Tim Oren's Due Diligence

On The Road: No TARP Wanted Here

The rest of the country seems to be taking a different attitude towards bailouts than the coastal political class. Unfortunately for Obama and Tim Geithner, TARP is something to market... against. The following was spotted in Pocatello, ID:

(Right down the street from Portneuf Valley Brewing's brewpub, which I can recommend.)

I also spotted a large billboard ad for a Toyota dealer near Ogden, Utah - proclaiming "No Taxpayer Subsidies Here" as a come-on. (I didn't get a photo of that one, as a nasty cross-wind meant two hands on the wheel or else.)

On The Road: A Wet Year

We're out of town for our annual summer camping trip, this time to Rocky Mountain National Park and return, taking our time both ways. We've been in Salt Lake and the Pocatello area, and now headed east in Wyoming on I-80, after cutting through the corner of Utah to see Bear Lake.

The whole area has been getting a wet start to summer. The northeast corner of the Great Basin and the central Rocky Mountains have gotten 150 - 300% of normal rainfall for June so far, and it's only half done. Two days ago we watched the bank-full Snake River in Idaho Falls. We've had to dodge sporadic thunderstorms and rain showers the whole time, and the mosquito population is making the most of it in this normally arid locale.

Other than needed refilling of reservoirs, one positive result of the precipitation is an outrageous display of wildflowers. Since photographing them is one of my hobbies, I've been having a good time. So here's some gratuitous eye candy, courtesy of Mother Nature:

Sego Lily

Blue Flax

Penstemon

All shot with a Sony alpha DSLR.

The Roving Eye: Ember the Mini-Bot, P. J. O'Rourke Nails It, Newspapers On Notice

How much? Thats my question about iRobot's new mini-warbot, developed for DARPA. Not only is it cute, but equip it with open hardware interfaces and/or programming environment and it should have serious potential for the hobbyist market, as well as repurposing to other applications.

The truth about suburbs. I've been a P.J. O'Rourke fan since his National Lampoon days. In a WSJ piece nominally about cars, he unloads this:

We’re way the heck out here in Valley Bottom Heights and Trout Antler Estates because we were at war with the cities. We fought rotten public schools, idiot municipal bureaucracies, corrupt political machines, rampant criminality and the pointy-headed busybodies. Cars gave us our dragoons and hussars, lent us speed and mobility, let us scout the terrain and probe the enemy’s lines. And thanks to our cars, when we lost the cities we weren’t forced to surrender, we were able to retreat.

Yes. He's defined part of the the battle-line of today's political cold war. Those 'futurists' who think that increasing fuel prices will bring suburbanites back to live in central city tenements are out in la-la-land. Instead the jobs may just follow the productive; Detroit gives a preview of that outcome.

A failed state. California's state expenditures have increased 35% since the 'tax cutting' Governator took office in 2003. As Matt Welch asks:

What, exactly, has been the return on this added investment? If spending under Gov. Arnold Schwarzenegger increased 6.75 percent a year during mostly good times, surely there must be, say, a 3 percent increase in the quantity or quality of...something? Crickets.

If we had back that 35% increase, the California budget would be in surplus. Instead of considering rolling back the spending, we're asked for more taxes and budget gimmicks. When the electorate wisely refuses them, the political class once again threatens to shoot their hostages - public safety and parks - while protecting the public employees' unions. What is there about layoffs and salary and benefit cuts that they don't understand? The private sector gets to deal with this in every downturn, while our betters in the political class skate through. Needless to say, this contributes greatly to the business climate in California.

A relic of the 20th century. Just what the newspapers need, more advertisers headed for the exits. Local fish-wrappers have long been the vehicles for required public notices of events such as mortgage foreclosures, public meetings and business name registrations, which creates an effective subsidy to their businesses. This requirement dates back to when the town rag was in fact read by most of those who would need notice of such events. With the readership shrinking, that's no longer a good bet, and some government entities are starting to take notice. It's pretty hard to argue that publication on dead trees is more useful than a combination of appropriate RSS feeds and a searchable archive would be. As the linked article points out, there are issues regarding reliable and trusted implementation, but it shouldn't be hard to beat the status quo. A business opportunity out there for someone - Google? Iron Mountain? Maybe even archive.org, if they'd like an actual revenue stream.

