Where’s Google Going Next?

I just finished watching this TED interview with Larry Page. I’m amazed by Mr. Page’s humility and willingness to reimagine the world.

Watch Video: Where’s Google Going Next

Some of my favorite bits from the video:

The shortcomings of Search

Q: When [search is ] done, how will it be?

A: Well, I guess, in thinking about where we’re going – you know, why is it not done? – a lot of it is just computing’s kind of a mess. You know, your computer doesn’t know where you are, it doesn’t know what you’re doing, it doesn’t know what you know, and a lot we’ve been trying to do recently is just make your devices work, make them understand your context. Google Now, you know, knows where you are, knows what you may need. So really having computing work and understand you and understand that information, we really haven’t done that yet. It’s still very, very clunky.

On Ed Snowden, Internet Security & Privacy

A:  I saw the picture of Sergey with Edward Snowden yesterday. Some of you may have seen it. But I think, for me, I guess, privacy and security are a really important thing. We think about it in terms of both things, and I think you can’t have privacy without security, so let me just talk about security first, because you asked about Snowden and all of that, and then I’ll say a little bit about privacy. I think for me, it’s tremendously disappointing that the government secretly did all this stuff and didn’t tell us. I don’t think we can have a democracy if we’re having to protect you and our users from the government for stuff that we’ve never had a conversation about. And I don’t mean we have to knowwhat the particular terrorist attack is they’re worried about protecting us from, but we do need to knowwhat the parameters of it is, what kind of surveillance the government’s going to do and how and why,and I think we haven’t had that conversation. So I think the government’s actually done itself a tremendous disservice by doing all that in secret.

Q: Yeah. And then there’s a privacy side of it.

A: Yes. The privacy side, I think it’s — the world is changing. You carry a phone. It knows where you are. There’s so much more information about you, and that’s an important thing, and it makes sense why people are asking difficult questions. We spend a lot of time thinking about this and what the issues are. I’m a little bit – I think the main thing that we need to do is just provide people choice, show them what data’s being collected – search history, location data. We’re excited about incognito mode in Chrome, and doing that in more ways, just giving people more choice and more awareness of what’s going on. I also think it’s very easy. What I’m worried is that we throw out the baby with the bathwater.And I look at, on your show, actually, I kind of lost my voice, and I haven’t gotten it back. I’m hoping that by talking to you I’m going to get it back.

A: All right. So get out your voodoo doll and whatever you need to do. But I think, you know what, I look at that, I made that public, and I got all this information. We got a survey done on medical conditions with people who have similar issues, and I look at medical records, and I say, wouldn’t it be amazing if everyone’s medical records were available anonymously to research doctors? And when someone accesses your medical record, a research doctor, they could see, you could see which doctor accessed it and why, and you could maybe learn about what conditions you have. I think if we just did that, we’d save 100,000 lives this year.

A: So I guess I’m just very worried that with Internet privacy, we’re doing the same thing we’re doing with medical records, is we’re throwing out the baby with the bathwater, and we’re not really thinking about the tremendous good that can come from people sharing information with the right people in the right ways.

 On Corporate Responsibility

Q:  Which is a second thing about corporations. You are one of those people who believe that corporations are an agent of change if they are run well.

A: Yeah. I’m really dismayed most people think companies are basically evil. They get a bad rap. And I think that’s somewhat correct. Companies are doing the same incremental thing that they did 50 years ago or 20 years ago. That’s not really what we need. We need, especially in technology, we need revolutionary change, not incremental change.

28. April 2014 by Miguel Barbosa
Categories: Curated Readings, Financial Technology | 2 comments

Sustainable Energy a la Munger

Two years ago a friend and shareholder of Aggreko told me about a book called, “Sustainable Energy Without The Hot Air“. The book was recommended by Aggreko’s senior management as a primer for investors to learn about sustainable energy. As I started reading the book it reminded me of Richard Feynman’s physics lectures (and Charlie Mungers approach to multidisciplinary problem solving).  Little did I know that Bill Gates was also a fan of the book and named it the one book to read if you want to learn sustainable energy basics. 

