The China Crackdown Paraxox


We’ve seen compelling evidence of Chinese state-sponsored hacking here in the United States for a number of years, now.  We’ve seen allegations without teeth and finger-waving from any number of politicians, but we’ve yet to see any real action against China.

Early this week, the Obama administration took the most visible and tangible action to date against this activity by indicting five Chinese PLA members.  While this is still generally regarded as a pretty weak tactic, given that US courts have zero recourse against these men (provided they don’t set foot on US soil), this new move has given the United States a much clearer sense of direction on the issue of Chinese hacking simply by prompting a response from the Chinese government.

Today, the Chinese government announced that it would “vet” US tech firms doing business in China — nominally to protect Chinese clients from disruption.  In effect, they’re threatening to make it much more difficult for US firms to do business in China in direct retaliation for the hacking charges.  The message is pretty clear: China considers state-sponsored industrial espionage to be a natural perk offered by China to its industries, and if US companies want to do business in China, that’s the price of admission.

I’ve yet to hear any US companies actually come right out and admit that they’d be willing to put up with a little bit of spying in return for access to a $7.5 trillion market (not to mention its supply chain), but I wouldn’t be a bit surprised if lobbyists all over Washington were asking for some restraint on the part of the administration.  And thus, the paradox: these same companies really want to see the government provide protection (in the interest of fairness), but perhaps not at the cost of losing that market.

Ignoring for the moment the debate about whether mega-corporations should have the ability to sway national policy at all, I think the administration (as others before) is really in a tough spot if the US is acting unilaterally.  There’s encouraging evidence to suggest that all the world’s trading nations, acting together, can influence market fairness, but to-date, these hacking allegations have been far too ethereal to be formally actionable, leaving the US government and corporations to their own devices.

So, what’s a modern global mega-corp to do, assuming it’s got an interest in the Chinese market?  Lobbying Washington for hard-line action against China seems clearly to be a dangerous game, but it seems pretty clear that this paradox favors efforts to improve security.  Although there are few corporations that would seem to have the means to withstand dedicated hacking efforts by a global economic power like China, I think there’s an extent to which many of these firms merely have to improve to the point where other companies become much more attractive targets.

Considering the number of large-scale password breaches we’ve also seen in recent years, I can’t say that I really see a downside to this approach.



Externalized Costs 101

Long ago in an economics class, I learned about externalized costs, or externalities.  It appears that most of the American public doesn’t know about this concept, however, based on their consistent lack of ability to connect the dots we see each night on the news.  As a public service, then, here’s a little primer.

Many of us are used to simple economic ideas like supply and demand, but externalized costs are sort of sneaky.  They skew normally simple economic equations a little like insurance can do because they trick us into thinking we’re making rational policy decisions — but if we ignore externalized costs, we’re not (collectively) making good decisions at all.

Although most of the economic externalities we’re interested in are negative, the actual definition of an externality is either a negative or positive economic consequence of an activity that affects a party who didn’t choose to incur that consequence.  One more time in English: if you do something that causes an economic impact to me, and I didn’t have a say in you doing that thing, that’s an externality.

Externalities can take place between two individual parties, but a far more typical scenario involves a governmental entity –maybe because the one function governments perform best is confusing economic transactions.  Recently, AEP CEO Nick Akins made a speech at a conference in California, and he dropped a great one on the crowd gathered there.  You see, Akins believes that our government should start funding carbon capture projects so that AEP can continue to operate coal-fired power generation plants.

In this case, the (proposed) externality would occur by transferring the costs of burning higher-polluting coal (vs. natural gas, for example) from the publicly-traded AEP to the federal government, despite our government’s well-publicized budget challenges.  Those costs, then, would effectively be passed on to all US taxpayers — the ultimate cost-shifting move.

Once you start tuning into this sort of cost-shifting, you’ll begin to recognize more and more cases of externalization — some operating on a truly massive scale.   I’ll touch on a couple of these in upcoming posts.


