Monthly Archives: February 2009

Urban Precedents

Published by peter on 2009-02-23 in Culture, Heroes, History, Politics and Post-Industrial Nomads. 0 Comments

In the excitement over the USA’s first black American President, some people have become over-excited. An example is Marbury, who claims Barack Obama is also the nation’s first urban President.  This is simply not the case.

Although most US Presidents are creatures of the countryside or the suburbs, there have been at least two Presidents with as much claim to be urbanistas as does young Bam. Most recent was John F. Kennedy, raised in Boston and a sophisticated habitue of London, Washington and New York City before becoming President. Of course, as all rich kids of his time did, he spent summers sailing on the Cape or vacationing in Florida, but JFK was as urban as they come.

And before JFK, a century ago, there was Teddy Roosevelt, born and raised in Manhattan, and urban to the core. Of course he loved Nature (he could justly also claim the title of the country’s first Environmentalist President), and he decamped to the wilderness of the North Dakota Badlands to find himself after the death of his first wife. But this was a man who was such an urban-dweller that he took the job of President of the Police Commission of the New York City Police Department – the NYPD! – literally running to his office on the day of his appointment, according to the account of his friend, the journalist Lincoln Steffens. While in that post, Roosevelt spent his evenings walking the streets of Manhattan to meet his policemen on the beat:

T.R. went about  at night with [journalist Jacob] Riis as his guide to see the police at work.  He had some bizarre experiences.   He caught men off post, talking together; he caught them in all sorts of misconduct and had funny, picturesque adventures, which Riis described to all of us [journalists] (so fair was he as a reporter) and which we all wrote to the amusement of newspaper readers.  But what T.R. was really doing – the idea of Riis in proposing it – was to talk personally with the individual policemen and ask them to believe in him, in the law, which they were to enforce.  T.R. knew, he said, the power they were up against, the tremendous, enduring power of organized evil, but he promised he would take care of them.”

Walking the streets of Manhattan at night is not the behaviour of a President Cornpone. Obama is the third urban President the USA has had, not the first.

Reference:
Lincoln Steffens [1931]:  The Autobiography of Lincoln Steffens.  (New York, USA:  Harcourt Brace and Company.)

Abraham Lincoln

Published by peter on 2009-02-17 in History and Politics. 0 Comments

This month is the 200th anniversary of the birth of Abraham Lincoln.

Lincoln is not the offspring of a people’s revolution.  The ordinary play of the electoral system, unaware of the great tasks it was destined to fulfill, bore him to the summit – a plebian, who made his way from stone-splitter to senator in Illinois, a man without intellectual brilliance, without special greatness of character, without exceptional importance – an average man of good will.  Never has the New World scored a greater victory than in the demonstration that with its political and social organization, average men of good will suffice to do that which in the Old World would have required heroes to do!“

Karl Marx [1862-10-12]: “On events in North America.” Die Presse, Vienna.

A plan for infrastructure projects

Published by peter on 2009-02-11 in Economics, Planning, Politics and Project Management. 0 Comments

While on the subject of infrastructure, and the UK Government’s lack of any apparent action to start new infrastructure projects despite the economic crisis, here is a draft plan of action:

  • Start with a national competition for suggestions for new infrastructure projects.  People and businesses in regional communities have loads of ideas for projects – should anyone in Westminster bother to listen.   Perhaps allow 1 month for this, so Month 1 is spent soliciting proposals.  Creating a press release to announce the competition and a web-site to receive suggestions could be done within a day.
  • In the meantime (also during Month 1), create a temporary government agency like Australia’s national infrastructure agency, to receive these proposals and do a preliminary filtering in terms of (say): employment impact, wider business impact, social impact, cost, and long term potential for follow-on benefits.   A leading management consulting firm or two could be used to detail the criteria, assess all the proposals against the criteria (tedious but necessary work), and produce this long listing, winnowing down from (say) hundreds of proposals to (say) 50.  Month 2 could be devoted to this effort.
  • Then, have an appointed national committee, comprising politicians from all three major national parties, people from business and industry, the trades unions, people and politicians from the regions (say about 20 people) assess the 50 long-listed proposals and winnow them down to (say) 10.   This should be done in closed session in one, dedicated, all-day-and-all-night effort, over (say) 7 days.   We want the committee to bond, because we want their conclusions to be unanimous.
  • Then, prepare detailed technical and financial plans for each project on the shortlist.   This could be achieved within (say) 21 days.    As with the earlier stages, this work could be undertaken with the assistance of consulting and/or engineering firms, major corporations or banks  – there are currently lots of bankers at a loose end, I hear.  Hell, I’d even volunteer for this myself, because of the fun it would be and the importance of the work.
  • Then, fund the final 10 projects immediately and start digging ground (or spinning fibre, or whatever).  These projects should be give short, sharp names (eg, Fibre-up; Fast-Track) and short descriptors, so that every person over 16 can identify with them, and support them.  Insist that each team’s management produce detailed progress reports online each month, with (say) quarterly public hearings.   We want this work done, done well and done properly.

