one will follow.
Paradoxically, the charges against us in the court of world opinion are contradictory. We are deemed by many to be dangerously aggressive, a threat to world peace. You may regard that as ridiculously unwarranted, no matter how often international surveys show that attitude to be spreading. But remember the old axiom: "No matter how good you feel, if four friends tell you you're drunk, you better lie down."
Yet we are also charged not so much with intervention as indifference - indifference toward the suffering of millions of our fellow inhabitants of this planet who do not enjoy the freedom, the opportunity, the health and wealth and security that we enjoy; indifference to the countless deaths of children and other civilians in unnecessary wars, countless because we usually do not bother to count them; indifference to the centuries of humiliation endured previously in silence by the Arab and Islamic worlds.
The good news, to relieve all this gloom, is that a democracy is inherently self-correcting. Here, the people are sovereign. Inept political leaders can be replaced. Foolish policies can be changed. Disastrous mistakes can be reversed.
When, in 1941, the Japanese Air Force was able to inflict widespread death and destruction on our naval and air forces in Hawaii because they were not on alert, those military officials most responsible for ignoring advance intelligence were summarily dismissed.
When, in the late 1940's, we faced a global Cold War against another system of ideological fanatics certain that their authoritarian values would eventually rule the world, we prevailed in time. We prevailed because we exercised patience as well as vigilance, self-restraint as well as self-defense, and reached out to moderates and modernists, to democrats and dissidents, within that closed system. We can do that again. We can reach out to moderates and modernists in Islam, proud of its long traditions of dialogue, learning, charity and peace.
Some among us scoff that the war on Jihadist terror is a war between civilization and chaos. But they forget that there were Islamic universities and observatories long before we had railroads.
So do not despair. In this country, the people are sovereign. If we can but tear the blindfold of self-deception from our eyes and loosen the gag of self-denial from our voices, we can restore our country to greatness. In particular, you - the Class of 2004 - have the wisdom and energy to do it. Start soon.
In the words of the ancient Hebrews:
"The day is short, and the work is great, and the laborers are sluggish, but the reward is much, and the Master is urgent."
New Colonist
One of the greatest benefits of the internet is the delight comes with an unexpected discovery. I've just unearthed a great website: http://www.newcolonist.com/asians.html
It's about cities and people, two of my favorite topics. The "Letters" section is fun to read. Browsing the website, I ran into some gems of writing, like this one:
California breeds high expectations and then crushes them. Through history and myth, it tells you there are no limits, and then it leaves you stranded in a cracker box tract house between a 7-Eleven and a freeway interchange." -- Steve Lopez
If you like good writing about cities, check out The New Colonist.
Speaking of good finds, I also enjoyed Aaron David Miller's article in the Spring 2008 (Vol. 32, No. 2) Wilson Quarterly, "The Long Dance: Searching for Arab-Israeli Peace." Here's one sentence from the article: "We must make a fanatical commitment to seeing the world as it is, not as we want it to be or as others want us to see it." This same vein of pragmatism is what I see in successful leaders (e.g. Lee Kuan Yew). I am beginning to realize that the American way--of getting an ideology and then defending the ideology against another (e.g. capitalism v. socialism, rich v. poor, Democrat v. Republican) in a Socratic or adversarial method--must give way to a new paradigm. For progress to continue in a world that is becoming more and more complicated in terms of culture, people, and resources, the smartest people will be the ones without hubris who realize they cannot possibly factor in all the necessary variables to arrive at the right decision or ideology on a macro-level. As a result, we should move towards a more cooperative model where we work with others to achieve solutions that can be modified as needed, rather than try to make singular, dramatic changes based on any particular overarching theme.
It's about cities and people, two of my favorite topics. The "Letters" section is fun to read. Browsing the website, I ran into some gems of writing, like this one:
California breeds high expectations and then crushes them. Through history and myth, it tells you there are no limits, and then it leaves you stranded in a cracker box tract house between a 7-Eleven and a freeway interchange." -- Steve Lopez
If you like good writing about cities, check out The New Colonist.
