Tim Oren's Due Diligence

Never Forget, Never Forgive

The Roving Eye: New Media and The War, Buying A Silicon Valley?, Sic transit gloria Wired

The military weighs in. With the Iraq campaign winding down, and Afghanistan ratcheting up again, the Small Wars Journal put out a call for lessons learned on the influence of Intenet media on the Surge in particular, and war fighting in general. You can follow links from the cited post for opinions from serving military, veterans, strategists and others, or grab this PDF to read it all in one place. Fascinating and thoughtful stuff, relevant for anyone with an interest in military affairs, foreign policy or new media. If you follow just one link from this post, read this.

Times are changing. Y Combinator's Paul Graham asks an intriguing question: Can a city outside of Silicon Valley buy its way into the high tech ventures game? That used to be a dumb question, though often ignored by wannabe politicians and Chambers of Commerce, both in the US and elsewhere. The talent and capital pools of the Valley, combined with decades of network formation and institutional memory, gave it a regional advantage nearly impossible to duplicate. Doing so would be a 20 year slog, well beyond the attention span of politicians. Those who tried ended up with empty 'venture incubators' and busted portfolios of local champions crushed when they left their home court.

That could be changing. The Valley isn't what it once was, between the business killing antics of the California government and the outsourcing of most junior 'farm team' technology jobs to elsewhere. Still, the capital lives here, and often startups find it necessary to be local to access it. That's Paul's line of attack, that there needs to be funding for the whole life cycle available in any wannabe locale. And not controlled by politicians, but by investors who've earned their stripes as entrepreneurs or angels. He suggests how to piggyback the Valley's network of angels as talent scouts.

He could be onto something, though there's one thing he's not saying: The future of the early stage specialist investor looks dim. With two severe downturns within one decade, not having funds to follow a company through its whole life-cycle is a recipe for being crammed down and washed out, an additional burden to the IRR forecast on top of the normal vicissitudes of early stage venture. That is a second indicator that non-Valley venues should have funds for the whole life cycle. That would also indicate that any locales wanting to try Paul's idea will focus on software and services, whose falling capital requirements have made them increasingly difficult to fit into the Valley model.

Just another MSM rag. Once upon a day, it was worth dealing with the eye-bashing layouts and colors of Wired for the nuggets of pithy observation and cogent analysis buried in there. It's been quite a while though, and as it morphed into yet another fashion magazine, I dropped my sub and stopped following it. Now it's apparently fallen to the level of the common media - if you can't find enough stories, make something up. Chris Anderson, call your office.

The Roving Eye: That Mysterious Yellow Line, A New Long Tail Graph, Why CFLs Suck, Harsh Reality on Gaza

How do they do that? That was a great Super Bowl, lots of momentum shifts and 'did that really just happen?' plays. But enough about the game - didn't you ever wonder how they get that first down line onto the field? Here's how it works. A fascinating system integrating technologies from exotic to humble: modems on the audio channel!? Hat tip: Ole Eichhorn.

KHAAAAAAAAAAAAN! OK, this is funny. Ain't it wonderful the serious research you can do with the modern intertubes?

Yeah, me too. Even the advocates of 'green' fluorescent lights admit the quality is horrible. When we moved into our new home in 2000, I outfitted the kitchen with all CFLs. My wife didn't like the appearance, so they were moved to my study, where every one of the set is still working. Flash forward to late 2008. I pick up a four pack at a low (probably PG&E subsidized) price at Home Depot. One of the four is DOA. One the survivors gives a light so harsh it goes on the shelf. I'm watching to see if the other two outlive a typical incandescent. Quality standards have collapsed as CFLs have gone mainstream. I might suppose it could have something to do with anticipation of a government mandate, but that would be cynical. Fortunately, LED lighting that will actually deliver on longevity and decent emissions spectrum is dropping in price. (Disclosure: I have an investment in a company that supplies the LED industry.)

And yet more greenery education. Or would that be propaganda?

Michael Totten delivers... one of the most informative interviews on Israel and the Palestinians that I've read in a long time. Note I'm saying informative and insightful, not optimistic. A dash of cold water for those who would like to believe there's a 'solution' for the mess, but well worth the read.