Kudos For Kel-Tec

A while back I posted about damage to one of rifles, a Kel-Tec SU-16B, and promised a report on how the company handled the repair under their lifetime warranty. I'm pleased to say that it's back in my hands, with the time to repair being about two weeks, rather than the 4-6 week delay promised. They not only replaced the broken plastic upper, but the bolt and carrier assembly which could have been damaged by impact.

I took the repaired rifle out to the range last Saturday, and not only does it work but it seems to be grouping a bit better than before. My only gripe is the $70 it took to ship it to the factory for repairs due to the required options for a firearm. Also anyone finding themselves in a similar situation shouldn't bother trying to contact the company by e-mail or Web, they seem to be totally unresponsive to that channel. On the other hand, their phone support line had a short hold time and give me quick and courteous answers to my questions about shipping and repair.

So +1 Kel-Tec.

The Roving Eye: The Grin Test, Buh-bye Pontiac, Red State CA

Sovereign Risk. Everyone who's pitched knows about the 'grin test' - where you get to take your best shot in front of the executive staff/board/investment committee/limited partners, and then have to smile - and mean it. Just now a lot of hedge fund managers are thinking about that test as it regards investing in unionized companies in politically charged industries. Wonder what that means for the unionized, leveraged, leftist newspaper industry?

I learned to drive on my father's 1967 Pontiac Catalina station wagon. Big honkin' V8, 3-speed manual shifter on the column, as long as my current F-150 and probably weighed more. It was a pig, and even more fun when towing a trailer. It was years later when someone informed me that I'd taught myself double clutching to keep it (and my later VW bus) from ripping out the clutch. Here's some other memories of Pontiac for those who date. Good bye, GM, you're dead to me.

Bankrupt in Sacramento. The electorate paints the state red as the Democrat and RINO taxes and budget fiddles fail big time. Except the proposition to cut legislators pay when there's a deficit. Let's see: no deficit, no new taxes, and no budget chicanery. Just what part of stop spending can't the political class understand? Under the Democrat legislature and Schwarzenegger, the annual budget has increased $41 billion in five years - nearly 40% - while businesses and citizens flee the state. Meanwhile, Ahnuld is in DC, hoping for a bailout. How pathetic is this?

Revolution. Is that a description, or a recommendation?

Back To Code: Blog Community Watcher

Last week I wrote about getting back into coding, in part to pursue some pet projects. So here's one thing that I've been tinkering with off and on since late January. (Anyone waiting for a big technology revelation is going to be disappointed - in some ways this is quite retro.)

While there are some deeper agendas involved (once again, to be discussed later), the proximate cause for this project was my simultaneous frequent use and continued frustration with Gabe Rivera's Techmeme and Memeorandum blog discussion trackers. The good news is that they are a mostly ad-free way to keep up on top stories in their respective domains, high tech and politics. The bad news is that the blogs and topics followed are Gabe's choice, not mine. What I was really wanting was 'automatic peripheral vision' to pick up breaking stories from blog communities that I find interesting, but can't afford the time to follow in detail.

According to legend, Gabe knocked together the core of his platform in a year, so I figured I should be able to build something useful in less than that if I was willing to cut back the functionality where it didn't support my goal. Making this my first serious project in Perl would take me right into the heart of its library functionality, dealing with HTTP requests, XML crunching, Web services calls and piles of regular expressions and other text grinding. A decent sized journeyman's project.

I made several functionality compromises to keep the effort bounded. The first was not to try scraping arbitrary blog HTML, but instead to use only blogs that publish a feed of some sort, ATOM or one of the flavors of RSS. And that feed would need to be either full or long enough to contain a decent number of outbound links. The second compromise was a direct consequence: Not to worry about being exhaustive; this was to be my own alerting service not a generic utility such as Technorati. I would hand-build the blog community lists, rather than try to gather them automatically - I considered this degree of hand control to be a feature. Finally, I wouldn't attempt any sort of full text analysis, other than collecting HREF texts - this was strictly about citation counting until and unless I proved something else was needed.