Before you commit to reading the book do the following:

First, read the synopsis to get a flavor for the book -  http://www.withouthotair.com/synopsis10.pdf

Next, watch the following ted talk by author, David MacKay.

Video: How The Laws of Physics Constrain Our Sustainable Energy Options

Finally,  I recommend you read the book and flip to the corresponding technical appendix after you finish each chapter. In the appendix, the author walks you through -step by step- how to think about the physics of a particular type of sustainable energy. Here’s an example of the appendix related to cars.

Screen Shot 2014-04-26 at 2.00.08 PM                      Screen Shot 2014-04-26 at 2.14.38 PM

Read: Sustainable Energy Without The Hot Air by David MacKay

As PDF:  http://www.inference.phy.cam.ac.uk/sustainable/book/tex/sewtha.pdf

Via The Web: http://www.withouthotair.com/

As Paperback: http://www.amazon.com/dp/0954452933/tag=davidmackayca-20

Read: The Appendix to Sustainable Energy Without Hot Air by David MacKay

As PDF: http://www.inference.phy.cam.ac.uk/sustainable/book/tex/psh/253.326.pdf

Via The Web http://www.withouthotair.com/  *click on right most column where it says technical chapters

26. April 2014 by Miguel Barbosa
Categories: Curated Readings, Science & Technology | 2 comments

Inequality in the US – Part 2

This is the second part of our lit review on inequality in the US. Let me start by highlighting a book that I started reading called, Capital in the 21st Century, by Thomas Piketty.

Synopsis via Amazon – What are the grand dynamics that drive the accumulation and distribution of capital? Questions about the long-term evolution of inequality, the concentration of wealth, and the prospects for economic growth lie at the heart of political economy. But satisfactory answers have been hard to find for lack of adequate data and clear guiding theories. In his lecture, Thomas Piketty analyzes a unique collection of data in twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. His findings are raising issues for the next generation of thought about wealth and inequality. Piketty shows that modern economic growth and the diffusion of knowledge have allowed us to avoid inequalities on the apocalyptic scale predicted by Karl Marx. But we have not modified the deep structures of capital and inequality as much as we thought in the optimistic decades following World War II. The main driver of inequality – the tendency of returns on capital to exceed the rate of economic growth – today threatens to generate extreme inequalities that stir discontent and undermine democratic values. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past and may do so again.

You can learn about the book via these book reviews (from all sides of the inequality debate).

Also take a look at this video: Thomas Piketty Lecture On Inequality @ Max Plank Institute

Moving on to today’s curated readings I recommend starting with this post by Michael Pettis –  of Credit Writedowns -comparing and contrasting the pros and cons of income inequality.

Next take a look at this Video: Does Income Inequality Have A Good Side - via PBS

The Myth of Increasing Income Inequality - by Roth – Via Manhattan Institute - President Obama’s new fiscal year 2013 budget, with its proposed  tax-rate hikes, reflects the misguided assumption that income  inequality in the U.S. has increased in recent years. Populist  cries for redistribution as a means to remedy this purported  inequality have gained currency in both the press and in the public  imagination.1 This paper, based on an original analysis of U.S. Labor  Department data, concludes that inequality as measured by per capita  spending is no greater today than in it was in the 1980s

Redistribution, Inequality, & Growth - by Berg, Ostry, & Tsangarides –  via IMF - Economists are increasingly focusing on the links between rising inequality and the fragility of  growth. Narratives include the relationship between inequality, leverage and the financial  cycle, which sowed the seeds for crisis; and the role of political-economy factors (especially  the influence of the rich) in allowing financial excess to balloon ahead of the crisis. In earlier  work, we documented a multi-decade cross-country relationship between inequality and the  fragility of economic growth. Our work built on the tentative consensus in the literature that  inequality can undermine progress in health and education, cause investment-reducing political  and economic instability, and undercut the social consensus required to adjust in the face of  shocks, and thus that it tends to reduce the pace and durability of growth. So what does the historical evidence say? First, more unequal societies tend to redistribute more. It is thus important in understanding  the growth-inequality relationship to distinguish between market and net inequality. Second, lower net inequality is robustly correlated with faster and more durable growth, for a  given level of redistribution. These results are highly supportive of our earlier work And third, redistribution appears generally benign in terms of its impact on growth; only in  extreme cases is there some evidence that it may have direct negative effects on growth. Thus the combined direct and indirect effects of redistribution—including the growth effects of the resulting lower inequality—are on average pro-growth.