Seven Years

We spent our day under blue skies in Vancouver, Washington.  Extreme clear, with Mt. St. Helens or Mt. Hood etched on the horizon when we topped a ridge.

Seven years ago was another extreme clear day.  Waking not to oldies, but to "Ladies and Gentlemen, the South Tower of the World Trade Center has just collapsed."  Not a joke.  Turn on the tube.  Plane into building.  Two planes.   Slo mo.  Full speed.  Towers.  People.  Falling, falling.  Over, and over, and over and over.  The skies blue, and quiet, on the SFO approach path.  We're at war. 

In seven years, they haven't touched us again.  It's not an accident.  We took the fight to Al Qaeda, closed with the enemy.  Kicked them out of Kabul, tore up their networks, sucked them in and killed them.  Whatever mistakes we made in Iraq, they made worse, and showed their murderous intent to Muslims as well as the West.

We've won in Iraq.  What did we win?  We don't know yet.  Iraqis, Arabs and Muslims will tell us, that's the only way it can be.  We do know we'll never fight such a campaign again.  The political will to fight slowly and carefully is exhausted.  And if the attempt to build a strategic backfire in the Arab and Muslim worlds fails, then come another extreme clear day, it will be war to the knife.

They are still out there.  The weakened government of Pakistan offers sanctuary to the Taliban and Al Qaeda, willingly or not.  And we're over the border after them, admitted or not.  Iran still perseveres in building a Bomb, and Russia plays with that fire thinking it can escape being burnt.  The next administration will get to figure out how to take up where Jimmy Carter left off.

The scars are deep on our own body politic.  The enemy used our own media - some willing - against our civilization.  The Fourth Estate is debauched and debilitated.  Our citizenry will now be informed through the Internet.  What will that do to the Republic?  We do not know.  We talk of some form of civil war - can the center hold?

Seven years.  Never forget.  Never forgive.

The Roving Eye: Energy, Blackmail and Memorial Day

Freeman Dyson gives a take on global warming and energy policy, in the form of a book review of William Nordhaus' "A Question of Balance". Written in Dyson's usual clear and concise style, it spells out conclusions for the layman and policy maker. Being an old modeling wonk, I'd like to know more about Nordhaus' DICE simulation that underlies the comparisons, but the lessons are pretty clear: The only clear policy winner out there, other than getting lucky with technology fixes for cheap energy, is a carbon tax. Direct government regulation is an economic catastrophe, and the more arbitrary and heavy-handed the worse. Al Gore's prescription comes out as a tens of trillions disaster, no surprise from someone who doesn't seem to have grip on either economics or engineering. If we're to get lucky with technology fixes, the best way to improve our chances is a carbon tax that creates a reliable incentive for inventors and investors. The current ethanol subsidy/tariff fiasco stands as an example of the outcome when winners are picked by political fiat.

Meanwhile, what's happening with the price we currently paying for energy? We're handing a cool trillion dollars a year to OPEC, according to an article by Bob Zubrin, whose work I've reviewed here. Not only is that crippling to our economy, but a good fraction of the money goes to prop up regimes pursuing policies inimical to our welfare, such as promoting socialism and Islamism. So while we're talking about a carbon tax, we should be discussing an additional levy on imported petroleum and gas. Meanwhile, go full bore after tar sands, oil shale, and - yes - drill offshore and in ANWR. If the right can get around the need for carbon taxes, it's time for the left to quit whinging about doing what we need to survive a transitional period. Reduce impact, but drill and dig. Those who oppose are effectively voting for more tombstones in our military cemeteries. There's only so long that the citizenry are going to put up with blackmail by those who happen to live on top a pool of oil, but add little value and often seek our harm, a fact likely obscured by the political battles of the moment. We can fix the problem by sweat and innovation, starting now, or by force later.

As we start the summer holiday season, and remember those who sacrificed for our freedom, it's also good to recall how good Americans have it. We live in a style beyond the dreams of our ancestors, and are not - yet - in a mortal struggle for survival. We're in a season when politicians of every stripe are incented to convince us we have bad problems that only they can solve. That's a siren song well worth ignoring. When political interests give us an ethanol fiasco, or prove unable to face simple actuarial realities, it's fair to ask what confidence we should have that government can fix the energy (or any other) mess with regulation and prescription. The best Memorial Day gift the government and politicians could give the American people is to get out of the way.

