Jam Side Down

Solar Power

There is a natural and healthy tension between politics and markets. The tension is the difference between socially oriented citizens who are often unfamiliar with business and in any case favor the strong, visible hand of government protection and their commercially-oriented brethren who prefer the invisible hand of market competition and generally view government as a cost to be minimized.

The trade offs between these views are the leitmotif of this blog. Jam Side Down refers to the tendency of partisans of both schools to inhale too deeply their own exhaust, underestimate perverse consequences, and end up with a sticky mess on the floor. 

LET THE SUN SHINE IN

Interestingly, one type of regulation is generally favored by both camps. These are Sunshine Laws, named after the famous observation by Supreme Court Justice Louis Brandeis that "Sunshine is the best disinfectant". Sunshine laws mandate transparency in government and have been passed by the federal government and all fifty states. They generally require that public business be, well, public. The case for transparency increasing government accountability and reducing corruption poses problems in practice (Guantanamo comes to mind) but is by now so widely accepted as to be unworthy of debate.

If Sunshine laws work so well in the public sector, why are they are so little used in the private sector? There are two general excuses. First, government is a monopoly, so accountability is frequently a function of transparency whereas the private companies are held accountable by market competition, which requires secrets. This is not entirely silly. Second and less convincing to me, private business is private. There is, after all, money involved. Norway publishes the annual income and net worth of every citizen and, although there is an interesting case to be made for it, we don't do that here and are not likely to start.

Companies prefer the shade. They avoid sunshine, especially if it can lead to public embarrassment. As a duly sworn federal regulator, I noticed that even in the very early days of the internet a company whose dangerous working conditions had killed an employee thought nothing of paying a fine and conducting business as usual. But propose to publish the details of their transgressions on a public web site and suddenly you had their full and undivided attention.

In short, Brandeis was right and we should apply his insight more often to the private sector (and in fairness, publicly trade companies are for good reason subject to high standards of disclosure).

SILLY CON VALLEY

We have seen an amazing example of the power of sunshine in Silicon Valley this week. Our arguments here tend to involve slightly obscure technologies, but bear with me -- it's a great story.

Background: Social networks like Facebook and MySpace are huge. Facebook alone accounted for a quarter of all page views in the United states in the past 90 days.

What, exactly, is everybody doing on Facebook? They are playing games. Games sell virtual goods (seeds for your garden or a shotgun to dust an opponent) and they are fertile grounds for advertisers.

Some of these ads are sleazy, or in the current vernacular, they are "scammy". Some of the scammiest ads sell cell phone subscriptions (example: ad copy says" Where is Your Girlfriend? Find out her exact location now." See the add here but watch where you click). This particular site sells a useless $10/month subscription onto your cell phone. The worst scams always seem to cost $9.95/month (take an IQ test, then "enter your phone number to see the results". Congratulations, you just subscribed). The carrier gets half, Facebook gets a couple bucks and the publisher and the ad service get the rest. It is extremely lucrative for everyone except the consumer, who has a very difficult time getting these subscriptions taken off of a phone bill. Consumers learn the hard way that if their 11 year old enters a cell phone number to get some free seeds in Farmville, an innocent farming game on Facebook, they need to change their cell phone number in order to stop the bills.

This is not small time stuff. Farmville, for example, has 61 million active users, a population slightly larger than Great Britain. Companies like Slide, RockYou, Zynga, Playdom, and Playfish author games for social sites. The last three of these companies serve ads and make hundreds of millions of dollars in revenue -- a huge amount of it fraudulently (meaning that people subscribe without realizing they are subscribing, or subscribe to a service that has little or no value).

The Hamilton Mixtape: "Cause I'm the damned genius that shot him"

One of the cool things about being President is that talented people of all sorts are happy to drop by and perform for you. Last May, the White House sponsored "Poetry, Music, and Spoken Word", an opportunity to let people most of us have never heard of get their 15 minutes.  

In the Heights author Lin-Manuel Miranda performed a preview of his newest project: a hop hop album on the life of Alexander Hamilton, at least some of it told from the point of view of Aaron Burr, the guy who met Hamilton for a duel in Jersey and killed him.

I am not a huge fan of hip-hop. But after watching this, I'd be happy to learn. Check it out (hat tip to James Fallows for the pointer).

Did Susan B. Anthony and Abraham Lincoln elect Barack Obama?

In the earliest days of the United States, only white protestant men with property were eligible to vote, Since that time however, the US has steadily, if unevenly, advanced the cause of suffrage. Has it mattered?

To find out, ask how the 2008 presidential election would have turned out if only white men had voted. Paul Rosenberg at Open Left worked out the answer and drew the picture, which is fascinating.

Had only white men voted for President, Obama would have carried only eight states and lost in a landslide. 

The Apple Squeeze

Have your noticed that Apple is getting squeezed? Consider these recent developments:

1. With Windows 7, Microsoft has substantially closed the performance gap with the Mac OS, thus quietly removing the major reason to switch to a Mac.

Both professional reviews and personal experience confirm that with Windows 7, Microsoft got it right. In a recent head-to-head poll with technically obsessed users, Windows 7 held its own against Snow Leopard -- Apple's outstanding UNIX-based OS. I have put Win7 on two machines, one Vista, one XP and it is a major improvement. 

