Odds and Sods

Just to echo something Fred Wilson noted that on his blog, the commenting is getting almost salon-like:

....there's this great back and forth between two frequent commenters about the bank panic of 1907 and JP Morgan's role in it. That's the kind of conversation that just didn't exist for most people pre-Internet. You could get it in college dorms, bars and coffee shops in the right towns and cities to some degree, but certainly not late at night in your pajamas in your studio apartment.

I think we are becoming a more literate and conversational society because of the internet. And the tools aren't there to fully leverage this activity.

Now Fred named his post "Correspondence Is Making A Comeback" and I wanted to note two other things I've read recently:

- Letter writing is making a comeback in this digital age
- Written CV's are seen as more valuable han email ones by some head hunters

(This maps to the Return of Vinyl in an mp3 world)

The game theory would argue that this is so as actually writing something has a higher transaction cost than banging off some digital text and hitting "send", and game theorists are keen on seeing "strong tells" - signs of strong commitment - in signalling intent.

The other thing I'd note, in London anyway, is that UK bloggers have been drawn to meet each other in person in te Coffee Shops of London (hence the Tuttle Club) and now even Micro-Bloggers are getting together (at Twinterval, hardly a micro-bash)

Saw an article that fascinated me re the Modern concerned Green citizen. They have higher carbon footprints than un-Green people according to research by CACI - says spokesman Jonathan Burston:

An enthusiastic green is likely to be well educated, with high levels of household income, generally likely to be professional or senior managers, often middle-aged, generally has older children; the family home is likely to be detached and larger than average ... and they generally read broadsheet papers,' said Burston. 'They are likely to take more flights [and] have a company car or luxury car with a slightly larger engine. They have begun to recycle more, they are likely to compost their garden waste, use energy-saving light bulbs - but they have a relatively high carbon footprint.'

The 'environmentally unconcerned' tend to be male, be interested in science fiction and fantasy, generally read tabloid newspapers and are more likely to be football supporters and to have been refused credit. 'They have little or no concern for the environment. They are less likely to recycle or use energy-saving light bulbs,' said Burston. However, because they had less money to spend, they were more likely to cycle and use public transport, and less likely to have cars, or big homes to heat and multiple appliances to power, he added.

CACI's study follows similar national results from a study earlier this year by Exeter University, which reported that people who claimed to have the greenest lifestyles were often some of the main culprits behind global warming. Stewart Barr, who led the research, told the Guardian: 'Green living is largely something of a myth.'

In other words, to save the planet, you have to be a Chav

So next time you hear some proud person in a Pious warbling on, or someone extolling the virtues of the Organic Veg Delivery Man, or even better how they only use Green lightbulbs and toilet paper, slip that into the conversation

Some things in life are priceless.......

Prediction - in a year's time you are going to hear and see a heck of a lot less about Green Issues from the Chattering Classes.

One of the talks at LeWeb was from Dr Helen Fisher of Rutgers University, about the chemicals that act on you in different phases of Lurve. She also went on to hypothesise that there are 4 different character types, based on the types of chemicals swirling round in you - which was then equated with the Plato / Aristotelian view of character types.

(Maybe its just me, but I do get worried that a lot of modern character typing methodologies - certainly the stuff you see in consumer and the "biz psych book" sectors anyway - just seems to be a rehash of 2,500 year old thinking ).

At the end of her talk she was asked whether she would put her slides up at the conference, and she refused. It would seem that there is a book coming out in the New Year, and in the Christmas spirit..... Anyways, the video is actually up over here, and with a bit of judicious "Ctrl PrintScreen" action you can of course get the slides - like I have below on the 4 character types one.



We are all mixtures of these 4 types, but it would appear that Entrepereneurs are strong Explorers, bloggers have a lot of the Negotiator in them, and conservative rural folk are mainly Builders.

Now to me the really fascinating implication of her talk was that you can be anyone you want to be so long as you take the right drugs. Ditto, a Midsummer Night's Dream becomes possible with slipping the correct cocktail into your intended's drink.