The Roving Eye: The Disaggregation Generation, A Merger Of Inconvenience, Too Much Greenery?

Second Order Effects. Growing up in a low-friction economy, taking networked media for granted, may have profound effects on society and its organization, observes Michael Malonein a great WSJ piece. I've often found it ironic that electronic media, conceived in part with the idea of 'augmenting' large hierarchical organizations, have at times had the effect of pouring acid on them instead. Another effect has been to shift attention to areas where friction still binds, such as the need to free healthcare risk pooling from ties to specific companies, without turning it into a government bureaucracy. Meanwhile, the regulatory and compliance burden on even small enterprises continues to grow, not shrink. At some point these two trends are going to impact head-on.

Now there's an investing theory. Let's have all the annoying companies buy each other. Comcast acquires Plaxo.

Why I'll be backing McCain. It's certainly not because he's my favorite politician. For one, he takes a too casual - if not arrogant - attitude towards the First Amendment. Nonetheless, he will have my vote and support. This guy says why.

Has Green hype gone over the top? Well, yes.

The Roving Eye: Harshing Microsoft, An Anthropic Principle For Investing?, Proof God Loves Us

Vista Collapse? And here I thought I was being rough on Microsoft. Now Gartner says Vista (and Office) are becoming irrelevant, and maybe only a Yahoo deal can save Microsoft.

That really depends on how MSFT handles the acquisition, should it close. If it compromises the Yahoo business for the sake of the core, or tries to use the Windows and Office franchise to dragoon users onto the Yahoo properties or worse - both - then both businesses will end up in the same tar pit. In the best interpretation, closing the Yahoo deal could be a gigantic example of the business move known as 'getting pregnant' - spending so much on a venture that it can't be ignored or compromised. If Microsoft forced itself to stop regarding services and anything operational as a red-haired stepchild of the Windows franchise, trying to leverage everything to and from that same franchise, and learned to respond to customer input in real time, it might end up being worth it. But it still wouldn't answer the question about Vista's relevance.

Update: The save XP movement breaks into the mainstream press. Pretty soon people are going to be squirreling away XP discs next to their incandescent light hoard.

What Can't Be Hedged? Physics has the notion that models that don't allow the existence of humans may as well be ignored. An interesting article from Policy Review essentially proposes an investing parallel, with globalization in the place of humanity: Any future in which globalization collapses cannot be hedged, and it's not worth doing it anyway. Globalization is now so deeply entrenched that the magnitude of disruption it would take to break up its economic patterns would leave little future in which to enjoy any proceeds of betting on the ultimate Black Swan. The author, Peter Thiel, is alarmed by the current frequency of bubbles that seem to threaten financial stability, but it doesn't take a lot of reading in (for instance) 19th century history to know that frequent shocks are nothing new. In theory, a more networked society and financial system may generate more frequent excursions, but also be more resilient against them. Thiel's point is that it's only worth taking one side of that bet. (Another interpretation is that this is a public display of how a hedger talks himself into being an optimist...)

Congress, As Seen From Iraq. You can take it from one of the locals or from one of our folks on the scene: The Congress critters trying to smear Gen. Petraeus aren't hurting his reputation, but their own.

The Religion of Beer. Speaking of Iraqis, some of them have their heads screwed on straight. As soon as Sadr's militia got kicked out of town, the Basrawis got their priorities in order. Perhaps they were inspired by one of America's founders, but more likely the cradle of civilizations was among the first to display mankind's proclivity to ferment anything that will, and sample the results. Meanwhile, back in California, one of our 'esteemed' legislators wants to make beer so expensive we'll be resorting to homebrew ourselves. Brilliant!

The Roving Eye: Eqyptian Unrest News Source, Howl's Moving Moonbase, Yahoo's Ad Platform

Unofficial Eqyptian Media. The Egyptian Sand Monkey is blogging up a storm about the revolt and riots there. There don't seem to be any Western journalists on the scene, and the police are trying to shut down the city and strikers, so Internet reports funneled out through blogs are the best information source.

Miyazaki On The Moon? Fans of a certain Japanese animated film might get a bit of déja vu from this NASA proposal for a mobile moon base for astronauts. Miyazaki always loved airships, but this is above and beyond.