Total time, from start of campaign to shoveling: 3 months.
Of course, I realize getting major projects to shovel-ready normally takes longer than 3 months.  THIS FACT SHOULD NOT STOP ALL THESE PROJECTS STARTING SOMETHING WITHIN 3 MONTHS.  A key task will be creating semi-permanent, quasi-independent parastatal bodies (quangos) to run each project, to acquire land, employ people, etc.   That can all be done after the projects start, since the first main purpose of these projects is to boost aggregate demand and employment in the short run.    Our models here should be the  USA’s Tennessee Valley Authority and Australia’s Snowy Mountains Scheme, updated for the Internet age.
Not all infrastructure projects need to involve alteration to the earth’s physical landscape. My own proposal would be to create a major national organization – part-research lab, part-investment bank – to identify, to prototype, to seed, and to invest-in business ideas for future-generation Internet applications, starting from about Web 6.0 (whatever that will be) and upwards – a Xerox Parc for 21st-century e-services, with an investment budget of (say) USD 5 billion or so to start.  I would start this with public funding, with the aim of privatizing it once it becomes successful.
And (added 2009-02-12), if 3 months is too long (and it is), here are three potential major national infrastructure projects suggested by journalist Andrew Rawnsley:

  1. A national high-speed rail network (I would call this Fast-Track, or similar)
  2. A national, super-fast broadband fibre optic network (Fibre-Up), and
  3. A large-scale renewable energy production program, connected to the National Electricity Grid (Green-Power-to-go!).

There would be nothing stopping the Government spending (say) GBP 1 million on each of these to prepare outline feasibility and financial plans, with the aim of launching one of them within a month.
Building a national fibre broadband network without thinking also about what would run on it would not be sensible, which is why I propose the Web6.0 idea above.  But a little creativity could generate lots of proposals for non-physical infrastructure, which would create UK employment here and now, train people, stimulate demand, and leave something behind for future generations, for example:

  • Digitizing the contents of ALL Britain’s art galleries and museums, something which could employ artists, photographers, and lots of those unemployed media studies and IT graduates.
  • Digitizing the contents of the British Library, the main University Libraries and the national archives.
  • Digitizing ALL past census records.
  • Recording the life story of every citizen over 65.
  • Recording a performance at every live music venue in the country, including pubs and churches.
  • Producing online visitor guides to every locality in the country, annotated by people resident in the locality.
  • Producing a digital record (films, interviews, oral histories, photos, etc) of every factory facing downsizing or closure, with a record of the skills and networks being lost.

It should not need saying that all this digitized information, if paid for from the public purse, should be made freely accessible online.  These projects could be our generation’s equivalent of the Works Progress Administration.   I am sure there are many more ideas, both sensible and wacky, than these.
Well, Mr Brown?  What are you waiting for?  How about some vision?  If not these projects, then what?  If not now, then when?