Speaking of good finds, I also enjoyed Aaron David Miller's article in the Spring 2008 (Vol. 32, No. 2) Wilson Quarterly, "The Long Dance: Searching for Arab-Israeli Peace." Here's one sentence from the article: "We must make a fanatical commitment to seeing the world as it is, not as we want it to be or as others want us to see it." This same vein of pragmatism is what I see in successful leaders (e.g. Lee Kuan Yew). I am beginning to realize that the American way--of getting an ideology and then defending the ideology against another (e.g. capitalism v. socialism, rich v. poor, Democrat v. Republican) in a Socratic or adversarial method--must give way to a new paradigm. For progress to continue in a world that is becoming more and more complicated in terms of culture, people, and resources, the smartest people will be the ones without hubris who realize they cannot possibly factor in all the necessary variables to arrive at the right decision or ideology on a macro-level. As a result, we should move towards a more cooperative model where we work with others to achieve solutions that can be modified as needed, rather than try to make singular, dramatic changes based on any particular overarching theme.
Tuesday, April 15, 2008
Richard Florida's Who's Your City?
Richard Florida has published an interesting book about what makes certain cities more desirable than others, and what factors ought to be taken into consideration when a person decides to move. The main points I got out of his book were these:
1. People don't buy houses or land for the property--they pay high prices in CA and NY to gain access and proximity to certain types of people. In the South and Midwest, people pay to be around more agreeable personalities, while on the East Coast, people are more neurotic and pay to be around people like them. In addition, highly educated people cluster together, creating super-centers of innovation, such as San Jose, CA, or, for offbeat, artistic types, Portland, OR. In short, people pay (in some cases, extraordinary costs) to choose their neighbors. It's an interesting premise, based on the old adage that "people of the same feathers flock together," and destroys the idea that people pay for a house based on square footage rather than neighbors and local amenities. (Potential buyers of a 550 sq foot guest house in Palo Alto, CA for 500,000 dollars, take note!)
2. Cities with high gay/lesbian populations tend to have favorable characteristics such as tolerance and culture, thereby attracting more affluent people who favor such openness. I agree that gay/lesbian populations add to the vibrancy of a city, but not because of any innate predilection towards "culture." The answer is far more simple. Gay people, on average, do not have children or many children; as a result, they tend to have much higher disposable incomes than families, who typically save more due to future expected expenses, such as college educations. Cities with residents who have higher disposable incomes tend to attract interesting outlets for spending money and more small businesses willing to take the risks of setting up shop to cater to affluent residents.
Mr. Florida has some charts in the back of his book that list "best buys" and ranks different locations for potential nomads based on different criteria (families, singles, etc.) I wouldn't call Mr. Florida the second coming of Jane Jacobs just yet. Reading his book is like eating a sweet, light cupcake with sprinkles of statistics--it'll fill you up for a little while, but in about two hours, you'll start getting hungry for more substance.
1. People don't buy houses or land for the property--they pay high prices in CA and NY to gain access and proximity to certain types of people. In the South and Midwest, people pay to be around more agreeable personalities, while on the East Coast, people are more neurotic and pay to be around people like them. In addition, highly educated people cluster together, creating super-centers of innovation, such as San Jose, CA, or, for offbeat, artistic types, Portland, OR. In short, people pay (in some cases, extraordinary costs) to choose their neighbors. It's an interesting premise, based on the old adage that "people of the same feathers flock together," and destroys the idea that people pay for a house based on square footage rather than neighbors and local amenities. (Potential buyers of a 550 sq foot guest house in Palo Alto, CA for 500,000 dollars, take note!)
2. Cities with high gay/lesbian populations tend to have favorable characteristics such as tolerance and culture, thereby attracting more affluent people who favor such openness. I agree that gay/lesbian populations add to the vibrancy of a city, but not because of any innate predilection towards "culture." The answer is far more simple. Gay people, on average, do not have children or many children; as a result, they tend to have much higher disposable incomes than families, who typically save more due to future expected expenses, such as college educations. Cities with residents who have higher disposable incomes tend to attract interesting outlets for spending money and more small businesses willing to take the risks of setting up shop to cater to affluent residents.
Mr. Florida has some charts in the back of his book that list "best buys" and ranks different locations for potential nomads based on different criteria (families, singles, etc.) I wouldn't call Mr. Florida the second coming of Jane Jacobs just yet. Reading his book is like eating a sweet, light cupcake with sprinkles of statistics--it'll fill you up for a little while, but in about two hours, you'll start getting hungry for more substance.
