Link Buffet for June

Lots of backlogged stuff, so little time. Here's a linkpile for early June:

In "Investing Strategies for iPhone Customers" Khoi Vinh writes:

Like I said, this comes with the territory. The “early adopter tax,” is how most people refer to it. I can accept that painful but predictable phenomenon to a certain extent, but here’s where it really hurts. Take a look at the price of Apple stock over the past year, and note that the value of my iPhone is now way less than just one share of AAPL.

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China's affluence is booming. Two things that are going in the US - recession, conservation of resources. Two things going on in China - double-digit economic growth, um-what's -conservation? The difference here is that China is FREAKING huge. As in - the handful of cities mentioned in the below quote easily approaches the entire population of the United States - I'm not kidding - look it up yourself.  In "China's rich have insatiable appetite for haute couture" in the IHT:

As the Chinese economy surged more than 10 percent annually over the past five years, the country boasted 345,000 U.S. dollar millionaires by the end of 2006, a third of whom were women [...]

"The Chinese are the newcomers to the global market," said Sebastian Suhl, Asia-Pacific chief executive of Italian fashion house Prada, which has nine stores in China. "They're very hungry to learn about fashion. Fashion represents obviously status, but luxury is also a kind of bridge to the modern world for them." [...]

Elegantly dressed Chinese manager Zhang Ning, 30, has never been to France but she likes to wear Hermes which she says is the epitome of style. "I like its simplicity, it makes me feel elegant," said Zhang, who works as a manager at an electric power company in the southern Chinese city of Guangzhou.

"The mainland Chinese market is still very accessories oriented but we believe that will change," said Alex Bolen, chief executive of New York-based couture house Oscar de la Renta, whose sleek cocktail dresses retail for up to $10,000, while its evening gowns approach double that. "There's definitely a market for the cocktail dress. But what has surprised us, pleasantly, is how rapidly the customer has also adopted our daywear."

Reaching out beyond Beijing and Shanghai is the next step. The southern boom city of Shenzhen replaced Chengdu in 2007 as the city with the highest average spending on luxury goods, according to Credit Suisse, while the size of the luxury markets in Shenzhen and Wuhan doubled.

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Two great posts from Robert Reich. From (aside from the oft-covered reasons in mainstream media - global demand, dropping dollar, instability in the Middle East):

(3) Global investors (including, perhaps, your own pension fund) are anxious about the American economy, and looking to hedge their bets against future declines. Oil is one of the commodities that looks like a good bet. Hence, there's speculation in oil futures. This isn't a nefarious plot. It's the way the market works. A bit of a speculative bubble is forming, so beware. I attribute a big part of oil's price rise over the last few weeks to this.  

And a plea for a more inward-looking America (ie next administration chilling out on foreign policy boondoggles, um, like, stupid wars, and focussing in on domestic infrastructure):

Public transit has always been the poor stepchild of infrastructure development. America's usual answer to traffic congestion has been to add more lanes on highways, or more highways, or more bridges and tunnels for more cars. America hasn’t been really serious about public transit for almost a century. Most of New York City’s subway system was built over a hundred years ago. Los Angeles ripped out its trams long ago. Boston's Big Dig, one of the biggest infrastructure projects in modern American history, was designed entirely for cars. In recent years, only a few farsighted and ambitious cities, like Portland, Oregon, have invested in light rail. 

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NYT describes how a spike in oil prices is trickling down to the cost of all kinds of consumer goods that use petroleum-based materials:

No business in America produces more of the oil-based ingredients that go into the nation’s products than the Dow Chemical Company, based in Midland, Mich. From Dow’s petrochemical operations come the basic ingredients of a wide variety of plastic bottles and packaging, including numerous containers once made of glass or tin.

Indeed, paint, computer and television screens, mobile phones, light bulbs, cushions, paper, mattresses, car seats, carpets, steering wheels and polyesters are all made with ingredients that Dow and other chemical companies refine from oil and natural gas.

Dow normally raises prices piecemeal. Last month, though, the surge in the cost of oil and natural gas, the company’s principal raw materials, produced a rare across-the-board price increase of as much as 20 percent.

“We have taken out head count, automated, been very diligent on cost control,” said Andrew Liveris, Dow’s chairman and chief executive, “but these surges in energy prices are just one surge too many.”

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Warren Buffett just made a $1 million Long Bet (the largest by far):  [via ejaz]

Warren Buffett recently bet an ambitious hedge fund operator $1 million that they won't beat the returns of S&P 500 after their extremely hefty fees are accounted for. Buffett claims investors will do as well with a no-load index fund over the ten years of the bet. He has long been critical of the performance claims of hedge funds, and his bet is intended to put his money where his mouth is. [...]

In order to make a Long Bet, bettors need to lay out their reasoning. It's worth reading the two sides' very short arguments about investing because the two extremes of investment advice are contrasted in them. Buffett, as usual, is stunningly clear in his argument, which ends:

A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund than with a group of funds of funds.

Buffett's Big Bet is by far the largest bet on Long Bets. The previous largest Long Bet was one for $20,000 between Mitch Kapor and Ray Kurzweil. The two prominent thinkers were betting whether an AI would pass the Turing Test by 2029. Ray was certain an AI would pass muster by then and Kapor was sure it would not get close. (Incidentally, Kapor told me recently he's willing to double, triple, or quadruple the bet with Ray, or anyone else betting on an AI by 2029.) 

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Google is now offering real-time quotes for free. From a comment on the googleblog, "Goodbye 15 minutes: 1.5 seconds is the new real-time." 3rd party data-providers are hosed.