Bonus culture-vultures

Published by peter on 2009-02-11 in Corporate culture and Economics. 0 Comments

Since this post is certain to be controversial, let me state some things at the outset for the avoidance of any doubt:

  • Owners of companies have the legal and moral right to establish any legal payment policies they so wish.  Thus, if the econopopulists now living at 10 and 11 Downing Street, London, wish to abolish bonus payments to managers at the banks our government owns, then they have every right to do so.   As company owners, they do not need to give reasons for their actions.   As elected officials in a democracy, however, rational justification and evidence of due deliberation behooves them.
  • People who fail should not be rewarded for that failure.  Those who placed bad bets on house prices or credit swaps should not receive financial rewards for their bad bets.

But in all the Grand Populist Upswelling of Outrage (GPUO) fed or created by the media in Britain, in France and the USA (and maybe elsewhere) this last week over bonus payments to managers in the financial sector, there are some aspects which I’ve either seen little of, or not seen reported at all.

  • The first is that not all business units of all banks and financial institutions failed, these last 6 or 18 months.   Some parts of even the bankrupt banks made profits, sometimes large profits.  The managers who made those profits, particularly at a time of global economic doom, deserve whatever bonus payments they were promised.
  • Second, many bonus payments are subject to legally-binding employment contracts.  Any half-decent financier would not have accepted a senior position without first having a written, legally-binding statement of what he or she was owed in payment under what circumstances.  New owners or not, even owners living in Downing Street, have a legal and moral obligation to fulfil legally-binding contracts.
  • Finally, in all the nonsense spoken about a “bonus culture” in banks, I have nowhere seen any discussion as to WHY bonus payments are common in the financial world.   The first reason is that financial markets are capricious:  despite all the boastful talk about skills and experience, and despite the multi-terabytes of computer memory, the massively-high bandwidths of connection, and the arrays of rocket scientists deployed, the taking of positions in markets is still a matter of taking views on the future, and betting these views against other views.   The future is uncertain, so bets can lose, as well as win,  and these two outcomes may happen regardless of the skills or expertise or resources applied to the taking of a view.  People may be just lucky or unlucky – even clever, experienced, well-resourced, cautious, nice people.    The second reason is that when bets win, they may win big.    If  a company makes hundreds of millions of dollars profit from a one or a handful of trades, it can seem most unfair to those deciding what trades to do that all of this capricious, windfall gain should accrue just to the shareholders.  Those doing the trading therefore ask, quite reasonably in my opinion, for a share of this windfall gain.   Most companies have then a choice:  give a few percent of these capricious windfalls to the staff doing the work as bonus payments, or risk losing the staff to the competitor down the street who will.   No rational, long-term manager would choose the latter option, and no rational, long-term shareholder would force him or her to.

Nothing in what I have written here should lead you to conclude that I consider the occupants of 10 and 11 Downing Street to be rational, long-term managers of the companies our Government owns.  The occupants of Downing Street, it seems to me, have their eyes firmly fixed on the next election, and the Government’s re-election thereat, and pretty-much nothing else.    Neither rationality nor long-termism feature in such gazing, sadly.  If it did, we would be reading in our media the details of the new, 20-year, national infrastructure projects about to commence – thereby creating domestic UK employment, supporting local supplier firms, supporting demand, and providing a basis for future prosperity –  and not econopopulist nonsense about stopping bonuses to bankers.  Can anyone even name, let alone describe, a single infrastructure project that the UK plans to embark upon now?
POSTSCRIPT (2009-03-29):  The International Herald Tribune has carried an oped article by Jake DeSantis, comprising a letter to resign his position as an executive vice president of the American International Group’s financial products unit.  His letter examplifies my first bullet point above:  not all business units of failed financial institutions were or are failing, and it is unfair and irrational to punish those still successful.  Punishment is irrational both tactically – since offended staff will soon leave – and strategically – since failed institutions still operating need to have some successful product lines to stay in business.

“As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house. “

Brand immortality

Published by peter on 2009-02-09 in Advertising, Computer technology, Culture and Telecommunications. 0 Comments

Catching up with films I missed when they first appeared, I have just watched that action-spy thriller of the almost-over Cold War, Little Nikita, which first appeared in 1988.