A Brave New World awaits..............

The First World War ended 90 years ago today.

As we that are left grow old:
Age shall not weary them,
Nor the years condemn,
At the going down of the sun
And in the morning
We will remember them. ...

Sez the NYT:

Barack Obama wanted to know whom Mr. Doerr would recommend for chief technology officer of the United States, a position that Mr. Obama has promised to create. Mr. Doerr’s first choice was Bill Joy, co-founder of Sun Microsystems, in which Mr. Doerr invested early on. Mr. Joy is now a partner at Mr. Doerr’s firm, Kleiner Perkins Caufield & Byers. Mr. Doerr said it would be a sacrifice to lose him to the Obama administration, but that “there is no greater cause.”

Apart from wondering what Kleiner gets out of handing over one of their scions to the US Gov (truly there is no greater cause he could serve ). Does the US - and the UK - need a CTO, a TechCzar? If so, who? Is Mr Joy still the best man (or woman) for the job - is any one person up to the job?

If it were me, I'd go for a more Web 2.0 feel - a (gasp) network of experts, who work collegiately - A Wisdom of A Few Good People.....

This is fascinating - apparently Love & Hate tickle the same neurons, and of the two, St Paul may have been right on when he said we are nothing without Love, but he was being a lot more rational when he was Saul doing Hate. On C:Net

Since embracing Incorrectness, I have noticed that the passion of those who love either Microsoft or Apple seems even to exceed a Goth's passion for black eyeshadow.

......

Now, research led by Professor Semir Zeki of University College London may help to illustrate and explain the inflamed emotions that surround two mere technology brands.

It appears that, although love and hate seem to be rather opposing feelings, some of the same nervous circuits in the brain are responsible for both emotions.

The lovely thing is that the two radical heights of intensity both seem to involve two of the most pornographically named parts of the brain's sub-cortex: the putamen and the insula.

Which probably also goes a long way to explain the (to me, anyway) almost religious fanaticism Americans are showing over this election (did anybody catch the BBC's Question Time this week - hoo boy). I'm not American nor in the US, but I have noticed how polarised it all is, and Tribal - trying to have a rational debate with an American on politics right now is like trying to have one on Religion (oh yes, its the same thing ). I think if you said you supported McCain on Twitter you'd get lynched!. Not that I support McCain, you understand - but it would be amusing to do so on Twitter just to see what hate-twts looked like....

But clock this - Prof Zeki notes:

One major difference between love and hate appears to be in the fact that large parts of the cerebral cortex – associated with judgement and reasoning – become de-activated during love, whereas only a small area is deactivated in hate.

"This may seem surprising since hate can also be an all-consuming passion like love. But whereas in romantic love, the lover is often less critical and judgemental regarding the loved person, it is more likely that in the context of hate the hater may want to exercise judgement in calculating moves to harm, injure or otherwise exact revenge,"

In other words, in vitriol veritas (in hate there may be a lot more truth.......)

(Update - Valleywag suggests some people are supporting Obama for opportunistic rather than true belief reasons - tsk, we hate profane suggestions like that )

Read three great posts over a cup of coffee this afternoon - first, on the Hubris of The Bankers:

If Wall Street were truly serious about convincing Main Street that we're all in this together, its top executives would have stepped before the cameras yesterday and promised not to cut lines of credits to long-standing business customers who have never missed a payment.

They would have committed themselves not to foreclose on any homeowner who is willing and able to refinance into a new, government-guaranteed, fixed-rate mortgage set at 85 percent of the current value of the property.

They would have offered to suspend dividend payments until capital levels had been restored to pre-crisis levels.

They would have given us their solemn promise not to advise clients to hold on to their own investments while quietly dumping whatever they can from their own portfolios and shorting every security in sight.