Mac Books are still very cool notebooks. But there is nothing about them that cannot be or won't be copied and improved. What is proprietary about a Mac is its software -- especially its OS. And that advantage is a lot smaller than it was a month ago. The nerd commercials were hysterical in an XP/Vista world. They don't resonate as well with Windows 7.

"Dream bicycles that change and grow"

One of my favorite cycling blogs, Eco Velo, ran this photo some time back. I am slightly obsessed with bicycles and business, so I noticed not just four sweet rides, but a nice illustration about how competition and business innovation are changing even the bike business. 

THE ROMANCE OF BICYCLES

Most bikes sold in most stores have a racing heritage. These don't -- they are designed to be incredibly practical. They each let you ride comfortably upright, with your bars at least as high as your saddle. Nobody on these bikes will be confused with Lance Armstrong and they are likely to enjoy their ride a lot more as a result. When John Kennedy said that "Nothing compares to the simple pleasure of a bike ride" he was not fantasizing about clipless pedals, carbon fiber frames, and aero bars.

These are deeply romantic bikes -- the sort that caused novelist and poet Christopher Morley to declare bikes "the vehicles of novelists and poets" and H. G. Wells to declare bikes a cure for Melancholy. "When I see an adult on a bicycle", he later claimed "I do not despair for the future of the human race."

These are what what we used to call "touring" bikes and what many Europeans think of as normal: a steel frame, a long wheel base, a leather saddle, racks, fenders, comfortable tires, and bags. The prettiest one even has lugs (artistic steel joints) where the tubes come together. They are the profoundly useful bikes meant to cover long distances in comfort -- the sort of bike that caused writer Iris Murdoch to observe that while "other forms of transportation grow daily more nightmarish, only the bicycle remains pure in heart". Grant Peterson, a local hero who founded Rivendell Bicycle Works, makers of the orange bike, got it right when he called them "rideable art that can just about save the world".

These bikes can shape your dreams. You come to understand what Wells meant when he claimed that "After your first day of cycling, one dream is inevitable...You ride ... on wonderful dream bicycles that change and grow."

US Newspapers in a Free Fall

Today the Audit Bureau of Circulations released weekday circulation numbers for the top 25 daily newspapers in the U.S. The graph below shows changes in circulation during the past six months.

These numbers are not simply awful -- they represent the total collapse of the newspaper business. Only the Wall St. Journal added any subscribers at all during the past six months. They just became the biggest paper in the country not because they grew, but because USA Today managed to shrink a shocking 17% in two quarters! The San Francisco Chronicle, to nobody's surprise, lost a quarter of its readers. Splat.

The Future of Twitter

Twitter just raised $100 million on a $1 billion valuation, making Twitter about as valuable as say, Barnes and Noble, which has 720 bookstores and about $5 billion in revenue.

Twitter revenues? Well, none. But someday we can serve ads to all those eyeballs, right?

Right. But the competitors are circling. And I don't mean Facebook trying to out-tweet Twitter or LinkedIn trying to become Facebook. I mean real, scary competition. I mean Flutter.

Check it out.

Grading College Admissions Essay Questions.

The Jam Kid is applying to college. He will do fine, but his applications have exposed me once again to the college admissions racket. College applications are now standardized and online, which means that to apply to lots of colleges, a kid clicks a bit and send along a few more $50 dollar bills. He or she also write a few more essays, about which more in a moment.

Is this good for colleges? Well, they think so. It makes them all more "selective". Being selective is a wonderful thing for a school. Colleges imagine that they are getting better students, better faculty, and above all, a better feeling about themselves, since they have obviously moved up in the world. So every student applies to more schools, so every school is suddenly more selective. Instead of saying "we only take one applicant in five", colleges can now brag that "we only take one applicant in ten".

This lunacy fuels a false impression of underlying demand and helps colleges justify price increases. From 1990-2006, the average price tag for a year at a private college rose from $10,348 to $19,312, an increase of 86%. Costs for a year at a public college rose 85%, from $2,035 to $3,774. During this time, tuition costs rose more than three times faster than inflation.

There are other factors driving up the number of schools kids apply to. Information is free, so every American high school kid can find out about every college. Travel is cheaper. And both of these factors have led to a huge number of overseas applicants. A recent New York Times piece (citation anyone?) noted that top universities now admit 20-30% their incoming classes from overseas. Next to these factors, age demographics (cited continuously by college counselors) are a trivial factor.

The downside to a college of taking more applications? They have to do more work to select an incoming class. They use grades and test scores to screen some applications, but when admissions committees face a large pool of kids who could all do the work, they turn to essays. Here is where applicants are told that they can really differentiate themselves. College essays have become the new rite of passage in middle class America.

So who decides the essay topics? Indeed, who evaluates colleges for the essays they require? Not only can essays differentiate applicants, they are a great way for colleges to differentiate themselves. Good colleges should ask smarter or at least more provocative questions. Kids notice -- and so do parents.

Do colleges ask students for thoughtful essays? Generally they do not. Many schools require little more than the common application essays. I have just reviewed the 2009 supplemental essay questions for about 75 colleges that ask for extra essays. Most of them are dumb as a stick -- variations on "why do you want to come here?" and "how will you contribute to our campus?" -- questions that the average 16 year old or anyone else cannot do much with.