The story was fairly predictable, and the most exciting moment for me occurred at minute 77, when two of the protagonists, trying to flee San Diego for Mexico, turned a corner on which was located a NYNEX Business Center. These were a nationwide chain of 80 retail computer hardware and services outlets most of which NYNEX bought from IBM in 1986 (according to rumour, after a handshake over an inter-CEO game of golf), and then sold in 1991 to Computerland.    When NYNEX owned them, they comprised the third-largest non-franchise network of retail computer outlets in the US.

One of the seven Baby Bells (aka RBOCs) created by the break up of the Bell System in 1984, NYNEX was the only one to pursue an adult career as an IT services company, at one point earning sufficient revenues from software and related services to be placed in the Top-10 largest US software companies.    For all the synergies, however, telecommunications and software development are sufficiently different businesses, and/or NYNEX senior managers cared insufficiently for these differences, that NYNEX never appeared to take seriously their role as a software company.   Having cured itself of its untypical desire to be a leading software house by re-selling most of its purchases in this sector, NYNEX, a few mergers later, has now become Verizon.

It is nice to think that, in centuries to come, the NYNEX Business Centers brand will live on in the moving pictures.

Old, beardy revolutionaries wielding spreadsheets

Published by peter on 2009-02-06 in Economics, Globalization, Manufacturing and Prophecy. 0 Comments

If you were aiming to model global, 21st-century capitalism, the obvious place to start would not be with a model of the firm based on mid-Victorian Lancashire textile manufacturing companies.   Firstly, the textile industry developed in Lancashire in the 18th century because only here (and almost nowhere else) was the climate sufficiently conducive for the then leading-edge technology to operate successfully.  (The air needed sufficient dampness, but not heat, for the cotton fibres not to be broken by the early textile machines.)   Technology in most industries has progressed so much in the two centuries since that very few industries are now tied to specific climates.     So industries are mostly not tied to place any more.
Secondly, large swathes of  work – even most work undertaken in companies described as manufacturers – is not anything a Victorian economist would recognize as manufacturing.  Rather it would be better described as symbol analysis and manipulation.  A relative of mine recently embarked on training as a surface-materials mixer for a road-building company – a great job, all done inside in an airconditioned office, mixing different ingredients and assessing the results, achieved by moving graphic objects around on a computer screen.  Of course, some person still has to be outside moving and switching on the automated machinery which actually lays the road surface once it has been created, so not every task is symbol processing.     But mixing is no longer done by eye, by a man using using a shovel in front of a furnace.  The relevant attribute of symbol manipulation – unlike, say the operation of a loom – is that this too is something no longer tied to place, thanks to our global telecommunications infrastructure and to digitisation.  Thus, the processing of US insurance claims can move from Hoboken, New Jersey, to Bangalore and Mauritius, and then maybe back again, if circumstances so dictate.
Thirdly, for companies whose sole business involves symbol manipulation – eg, banks, investment firms, graphics designers, media companies, software developers, consultancy companies, etc – the economics of traditional manufacturing industry no longer applies.  Information is a product whose value increases as more people use it, and whose marginal costs of production can decline to zero with multiple users.  It costs Microsoft  between US$1 and $2 billion to develop the first copy of each new generation of its Windows operating system, but less than $1 each for the second and subsequent copies;  the cost of producing these subsequent copies comprises only the cost of the media used to store the product (a DVD or a filestore).   (Of course, I am not including the cost of marketing and distribution in this statement of the cost of production.)  Similarly, a well-crafted, well-timed IPO and financial plan may raise (to cite the case of one IPO whose writing we led) US$5 billion on the world’s capital markets if successful, and nothing at all if less-well crafted or placed at a different time.  These information-economy attributes also apply to those parts of so-called manufacturing companies which undertake symbol manipulation:  the design team of Mazda cars for example, which relocated from Japan to the UK because London is a world-centre of art, design and marketing, or the 2-man in-house forex-trading desk which two decades ago first enriched and then almost bankrupted Australia’s largest defence electronics firm, AWA.
So, although I do not share the sentiment, I think it fine for someone to express a personal dislike of an alleged bonus culture in our banks and financial sector companies, as Alex Goodall has done.  But to argue against this feature of our modern world using a micro-economic model based on mid-Victorian manufacturing would seem inappropriate.   Much as I admire Karl Marx for his startling and still-interesting contributions to the 250-year-old conversation that is economic theory, for his insightful criticisms of the world he knew, and for his desire to make that world better for all, his model of the firm describes almost nothing about the world of 21st-century business that I know.

