Aid to Africa: Success or Failure?

HERE is an excellent post on aid to Africa. It might seem as if money sent to Africa is going into a black hole, but in reality, the money is saving millions of lives. The problem is that when nations increase fertility, they must also increase jobs. African nations are not doing well when it comes to creating jobs, but their economic incompetence doesn't mean international aid isn't accomplishing its purpose.

Intuit Shareholder Meeting (2009)

I attended Intuit's (INTU) annual shareholder meeting in Mountain View, California on December 15, 2009. Upon entering Intuit’s building, shareholders were offered complimentary copies of either Quicken Premier or an Investments and Rental Property tracking software. Intuit also offered shareholders Peet’s coffee, Odwalla juices, mineral/bottled water, and various pastries.

I won’t hide my fondness for Intuit. I’ve been using Intuit’s products for years, and I think the company is a godsend for small businesses. CEO Brad Smith--who looks similar to Matt Damon--handled most of the meeting, which included a thirty-minute presentation. Below are the highlights of his presentation:

Although Americans have experienced high unemployment, small business formation has not trended upward, possibly because small businesses lack access to bank capital.

Intuit has acquired Mint.com and PayCycle, an online payroll service.

80% of Intuit’s sales come from word-of-mouth, i.e. personal recommendations.

1/3 of U.S. tax returns are filed using some Intuit software.

Intuit's major competition is the pen-and-paper (people don't use computers to do their taxes).

1/12 Americans are paid with Intuit’s payroll services.

Intuit is trying to improve first use and first year user retention. [Intuit users tend to remain loyal customers, but the difficulty is getting them to break old habits and learn new how to navigate a new piece of software.]

Intuit is focusing on emerging markets, such as India, and healthcare. The CEO mentioned that the average patient gets three medical bills before returning a payment, but Intuit’s software reduced turnaround time significantly. Cigna and other select healthcare providers use Intuit’s software, so it is not yet available to all patients or medical offices.

The Q&A session began with a shareholder questioning Intuit’s stock price. The shareholder compared Intuit’s stock price to Adobe’s (ADBE) over the past ten years. During that time period, Adobe shares have increased over 100% in value (10% annually), while Intuit shares have returned about 15%, or just 1.5% a year. The shareholder implied that R&D expenditures–which he cited at between 16 and 17% of revenue–were too high.

CEO Smith responded that Intuit’s R&D expenditures were in line with competitors’ R&D expenditures, and the reason Intuit’s stock price hasn’t performed better is because of a disconnect between the company’s expectations of growth and Wall Street’s expectations of growth. While Wall Street believes Intuit will likely grow only in the single digits, Intuit believes it will achieve double-digit growth, which should justify a higher multiple. Since Intuit already has a high share of the American market relative to competitors who offer similar products, there doesn't seem to be much room for domestic growth, and significant growth in international markets will take time.

I suggested that Intuit create an Audit-Defense software that would provide consumers with peace of mind in case of an audit. Right now, there are many consumers who have envelopes and/or folders filled with business expense receipts, as well as separate envelopes for canceled checks. Many consumers would appreciate a product that allowed them to ensure their receipts matched expense data entered in Quicken and/or TurboTax. Intuit could easily create a software program that reconciled consumers’ physical receipts and canceled checks with their expense entries on Quicken and/or TurboTax. This proposed product should include a mini-scanner to allow users to scan and upload jpegs of their business-related receipts so all of their data would be in one convenient place in case of an IRS audit. CEO Smith responded that Intuit was already working on something similar to my idea called QuickReceipts.

I also asked how Intuit planned on making money from its Mint.com acquisition. I sometimes read Mint.com's blog, but I don’t usually click on any ads on the website, and I don’t pay any money to use Mint.com. CEO Smith said that Intuit planned on making money through referral fees from Mint.com’s “ways to save” engine, which is similar to the way Google makes money from its AdWords program.

I mentioned that Intuit's biggest threat probably wouldn’t be another competitor, but its own potential mis-steps. Perhaps Intuit should make a more tangible assurance of its security capabilities. Why not advertise that if anyone actually gains access to a user's personal data, Intuit will pay the affected user $100,000? Why not put its money where its mouth is, and win over the remaining online skeptics? For example, LifeLock has a $1 million guarantee against identity theft. If Intuit had a similar policy, wouldn't more consumers trust the company and feel more comfortable rejecting the old pen-and-paper method? Intuit would probably argue that it would be foolish to issue a worldwide challenge to hackers, and there is no such thing as an "unhackable" database. Intuit's cautious approach is probably the right one, but without a guarantee, how will it convince the pen-and-paper holdouts to use its software?