The first bootstrap step was obvious, since I needed a blog community list, and the easiest way to get it was via OPML export from iGoogle, which I use as a reader. Making that choice as a config file format also let me borrow OPMLs from around the blogosphere as blind tests. (Thanks to Ole Eichhorn and others who unknowingly provided test data.) Getting the OPML import working got me into XML parsing. I started out using the CPAN XPATH library, but that eventually turned out to be a mistake: The parser involved was not very robust, and while it worked fine for OPML, it fell apart when exposed to malformed feeds (which are out there, and in the oddest places - slashdot!?). I eventually had to back it out and go with the full LibXML interface, with attendant gnashing of teeth since their interfaces are similar, but not identical.

Getting to the feed parsing milestone pushed me through fun things like XML name spaces and the specs for ATOM and the various RSS flavors. It also produced some interesting revelations about their rather variable semantics in actual use, around things like GUIDs, alternate links and even publication dates. The good news was that I found plenty of feeds meeting my requirements. Those bloggers with a feedburner source have obviously thought about the matter. There are also a large number of blogs that are publishing feeds without even having an RSS/ATOM bug on their home page - evidently as a result of default or trivial settings on their blogging platform. Those who think RSS is dead or dying haven't been trying to actually use it.

This got me to the point of actual output for the first time, which was simply a matter of collecting outbound links from the feeds, using a hash to build an inverted table, and sorting the referenced pages by link count. Followed by an interval of writing code to stomp out ad links and the more egregious self-linking behaviors. An elapsed-time based weighting function also turned out to be necessary to keep popular stories from staying on top the pile for a week.

Somewhere along the line some CSS was thrown in to make the output look a little less like the 90s. I also added a Technorati cosmos call for the top stories, in part as a means of finding further blogs to be evaluated for inclusion in a particular community list. It's a nice feature when the Technorati API service is running and stable, which is not always the case. (It's evidently not part of their core business model, whatever that may be.) I'm also generating multiple sections in my output lists, using different link weighting schemes to differentiate newly hot topics from those that have held interest over a longer time.

This was intended to be a Perl journeyman's project, and I have suffered accordingly. There was one complete pass through the code to rewrite in more Perlish idiom, which I consider penance for my C accent. And two rounds of refactoring, almost inevitable in an 'organically grown' project, and resulting in a style (at least for now) of rather coarse-grained cover classes and abstractions for feed components and analysis steps.

So how'd it come out? Here's a sample output so you can see for yourself. This was generated from my 'right & libertarian politics' community list. This list has been a useful test target since the posts and referenced stories turn over frequently, and it's an interesting counterpoint to memeorandum's spin.

I've found it takes 30 or more sampled blogs with varying posting frequencies to regularly produce interesting results. The bloggers also need to be part of a topically coherent community. Otherwise, the leading stories are simply generic top headlines that everyone tends to mention, regardless of their blogging focus. Different communities turn over their focal stories at different rates. Political bloggers are the most frenetic, milbloggers and scientists shift topics more slowly, and those with a finance or technology bent are somewhere in the middle. Make of that what you will.

What's next, other than continuing to tweak the community lists and output format? The project has met my initial goals. I let it run while I'm drinking the first cup of coffee and reading a couple of usual blogs, and by the time I'm done it'll have found the top topics in the communities I want to monitor. The peripheral vision gained is a win already. Getting into HTML scraping and full text analytics doesn't seem like it will offer much improvement for the effort. A little more automation seems in order, perhaps whatever cron-like thing OS X will do, along with auto-posting the results.

What this approach does miss is the action in blog comments, web-based bulletin boards, or in whatever real time channels (e.g., Twitter) are also used by a community of interest. If I wanted to turn this from 'peripheral vision' into an 'early warning system', it would likely be necessary to widen out the data sources accordingly to pick up interest closer to real time. Shorter messages tend to have few or no links, and following dialog can require discourse analysis on top of full text parsing. That's a long, deep rathole...

Uncharacteristically, I've opened comments on this post for questions, reactions and suggestions.

Ammo Shortages And The Beer Game

If you have anything at all to do with shooting sports, even having a family member or friend who's a devotée, you've heard about the ammo shortages. Pretty much all the popular and some not-so-popular rifle and pistol calibers have become scarce and pricey. Causes ascribed to the ammo drought range from dark government conspiracy to war stockpiling to metals shortages. The truth is likely more prosaic.