With the Treasury now desperate for help in managing its new rescue efforts, they would have volunteered, at no cost to taxpayers, the services of some of those investment bankers and financial wizards who now don't have much else to do.

And the maharajas of finance could have set a wonderful example if they had all gotten together and agreed to work for a dollar a year until the crisis has passed.

(From The Washington Post via Paul Kedrosky).

Following that, an FT piece explaining how Hubris is rapidly followed by Hysteria in matters Financial.

Bank panics invariably reveal the poor quality of lending that accompanied the preceding boom. Walter Bagehot, the greatest of 19th-century writers on finance, was aghast at the stupidity of the directors of the discount house Overend Gurney, whose failure in 1866 was the cause of the last run on a British bank before the ignominious demise of Northern Rock. “They ruined a firm almost inconceivably good by business so inexplicably bad that it could hardly be much worse if they had of set purpose tried to make it bad,” wrote Bagehot.

The behavioural characteristics of the panic are the obverse of those of the boom. Excessive confidence is replaced by extreme fearfulness and a nervous distrust takes the place of blind trust. During the panic, the buying frenzy of the boom gives way to panicky disposals.

The Hubris to Hysteria was ever thus, and in every crash is the view that the Centre and the Sides Cannot Hold, and it is The End of Things. So likewise is the solution always the same:

......even in 1825 the authorities belatedly succeeded in quelling the panic in that incident by borrowing money from France and distributing a stash of old banknotes found in the vaults of the Old Lady. In the 20th century, the end of the panic tended to coincide with decisive government intervention: Roosevelt’s bank holiday of March 1933, the launching of the Bank of England’s “lifeboat” in December 1974 and the nationalisation of Japan’s Long-Term Credit Bank in October 1998, which was accompanied by a $500bn capital injection into the stricken banking system.

But fleecing the punter to put Humpty Dumpty back together again is not in general a way for bankers to earn love and admiration, and in this email age the Broadside Ballads are electronic - here are some choices from an email going round:

What do you call 12 investment bankers at the bottom of the ocean? A good start.

What's the difference between Investment Bankers and London Pigeons? The Pigeons are still capable of making deposits on new BMW's

I had a cheque returned earlier. "Insufficient Funds" Mine or the banks?

For Geography students Only: What's the capital of Iceland? Answer: About Three Pounds Fifty...

And poor old Japan - no sooner out of one crunch, and their economy is struggling again, it seems......

Following the problems in the sub-prime lending market in America and the run on Northern Rock in the UK, uncertainty has now hit Japan. In the last 7 days Origami Bank has folded, Sumo Bank has gone belly up and Bonsai Bank announced plans to cut some of its branches. Yesterday, it was announced that Karaoke Bank is up for sale and will likely go for a song while today shares in Kamikaze Bank were suspended after they nose-dived. While Samurai Bank are soldiering on following sharp cutbacks, Ninja Bank are reported to have taken a hit, but they remain in the black. Furthermore, 500 staff at Karate Bank got the chop and analysts report that there is something fishy going on at Sushi Bank where it is feared that staff may get a raw deal.

Speaking of fish, there seems to be quite a strong feeling that the bankers have not yet copped that they are in bad odour.....

This morning I thought we had a sensible, pragmatic solution to the UK bank crisis - an £50m recapitalisation, so We the People actually took ownership of the banks our money propped up. Next thing I know, its the evening news and its a £500bn deal, only £25bn recap, and most of the rest are various forms of taxpayer guaranteed loans. The BBC showed it in scale in the diagram above - its 3x more than we spend on health and schooling etc pa for example.

To put this into perspective - £50bn (c $90m) is about equal on a pro rata GDP basis to the US $700bn bailout. £500bn is an equivalent of a c $6- 7n TRILLION bailout pro rata'd into US terms - its about 30% of the UK GDP. Or looked at another way, every UK taxpayer is on the hook for £20k if it goes belly up, ie about 80% of the annual average wage. Because we have two earners at home, thats this household on the hook for (on average) £40k. Thats c $75k.