I respect and admire Intuit, but I can also understand why Wall Street is hesitant to bid up its shares. Intuit runs its company like engineers who happen to have MBAs–conservative and focused on consistent growth without unnecessary risk. Wall Street must imagine Intuit to be a leaner Microsoft (MSFT), if Microsoft owned only its Office software suite–a highly profitable company with low maintenance products, but nothing revolutionary or indicative of a major paradigm shift like an iPod or a Google. If Intuit wants Wall Street’s respect, it needs to spend its ample cash and roll out riskier initiatives.

In conclusion, Intuit may believe it is growing adequately each year, and therefore has no need to make radical moves, but New York money managers probably view Intuit as a stodgy company that refuses to take risks. Indeed, one has to wonder why Intuit couldn’t invent something similar to Mint.com instead of having to buy it. Isn’t it a little strange when a software company’s most touted new product (Mint.com) was made by another software company?

Intuit needs to make up its mind: either be like Microsoft and pay a decent dividend and focus on consistent growth, or act like a growth company and use its cash to invest in new ventures or riskier acquisitions. Taking the middle ground–safe and steady–won’t gain Wall Street’s respect, even if Intuit is clearly an amazing company with good management.

Disclosure: I own an insignificant number of Intuit shares. I am also a user of its software.

Victor Davis Hanson Explained in Just 8 Steps

I just finished reading a Victor Davis Hanson speech (from a Hillsdale College transcript). I used to read some of his WSJ articles, and although I respected his intelligence, I was never really impressed with his work. I finally figured out why--most of his articles follow the similar themes, so once you've read one of them, you've read them all. Below are his eight major themes: 

1. Western culture is superior because of x, y, and z. 

2. Western culture has created the highest standard of living for its citizens worldwide. For example, a poor person in a Western country is typically better off than a poor person in a country that does not follow Western culture. 

3. The West's enemies have not followed Western culture. As a result, their citizens are generally worse off when compared to Western citizens. 

4. The West values human life more than non-Western countries. 

5. Some of the West's enemies are beneficiaries of "unearned capital," such as oil and natural gas reserves. The West needs these natural resources, so its enemies are able to import some of the West's technological advances, but without the West's system of checks-and-balances. 

6. The West will have problems battling outside enemies because its system of checks-and-balances, its high valuation on individual human life, and its openness--all of which are responsible for the West's success--will also hold it back when confronted with a serious enemy. [Note: Hanson assumes all wars require the loss of individual Western human life. With drones and WMDs, the West may one day be able to wage war without suffering many losses.] 

7. Western culture allows anti-war activists and other relatively comfortable residents to restrict the West's ability to defend itself. The West's enemies have no such problems because their systems are not open and do not have a system of checks-and-balances. Meanwhile, the West's enemies will--using their unearned capital--continue taking some of the best products of Western culture without incorporating the very Western system that is responsible for the creation of these sought-after products. 

8. The West's enemies, if allowed to attain high-level technology, such as nuclear weapons, will use these weapons against the West. It is naive and foolish to think otherwise, because these non-Western countries are run by religious fanatics who do not operate under a system of checks-and-balances. 

My problem with Mr. Hanson is that paragraphs 1 through 7, even if true, do not necessarily lead to 8. It may be true that countries that follow Western culture will have economic advantages over countries that do not follow Western culture. At the same time, the previous statement does not necessarily mean that non-Western countries will, if given Western items, destroy the West. In short, nothing in paragraphs 1 through 7 logically leads to paragraph 8. At the end of the day, Mr. Hanson is really saying that certain countries are different than we are (and inferior) and therefore they will attack us. I don't follow that kind of "logic." 

Mr. Hanson also seems to have devised a belief system that allows the West to feel morally comfortable attacking the rest of the world. Paragraphs 1-7 are stealthily insidious in a way you may not have noticed--they assume that a child born in a non-Western country is worth less than a child who happens to be born in a Western country. In short, Mr. Hanson seems to believe that the accident of birth determines the worth of a human being. I have traveled to several "non-Western" countries, and the parents I have seen in Iran, Costa Rica, and Singapore love and value their children just as much as parents in Europe and North America. I must respectfully disagree with Mr. Hanson's implicit allegation that a child who is not lucky enough to be born in a Western country is worth less than other children. 