Wednesday, April 9, 2008
Does Overpopulation Cause Declining Wages?
I had a little debate with the author of this blog (http://openwindowpublishingco.com/cgi/wp/), who posted a comment to my recent entry reviewing the book, Free Trade:
Here is how I understand your theory: overpopulation (and thereby immigration) eventually causes less per capita consumption due to the limits of land and space for consumables. In other words, as population increases, space decreases, and at some point, consumption must decrease, especially because overpopulation also causes less wage growth. The problem with any economic theory based on overpopulation is that the U.S. is one of the least densely populated places in the world. Also, the idea of physical space limiting consumption only applies to certain industries, such as autos and boats. It is far more likely that spending will increase as people buy smaller products, such as an iPhone or a laptop, which need to be replaced more often than larger products. In addition, more workers are necessary to pay the Medicare and Social Security liabilities we've built up, and some economists estimate 50 to 99 trillion dollar liabilities with respect to government entitlements/programs.
If your overpopulation/anti-immigration theory is correct, then people, especially younger ones, would be flocking to open spaces, such as Indiana and South Dakota, and states with smaller cities would have a higher GDP per capita. But a quick look at the following websites shows that CA (#11 and 10), Illinois (#14, 14) and NY (#5, 5) have relatively high per capita income:
http://www.top50states.com/average-job-salaries.html (2005)
http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per_capita_%28nominal%29 (2006)
What you are really saying is that the fewer the people in a country, the more work there is for the existing residents, because competition is less; however, promoting population decline is a good idea only if you want to be a slow growth country. Part of growth means making way for the younger population and immigrants who can found companies, such as eBay (Iranian/French), Sun Microsystems (Indian), Google (Russian), Yahoo (Taiwan), and probably at least 30% of the start-ups in San Jose, CA:
http://blogs.zdnet.com/ITFacts/?p=12064
Immigrants who found companies in the U.S. create more jobs and also penalize the countries that couldn't keep them (referred to as the "brain drain"). So your argument is flawed, because it assumes population growth is automatically responsible for declining wealth and declining wages in all industries. Such an argument is simply not true--and if it were, NY and CA would not be at the high end of the per capita salary list. (You could counter with TX at #27 and #20, but that is still nowhere near the bottom of the list, as your argument would require.)
What is true is that certain industries, such as manufacturing, will see a drastic decline in wages, while employees in other industries, such as nursing, hotel ownership, marketing, advertising, and law, will experience a higher per capita wage increase. The primary issue is what should be done about the prospect of declining wages in industries that can easily outsource jobs or that require little training (e..g, McDonald's). I wish I knew the answer to that, but all I can come with are 1) job re-training programs; 2) better education, especially at the high school level; 3) longer periods of time unemployment insurance can be collected; 4) corporate acceptance of some due process prior to being terminated for cause, such as IBM's peer review panel, in exchange for an agreement that if the employee pursues litigation, s/he would be liable for the company's attorneys' fees [Update: up to a reasonable cap, such as 20% of total compensation at the time of his/her termination] if s/he loses in court and would be barred from receiving attorneys' fees; 5) elimination of all civil laws except for wage and contract laws relating to businesses with fewer than six non-family employees and/or gross revenue of less than 575,000 dollars per year (thereby encouraging entrepreneurs and small businesses); and 6) heavily subsidized health care benefits financed by higher taxes on gasoline, "sin taxes" (on cigarettes and alcohol), and also a sales tax that would go to the state (notice I said state, not federal) agencies administering the health care programs. Subsidized health care would create service jobs that could not be outsourced and which would also increase wealth across the board by decreasing all Americans' health care costs.
In addition, note that U.S. homeowners will also see a higher wealth effect as demand for homes increases because of population growth (after the market corrects the current bubble, which was good for most homeowners in the U.S. who already owned homes). Thus, while certain wages may decrease, net worth may actually increase due to higher demand for certain products.
Note: here is a counterargument to my post:
http://www.epi.org/content.cfm/bp196
This article says that because 70% of the American workforce is involved in "production/manufacturing" work, outsourcing will cause major displacement that presumably cannot be moderated by legislation or piecemeal benefit programs.