At Google, we get excited about making all kinds of information accessible to everyone. The more up-to-date the information, the more valuable it is. This is particularly true in the world of finance; information, and timing of that information, is money. Today, real-time quotes are not freely and easily available on the web. Some websites offer one real-time quote at a time, but typically only after you have enrolled in a service and/or signed a complicated legal agreement. Other sites approach the problem differently and show you streaming delayed data, but that doesn't solve the problem either -- it masks it. What's really important is getting free, easy and fast access to real-time quotes so you know how the market or your company is doing now, not as of twenty minutes ago. 

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The ill-conceived and even-more-ill-executed boondoggle that is OLPC has been profiled in BusinessWeek. Quoted below is about (one of) my greatest misgivings about the entire endeavour:

While this philosophy is essential to the mission of OLPC, it's also a source of tension. Current educational leaders in Peru embrace Constructionism, but most countries base their education systems on the idea that teachers pass their knowledge to receptive students. That was a problem for OLPC in China as well as India. India's education department, for instance, calls the idea of giving each child a laptop "pedagogically suspect," and, when asked about it recently, Education Secretary Arun Kumar Rath barked: "Our primary-school children need reading and writing habits, not expensive laptops."

Some observers accuse OLPC of cultural imperialism. "It's arrogant of them. You can't just stampede into a country's education system and say, Here's the way to do it,'" says William Easterly, a professor at New York University and author of The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good.

And in their infinite wisdom, OLPC has also announced XO-2, a complete vaporware "next-gen device" with a very sexy dual-touchscreen design. Not only have they not solved the teaching problem (No, No, NO -- Constructionism addresses an aspect to learning, but education with a capital "E" it is decidedly not -- don't drink this Kool-aid, for cryin' out loud) -- they've invested resources in a new device that is sure to put a permanent stop to any future orders for gen-1 (orders they desperately need for ongoing validation of the model) as all the countries that have been hold-outs have been given yet another reason to wait. Don't get me started.

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I recently tumbled upon the Jive device, a very nicely conceived tangible media solution aimed at social networking for the elderly. Many cool ideas in it, by one ambitious British design student. I do like those RFID card thingies.

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From "The Paradox of Free Trade" by James Surowiecki in The New Yorker:

The less you make, the bigger the percentage of your spending that goes to manufactured goods—clothes, shoes, and the like—whose prices are often directly affected by free trade. The wealthier you are, the more you tend to spend on services—education, leisure, and so on—that are less subject to competition from abroad. In a recent paper on the effect of trade with China, the University of Chicago economists Christian Broda and John Romalis estimate that poor Americans devote around forty per cent more of their spending to “non-durable goods” than rich Americans do. That means that lower-income Americans get a much bigger benefit from the lower prices that trade with China has brought. 

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I spent Saturday with Bonnie, Willow, and Dori Tunstall at the Cradle Project, a remarkable fundraising and awareness-raising event for the overwhelming number of orphans in Africa due to AIDS, famine, and genocide - culminating in an online auction of 500 handmade cradles from creative donors from all over the world using only found materials. It was sensory overload, but some really beautiful cradles that really make you take pause. Willow likes art.

  

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A few days ago at the burrito stand at the Albuquerque airport, I encountered an exquisitely dressed Richard Branson-looking man standing in front of me wielding a brand-spanking new copy of Ayn Rand's Atlas Shrugged, the pre-eminent treatise (tome, if you will) on the philosophy of Objectivism. Here's how our encounter at the airport burrito stand went:

Him: "Meat and bean burrito to go."

Me: "You gonna read the entire book?"

Him: Turning to me surprised, "Why yes, I read this once every three years. Now, especially with the elections and all."

Me: "Are you a...Capitalist?" I asked in a pseudo-naive way.

Him: "I am an Objectivist." Which really took me aback since the word "objectivist" is something I've only read with my eyes, and have never actually heard uttered in speech, much less a random conversation with a stranger.

Me: "Well, aren't all Objectivists capitalists?" after I was told that they were all out of carne adovada, a total drag.

Him: "Capitalism is the chosen social system for Objectivists. Rational-self-interest, that sort of thing."

Me: "You know, I am working on a rebuttal piece to an essay I read in Capitalism Magazine (tightly connected to the Ayn Rand Institute). They allege that expensive gas is all the environmentalist's fault (environmentalists won't let Capitalists drill in protected land), which is completely bogus."

Him: "But you know, there's a lot of money to be made in environmentalism."

Me: "But that's not my objection. My objection is..."

Him: "Have a nice flight."

Me: "Uh, you too."

A short, albeit impactful, exchange between myself and a self-proclaimed Objectivist. I've never met one before, but I suspect they lurk around everywhere. This exchange bugged me all week. Later, I talked to Dori Tunstall about it and she couched it as a means and ends issue - greed is the great motivator for capitalism, and freewill allows for all kinds of things to happen. In Mr. Objectivist's statement, "There's a lot of money to be made in environmentalism" there is an inherent confusion about means and ends. The goal here is to make lots of money pursuing an environmental agenda; making money being the primary goal, being environmental being the means to achieve that goal. I believe environmentalists' agenda is simply to preserve the environment for current and future generations, the means being accumulation of another kind of capital...awareness capital on a broad scale. The two ideologies are perfectly inverted. Thanks to Dori for pointing out that causality is something pretty important to suss out when contrasting competing ideologies. So, in other words, Objectivists simply have it completely ass-backwards. :)

NB: I know famed frontman for "Big-D Design" Michael Beirut is a big Ayn Rand fan, and I think he mentions in his recent book having read Atlas Shrugged many times. Michael, if you're listening, I'd love to know how you solve the paradox of being a "Big-D Designer", and what I am surmising, "Objectivist Designer" (Zee shall make zees typeface smaller becoss I zay so becuss eet vill be better for zocietee...) and being a conscious steward for the planet (this new mainstream trend of Eco-Chic, suddenly all of society's preferences matter). Thoughts?