This post at the 'Books, Bikes and Boomsticks' blog lays out some of the basics of ammo production and the current supply and demand situation. To simplify (read the post for details), there's a fairly fixed supply capacity, some portion of which can be converted amongst calibers. There's been a spike in retail demand since last fall, probably caused by a combination of fears of civil disorder in the wake of economic collapse and/or moves against ammo supplies by the leftist Obama administration.

This all brought back memories of a little simulation that I've encountered in the past, the Beer Game, which was originated at the MIT Sloan School back in the '60s. Details of the game are given here, but basically it simulates the production, distribution and sale of beer, from manufacturer through distributor, wholesaler, and finally retailer. Players take on one of these roles, and the only communication allowed amongst them is placing their next week's order for fulfillment from up the chain. There's a scoring function that penalizes for holding inventory, but even more for not having stock on hand to fill an order.

After setting up the players and roles and initial inventories, the moderator (or computer, these days) does exactly one more thing: Presents a sharp spike in demand to the player representing the retailer.

Chaos ensues. Every time. It's not giving anything away to say that the result is always gross oscillation in both inventory levels and ordering, which gets worse and worse as demand is aggregated up the supply chain. That dynamic instability is built into the system structure, and all it takes is a sharp transient in the input to kick it off.

I first played this as a graduate student in systems science in the late 70s, and the experience stuck with me. I encountered it again in the late 90s as a participant in an executive workshop, and even though I knew what was about to happen, there was nothing that could be done about it without breaking the information exchange rules of the game. It did make it a lot funnier, however.

The point, of course, is that rule about limited information exchange. After you've been through a session of the Beer Game, you're not going to argue about the value of visibility of inventories and pull-through rates throughout supply and distribution chains. (There's also a meta-message: The best people, with the best practices and data, will still end up SOL if they're working in a system that's structured contrary to their goals.)

Now go back and read the blog post about ammo supply, if you didn't already. Once you get outside of Wal-Mart, and maybe Cabela's, it's a fragmented sector of small retail gun shops, with little to no IT infrastructure and working through at least one level of distribution, along with a smattering of specialist online vendors. Which all got hit with a demand spike back last fall. In the case of the ammo shortages, it's neither incompetence nor conspiracy, it's the nature of the beast. (And maybe some bright entrepreneur can figure out how to make a buck by fixing it.)

<PSA> Boom first, beer later. </PSA>

Back To Code

So if I'm only doing the VC thing part time, and don't currently have my fingers in a startup pie, why the relatively slow rate of posting around here?

I've gone back to writing code, and it's been sucking up a fair amount of time and bandwidth.

Why? One level of answer is that I missed being able to build my own tools. Since HyperCard finally died I've had no environment for knocking out quick hacks, unless you count Excel, and I don't. I also found my engineering feasibility and schedule BS detector becoming fuzzier and less useful given the accumulating years since being hands-on.

But Rich Miller didn't buy that motivation when I laid it on him, and you shouldn't either. The second level answer is that I'm playing around with a set of notions about social software, and have some specific ideas that I think worth implementing at prototype level. Exactly what is a matter for later posting. Being acutely aware of the overhead involved in building a team and raising funding, and wanting to remain agnostic about where these ideas were on the spectrum from hobby to serious business, I decided to just have a go at it myself.

I've been working in Perl, for a variety of reasons:

My last serious code (defined as something used by another human) was in a combination of C and various scripting languages. Perl has a familiar feel to someone used to C syntax, immediate gratification, and loosey-goosey typing. Object orientation in Perl is only skin deep, so I can decide how deeply I want to buy into it for a specific project.

CPAN has an awesome collection of libraries with mature functionality aimed right at my tasks of interest. Even the not-so-mature bits are useful cribs for a newbie. While the excitement may have moved on to other languages, the archives of accumulated Perl wisdom at places like Perl Monks saves a lot of frustration when hitting a real puzzler.

I deliberately punted the choice between the leading languages du jour, Ruby and Python. A combination of avoiding premature commitment, and deliberately creating the potential (necessity?) of shifting environments when going from batch-like personal prototypes to possible future web services.

