29 October, 2015

Plane reading, Oct 29 2015

Expert takes worth reading on economics, technology, and other interesting topics from the last week.
Plus, recent news on Uber and on-demand/autonomous vehicles:

Economics and business in emerging markets

  1. Xinhuanet, on Chinese exams and licensing for TV hosts
  2. Tyler Cowen, on characterizing China's growth as Solow catch-up (capital accumulation)
  3. Dallas Fed, "Long view of China suggests economic slowdown"
  4. QZ, on the possibility that failed China metals exchange Fanya was a Ponzi scheme, possibly supported/protected by government
  5. Tim Taylor, on China's growth's contribution to reducing global inequality (from Hellebrandt/Mauro)
  6. NBER, on China's apparent massive understatement of real unemployment 1998-present

Economics and Inequality

  1. Tim Harford, "The real benefits of migration."  Interesting framing of impact of ignoring benefits to migrants themselves
  2. Middle Class Economist, on a study claiming 90% of state subsidies go to large businesses
  3. Tim Taylor, on more research showing inequality partly driven by handful of outperforming firms: inter-firm pay, not intra-firm pay
    • This doesn't appear to be widely understood, as VoxEU reports on the "surprising" negative correlation to unionization and top earners' shares of income.  Seems to me that this is expected since outperforming firms are unlikely to be unionized (due more to type of work(ers) at leading-edge firms than impact of unions on manageability)
  4. Atlantic, on Frankfurt's new book On Equality suggesting inequality is a strawman for unfairness: "The poor suffer because they don't have enough, not because others have more, and some have far too much."
  5. A new Vanderbilt study on the impact of universal pre-K is a bit of a Rorschach test:

Economics and environment, including global warming

  1. VoxEU, on Europe's anti-dumping protections against Chinese solar panels overcorrecting and tilting the playing field in favor of European production
  2. Nature, on generalizing the likely overall negative impact of global warming on economic productivity
  3. CNN, on breakeven oil prices for Middle Eastern economies (based on budget/expenses)

Economics and Politics (aka public policy)

  1. Noah Smith, on financialization depth's potential as a form of the "resource curse"
  2. Mark Thoma, on Brad deLong's "Central banks are not agricultural marketing boards"
  3. Tyler Cowen, on Clinton's and Sanders' plans for reduced/free college tuition
  4. Economist, on perverse impact of Romania's plan to reduce jail time in exchange for research
  5. Spontaneous Finance, on negative deposit rates in Swiss banks
  6. Paul Krugman (via Mark Thoma) on a new paper examining the 30-year decline of "natural interest rates" - the rate of interest at which the economy is neither depressed and deflating nor overheated and inflating

Economics and business

  1. Alphaville, on "commodity financing as deflationary feedback loop of hell."  Interesting sidebar on backwardating self-driving POV into rental markets
  2. Alphaville, on the accounting impacts of Moody's updated guidance for capitalizing operational leases
  3. Alphaville, on deal multiples of PE firms vs strategic buyers
  4. SSRN, on the positive impact (financial and governance) of professors on corporate boards
  5. NBER, research suggesting Spotify is revenue neutral (displaced album sales offset by reduced piracy)
  6. Chad Jones, on Paul Romer's concept of the economics of ideas as nonrival goods and increasing returns to scale

Bitcoin, blockchain, and more general FinTech

  1. Alphaville, on Digital Currency Group - a bitcoin trading platform nee Genesis Trading
  2. Bloomberg, on McKinsey's new report "Two routes to digital success in capital markets" predicting that FinTech can increase revenue, cost cuts, and boost profit by 30%
  3. Dealbreaker agrees: "FinTech thinks that's a cute little job you've got there"
  4. Lawrence Uebel, on opportunity to use tech for anti-money laundering / know your customer compliance to gain tech/cost advantage
  5. Alphaville, on a blog analysis of SPECTRE (Bond villain) as an investment vehicle

Big Data, Machine learning, AI, etc.