Also, on a separate note, Switzerland's prosperity may indicate that a slow growth economy can work in certain circumstances, assuming a liberal guest worker program (apparently, about 15 to 20% of the workforce in Switzerland are from other countries).
Here is how I understand your theory: overpopulation (and thereby immigration) eventually causes less per capita consumption due to the limits of land and space for consumables. In other words, as population increases, space decreases, and at some point, consumption must decrease, especially because overpopulation also causes less wage growth. The problem with any economic theory based on overpopulation is that the U.S. is one of the least densely populated places in the world. Also, the idea of physical space limiting consumption only applies to certain industries, such as autos and boats. It is far more likely that spending will increase as people buy smaller products, such as an iPhone or a laptop, which need to be replaced more often than larger products. In addition, more workers are necessary to pay the Medicare and Social Security liabilities we've built up, and some economists estimate 50 to 99 trillion dollar liabilities with respect to government entitlements/programs.
If your overpopulation/anti-immigration theory is correct, then people, especially younger ones, would be flocking to open spaces, such as Indiana and South Dakota, and states with smaller cities would have a higher GDP per capita. But a quick look at the following websites shows that CA (#11 and 10), Illinois (#14, 14) and NY (#5, 5) have relatively high per capita income:
http://www.top50states.com/average-job-salaries.html (2005)
http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per_capita_%28nominal%29 (2006)
What you are really saying is that the fewer the people in a country, the more work there is for the existing residents, because competition is less; however, promoting population decline is a good idea only if you want to be a slow growth country. Part of growth means making way for the younger population and immigrants who can found companies, such as eBay (Iranian/French), Sun Microsystems (Indian), Google (Russian), Yahoo (Taiwan), and probably at least 30% of the start-ups in San Jose, CA:
http://blogs.zdnet.com/ITFacts/?p=12064
Immigrants who found companies in the U.S. create more jobs and also penalize the countries that couldn't keep them (referred to as the "brain drain"). So your argument is flawed, because it assumes population growth is automatically responsible for declining wealth and declining wages in all industries. Such an argument is simply not true--and if it were, NY and CA would not be at the high end of the per capita salary list. (You could counter with TX at #27 and #20, but that is still nowhere near the bottom of the list, as your argument would require.)
What is true is that certain industries, such as manufacturing, will see a drastic decline in wages, while employees in other industries, such as nursing, hotel ownership, marketing, advertising, and law, will experience a higher per capita wage increase. The primary issue is what should be done about the prospect of declining wages in industries that can easily outsource jobs or that require little training (e..g, McDonald's). I wish I knew the answer to that, but all I can come with are 1) job re-training programs; 2) better education, especially at the high school level; 3) longer periods of time unemployment insurance can be collected; 4) corporate acceptance of some due process prior to being terminated for cause, such as IBM's peer review panel, in exchange for an agreement that if the employee pursues litigation, s/he would be liable for the company's attorneys' fees [Update: up to a reasonable cap, such as 20% of total compensation at the time of his/her termination] if s/he loses in court and would be barred from receiving attorneys' fees; 5) elimination of all civil laws except for wage and contract laws relating to businesses with fewer than six non-family employees and/or gross revenue of less than 575,000 dollars per year (thereby encouraging entrepreneurs and small businesses); and 6) heavily subsidized health care benefits financed by higher taxes on gasoline, "sin taxes" (on cigarettes and alcohol), and also a sales tax that would go to the state (notice I said state, not federal) agencies administering the health care programs. Subsidized health care would create service jobs that could not be outsourced and which would also increase wealth across the board by decreasing all Americans' health care costs.
In addition, note that U.S. homeowners will also see a higher wealth effect as demand for homes increases because of population growth (after the market corrects the current bubble, which was good for most homeowners in the U.S. who already owned homes). Thus, while certain wages may decrease, net worth may actually increase due to higher demand for certain products.
Note: here is a counterargument to my post:
http://www.epi.org/content.cfm/bp196
This article says that because 70% of the American workforce is involved in "production/manufacturing" work, outsourcing will cause major displacement that presumably cannot be moderated by legislation or piecemeal benefit programs.