Is The United States Still A Land of Opportunity? Recent Trends in Intergenerational Mobility – by  Chetty, Hendren, Kline, Saez, & Turner - We present new evidence on trends in intergenerational mobility in the U.S. using administrative earnings records. We find that percentile rank-based measures of intergenerational mobility have remained extremely stable for the 1971-1993 birth cohorts. For children born between 1971 and 1986, we measure intergenerational mobility based on the correlation between parent and child income percentile ranks. For more recent cohorts, we measure mobility as the correlation between a child’s probability of attending college and her parents’ income rank. We also calculate transition probabilities, such as a child’s chances of reaching the top quintile of the income distribution starting from the bottom quintile. Based on all of these measures, we find that children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s. However, because inequality has risen, the consequences of the “birth lottery” – the parents to whom a child is born – are larger today than in the past.

Has Consumption Inequality Mirrored Income Inequality? - by Aguiar & Bils – Abstract via NBER - We revisit to what extent the increase in income inequality over the last 30 years has been mirrored by consumption inequality. We do so by constructing two alternative measures of consumption expenditure, using data from the Consumer Expenditure Survey (CE). We first use reports of active savings and after tax income to construct the measure of consumption implied by the budget constraint. We find that the consumption inequality implied by savings behavior largely tracks income inequality between 1980 and 2007. Second, we use a demand system to correct for systematic measurement error in the CE’s expenditure data. Specifically, we consider trends in the relative expenditure of high income and low income households for different goods with different income (total expenditure) elasticities. Our estimation exploits the difference in the growth rate of luxury consumption inequality versus necessity consumption inequality. This “double-differencing,” which we implement in a a regression framework, corrects for mis-measurement that can systematically vary over time by good and income group. This second exercise indicates that consumption inequality has closely tracked income inequality over the period 1980-2007. Both of our measures show a significantly greater increase in consumption inequality than what is obtained from the CE’s total household expenditure data directly.

Misperceptions About the Magnitude and Timing of Changes in American Income Inequality – via Gordon- The rise in American inequality has been exaggerated both in magnitude and timing. Commentators lament the large gap between the growth rates of real median household income and of private sector productivity. This paper shows that a conceptually consistent measure of this growth gap over 1979 to 2007 is only one-tenth of the conventional measure. Further, the timing of the rise of inequality is often misunderstood. By some measures inequality stopped growing after 2000 and by others inequality has not grown since 1993. This cessation of inequality’s secular rise in 2000 is evident from the growth of Census mean vs. median income, and in the income share of the top one percent of the income distribution. The income share of the 91st to 95th percentile has not increased since 1983, and the income ratio of the 90th to 10th percentile has barely increased since 1986. Further, despite a transient decline in labor’s income share in 2000-06, by mid-2009 labor’s share had returned virtually to the same value as in 1983, 1991, and 2001. Recent contributions in the inequality literature have raised questions about previous research on skill-biased technical change and the managerial power of CEOs. Directly supporting our theme of prior exaggeration of the rise of inequality is new research showing that price indexes for the poor rise more slowly than for the rich, causing most empirical measures of inequality to overstate the growth of real income of the rich vs. the poor. Further, as much as two-thirds of the post-1980 increase in the college wage premium disappears when allowance is made for the faster rise in the cost of living in cities where the college educated congregate and for the lower quality of housing in those cities. A continuing tendency for life expectancy to increase faster among the rich than among the poor reflects the joint impact of education on both economic and health outcomes, some of which are driven by the behavioral choices of the less educated.