Ed Witten, meet Gerard Debreu

Published by peter on 2009-02-04 in Economics, Politics and Religion. 0 Comments

Oliver Kamm has a post arguing that theology is not an academic discipline, since (he asserts) it does not aim to discover anything new.   I am not qualified to assess this claim about theology (and, to be honest, nor do I think is he).  But I am intrigued that so many of the lord high panjandrums of contemporary western society, including  the normally-reasonable Mr Kamm, treat theology with such disdain, but present no such criticisms of mathematical physics or neoclassical mathematical economics.
What are the epistemological differences between theology and (say) string theory?  Most religious believers will claim to have had personal, direct contact with the divine, and these personal experiences provide evidence for their beliefs and/or practices.  Such evidence is personal and subjective; only rarely, if ever, is more than one person involved in these experiences, and these experiences and contacts are almost never able to be independently and objectively verified, or repeated, or deconstructed, or analyzed with experimental methods. But for all its many failings, this evidence is significantly greater, deeper and more compelling than anything yet presented for that part of mathematical physics known as string theory.   No objective, experimental or other, evidence yet exists that the universe is comprised of invisible entities, known as strings, vibrating in additional dimensions to our own three of space and one of time.  Indeed, it may be the case that no such objective evidence COULD even exist, since these entities are supposed to inhabit additional space-time dimensions inaccessible to us.   To my knowledge, no string theorist has yet claimed to have personal direct experience of these objects of their study.  Thus all of theology – even that part which claims the world is run by large extra-terrestrial lizards  – has firmer epistemological grounding than any part of string theory, or its younger siblings, such as M-theory, which posits a universe comprised of large, multi-dimensional objects called branes.
And what of the epistemological differences, if any, between theology and mainstream mathematical  economics?      Despite what a reasonable observer might think, mathematical economics is not concerned at all with economy or society, or the economic transactions which so dominate most of our lives.  Rather, mathematical economics studies abstract mathematical objects, called (in that enmystifying manner which western academics have made their own) “economies”.  These economies do not exist anywhere, not even in an ideal form, they bear no relationships whatever to anything a contemporary westerner would call to mind when the word “economy” is read or spoken aloud, and the study of their mathematical  properties has no relevance to any question any politically-engaged person might wish answered about the allocation of resources or the sources and distribution of wealth.   How could  it, when the entities of study are such abstracted objects, in some cases significantly simpler, in other cases more complex, than the real-world markets and economies which surround us?
Which of the two, then – theology or mathematical economics – deals with matters of importance in people’s lives?  Which of the two aims to talk about their direct, personal experiences?  Which addresses questions people have in their everyday lives, or even about those questions which societies only raise every generation or so?  Which, despite its failings and flaws, deserves our respect for its relevance and attempt at finding meaning, and which deserves disdain for wasting so many of our society’s scarce resources on self-indulgent, technique-besotted,  status-ridden, exclusivist, navel-gazing?
As is probably clear by now, if I ruled the world, the string theorists and the mathematical economists would all receive compulsory re-education as theologians.   Of course, given what I have just written above, they should all prosper in their new careers.

A salute to Dot Crowe and Kewpie Harris

Published by peter on 2009-02-04 in Culture, Heroes, History, Jazz, Music and Obituaries. 0 Comments

In my teens, I played the church organ for wedding ceremonies, receptions, etc.  For this I had the significant help of an elderly spinster lady, Miss Dorothy (“Dot”) Crowe, who also played the organ and piano.  She lent me music, gave me performance and business tips, referred clients on to me, and, at one point, advised me to increase my fees to increase the demand for my services.  My first of many experiences of the failure of mainstream economic theory was that demand for organ-playing services increased with price – the more I charged, the more business came my way.   I learnt that potential customers, who did not know one organist from another (even if they had heard them each play), used price to judge quality: charging lower than my competitors, as I did initially, meant that I was assumed to be not as good or not as reliable an organist as they.   It was very nice of Dot Crowe, who was after all also a competitor, to tell me of this.