And what do we get for this in return? Its all very vague right now. It was cooked up* behind closed doors by the same politicians and bankers who got us into this mess, so the probability of this being a deal where the good stuff lands on my side of the fence is.....interesting. No Senate style hearings yet even to get a bit of pork back.

Now, if I may have a small rantette - No, If I'm going to keep the buggers who lost our money in their jobs, I don't want it to be just so they can repossess my house when I lose my livelihood thanks to their activities. Heck, between Gordon Brown's raids and the stock market shenanigans they've already ruined my pension - maybe a quid pro quo on last 5 years bonusses, chaps?

Something of this size needs ever person in this country on the front line to make sure it gives us what we want - irrespective of party or any other affiliation. We need politics at the level of the individual, and of the polity at the same time.

Its time for Politics 2.0

If ever there is a time for a people to take some control of what is being decided in their name, its now. If not, every type of abuse of that £500bn trough you can possibly imagine will occur - starting with the Olympic lot, some Councils, and no doubt a horde of other unworthy causes.

*No, turns out they sent out for curry takeaway

We reported last week that the initial response to the Bailout that we could pick up, from the online zeitgeist, was the joy of the worthies who stood to benefit from it - but in very short order we could see a strong counter coming up (see our analysis over here.)

This is not an economics blog per se, but we do deal with behavioural psychology & economics, and game theory - mainly as it pertains to online business strategies and e-commerce - and we do believe that the Paulsen team are missing a big trick, as they have been ignoring the behavioural economics of the situation. Worse than that, they have done it in such a way that makes them come across as extremely arrogant and insensitive to the very people whose help they need.

Now in normal circumstances politicians, financiers and other worthies blithely ignore the Will of The People - its one of the reasons why people normally can't be *rsed to vote - but in an election year, with their seats not firmly attached to their bottoms, the politicians are more likely to actually listen to the Vox Populi. Timing, as they say, is everything.

Thus it is worth examining the behavioural economic mistakes here:

- Firstly, study after study has shown that people would prefer to take a loss themselves, rather than give a benefit to people they believe are cheats. Its a part of the way humans are socialised. And make no mistake, outside of Wall St, the bankers are seen as cheats, if not worse.

- Secondly, the original plan was presented initially in a way that was breathtakingly insensitive - almost designed to annoy the hand that was supposedly to feed. Essentially it came across as "hand over $5000 per taxpayer now, so we can pay off the very rich guys who f*cked up, and then leave them to sort this out (potentially to your detriment) - and you only have X hours to do so or else we're all doomed". Behavioural economics suggests we do not take kindly to perceived coercion. This, we suspect, only served to raise hackles farther and make people dig their heels in even more. Would you hand over your money in this way to anyone else?

- Thirdly, it was woefully short on detail, and thus perceived credibility - the message was essentially "trust us" - from the selfsame people who had just lost everyone's trust. There was little in terms of detail to make people feel comfortable that their interests were being looked after. This would not have been too bad (after all, they had very little time) if what detail that did emerge was on the side of the people - but their devilish plans, such as buying assets from banks at inflated prices, did not exactly inspire confidence. Again, it was almost designed to ensure people felt they were being sold a pup.

For these reasons, I believe that the actual initial bailout plan actually made the conditions worse, not better, for acceptance. (Update - these same points are made in this video from Yahoo Finance with Aaron Task & Henry Blodget - by the way, the sponsored Ad worked very well I thought)



If I were to hazard a guess, based on (my own interpretation and view) of what the behavioural economics tells us, then it would be that the successful bailout plan would now have to encompass something like this:

- More of the "cheats" will have to go to the wall. We suspect there is little appetite to give any money to banks while the perceived cheats are still running the joints, and certainly not at inflated values. In a nationalisation or bankruptcy the "bad guys" get visibly wiped out, and the assets get bought at lowest possible cost, so its hard to imagine why the public would support any other approach in preference.