Finally, I've got 40 years worth of computer language history and syntax buried in my hind brain, all the way back to assembler and Fortran II. Reading the camel book alone can't suppress all those years of bogus instincts. I need live code and a motivation to screw around with it to make a new language natural. Fortunately, one of my other avocations provided both: geocaching, of all things. One type of geocache is the 'puzzle' cache, where one has to solve a problem to find the actual coordinates. Given the Silicon Valley environment, a lot of the puzzles around here are rather nerdy - math problems, word puzzles, and cryptograms, many of them most efficiently solved with code. And the lingua franca of the code snips passed among would-be puzzle solvers is Perl. That gave me lots of little challenges and quick rewards while getting started, culminating in writing a hill-climbing solver for substitution ciphers.

Those toy programs barely touched the Perl libraries, and went just fine with a plaintext editor and the command line. That's not enough power for a real project, and misses the point of modern development environments anyway. So I've ended up working in an Eclipse environment, using the EPIC plug-in, all on my trusty MacBook Pro. I'm using git for source code control (it's good enough for perl, it's good enough for me), but mitigating its rather arcane command line interface with the GitX GUI for commits and other common tasks. The developers' suite that comes with OS X provided a nice stable Perl 5.8.8 configuration, which I'm sticking with for now. All in all, probably overkill for a one man project, but you never know.

None of this is meant to provoke a religious discussion about languages and environments (YMMV, and I've seen so many flame fests that they are just boring) but as a bit of background for upcoming posts about the actual topics of interest.

If I Tried This, I'd Be On My Way To Prison

Negotiated alternatives to bankruptcy, and negotiated bankruptcy settlements that differ from strict seniority rules happen all the time. Particularly when there's the chance that some viable entity or set of assets might emerge from the wreck, the various creditors and equity holders will often dicker and deal towards an outcome that reflects their own sensitivities towards getting back some cash now, versus hoping for a better tomorrow. Terms that include 'carve outs' to offer a return for executives or even staff who agree to stay through the process are also common. It happens all the time in the venture world, just more quietly than the ongoing Chrysler debacle.

But these outcomes are all voluntary. Unless there are specific 'drag along' provisions that were disclosed at the time a financing occurred, any holder can decline to participate in such a work-out agreement, and throw the matter into the hands of the bankruptcy court. Which court is then obliged to respect the interests of the debt and equity holders in strict order by statute and prior contract.

Voluntary means no coercion. If an interested party in the matter threatened retaliation outside the deal for not cooperating in a desired outcome, that would be actionable, and quite likely criminal (a little matter known as blackmail). If I pulled such a stunt as a VC, and got caught, I would expect to be having a chat with my counsel and perhaps the district attorney.

Bringing us to the behavior of the Obama White House and the Treasury Department in respect of the Chrysler bankruptcy. It is now confirmed that Treasury officials threatened retaliation against Chrysler creditors who declined to accept terms proposed by the White House. And further used implied control over TARP banks to intimidate holders who have other business with them. See the second link for some specifics on the administration behavior and relevant bankruptcy law.

I hope the 'speculator' hedge funds stick to their guns, and bring the White House behavior into open court. This administration has been playing fast and loose with the law and Constitution, and is being covered by the Democrat-controlled legislative branch. Time to see if the judicial branch still has any cojones. Meanwhile, I'll just nod agreement with this quote from Finem Respice:

There are three things that are scarier than the actual resort to common thuggery. The ease with which it comes to this administration. The ubiquitous and rank ineptitude that makes a resort to thuggery necessary in the first place- and promises it will become a common tactic in the days to come. And the forgiveness the population regularly affords the administration after one or another of these episodes is, yet again, made public.

Update: Thuggery has consequences. Check out this Roger Kimball column at PJ Media, and scroll down to the open letter from hedge fund manager Clifford Asness. Here's a sample:

Let’s also mention only in passing the irony of this same President begging hedge funds to borrow more to purchase other troubled securities. That he expects them to do so when he has already shown what happens if they ask for their money to be repaid fairly would be amusing if not so dangerous. That hedge funds might not participate in these programs because of fear of getting sucked into some toxic demagoguery that ends in arbitrary punishment for trying to work with the Treasury is distressing. Some useful programs, like those designed to help finance consumer loans, won’t work because of this irresponsible hectoring.

Update 2: 'Gangster government', including the full text of Asness' letter.

Gollum, The Dancing Bear

"The wonder of the dancing bear is not how well it dances, but that it dances at all."