Does this seem odd?


There seems to be some lack of clarity with respect to what’s going on in Crimea.  Russian troops have taken over military bases there, or maybe not, depending on which press release you read.  So here we sit, playing “we said, they said”, as if there was any hope of resolving anything that way.

It occurs to me, though, that the US is supposedly in possession of a whole flock of it drones that might be able to help.  If these drones were carrying video cameras instead of missiles, wouldn’t we have all sorts of convincing footage we could send to CNN, etc.?  I bet someone could even scare up a projector at the UN headquarters.  I remember something along these lines occurring back when there was a little conflagration down in Cuba, and the visual aids really seemed to cut through the BS pretty handily.

Seems like it might be worth a shot.

Good news

Clearly, Congress has solved all our real problems, as evidenced by this completely toothless farce of a vote today:

You know, I think in hindsight, we were better off with Congress trying to fix baseball.

Energy policy FAIL

Facebook is building a $1.5 Billion (with a B) data center in Altoona, Iowa, and yesterday, I saw a blog post explaining why.

Although there are several reasons why this location makes sense for a modern data center, Facebook’s own blog post notes “an abundance of wind-generated power” among the key draws for Altoona.  I’ve driven up I-65 from Indianapolis to Chicago a couple times a year for the last dozen and a half years, give or take, and I’ve seen vast areas of the adjacent farmland turn into colossal wind farms.  Apparently, Iowa was smart enough to get on this bandwagon, too.  Good for them.

Not in Ohio, though.  Here in Ohio, we’ve got gas.  Governor John Kasich is a famous fracking fan, though I’m sure this doesn’t have anything to do with the $200K+ he’s received in campaign donations from the oil and gas industry (followed closely by $186K to Rep. John Boehner).


So, thanks to Kasich’s leadership in fracking Ohio over, here are some of the things we get to look forward to (instead of $1.5B data centers):

A deformed fish found downstream of Alberta’s oil sands –

  • Hundreds of tons of chemicals, millions of gallons of water, and thousands of tons of sand used per well to make these things productive.
  • Earthquakes, which in a tragically ironic twist, are one of the things Facebook was trying to avoid by locating in Iowa.
  • Mutant fish.  Personally, I’d love to see a few of these tumorous little morsels show up on Kasich’s plate at a State dinner.

Follow the money, folks, and weep.  You’re getting fracked, Ohio.

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We, the People

The dome of the US Capitol building.

The dome of the US Capitol building. (Photo credit: Wikipedia)

Right now, the only thing in Washington that’s truly bipartisan is the cancer that’s eating our Republic from within.  Like so many cancers, the damage has been difficult to spot as it’s grown, but it’s reached a point where it’s visible — at least to some.  Like cancer, when we focus on symptoms, we may very well miss the underlying disease — but it’s there, eating and growing and killing.

Last year, I read a book called “Republic, Lost” by Lawrence Lessig.  It’s a book I wish I could make every American citizen read, but I’ll settle for asking you to read it.  This book explains why Washington has devolved into the gridlocked parking lot we see today.  It’s not a problem caused by either the Democrats or the Republicans in isolation, and it won’t be fixed by one or the other, either.

Our government has well and truly become the living embodiment of Mad Magazine’s famous “Spy vs. Spy” cartoons, and like those cartoons, the only thing that ever gets accomplished any more is for each party to beat the snot out of the other — over and over and over.  “Rebublic, Lost” explains why this is not only not a fluke, it’s an absolutely necessary and obvious extension of the root-cause issues underlying American politics for the last thirty years or so.

While Lessig’s book was an absolute revelation to me, it’s not an especially light read, and it’ll take a small investment of your time to get through its 341 pages.  It’s a worthwhile investment, but I understand that not everyone is going to run out and do that — not during American Idol season, anyway.  So, in the meantime, here’s some appetizer-sized food for thought.  In February, Lessig  gave a TED talk entitled, “We the People, and the Republic we must reclaim”.  It’s just over 18 minutes in length, and if you’ve never read any of Lessig’s work, you need to watch it.  It’ll be the single most valuable contribution you can make to the United States of America in 18 minutes — I promise.