As far as I knew at the time, Miss Crowe, who was then aged somewhere between 60 and 75, had spent all her life quietly and staidly playing the church organ for Sunday mass and for local weddings. Recently, however, I discovered that she had had an earlier career as a swing band pianist.   According to Col Stratford’s oral history of jazz on the Far North Coast of New South Wales, Australia (see reference below), by 1938 Dot Crowe was a band member of Aub Aumos’s band, The Nitelites (photo, page 47).   She later led her own band, Dot Crowe and the Arcadian Six.   I am stunned to learn this about her, and my admiration, which was already high, now reaches the skies.   I never knew she had had this experience when I knew her, and now, of course, it is too late to ask her about it.

The Far North Coast of New South Wales was an epicentre of early jazz in Australia, largely due to the energy and influence of one man:  David Samuel (aka “Kewpie”) Harris.  Kewpie Harris arrived in Ballina in 1919, aged 27, apparently selling suitcases.   He died, mostly forgotten, in Brisbane in 1981.   His nickname arose apparently because his youthful face was open and wide-eyed, like that of a Kewpie Doll. Harris had been born in Britain, and as a schoolboy was a chorister at St Paul’s and St. Stephen’s churches in London.   As a teenager, he was a member of the orchestra of Tom Worthington in their regular gig at the Holborn Restaurant, London.     For a time he worked in San Francisco, and also played in dance bands on the steamships of the Canadian Pacific Railway’s West Coast fleet. By 1913, he was in Australia and had formed a dance band in North Sydney, and played violin with symphony orchestras and ensembles in Sydney.  (As a violinist in Sydney before WW I, he presumably knew Alfred Hill, Australian composer and violinist, and, earlier, a player with the Leipzig Gewandhaus Orchestra.) 

According to family lore, Harris learnt jazz from black American musicians he met on his travels.  Upon arrival in Ballina, Harris helped create the Ballina Jazz Band with several other players, including my grandfather and great-uncle. The original members of the band were:  Rex Gibson on piano, Harris on violin, saxes, and keyboard percussion (originally marimba and xylophone, and later vibes), Harry Holt on trombone, Charles McBurney on trumpet, and Tom McBurney on drums.   Harris then led jazz bands with regular gigs in Northern NSW till 1951, when he left to join the Sydney Symphony Orchestra.

Why was jazz so strong in that part of Australia?  Partly, perhaps, because Ballina, at the mouth of the Richmond River, was a major trading port – until rail replaced shipping as the main form of freight transport to and from the region, and within the region. Ports have lots of visitors, interested in entertainment and with free time and cash.  Partly also, because the area hosted a US Air Force base during WW II (just down the coast, at Evans Head).  With the end of the war in the Pacific, and the arrival of television to Australia (in 1956), weekly dances declined in popularity, and no longer regularly attracted the hundreds or thousands that dances even at tiny river ports like Bungawalbyn and Woodburn once did.  Dance bands all but disappeared.   I guess that good, entrepreneurial jazz musicians were forced to join classical orchestras or to play Mendelssohn’s Wedding March for people with their minds on other things, and spend their evenings remembering what great fun they had once had, and given.

FOOTNOTE (added 2010-08-18): The Kewpie Harris Band is also mentioned in this history of Lismore’s Crethar’s Wonderbar, home of the world-famous Crethar hamburger.   A descendant of Harris’ band is the recently reformed Northern Rivers Big Band (for which, in its earlier incarnation, my father played). See here.

The photo shows the Ballina Jazz Band in 1919.  Players were (left to right):  Tom McBurney, Harry Holt, Kewpie Harris, Charles McBurney, and Rex Gibson.

References:
Julia Buchanan [1982]:  “Bandleader died a forgotten figure.”  The Northern Star. Lismore, NSW, Australia. 6 January 1982, page 50.

Interview with Tom McBurney [1977-01-11] in The Indonesian Observer, reported in Stratford [1990].
Colin Stratford [1990]:  From The Stage.  Lismore, NSW, Australia. ISBN:  0-9594070-2-2.