Tim Oren's Due Diligence

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.

What's Going On In Iraq?

Judging by the TV news I saw while consuming the morning coffee, the MSM is doing its usual inept job of explaining the flare-up in fighting in Iraq. Being unwilling to waste time backgrounding the conflict in the first place, they have no basis for analysis but sensational claims of a 'civil war'. Fortunately, the blogosphere provides, and some real analysis was in hand minutes after hitting the nets. The ever invaluable Strategy Page sets the tactical stage:

In the last year, the number of terror attacks has sharply declined, as the Shia Arab criminals and militias are not interested in slaughtering civilians. They were interested in maintaining control over neighborhoods, criminal enterprises, and augmenting political control. Many of these militias were supported by Iran, a neighbor that wanted to have more control over what went on inside Iraq. But Iran is run by the Shia clergy, and the prospect of a religious dictatorship in Iraq turned off many Iraqis. This was no secret to anyone, and the Iraqi government, run by more independent minded Shia, finally agreed that the Iran backed militias could not be tolerated. This has led to a recent campaign to take apart the more troublesome factions. The worst of the lot are in Basra, where Shia militias make a lot of money off the oil and port operations down there. These gangs were getting greedy, and stealing more than the government was willing to tolerate. Thus in the last week, thousands of Iraqi police and soldiers moved into Basra and began arresting members of the Mahdi Army (run by Shia cleric Moqtada al Sadr). At the same time, police moved in on Mahdi Army groups in Baghdad. But Basra was where the money was, and the fighting was expected to be long and difficult. On March 26th, the government gave the Mahdi Army three days to surrender, or face some real violence. For some Shia gangsters, this seems to mean American smart bombs. That rumor is all over Basra, and the bad guys are truly scared. Hiding out in a mosque won’t help, because American ground troops are not involved. Iraqi cops have no problem clearing out a mosque.

The Mahdi Army apparently believed that firing mortar shells at the Green Zone (where the senior Iraqi politicians live and work) would be a good way to strike back. But the Green Zone is a big place, and a few mortar shells rarely hit anything important. The police do know who lives where, and are raiding the homes of key Shia gangsters. The gangs look to their Iranian advisors, and get no answers, other than “fight hard.” That may not be enough. While Iran believes that eventually the Americans will go home, the Iraqi police are at home, and they want to send the Iranians back across the border.

The best strategic frame I've seen comes from commenter "Major John" at Jule Crittenden's place. It's short and pithy and worth a look, but here's the nut of it:

The fight up North is the fight to run AQI out of Iraq. The fight down South is the fight to see which way Iraq will go once AQI is beaten.

NB: North is the US and IA vs. Al Qaeda in Mosul. South is the IA vs. JAM in Basra.

Update: More useful commentary from Abu Muqawama, one of the most valuable counterinsurgency blogs out there. And Uncle Jimbo at BlackFive backgrounds in his - ummm - inimitable style.

The Roving Eye: Tiny UAVs, So Long Brett, The Pachinko Effect

Itty-Bitty UAVs. Check out these pix from a recent unmanned vehicle conference in DC. The first one looks like one of those scale models you see displayed as a trophy in an aerospace exec or pilot's office. But no, it's a fully functioning drone - get it airborne with a bungee cord or using a grenade launcher attachment for a rifle. Have a fat wallet and an urge to build your own, or start a UAV venture for that matter? Check the next image for an assortment of controller components from tiny to chunky. If you're into things robotic, check out the main DIYDrones home page and feeds for everything from hobbyist to milbot news. Organized by Chris Anderson (yes, that one) - which is a good recommend given his record as a trend spotter.

Remembrance Day: Why We Fight

Austin Bay has written a classic of the war at the frontiers, who fights it, and why. RTWT.

What LTG Sanchez Said About The MSM

Over the weekend the NYT and other MSM outlets were all aflutter about some negative comments by retired Lt. Gen. Sanchez, former commander in Iraq, had to say about the administration's policies there. For some strange reason, however, they neglected to pass along the first portion of his speech, which described the part of the MSM themselves in his 'nightmare'. As a public service, the lead paragraphs are below, and the rest follows the break.

It's rubbish like this that makes me cheer every time the legacy media take another hit. I'd rather trust a guy like this, who's there in uniform, or an independent writer who calls it as he sees it, than the whole mob of Howard Kurtz' twittering, spinning colleagues. The sooner the MSM and the associated 'profession' get taken down several more large notches, the better for both our culture and our country.

OK, here's the general, speaking last Friday at the Military Reporters and Editors luncheon in DC (aka "The Lion's Den"):

Today, I will attempt to do two things - first I will give you my assessment of the military and press relationship and then I will provide you some thoughts on the current state of our war effort. As all of you know I have a wide range of relationships and experiences with our nation’s military writers and editors. There are some in your ranks who I consider to be the epitome of journalistic professionalism - Joe Galloway, Thom Shaker, Sig Christensen, and John Burns immediately come to mind. They exemplify what America should demand of our journalists - tough reporting that relies upon integrity, objectivity and fairness to give accurate and thorough accounts that strengthen our freedom of the press and in turn our democracy.

On the other hand, unfortunately, I have issued ultimatums to some of you for unscrupulous reporting that was solely focused on supporting your agenda and preconceived notions of what our military had done. I also refused to talk to the European “Stars and Stripes” for the last two years of my command in Germany for their extreme bias and single minded focus on Abu Gharaib. Let me review some of the descriptive phrases that have been used by some of you that have made my personal interfaces with the press corps difficult:

“Dictatorial and somewhat dense”,
“Not a strategic thought”,
“Liar,”
“Does not get it” and
“The most inexperienced LTG.”

In some cases I have never even met you, yet you feel qualified to make character judgments that are communicated to the world. My experience is not unique and we can find other examples, such as the treatment of Secretary Brown during Katrina. This is the worst display of journalism imaginable by those of us that are bound by a strict value system of selfless service, honor and integrity. Almost invariably, my perception is that the sensationalistic value of these assessments is what provided the edge that you seek for self aggrandizement or to advance your individual quest for getting on the front page with your stories!