You drank my milkshake!

Independent globalists optimize their business.

Organize your after-tax returns, labor, and supply chains into the tax and regulatory regimes that are most favorable.  It’s an optimization exercise and a chess game.

1) After-Tax Returns

The equation: taxes + regulation.   Taxes are simple; they reduce your profits by their rate.  Regulation is more complicated because it costs money to comply, but there are also opportunity costs from business activities that are no longer available.

The game: reduce and eliminate taxes and regulation.  Express the stresses of international competition to pressure national politics using one issue at a time in the countries where you do business.

2) Labor

The equation: salary + benefits, including long term commitments.  Retirement, health care, and other benefits have costs, but also may reduce employee turnover.

The game: reduce and eliminate costs within each role.  Divide operational units and move them to locations with optimal rules and costs.  Use the placement of these units to pressure politics to reduce labor’s collective bargaining rights.

3) Supply Chains

The equation: price.  Commodities and other non-labor costs are priced on global markets, and are mostly fungible.

The game: reduce and eliminate regulations that internalize costs of production for your suppliers.

–

** Please don’t take this seriously.  Abuse of power and unfair exploitation of labor damages the economy and society.  **

A vocal group has been fighting this requirement in a growing protest known as “Nymwars“.

Google’s requirement is based on their plan to use G+ as an identity service while the nymwarriors demand that real identities are sometimes used by oppressive regimes to stifle free speech and track political activists.

Google’s position violates the “Don’t be evil” code.  It also ignores an important market demand: profile management.  G+ should allow real people with real names to create public profiles of any nickname they like.  These nicknames would be persistently attached to the account, and bad behavior could remain accountable, but real people could remain anonymous to the public to avoid retribution or political oppression.

It’s usually a good idea to give users what they want, and in this case, Google could use this opportunity to become a new kind of identity provider: one that supports private links between private citizens and their public profiles.

Policy makers – and the rest of us – should pay more attention to ROI.

We will still see the world as it is, of course.  But we will be able to add layers.  Layers can give us information like the ratings of a restaurant we see or night vision or heat vision, or little flying arrows showing the direction and speed of the wind.  Layers can also give us controls like interacting with vending machines or unlocking your car, or saving a good bottle of wine.

It will be very cool.

Wikipedia anything you see.  Add people you meet to your contact list with context.  Users generate content.  API lets developers add controls.

The future is already here – it’s just unevenly distributed

To me, it is a reminder that the things we imagine the future to be are already taking shape in the labs and garages around the world.  It’s also a good reminder that we’re creating our future – that it is up to us – and that our work is what gives the future its trajectory and shape.

Then there is Google.  Their incredible position reflects their inspired work, but the next steps seem so obvious and painfully lacking.  Their  future feels so clear, but the present is terribly clunky.

I got a voice mail using Google Voice.  A transcript and link was sent to my e-mail.  I click on the link and listen to the message.  So far, great.  Now I want to save the message, but there are no links.  I click the “Google Voice” logo, but no dice – not even the logo is linked.  The message mentioned a meeting, so I want to add the meeting to my calendar.  No link for that either, of course.  The page doesn’t even have the standard Google header bar.  Failure to integrate.  Failure to provide basic navigation.  Great functionality hidden in a tangle of stand-alone services that make it hard for users.

The internet giant has everything going for it – the important things at least – but regularly delivers a disappointing user experience.  They have sufficient users, capital, and talent to enter and dominate just about any market they want, but many projects fail because of the easy stuff.  Economies of scale in every corner of the business should give Google a powerful advantage as they enter and grow into new markets, but most times Google trips.

Their typical process appears from the outside to follow a pattern like:

1. Somebody likes a “20% time” project
2. Project enters “Google Labs”
3. APIs launch in Google Code and Google Apps
4. Failure to integrate among related services
5. New services must survive alone or they are abandoned

This last piece is important.  Just because you build it doesn’t mean people will come.  Integration with existing services is probably the best way to introduce new services to existing users and maximize value to consumers.

Integration and navigation among Google services is terrible.  I hope this will not be mirrored in Chrome OS and Google TV - these are 2 new business lines that will depend critically on good user experiences.

The idea of Google Labs is great on it’s surface: give new services a place to be refined while  gaining traction and validation.  But don’t sacrifice the vision of leadership.  Performance as individual lab experiments ignores the value these services gain when they are integrated.  Google Wave should have been integrated with Docs and Gmail as early as possible;  instead it was not integrated and cancelled.  Also, dropping the real estate layer from Maps instead of integrating with real estate ad sales … so disappointing.

I hope that lack of integration is not an intentional strategy to avoid becoming evil monopolists.  I know the culture of resentment for what Microsoft did in the operating system and browser markets has left Google feeling careful not to unfairly exploit their position of power.  Actually, I respect them a lot for that.  But integrating among services is not evil; instead, it is exactly what you hope for when you offer an API.  Every Google service should have an incentive to integrate other Google services.  They should also be encouraged to integrate non-Google services.  If Buzz played friendlier with Twitter, I think it’s adoption would have been a couple orders of magnitude better, and instead of Twitter growing essentially alone, there could have been a diversity of integrated messaging services.  Maybe next time…

Management:

There is another problem when Google fails to integrate across services:  incentives.  Because newer projects do not add value to existing services, they are perceived as expensive speculation.   Existing business lines only want to subsidize new business lines if they will add value.  Services in Google Labs that work in isolation or require opt-in for integration add little value to existing services.  I attribute many of the failed launches to this problem.