I was turned on by Ole Eichhorn to the impending online-only release of The Hunt For Gollum. That finally pushed me to lash together an improvised Internet home theatre. A little experimenting showed that WiFi was not going to supply enough steady bandwidth in our RF-polluted neighborhood, so I was tied to an Ethernet wire that would not reach the regular HT setup. Nothing that a well-stocked closet can't fix, and a 20-year old set of powered speakers, an obsolete boardroom projector, and a section of blank wall later, we were in business and hooked up the MacBook Pro for our own premiere. Cue up the latest in 21st century fanac.

If you haven't bumped into citations elsewhere, 'Gollum' is a 40 minute short film, produced and staffed entirely by Tolkien fans, headquartered in the UK but with contributions from around the world. Some of the creators have formal training and professional experience, but many are just enthusiastic amateurs when it comes to film. They have taken a few references in the original works to the hunt by Aragorn - the ranger 'Strider' - for the creature Gollum and blown them up into a set of short adventures all featuring the Aragorn character. It's a miniature prequel or back story to the LOTR itself.

There's no way to establish an elaborate, multilayered world like Middle Earth in a short, and 'Gollum' doesn't try. Instead it takes a ride on the presumed knowledge of its audience, gathered from both the Peter Jackson movies and the original fantasies. When we hear the scream in a barely visible nighttime fight scene, we know that's a Nazgul. When a new arrival saves Strider's hide, the true fan knows who it is, even if the dialog doesn't help much. A two line exchange in the framing dialog between Aragorn and Gandalf provides all the motivation needed for the quest, for those who know the backstory. Confidence in the audience lets 'Gollum' cut most of the exposition and get on with the action.

The same can't said of the production values and attendant technology. Don't get me wrong, they are extremely impressive for a shoe-string independent creation. Self-consciously so, to the level of quoting from the Jackson films. Long shot of terrain with heroic music. Check. Gorgeous matte of elven dwellings. Yup. Aragorn saved by soft-focus elvish dreams. Got it. We can do orc costumes. Yes we can. And Gollum in close-up CG. Yes, precious. It almost feels like each effects or production team got a few storyboards to themselves, making for a choppy flow to the overall work.

No matter, the point is that the bear can dance at all. And unlike a real bruin, this kind of film making is going to keep on getting better, less self-conscious, more technically adept, and able to focus on story telling. The gap between independent and Hollywood studio work keeps narrowing. And it's turning out to be a fun future for those of us whose fannish days were circumscribed by the limits of mimeograph stencils and tape recorders.

Note From A Friend in Mexico City

An e-mail from an acquaintance south of the border includes the following:

"Information is confusing and not helping at all. If we extrapolate the (real) cases we know of and the information we are getting it does not make sense. We should have more cases registered."

That fits with what I've been guessing: The only way to reconcile the apparent lethality of the swine flu outbreak in Mexico with the lack of same outside the borders is if there are a lot more unreported minor cases in Mexico. The official Mexican statistics suggest a 1/10 fatality rate, but they seem to be based on patients who present themselves at hospitals or other medical facilities, as opposed to those who spend a miserable few days stuck at home. Otherwise, you've got to believe the virus somehow magically becomes less virulent when it crosses the border.

On the good side, that suggests an actual mortality rate much less than 1/10. On the bad side, it also suggests there's a much larger disease pool in Mexico than reported, with correspondingly lower changes of controlling its spread - if those chances ever existed.

(A couple of good blogs for following the flu outbreak are Effect Measure and Aetiology.)

Range Report: %$#*@!!!

One hobby I don't post about very much is shooting. One of the firearms I own is a Kel-Tec SU-16B, a .223 semi-automatic rifle. With a short and light barrel, it's not exactly a tack driver, but it's fun to shoot and works well for the tactical rifle matches that I was shooting before my accident. The rifle is light in part because it has a lot of plastic components, and that's what leads to this story.

I've gotten to a recovery stage where running around and throwing myself prone on the ground, firing a few shots, hopping up and doing it again sounds feasible - that's the essence of a tactical match. I thought I'd take the little rifle out to the range and put a few rounds through it to get reacquainted before trying a match again.

After I'd fired a few shots I leaned over to check the results via my spotting scope, whereupon the rifle folded up in my hands. That alone is not too alarming. The SU-16 is designed to fold for shipping and storage. The upper action and lower stock parts are held in place with an assembly pin, which has been known to work its way loose.