  1. Chris House, on utility challenges of large datasets
    • Mark Thoma, on distinguishing between predictive and significant variables
  2. Alphaville, on the mainstreaming of technological abundance thinking

Education reform, MOOC, etc

  1. Alex Tabarrock, "Apple should buy a university"
  2. Slate, on textbook publishers getting into adaptive learning software
  3. New Yorker, "The rise and fall of for-profit colleges"

Business and Technology

  1. NYTimes, on Harvard's Law School Library's "Free the law" project - digitizing and making freely available case law (which is technically free, but expensively aggregated by Lexis/Nexis etc)
  2. Steve Randy Waldman, advice for Twitter
  3. Fred Wilson, "Software is the new oil" in terms of delayed operating leverage and cash flow
  4. NYTimes, on the economics and high automation of the used book market
  5. WashingtonPost, on Yelp's plan to integrate health & safety inspection data into restaurant listings
  6. Wired, on Apple Music's traction and likely eventual dominance
  7. BPS research digest, on research examining the link between personality traits and computer programming abilities (openness, not introversion or conscientiousness) 
  8. GigaOM, on AirBnB testing "Journeys" a full-service travel offering
  9. Digitopoly, a revised history of the quote "information wants to be free"
  10. Jason Lemkin, on Jet.com as "star-f*cking" not investing
  11. RT, on Grenoble's (France) literary short story vending machines
  12. Mother Jones, a longform piece on the failures of Electronic Medical Records
  13. Slate, on the origins of unpredictable behavior of Facebook recommendations
  14. Stratechery, on the NY Times / Amazon workplace scandal and response
  15. ManuKumar's take on Howard Mark's recent letter "It's not easy" and the value of second-level thinking


  1. AvWeb, on NASA's new x-plane distributed propulsion proof of concept
  2. NYTimes, on NASA probe Cassini diving through water vapor plumes on Saturn's moon Enceladus
  3. WSJ, on Germans' law-abiding nature intersecting bikes and pedestrian transit
  4. Futurity, on research showing that teeming ants function as both a liquid and a solid, not unlike ketchup
  5. Lifehacker, on an arduino/3d printer hack to open any combo master lock in under 30 seconds
  6. Charles Green, "Clients don't buy solutions they buy problem definitions"
  7. NYTimes, on Volkswagen's expanded inquiry into managers who knew about fraud but turned a blind eye
  8. Climateer, on Charlie Munger's positive view of expert generalists over specialists
  9. HBR, on research that suggests that empathy is harder if you've been in someone else's shoes
  10. Futurity, on connectivity/collaboration being good for data acquisition and bad for problem-solving and solution generation
  11. Gizmodo, on cold-weather-gear testing for US Navy Seals.  Great story, also interesting about ability of wicking microfiber layers to dry you from inside out
  12. DailyFinance, on startup alternatives to waiting on hold for customer service
  13. Corey Robin, attacking an op-ed that defends restaurant tipping customs
  14. Mark Mansen, on "Screw finding your passion"
  15. Tim Lawrence, on "Everything doesn't happen for a reason"
  16. Vanity Fair, on the divorce/sex scandal at Stanford's business school.  This hits close to home, not only on costly (and documented!) abuses of the legal system by people in power, but also on bystanders looking the other way in fear of losing their own jobs/livelihood.  This is a national problem.  "Marriage is an institution, divorce is big business."   Bystanders have a role in stopping bullying.

Uber, on-demand rides, ridesharing, hyperlocal logistics, parking, vehicle autonomy etc.