Moreover, Mr. Hanson forgets that most people do not consider Western culture and civilization to be superior or even enlightened until after the 1700's. To the extent that Western culture is inherently superior to all other cultures, one might ask why such superiority has only manifested itself within the last 300 or so years. To believe in Mr. Hanson's pro-Western approach, one must ignore previous Egyptian, Khmer, Mayan, and Peruvian civilizations and accomplishments. 

As for the non-West's "unearned capital," Mr. Hanson forgets the debt that Western civilization owes to the rest of the world. For example, the West and Westerners did not invent algebra or other conditions precedent to our modern-day technological advances. I can't help but wonder: why do so many smart Republican writers usually end up making pro-war arguments? Why aren't there more anti-war Republicans like Ron Paul in Congress?

© Matthew Mehdi Rafat (2009)

Controversy Ahead: Interview with White Pride Proponent

The link to the following interview contains an open discussion about race and could potentially offend people that are sensitive when it comes to such issues. If you fall into that category, I would recommend not reading any further. HERE is an interview with “White Pride” fighter Melvin Costa on the Sherdog forum:

First and foremost I want the people out there not to mix up love for my own with hate for others. I don't hate any other race. I love my own. That's what I'm about pretty much; the advancement of my people, my culture, my heritage.

Is Mr. Costa a racist? Apparently, Mr. Costa has been banned from participating in MMA fights because of his swastika tattoo and/or ideological beliefs. Mr. Costa says he was in prison for many years, and the swastika tattoo stands for the "purity of my people's blood," not hate.  Mr. Costa also quotes now-President Obama, who said, "I'm for consonance in all my people, putting in civic duties for my people, and advancing my people." He compares his views to President Obama's statements.

I don't know whether Mr. Costa is a malevolent racist--he never says in the interview that he believes "whites" are superior to anyone else or that he wants laws enforcing racial segregation. He appears to agree with voluntary racial segregation, but does believing in voluntary segregation make him a racist? Keep in mind that most parts of America right now are de facto segregated by race.

Also, how should we characterize people who believe Western culture is superior to other cultures? Would we call pro-Westerners ignorant or racist? Probably not--there are many PhDs and Wall Street Journal writers who are proud of Western culture and who believe it is the best culture. In fact, most pro-Western proponents probably believe Western culture transcends race, even though it was made exclusively by people they consider "white."  (The definition of "white" has changed over time in America, a fact I sometimes wonder whether white supremacists fully appreciate.)

In any case, some people might say the difference between a Melvin Costa and a Victor Davis Hanson is eight years of college, but that's a horribly unfair comparison. Mr. Hanson, of course, does not favor racial segregation and does not make comments based on racial pride. Perhaps if Mr. Costa removed his tattoos and talked about his love of Western culture instead of his love of "white" persons, he would become eligible to fight in major MMA events. Removing the tattoos certainly seems like the first step in re-gaining his MMA eligibility.  Beyond that, Mr. Costa could shift the debate into the free speech arena, where he could argue that a company like Dana White's Ultimate Fighting Championship has no business deciding whom to hire or deploy based on someone's non-violent personal views, and that no company ought to pick and choose participants based on tattoos.

I'll leave you with another reader's comment: "I've never understood the concept of being proud of complete genetic randomness."  Indeed.

[Note: this post has been updated since its original publication.]

Interesting Article on Foreign Basketball Player

I really enjoyed SI's article on Arsalan Kazemi. See HERE.

Father Jon Sobrino: Hero

Once in a while, I am reminded of my deep respect for the Jesuits. They combine logic with compassion in ways that no one else seems to be able to emulate. HERE is an article written by Father Jon Sobrino, about the world's neglect of the poor.

[M]ost of humanity...die fast in war and more slowly in the poverty caused by war. We need only look at Afghanistan, Iraq, Palestine; at health disasters like malaria and AIDS; at ecological problems like flooding and erosion; at natural catastrophes such as earthquakes, where the majority of the dead are those who cannot afford strong housing. The poor live on the sides of the mountains, next to rivers, or along railroad tracks. Anything can happen, and does. The majority of the earth’s people die innocently and cruelly, often after a life of great suffering. And they die defenseless. Who is risking anything to bring them down from the cross?

May God bless Father Jon Sobrino, who narrowly escaped being murdered by an El Salvadorian government death squad in 1989.

Jon Oliver and Jon Stewart on Switzerland

Hilarious and thought-provoking: the hallmarks of The Daily Show. More HERE.