In Defense of Citizens United - by McConnell – Abstract via SSRN –  Citizens United v. FEC is one of the most reviled decisions of the Supreme Court in recent years. The President of the United States denounced it to the Justices’ faces at his 2011 State of the Union address. His 2008 opponent, John McCain, called it “the worst decision ever.” The Democratic Party is pledged to reverse it by constitutional amendment if necessary. Prominent newspapers attribute to it virtually every excess of the campaign finance system, whether or not the practices were authorized by the decision or would have been lawful even without it. It has become shorthand for corporate domination of politics. It has few defenders among legal scholars. I believe it is time for a more balanced evaluation.

14. April 2014 by Miguel Barbosa
Categories: Curated Readings, Financial Technology | Leave a comment

How Do Corporations Play Politics? The Fedex Story

Here is a case study by Jill Fisch on how Fedex has played corporate politics (over a span of 40 years). I find a lot of the material in the study to be relevant to securities analysts, journalists, and regulators.

Abstract – via Jill Fisch

United States law extensively regulates corporate participation in the political process. The rationale for this regulation is a concern that corporate political activity, particularly campaign contributions, will corrupt the political process and enable corporations to obtain rents at societal expense. Regulators, the media and the public generally view corporate political activity as illegitimate and distinguish it from operational business decisions. Critics of corporate political activity advocate ever-increasing regulatory restrictions and support their analysis with empirical studies that purport to demonstrate the ability of corporate donors to buy favorable legislation by making political contributions to members of Congress.

This Article challenges the prevailing characterization of corporate political activity as a distortion of the political process. Using a case study methodology, the Article examines the political involvement of one company, FedEx, in a series of regulatory reforms over a forty year period. Drawing upon the business context, the legislative record, campaign finance materials and interest group analysis, the Article demonstrates that political activity has been an integral component of FedEx’s business growth and operations. FedEx has successfully used its political influence to shape legislation, and FedEx’s political success has, in turn, shaped its overall business strategy. Moreover, in identifying the specific components of FedEx’s political activity, the Article highlights the range of mechanisms that corporations use to engage in politics, revealing that the exercise of political influence is far more complex than the purchase of political favors in a spot market.

Regulation is becoming an increasingly important factor for United States businesses. As a result, corporations must integrate political activity into their overall business strategy and must develop and manage their political capital in the same way that they manage other business assets. The FedEx story demonstrates the importance of politics to business and explains the growing investment by corporations in political capital. It further explains how the business world has responded, and will continue to respond, to regulatory restrictions by developing alternative mechanisms for exerting political influence. By understanding how and why corporations participate in politics, policy-makers can better address concerns about the effect of corporate political influence.

Download: How Do Corporations Play Politics? The Fedex Story

10. April 2014 by Miguel Barbosa
Categories: Curated Readings, Finance & Investing | Leave a comment

Inequality in the US – Part 1

I have been spending a lot of time reading about inequality in the U.S. Today I am posting part 1 of my findings related to inequality, campaign finance, & political influence.*Note today’s curations might seem a bit left leaning. I hope to balance this effect with tomorrows post.

2 Books to read:

Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems - by Thomas Ferguson  -Synopsis via UChicago -

“To discover who rules, follow the gold.” This is the argument of Golden Rule, a provocative, pungent history of modern American politics. Although the role big money plays in defining political outcomes has long been obvious to ordinary Americans, most pundits and scholars have virtually dismissed this assumption. Even in light of skyrocketing campaign costs, the belief that major financial interests primarily determine who parties nominate and where they stand on the issues—that, in effect, Democrats and Republicans are merely the left and right wings of the “Property Party”—has been ignored by most political scientists. Offering evidence ranging from the nineteenth century to the 1994 mid-term elections, Golden Rule shows that voters are “right on the money.” Thomas Ferguson breaks completely with traditional voter centered accounts of party politics. In its place he outlines an “investment approach,” in which powerful investors, not unorganized voters, dominate campaigns and elections. Because businesses “invest” in political parties and their candidates, changes in industrial structures—between large firms and sectors—can alter the agenda of party politics and the shape of public policy.”