  1. Tyler Cowen, "Three counterintuitive scenarios for driverless vehicles."  This blog has been discussing #3 for several months now
  2. Cowen again, on peak consumer surplus for Uber riders
  3. Jason Lemkin, on Uber's IPO being 2Q2016 at earliest based on current capital raising implications
  4. DealBreaker, announcing reports Uber is looking to raise another $1 billion at a $60-70b valuation
  5. TechCrunch, on WalMart wanting in on drone delivery
  6. TechCrunch, Lyft beat Uber to Las Vegas airport
  7. CheapTalk, on last week's attempted (failed) Uber driver strike in Chicago
  8. NYTimes, on Uber's PR focus as alternative to drunk driving
  9. The Atlantic, on the true cost of roads (far more than drivers pay)
  10. Mike Shedlock, Amazon vs FedEx/UPS vs Uber
  11. WSJ, on Uber's systematic impact on taxi lenders (discussed by this blog several months ago)
  12. PointsGuy, on Uber partnering with airlines.  A broader version of this is among my upcoming recommendations for Uber
  13. TheVerge, on Domino's new bespoke pizza delivery cars
  14. TechInsider, on Oslo banning cars from city center by 2019
  15. WashingtonPost, on Navigant research framing of which auto companies are leading autonomy
  16. Dealbreaker, on Uber "entering the Balkans uninvited because that's never backfired on anyone before"
  17. DailyFinance, on Amazon Fresh subscription increase to $299/year (includes Prime)
  18. TechCrunch, on Amazon one-hour delivery launching in San Francisco
  19. Business Insider reports Uber accused (by rivals) of "using tax avoidance on massive scale" in Europe by issuing receipts from Netherlands to avoid VAT in most cities

21 October, 2015

Plane reading, Oct 21 2015

Expert takes worth reading on economics, technology, and other interesting topics from the last week.
Plus, recent news on Uber and on-demand/autonomous vehicles:

Economics and business in emerging markets

  1. Tyler Cowen, "The rise and fall of the Chinese economy" at MRUniversity
  2. Alphaville, on unsustainable debt growth inside "India's House of Debt" increasing financial stress, particularly as is tied to commodity exposure (and recent price drops)
  3. Barry Ritholz, with an excellent infographic from Visual Capitalist comparing the demographics and economies of China with the United States
  4. Christopher Balding, on the Chinese service sector's growth capacity to counterbalance the shrinking of China's manufacturing and construction
  5. TechCrunch, on Xiomi's new segway-scooter and 4k TV.  I just started reading "Little Rice: Smartphones, Xiomi and the Chinese dream"
  6. TechCrunch, on GrabHouse (India) being the latest attempt to eliminate brokers from real estate brokering.  It's not clear GrabHouse has insight into the dynamics of why something simple like Craigslist has stood up under almost all challengers (including Pittsburgh favorite RentJungle).
  7. David Warsh, on (mostly) unheralded Chinese economist Du Runsheng
  8. AlphaVille, on BofA monthly fund manager survey showing perception of decreased risk from China recession since last month

14 October, 2015

Plane reading, Oct 14 2015

Expert takes worth reading on economics, technology, and other interesting topics from the last week.  Plus recent news on Uber and on-demand/autonomous vehicles:

Economics and business in emerging markets

  1. Alphaville, on the topic of SOE "reform" in China under reduced need for infrastructure
  2. TheVerge, on a Pepsi-branded android phone in China
  3. Alphaville, on the prevalence of petrodollars in Sovereign Wealth Funds, the impact on emerging market capital inflows, and the impact of lower oil prices on both.  Also causes dumping of US-denominated assets.  Which isn't really the problem some people fear.  Somewhere I've seen a breakdown of OPEC country budgets, many were based on oil prices at/above $75/bb hence liquidation of SWF
  4. VOX, on ISIS business model being unsustainable (revenue is 50% extortion, 25% taxes, 25% oil/gas)
  5. Noah Smith, on why free trade is no longer seen as no-brainer by economists

09 October, 2015

Blog roll: John Hempton

Periodically I'll highlight some of the blogs I read on a regular basis - and share with you why I find them valuable.

Today, that's John Hempton of Bronte Capital in Sydney, Australia.  First some background, then I'll narrate a specific recent post and highlight what makes it a "good" example of strategic analysis of a business.


Hempton invests in long/short equity positions for non-retail clients and often shares thoughts about positions he holds or is considering - particularly potential frauds.