But when I checked for that problem, I found something else:

The back of the plastic upper had broken away, exposing the rear of the bolt carrier, and shearing off the connection to the assembly pin that should be holding everything together - you can see the jagged bits that shouldn't be there in the photo. This wasn't a dangerous accident - the pressure from cartridge detonation is confined forward of the bolt - but I was obviously done for the day, leading to this post's title. Rifles, like guns, should not go limp in the middle of the action!

So now I'll find out what Kel-Tec's lifetime warranty is actually worth. And I'll post a report here for the benefit of other shooters who may want to know the answer, courtesy of Google.

The Double Nickel

No, I am not talking about speed limits, I'm talking about my age. Yesterday was my 55th birthday.

It's the age at which I'd always envisioned pulling back on work, and spending more time seeing the world while I can. My misadventure of last year provided some pointed emphasis to that 'while I can'.

And it's certainly an interesting time to be contemplating the issue. If you count up the economic outlook, the commoditization of computing, the sorry state of venture capital, the apparent desire of the Obama administration to penalize those who succeed anyway, my disgust with the California government, and the more than occasional desire to chuck it and 'go Galt', some days it seems like all the arrows point in the same direction. But then again, I get bored rather quickly, so the odds of bowing out completely aren't very high. It will be an interesting year.

Microsoft's Netbook Dilemma

So Microsoft's put out a crippled 'Starter Edition' of Windows 7 that can only run three apps at a time, intended for 'netbooks'. Cost to the netbook OEM: $15. While some think this is not too big a deal from the user's point of view, a look at the market dynamics behind this announcement reveals serious problems for Microsoft. Consider the issues from the viewpoints of Microsoft, the netbook OEM, and the end user:

Microsoft

Microsoft gets $15 for a copy of the crippled Windows 7. We don't know what pricing it negotiates with big OEMs for full versions, but we can make an informed guess. Here's some 2007 pricing for the so-called 'OEM bundles' of Vista that leak out of the manufacturer channel and into the end user market. Take the 'Home Basic' version then at $99 and cut it in half to reflect markup along the way from leaky OEM to final buyer. That suggests that MSFT might be getting a little less than $50 per copy of the most limited Vista from its OEMs. Call it $45 to make the math come out neat.

So Microsoft is taking a 3x haircut when moving from Vista on a full laptop to 7 on a netbook. It may have no choice - see below - but Redmond simply can't afford to let the netbook price point erode what it can extract from the makers of full laptop and desktop PCs. There must be some sort of functionality differentiator between them. Limiting the number of launches is simple and doesn't involve the compatibility and regression testing issues of limiting the APIs or other gross functionality.

The OEM

While I've not seen the BOM cost analysis on a netbook, I have to imagine it's brutal. Every netbook product manager is fighting a deflating market on one side, and tough parts supplier negotiations on the other. Given the current economy, you know which is winning, but there is a hard limit to what you can squeeze out of a supplier. Each has a real cost of goods (COGS) because it produces a physical product. They might be willing to price below cost at the start of a big contract in the expectation of cost reductions due to volume and experience. But if the parts manufacturer finds itself running at no or negative margins, the OEM will find its supply channel drying up unexpectedly.

On the other hand, Microsoft is known to have essentially zero COGS in its product. After development costs are sunk, each incremental copy of Windows is essentially free. Under heavy market pressure, the product manager will turn to Microsoft and try to take advantage of this essential difference between virtual and real goods, knowing that MSFT will not go upside-down on its costs.

Whereupon the differing market expectation for netbooks cuts against Microsoft. By its very definition, the device is to provide portable access to the net, not necessarily a full Windows capability or 'experience'. The "it's not a real PC without Windows" boogieman already has one foot out the door. Linux or another embedded platform is a realistic option for a netbook. Given the open source option, and the presence of its own legacy XP product, Microsoft is likely having to accept close to a real market price for its OS. As this astute observer notes: "Windows only commands a $15 premium over free software on low end PCs." That's the market price for device-based compatibility with the conventional PC world.

The User

It's user expectations that are driving this situation, and where Microsoft's dilemma is most clearly exposed. In the past I've discounted the aspirations of 'almost PC' products to knock the Wintel world off its perch. See my trashing of the ludicrous OLPC for an example.