Affluence and Influence: Economic Inequality and Political Power in America - by Martin Gilens –  Teaser via Amazon

“Can a country be a democracy if its government only responds to the preferences of the rich? In an ideal democracy, all citizens should have equal influence on government policy–but as this book demonstrates, America’s policymakers respond almost exclusively to the preferences of the economically advantaged. Affluence and Influence definitively explores how political inequality in the United States has evolved over the last several decades and how this growing disparity has been shaped by interest groups, parties, and elections. With sharp analysis and an impressive range of data, Martin Gilens looks at thousands of proposed policy changes, and the degree of support for each among poor, middle-class, and affluent Americans. His findings are staggering: when preferences of low- or middle-income Americans diverge from those of the affluent, there is virtually no relationship between policy outcomes and the desires of less advantaged groups. In contrast, affluent Americans’ preferences exhibit a substantial relationship with policy outcomes whether their preferences are shared by lower-income groups or not. Gilens shows that representational inequality is spread widely across different policy domains and time periods. Yet Gilens also shows that under specific circumstances the preferences of the middle class and, to a lesser extent, the poor, do seem to matter. In particular, impending elections–especially presidential elections–and an even partisan division in Congress mitigate representational inequality and boost responsiveness to the preferences of the broader public.”

Papers worth reading: 

Inequality –  by Glaser

“This paper reviews five striking facts about inequality across countries. As Kuznets (1955) famously first documented, inequality first rises and then falls with income. More unequal societies are much less likely to have democracies or governments that respect property rights. Unequal societies have less redistribution, and we have little idea whether this relationship is caused by redistribution reducing inequality or inequality reducing redistribution. Inequality and ethnic heterogeneity are highly correlated, either because of differences in educational heritages across ethnicities or because ethnic heterogeneity reduces redistribution. Finally, there is much more inequality and less redistribution in the U.S. than in most other developed nations.”

Party Competition and Industrial Structure in the 2012 Elections: Who’s Really Driving the Taxi to the Dark Side? -By Ferguson, Jorgensen, & Chen

“This paper analyzes patterns of industrial structure and party competition in the 2012 presidential election. The analysis rests  on a new and more comprehensive campaign finance database that catches far more of the myriad ways businesses and  major investors make political contributions than previous studies. By drawing on this unified database, the paper is able to  show that both major parties depend on very large donors to a greater extent than past studies have estimated. The paper  outlines the firm and sectoral bases of support for the major party nominees, as well as for Republican candidates who  competed for the GOP presidential nomination. The paper shows that President Obama’s support within big business was  broader than hitherto recognized. A central conclusion is that many major companies in the sectors most involved in the  recent controversies over surveillance were among the president’s strongest supporters. The paper also analyzes patterns of  business support for the Tea Party in Congress, showing that certain parts of business are more supportive of Tea Party  candidates than others. The role of climate change, financial regulation, and other issues in the election is discussed at length.”

Super Pacs - by Briffault

“The most striking campaign finance development since the Supreme Court’s Citizens United decision has not been an upsurge in corporate or union spending as many commentators predicted. Instead, federal election campaigns have witnessed the emergence of a new campaign finance vehicle – the Super PAC – which relies primarily on extremely large individual contributions, not corporate or union money, but which threatens to upend the federal campaign finance regime in place since 1974.  Super PACs can accept contributions in unlimited amounts and use them to engage in unlimited independent expenditures expressly supporting or opposing candidates. Non-existent before the spring of 2010, Super PACs were significant players in a number of 2010 Congressional elections and became major factors in the 2012 Republican presidential nominating contest. In many of the Republican primaries, Super PACs outspent the candidates. Nearly all the leading Super PACs in 2011-12 were closely identified with specific presidential contenders, and they became vehicles for wealthy donors who had given the legal maximum in contributions to a candidate’s campaign to give much more to the Super PAC backing that candidate. As a result, Super PACs threaten to effectively eliminate limits on contributions to candidates.This article examines the Super PAC phenomenon. It compares and contrasts Super PACs with other campaign finance actors. It considers the judicial and Federal Election Commission decisions that authorized their existence and operations, and the impact of Citizens United — which is not directly responsible for Super PACs — in creating an atmosphere in which lower courts concluded that donations to independent spending committees cannot be limited. The article explores the preliminary data on Super PAC fundraising and spending and the evidence that they function as virtual, but legally far less constrained, alter egos for the candidates they support. As a result, the emergence of Super PACs may very well spell the beginning of the end of our nearly four-decade-old post-Watergate campaign finance regime.”