- No taxation without representation - we suspect that the money will only be able to be handed over now if there is public oversight.

- Hand over the money in tranches - again, no one trusts the bankers, so they are likely to prefer a plan that hands things out in parcels, and sees how well it is used and what effect it has.

- There will probably have to be some guarantee of good treatment to those who fall into arrears - it is probably unclear to most people that, if the problem is with bad mortgages, then why doesnt Govt just directly guarantee the mortgages rather than pass the money through all the banks, with all the friction and "cheat rewarding" unfairness that it entails. And never mind the possibility that your taxes are saving the hides of the guys who will repossess your house - this just won't fly.

- Some form of promised retribution on the perpetrators - this will likely the the form of Enron style court cases, but we are also seeing an interesting meme emerging - one of forcing bankers who took large bonuses over the last few years to hand most of the money back (and given the composite size of all those bonuses over the last few years, its no surprise.)

- It will probably have to be "sold" to the people by someone other than the existing administration or Messrs Paulsen and Bernanke, I believe they are seen as being too involved in creating the problems to be credible, and that the misjudged presentation of the initial bailout has made that worse.

Also, removing the "you're doomed if we don't get $700bn in 24 hours" is probably a pre-requisite - the only people doomed in the very short term (next few weeks) are bad bankers, and people probably get that..... and, we suspect, want a bit more reasoned thinking before handing over the loot.

Punting a bit further, if I were to hazard a guess then the most trusted form of organisation to oversee the resolution of this mess would be one that was totally publicly accountable and overseen by elected representatives, and would have a strong "public good" element to it. This almost argues for a Publicly Owned Bank - like an old fashioned Building Society - to manage out the mortgages. In addition I suspect it would not be acceptable for it to pick up inflated assets this side of a Chapter 11 or bankruptcy.

Furthermore, I suspect the "Elliot Spitzer" lesson post dotcom bust has not been forgotten, and many a politically ambitious lawyer is sharpening the blades..... hang on for a whole new class of class action suits if it can be proved the bankers lied to their computers about risk

Update - I see there is a NYT article reflecting similar things, but imho not understanding the underlying behavioural psychology - and also drawing a parallel with the New Deal structures of the 1930's which in my view maps closely to the endgame structure I mooted above (props to Dave Winer for link, he has been one of A list tech guys onto this issue early)

Update 2 - it seems that those who voted against this are being castigated for actually listening to what their consituents wished for. I know it seems incredible that one should do this rather than follow the whip, but when you are facing your own re-election.... Democracy eh

Update 3 - was reading Ina Fried's article on Tech stocks taking a bath and came across this brilliant line from a broker interviewed:

Popular sentiment on Wall Street, he said, is that the government's inaction amounts to "rearranging the deck chairs on the Titanic."

In other words the bankers are still hoping to be first in the queue for lifeboats, and beggar the women and children - which is exactly the reason why Main St doesn't want to let them off the boat until it goes down.

Update 4 - interesting article on the scale of existing corporate bailouts in the US - the only difference here is the size and the public awareness just before an election.

Watching over the morning coffee as various Tech pundits we know and love weighed in on Twitter, Friendfeed etc about the terrible goings on in the US Election run off.

(For the uninitiated, much of the New Media is populated by the US Coastal Elite, who are staunch Obama-ites and of course are horrified by Ms Palin and even more horrified that the lumpen proletariat may actually vote her and Mr McCain in).

Given that many of these same people have been among the most vociferous crusaders for various Wisdom of Crowds services, and things like Net Neutrality to ensure that the voices of those without power get through, it did strike me that there was a certain incongruity here.

In other words, when the 2.0 crowd talk about the "Wisdom of Crowds", do they mean that its fine for helping Mall Man buy consumer tat from their companies - but for serious situations like, oh, the practice of democracy, its time for the Coastal Elites to take over?

Tom Lehrer foresaw all this in the 1950's of course - thats the video above