Also, on a separate note, Switzerland's prosperity may indicate that a slow growth economy can work in certain circumstances, assuming a liberal guest worker program (apparently, about 15 to 20% of the workforce in Switzerland are from other countries).
Adobe Shareholder Meeting, April 9, 2008
I attended the Adobe Shareholder meeting in downtown San Jose. CEO Shantanu Narayen--who has my nomination for the coolest name in business--stayed afterwards to chat with a few shareholders. He was articulate and obviously extremely intelligent. Some CEOs don't come across well at all (Atmel's George Perlegos comes to mind), but Mr. Narayen presents very well. For such a well-recognized company, very few shareholders attended the meeting, probably around 20 or so (aside from the directors).
In a nutshell, Adobe is doing very well. Almost every metric of measuring profit showed improvement, usually by at least 20%. Software has great margins, so it is usually a good business, assuming a competitor doesn't make it obsolete. But with 2 billion or so in cash, Adobe can pull a Microsoft and buy out its competition.
The refreshments were average, the usual spread of coffee, some fruit, and some muffins.
Following the Adobe/Apple saga, I asked about Adobe's relationship with Apple, and the CEO remarked that the relationship was fine and that Adobe had access to Apple's newly released code and was working on an application for cell phones called Flash Lite. Adobe seems to be creating new products that will allow it to remain the standard in the marketplace. Overall, I was impressed with the company but concerned that it was not doing enough to increase its profile in Wall Street. Adobe may want to hire a PR firm to increase its visibility among traders and the public.
In a nutshell, Adobe is doing very well. Almost every metric of measuring profit showed improvement, usually by at least 20%. Software has great margins, so it is usually a good business, assuming a competitor doesn't make it obsolete. But with 2 billion or so in cash, Adobe can pull a Microsoft and buy out its competition.
The refreshments were average, the usual spread of coffee, some fruit, and some muffins.
Following the Adobe/Apple saga, I asked about Adobe's relationship with Apple, and the CEO remarked that the relationship was fine and that Adobe had access to Apple's newly released code and was working on an application for cell phones called Flash Lite. Adobe seems to be creating new products that will allow it to remain the standard in the marketplace. Overall, I was impressed with the company but concerned that it was not doing enough to increase its profile in Wall Street. Adobe may want to hire a PR firm to increase its visibility among traders and the public.
Saturday, April 5, 2008
Jagdish Bhagwati's Free Trade Today
Professor Bhagwati has published a number of economic books and is becoming a "hot" name in the academic world. I recently read one of his earlier works, Free Trade Today. I dislike his writing style, which carries a strange odor of disarming arrogance. Still, no one can doubt Professor Bhagwati's diligent research--there were 114 footnotes in a 120 page book, some to his own works (hence, the arrogance).
This book was divided into three chapters. The first one, a defense of free trade, was impenetrable. For example, Prof. Bhagwati says that in a recession, the free market is failing to pay people their properly calibrated wage, and responding to unemployment with tariffs in an attempt to spur domestic consumption only makes the problem worse. This is because the real answer to unemployment is to create higher demand , and tariffs curtail more demand for services by limiting entrants into the market. But here's how Prof. Bhagwati expresses these thoughts:
The Keynesian warming to protection in times of unemployment due to deficiency of aggregrate demand evidently derived from the notion that tariffs could divert aggregrate demand from foreign to domestic goods. But from the viewpoint that I am setting forth about the role of free trade, it is equally possible for us to see that since the social cost of labor in a situation of massive unemployment us clearly less than its (market) wage, this is a market failure, and free trade is no longer a compelling policy. [In other words, too much unemployment leads to major social detriment, which may create a compelling scenario for government intervention.] That the optimal policy mix would still be to remove that market failure by creating a sufficiently more aggregate demand, instead of diverting a given aggregate demand towards yourself, and then holding on to free trade, is a matter that I shall turn to in the context of proposition 2 in the next section. (p. 17, Princeton U Press, 2002)
Did we all get that? (I'm still not sure I have.) Prof. Bhagwati redeems himself in the second portion of the book, which is the only portion I would recommend to anyone. In one section, Prof. Bhagwati demonstrates his high intelligence and understanding of economics vs. sociology:
First, fairness rather than justice is the defining moral principle in the United States, as compared to the more socially structured European and Japanese societies. So equality of access trumps equality of success; equal opportunity trounces equal outcomes. (p. 52)
This statement holds true, as long as the average American continues to have political beliefs slightly right of center. In an extremely interesting premise, Prof. Bhagwati also says democracy is a check against unfettered and irresponsible capitalism:
Few governments, certainly now that democracy has broken out worldwide, are likely to say instead to multinationals: come and make profits by polluting our waters and air. (p. 59-60)
In another interesting section on preferential trade agreements (PTAs), Prof. Bhagwati correctly says that rich nations insert provisions in these trade contracts that are one-sided. For example, the U.S. will focus on child labor rather than environmental or "quasi-slavery conditions for migrant labor in American agriculture." (p. 71) In addition, eliminating child labor in poor countries may lead to children entering more undesirable professions, such as prostitution. (p. 77)
The third chapter is more technical, but still readable, and focuses on how to draft bilateral agreements that favor free trade. Prof. Bhagwati points out that there are now so many bilateral agreements establishing favored trading partners or products, that it is becoming more difficult for poorer countries to navigate this system or even attain fair results.