One of the heads from that old post is appropriate here: "Cheap Means Vanilla". Cheap is obvious - netbooks are nothing if not cheap compared to a conventional design. 'Vanilla' represents the default choice, the low-cost perennial volume leader at the ice cream parlor. Vanilla has heretofore meant Wintel.

The evolution of the word 'netbook' from a product name to a generic term shows that there's a new vanilla in town. We have a rough market consensus around a medium-size portable device whose function is primarily access to Internet based services, as opposed to local functionality.

In the new ice cream parlor, the price uplift for chocolate chips - device based Windows compatibility - is $15. The old ice cream stand - Wintel - is still in town, but what it can charge is now going to be limited by the competitor. Microsoft is fighting a rear guard action against that change, with all it implies for revenues and margins. Fire-walling against erosion by crippling netbook Windows functionality makes sense in this context, the first horn of the dilemma.

Reducing functionality, however, has the side effect of making the new ice cream flavor even more distinct. If it's a PITA to run extra apps on the client device, then it will be a natural tendency to push that functionality into the network as well. One of the ambitions of platform providers has always been to control the 'user experience' or, if you want it to put it more charitably, to be seen to deliver the most value on the device. The mere existence of netbooks shows that Microsoft is in retreat on this front. Crippling Win7 on netbooks represents Microsoft deliberately reducing its share of value and user experience even further.

This obviously leaves room for Google and others to provide the functionality that would have come from the 4th app and onwards via the browser - making the new vanilla even more tasty. And it further shifts the model for interaction with the Wintel world from device compatibility to data compatibility implemented on the net, weakening the total Windows and Office franchise.

This is the second horn of the dilemma, the one that will now gore Microsoft: Hastening the further differentiation of netbooks from the Wintel world.

(Update: See also this nice analysis, which arrives at similar conclusions for the Windows franchise through different but consistent reasoning.)

The Roving Eye: Facebook's Down Round, Print Cartel?, Rants of the Week, Government Or Mob?

Did MSFT get a ratchet? After peddling shares to Microsoft at a $15b valuation, the growing but still money-losing Facebook needs more funding to keep the boilers stoked. Problem is, the best valuation they're being offered is $2 billion.

Party like it's 1978. Newspaper employment of reporters is back down to 1978 levels, another way in which we've returned to the Carter years. (HT: American Digest) Meanwhile, a bunch of the MSM's best and brightest have founded Journalism Online, yet another attempt to wring micro-payments from the Web, this time by getting the press to move all of their content behind one pay wall. As I recall from econ, that's called a cartel, and it's got a few known problems with defections when there's an actual surplus of the commodity in question. OTOH, having publicly called for the extinction of the propagandizing MSM by market forces, I applaud this latest effort. You go!

Tell us what you really think Dept. Presented without further comment: Bill Whittle. Nick Gillespie. And this older rant from Andrew Klavan has become a catchphrase around our household as we've watched the MSM and political class react to the Tea Parties. Shut up!

Chilling effects? And speaking of our beloved media, last week featured CNN 'reporter' Susan Roesgen debating and insulting Tea Party protesters in Chicago, in a performance captured by both the network's own cameras and those of the 'Founding Bloggers' crew. It was of course YouTube'd immediately, and became the subject of derision and embarrassment to both the reporter and the network. Their reply: Shut up! Err, actually it was to to issue DMCA takedown notices against the clips. Having blatantly dropped its pose of 'reporting' on the story, and become part of it, CNN has little grounds to claim that their material is not subject to fair use as part of the debate. Patterico's article challenges CNN to sue him - that could be an interesting case if a reasonable judge doesn't throw it out immediately.

Welcome to the Family. A bit back I suggested that banks repaying TARP money would be a good thing. Not so fast! You have to have a talk with Guido Tim Geithner first. It becomes more and more obvious that this is about government power, not saving the banks. I loved this comment in response to a post I wrote at Wind of Change about what's missing from the Tea Parties:

"...i'd love to see the WF [Wells Fargo] chairman call a press conference and just turn it into a huge check signing ceremony. Thank the government (thanks for nothin) and announce it a big victory on the road to economic recovery. Then make a little aside saying the cynics believe the government might not want the money back and might use audits as a punishment, but he doesn't believe it and will happily keep the public informed of how business is going."

Any bank with the cojones to do that will make me a customer for life.