The future is clear.  Google can become a beautifully integrated suite of services that satisfy all the major demands of modern information-age consumers, including business customers and developers.  It can avoid being evil by opening as many APIs as possible to promote competition – enabling other companies to integrate all the services consumers are growing to expect.

But it’s not there yet.  Time to get back on track.

Do you blame Pakistan for bin Laden living there?  Do you think our relationship with their government should be strained by this?   Should we reduce support?  Sanction trade?

No.  That’s wrong.  Here’s why:

Pakistan is not one thing and their government is not monolithic.  There are many power structures in Pakistan.  You shouldn’t blame “the government” for sectarian separatists, terrorists, or others who secretly hide within their borders.  Thinking that way is like blaming a person when their body grows a cancer.

Did we blame the American Government when Timmothy Mcveigh was a terrorist in Oklahoma City?  No.  America was a victim.  And Pakistan is the victim now.  Pakistan has been in a complex civil war with multiple armies of radical extremists for many years.  Some of them are politicians trying to consolidate power with secret affiliations, others attack India trying to incite a broader war, others hide like rats.  Pakistan is suffering from these cancers.

We should be offering tax incentives to increase trade with Pakistan, increase aid, and increase support for democratic stability, secular and academic institutions, and human rights.   Economic sanctions and saber-rattling are counterproductive because they attack the commercial economy.  It would be better to empower the population through the commercial economy – enable them to overtake and stamp out radical separatists and would-be religious fascists.  Help them get on a path to become a productive and educated economy that has the power and will to suppress it’s own cancers.  Use economic levers to achieve better outcomes.

1. According to Zillow, 28.4% of all single-family homes with a mortgage in the United States are now underwater.

2. Zillow has announced that the average price of a home in the U.S. is about 8% lower than it was a year ago;

3. U.S. home prices have now fallen a whopping 33% from where they were at during the peak of the housing bubble.

4. During the first quarter of 2011, home values declined at the fastest rate since late 2008.

5. According to Zillow, more than 55% of all single-family homes with a mortgage in Atlanta have negative equity and more than 68% of all single-family homes with a mortgage in Phoenix have negative equity.

6. U.S. home values have fallen an astounding 6.3 trillion dollars since the housing crisis first began.

7. In February, U.S. housing starts experienced their largest decline in 27 years.

8. New home sales in the United States are now down 80% from the peak in July 2005.

9. Historically, the percentage of residential mortgages in foreclosure in the United States has tended to hover between 1 and 1.5 percent. Today, it is up around 4.5 percent.

10. According to RealtyTrac, foreclosure filings in the United States are projected to increase by another 20 percent in 2011.

11. It is estimated that 25% of all mortgages in Miami-Dade County are “in serious distress and headed for either foreclosure or short sale“.

12. Two years ago, the average U.S. homeowner that was being foreclosed upon had not made a mortgage payment in 11 months. Today, the average U.S. homeowner that is being foreclosed upon has not made a mortgage payment in 17 months.

13. Sales of foreclosed homes now represent an all-time record 23.7% of the market.

14. 4.5 million home loans are now either in some stage of foreclosure or are at least 90 days delinquent.

15. According to the Mortgage Bankers Association, at least 8 million Americans are currently at least one month behind on their mortgage payments.

16. In September 2008, 33% of Americans knew someone who had been foreclosed upon or who was facing the threat of foreclosure. Today that number has risen to 48 percent.

17. During the first quarter of 2011, less new homes were sold in the U.S. than in any three month period ever recorded.

18According to a recent census report, 13% of all homes in the United States are currently sitting empty.

19. In 1996, 89% of Americans believed that it was better to own a home than to rent one. Today that number has fallen to 63 percent.

20. According to Zillow, the United States has been in a “housing recession” for 57 straight months without an end in sight.

Source: The Economic Collapse: :”Don’t Buy A House In 2011 Before You Read These 20 Wacky Statistics About The U.S. Real Estate Crisis“

The IPO of LinkedIn demonstrated a public premium: public markets offered a higher valuation than the private markets did.   Valuations can be higher because discount rates are lower.  Think about it: public investors get maybe 15% in a strong year.  Private Equity investors are organized around discount rates of 20% or higher.    If your discount rate is so high, future profits are simply not worth as much.

There is another important reason for a public premium: regulated standards of conduct and transparency.  When owners (shareholders) are more informed and confident, risk is reduced and value goes up.

The reason to hope this is the case is for the public good.  If IPOs and public listings are shown to be a rational — because the cost of compliance is less than the valuation premium — then more companies will be public and capitalism will be more broadly accessible. Also, this will lead to higher overall investment rates and stronger economic growth.

“It will be the creditor that tightens global liquidity.  Not the debtor.”

I don’t agree with Russell Napier’s ultimate conclusion about S&P hitting 400, but this interview is full of gems:

http://video.ft.com/v/946244201001/Long-View-Historian-sees-S-P-fall-to-400

(it’s part of a series: http://video.ft.com/v/940727417001/Long-View-A-gathering-storm)

The reason that I don’t agree with his conclusion is that I think emerging market credit expansion will be harder to control.  I think credit expansion will be highly private, opaque, poorly regulated, and broadly accepted by the population.  Expansion of credit is an expansion of the money supply.  During which, emerging market consumption and inflation will be higher than expected.  Corporate profit growth would likely rise faster in that scenario, so downside risk should be protected to some extent by strong corporate balance sheets.

Or of course it could go the other way.  :)