I would not recommend this book to the casual reader, but if you want to major in economics, read this short book to see whether you have a future in the field, as most of the ideas mentioned are intelligent and informed.
This book was divided into three chapters. The first one, a defense of free trade, was impenetrable. For example, Prof. Bhagwati says that in a recession, the free market is failing to pay people their properly calibrated wage, and responding to unemployment with tariffs in an attempt to spur domestic consumption only makes the problem worse. This is because the real answer to unemployment is to create higher demand , and tariffs curtail more demand for services by limiting entrants into the market. But here's how Prof. Bhagwati expresses these thoughts:
The Keynesian warming to protection in times of unemployment due to deficiency of aggregrate demand evidently derived from the notion that tariffs could divert aggregrate demand from foreign to domestic goods. But from the viewpoint that I am setting forth about the role of free trade, it is equally possible for us to see that since the social cost of labor in a situation of massive unemployment us clearly less than its (market) wage, this is a market failure, and free trade is no longer a compelling policy. [In other words, too much unemployment leads to major social detriment, which may create a compelling scenario for government intervention.] That the optimal policy mix would still be to remove that market failure by creating a sufficiently more aggregate demand, instead of diverting a given aggregate demand towards yourself, and then holding on to free trade, is a matter that I shall turn to in the context of proposition 2 in the next section. (p. 17, Princeton U Press, 2002)
Did we all get that? (I'm still not sure I have.) Prof. Bhagwati redeems himself in the second portion of the book, which is the only portion I would recommend to anyone. In one section, Prof. Bhagwati demonstrates his high intelligence and understanding of economics vs. sociology:
First, fairness rather than justice is the defining moral principle in the United States, as compared to the more socially structured European and Japanese societies. So equality of access trumps equality of success; equal opportunity trounces equal outcomes. (p. 52)
This statement holds true, as long as the average American continues to have political beliefs slightly right of center. In an extremely interesting premise, Prof. Bhagwati also says democracy is a check against unfettered and irresponsible capitalism:
Few governments, certainly now that democracy has broken out worldwide, are likely to say instead to multinationals: come and make profits by polluting our waters and air. (p. 59-60)
In another interesting section on preferential trade agreements (PTAs), Prof. Bhagwati correctly says that rich nations insert provisions in these trade contracts that are one-sided. For example, the U.S. will focus on child labor rather than environmental or "quasi-slavery conditions for migrant labor in American agriculture." (p. 71) In addition, eliminating child labor in poor countries may lead to children entering more undesirable professions, such as prostitution. (p. 77)
The third chapter is more technical, but still readable, and focuses on how to draft bilateral agreements that favor free trade. Prof. Bhagwati points out that there are now so many bilateral agreements establishing favored trading partners or products, that it is becoming more difficult for poorer countries to navigate this system or even attain fair results.
I would not recommend this book to the casual reader, but if you want to major in economics, read this short book to see whether you have a future in the field, as most of the ideas mentioned are intelligent and informed.
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