Ad Vapor From Yahoo. Yahoo preannounces an ad management platform, that might help to enable the kind of site ad network that I blogged about before. The catch is that the rollout won't start until Q3, which won't have any impact on the current Microsoft takeover attempt. On the other hand, this could enable the type of destination site grand alliance that I mentioned in that post, combining the Microsoft and Yahoo properties and other big exposure ad venues, where the Google approach to ads hasn't worked so well.

Mistitled Robot Article. New Scientist has an interesting article titled "The Rise of Emotional Robots". The title, however, is pretty much backwards, as the content largely describes humans that get emotional about their bots, including milbots that get blown up in Iraq. For those who've followed the area of human computer interaction, finding humans projecting emotions - often unconsciously - onto machine displaying complex behaviors is not a surprise at all. More interesting is one cited study showing people when questioned about robot interactions don't believe the bots are 'thinking', perhaps due to their skepticism about current technical capabilities. Matching the likely human reaction to the task being accomplished by the robot is a very complex problem.

The Roving Eye: Bad Debt Decoded, Stories From The Front, Is No Media Cow Sacred?

Debt Crunch In Plain English. Many of the indirect consequences of the subprime mortgage meltdown have become so arcane and obscure that investors can be surprised when a bit of not-so-prime toxin turns up in a part of their portfolios they thought was safe. DLA Piper has a nice page with a (fairly) plain English explanation of the auction rate securities market meltdown.

No Editor, No Spin The US Army has put up a fascinating archive of debriefings of personnel returning from Iraq and other combat locations. (Click GWOT Oral History Program on the sidebar). There are hundreds of items from the top generals all the way to front line infantrymen. I've only dabbled in the archive, but there's some fascinating stuff there, like this story of the Thunder Run into Baghdad. This should be incredibly valuable for the historian, or for any pundit who's actually willing to read something from those on the ground before spouting off. Anyone up for correlating these reports against the MSM stories of the time?

Last As It Was First. The book was the first medium to go 'mass', back in the day of Gutenberg. Ironically, the advent of the net and the Long Tail phenomenon typified by Amazon, along with well-entrenched habits for print consumption, may have provided an Indian summer for the medium. But the distribution chain was in trouble, first the independent book shops, and now the big boys are being squeezed. (Update: More at the WaPo.) Along with all the time displaced to reading Web pages, we may finally have a successful electronic book with the Kindle. In common with vested interests from other old media, old style authors have noticed, and are screeching about the end of the world as we know it. Labels Studios Publishers are being squeezed as well, and cutting back on their risk-reducing activities of fronting advances to authors and absorbing returns from the channel, leading author Roger Simon to wonder "what's the point of the publisher?"

Sea-borne Owl. This place needs a Friday animal post occasionally. Aw, isn't that cute?? Every carrier group needs a licensed falconer on board.

The Roving Eye: Bogus Recession?, Bad Voodoo, CA's Favorite Export

Recession Limited to MSM? As opposed to the media atmospherics, the actual growth and inflation numbers are about the same as 2000, the end of the Clinton era. Of course, they are being treated very differently. Wonder why? Just another example to show that those making business and investing judgments based on journalists' writings are likely to get what they deserve. Update: More here.

Bad Voodoo At War. Tonight PBS' Frontline series will premier a documentary of a National Guard platoon caught up in the 'surge' in Iraq. The footage was shot by the soldiers themselves, and the editor seems to be trusted by the milblogs crowd, so perhaps we will get a portrayal free of the usual cant. For you Bay Area folks, it's on at 10PM this evening on KQED. I'll be watching.

A Zin A Day Keeps The Doctor Away. They keep finding out that red wine, or more accurately its antioxidant ingredient resveratrol, is beneficial to your health. First heart disease, now cancer treatment and side effects of diabetes seem to be benefited. Who knows, maybe it's good for healing broken limbs as well. Just in case, I'll have another.

Good On LiveLeak. After initially kowtowing to threats of Islamist violence and removing the controversial Fitna video, LiveLeak has now improved its security arrangements and reinstated the video. LiveLeak took a drubbing from the blogosphere when they caved, so they deserve some credit for manning up.