His posts are thoughtful, incisive, and full of wit.  Usually, he's sharing a contrarian position on something that has been hiding in plain sight that "public" investors aren't spending the requisite amount of intelligence on when analyzing.

Sometimes, Hempton is contrarian to the contrarians - like his long-running series opposite Bill Ackman's take that Herbalife is a ponzi scheme.  If you aren't familiar, the best single post on Herbalife to start with is probably here.

08 October, 2015

Uber (Part 6) - Transit network cross-subsidies make it easier to cherry-pick profitable routes

Summary: At a high level it appears at least plausible that in Pittsburgh today, the entire bus system could be profitably discontinued if the Port Authority operated an Uber-like service instead.

It's common for a business to offer a portfolio of products, some of which are more profitable than others.  This can either strengthen the business, or open it up to devastating competition, depending on the situation.

A product might even be sold at a loss (negative profit) as part of a marketing strategy.  Industries from banking to specialty chemicals, however, have slowly learned this can be a devastating strategy:  it invites new competition to cherry-pick profitable product volume, leaving a company saddled with both loss-making products and legacy overhead costs that are challenging to adjust in the short-term.

This is similarly true with customers who are cheap/expensive to serve/sell to due to idiosyncrasies in their structure or behavior.  Often times, these cross-subsidies aren't intentional - they evolve from organizations' cost structures bloating into the available revenue.

For example, the US postal service has a dual government mandate to provide both universal service and to break-even financially.  But years of having FedEx and UPS cherry-pick the most profitable routes, combined with an internet-driven shift away from "baseload" mailings, have left the postal service struggling to service its legacy costs.  In 2012, even the US government spent only $337m of its $4.8b in mailings with the USPS (7%).  The situation at USPS is going from bad to worse.

This concept of cross-subsidies is both an opportunity and a threat for Uber:

  1. Transit network subsidies are large, particularly in bus networks
  2. Profitable transit routes may fall to Uber-like competition, especially once autonomy is available, sending public transit systems into an accounting death spiral
  3. Meanwhile, Uber should be careful that its adoption of a legacy ride pricing structure doesn't leave it vulnerable to a similar disruption

07 October, 2015

Plane reading, Oct 7 2015

Expert takes worth reading on economics, technology, and other interesting topics from the last week.  Plus recent news on Uber and on-demand/autonomous vehicles:

Economics and business in emerging markets

  1. Chris Dillow, on the global trade slowdown
  2. TechCrunch, on Hoffman-backed Segovia - enterprise software for aid programs and NGOs.

Economics and Inequality

  1. Gale, Kearney, and Orzag at Brookings, on the Gini coefficient limits of a 50% tax rate's ability to alter income inequality particularly among the bottom quintile.  And John Quiggan with a partial rebuttal
  2. Mark Thoma, arguing that welfare states help (not hinder) economic growth.  Tim Taylor with more detail, including mythbusting about perceptions that the US has low and lagging transfer payments relative to global peers

01 October, 2015

Leadership: Do you get what you inspect or expect?


The capstone ROTC class is titled, simply, "Leadership."  Mine was taught in 1998 by CAPT J.A. Fischbeck, a nuclear-trained former skipper of the USS La Jolla (SSN 701) and later the director of the Navy's Arctic Submarine Laboratory.

Our final exam was to write an essay on the topic "Do you get what you inspect, or expect?"  I chose the latter, and wrote an essay on the power of setting clear, high expectations and demanding people be accountable to them.

It was too easy, I argued, for mere inspection to devolve into a checklist mentality.  I had been on board a submarine - I think it was the USS Oklahoma City (SSN 723) - as a midshipman when its computer emergency scrammed the nuclear reactor quite unexpectedly.  Someone had gotten complacent filling out a routine inspection form, and hadn't noticed an unsafe condition develop*.

It was an... interesting... experience.  Subs are usually trimmed for slight negative buoyancy and controlled with diving planes; without propulsion an already submerged submarine will slide backward into the depths while the operators scramble to bring the emergency electric propulsion online.  The backup to the backup is an emergency blow, which we did not have to perform that day.