Inequality & Democratic Responsiveness - By Gilens

“By Allowing voters to choose among candidates with competing policy orientations and by providing incentives for incumbents to shape policy in the direction the public desires, elections are thought to provide the foundation that links government policy to the preferences of the governed. In this article I examine the extent to which the preference policy link is biased toward the preferences of high-income Americans. Using an original data set of almost two thousand survey questions on proposed o policy changes between 1981 and 2002, I find a moderately strong relationship between what the public wants and what the government does, albeit with a strong bias toward the status quo. But I also find that when Americans with different income levels differ in their policy preferences, actual policy outcomes strongly reflect the preferences of the most affluent but bear virtually no relationship to the preferences of the poor or middle-income Americans. The vast discrepancy I find in government responsiveness to citizens with different incomes stands in stark contrast to the ideal of political equality that Americans hold dear. Although perfect political equality is an unrealistic goal, representational biases of this magnitude call into question the very democratic character of our society.”

Money Talks but it Isn’t Speech – by Hellman

“This Article challenges the central premise of our campaign finance law, namely that restrictions on giving and spending money constitute restrictions on speech and thus can only be justified by compelling governmental interests. This claim has become so embedded in constitutional doctrine that in the most recent Supreme Court case in this area, Citizens United v. FEC, the majority asserts it without discussion or argument. This claim is often defended on the grounds that money is important or necessary for speech. While money surely facilitates speech, money also facilitates the exercise of many other constitutional rights. By looking at these other rights, this Article notes that sometimes constitutional rights generate a penumbral right to spend money and sometimes they do not. Thus the fact that money facilitates the exercise of a right is insufficient to show that the right includes a penumbral right to give or spend money. The first contribution this Article makes is to identify this question: when do constitutional rights generate a penumbral right to spend money? The second contribution this Article makes is to provide an answer. When a right depends on a market good for its exercise, the right generates a penumbral right to give or spend money. When a right does not depend on a market good for its exercise, the right does not include a penumbral right to spend money. Using this account, this Article argues that the right to give and spend money in connection with elections need not be protected as speech under the First Amendment.”

The Democracy to Which We are Entitled: Human Rights and the Problem of Money in Politics - by Kuhner

“This Article is the first to argue that campaign finance, corporate political activity, lobbyists, and other ‘money in politics issues’ fall within the purview of human rights treaties. The universal assumption that domestic political finance is a purely domestic issue is mistaken. Domestic political finance is actually a matter of concern for international law. This is so because the provisions of the democratic entitlement under international law cannot be reconciled with the high levels of money in politics observed in many democracies. If this argument is sound, then human rights law requires States to enact political finance reforms.”

Inequality and Institutions in 20th Century America – by Levy & Temin

“We provide a comprehensive view of widening income inequality in the United States contrasting conditions since 1980 with those in earlier postwar years. We argue that the income distribution in each period was strongly shaped by a set of economic institutions. The early postwar years were dominated by unions, a negotiating framework set in the Treaty of Detroit, progressive taxes, and a high minimum wage – all parts of a general government effort to broadly distribute the gains from growth. More recent years have been characterized by reversals in all these dimensions in an institutional pattern known as the Washington Consensus. Other explanations for income disparities including skill-biased technical change and international trade are seen as factors operating within this broader institutional story.”

Does Corruption Affect Income Inequality & Poverty –  by Gupta, Davoodi, Terme

“This paper demonstrates that high and rising corruption increases income inequality and poverty by reducing economic growth, the progressivity of the tax system, the level and effectiveness of social spending, and the formation of human capital, and by perpetuating an unequal distribution of asset ownership and unequal access to education. These findings hold for countries with different growth experiences, at different stages of development, and using various indices of corruption. An important implication of these results is that policies that reduce corruption will also lower income inequality and poverty. “


Video: Affluence & Influence: Economic Inequality and Political Power in America

Video: How Economic Inequality Harms Societies 


09. April 2014 by Miguel Barbosa
Categories: Curated Readings, Wisdom Seeking | Leave a comment

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