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Lightning in a bottle

The Replacement

The Replacement (Photo credit: dglambert)

Mark Suster is a tech entrepeneur turned VC, and he’s got a blog that’s worth reading if you’re connected to tech at all.  Although this is geared toward tech entrepreneurs, his most recent article talks about how the pursuit of perfection can paralyze us.  Instead of waiting until your product is perfect, he says, launch early and learn from your mistakes.

Makes sense, but sometimes it’s difficult to figure out what that first step is.  When you’re actually building a product, there are some schools of thought that will help you figure out at what point your stuff might actually be worth calling a “product” (see minimum viable product), but in the general sense, I think Mark’s message is that it’s important to get moving as soon as you understand your general direction.

I’ve always been a fan of “vision” when it comes to products, goals, companies, and so on.  But visions so often wind up being couched in general terms, and they’re too far away, too complex, and too vague to help us with any specific plans.  I do believe it’s worth thinking about those visions — probably even writing them down and sharing them — but then, start moving and use the vision to check your progress rather than waiting for the vision to turn into a bill of materials or a road map.

When I was a kid, my Dad used to get frustrated with me sometimes when I was stuck trying to figure something out.  “Do something — even if it’s wrong,” he’d say.  I think Suster would agree.

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Why do we care about housing numbers?

It’s pretty typical when I see a news story to see it in relation to a whole host of similar stories I’d seen recently.  This isn’t always a case of multiple news organizations covering the same story — sometimes, it seems like once a big story breaks, a bunch of copycat stories trickle out, but sometimes, I see connections in stories that aren’t obviously connected at all.  This morning, for instance, I read an article from Zillow about home affordability — the gist is that our current low rates are masking an underlying trend toward higher home costs for most buyers, relative to income.

So what’s this connected to?

Good Ol' White Picket Fence

Good Ol’ White Picket Fence (Photo credit: porziuncola)

I think this is just another example of our middle class getting squeezed from all directions.  I recently shared some of my thoughts about the inequality I saw the first time I visited Silicon Valley.  Housing is a great indicator for the overall health of the economy — we’ve seen over the last ten years or so just how powerfully this can manifest in our overall economy, so I absolutely believe that when we see home affordability trending in one direction or the other, it’s worth paying attention to.

Housing, I believe, is also one of the issues that’s got the potential to reach across our political aisles to unite us as Americans.  After all, liberals want to see everyone have access to decent housing, and I’ve never met a conservative that wasn’t a proponent of the family values we know to be associated with all those white picket fences.  People are better citizens when they’ve got some skin in their communities, and home ownership is the single most tangible way for that to happen — period.

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Silicon Valley leading the way

It’s been a while since I last visited California’s Silicon Valley.  In fact, it was long enough ago that I recall being overwhelmed by just how much more rapidly the “.com” boom had taken root there relative to my Midwestern home.  Even then, though, one of the most striking parts of my visit was the contrast between rich and poor.  I recall driving up and down Highway 101, feeling pretty inadequate in my rental car.  Beautiful glass-covered buildings flanked the highway, and the import car dealers seemed to have discovered a brand new California gold rush.

Yet, when I drove a couple blocks from the highway, I felt as if I might have wandered into another country.  The transition to run-down shops and old cars made quite an impression on me.  I even picked up a local paper to check out the real estate market — including rentals — because I recall wondering how some of these people were able to make a go of it when prices in general seemed rather high, and real estate prices were screaming skyward.

I was a little disappointed to see an article this morning, then, on hinting that not only had this problem not gotten any better, but may very well have gotten worse.  California, over the last 30-40 years, has done great things in leading the United States forward in areas of environmentalism, technology, and progressive social attitudes, but to see it now leading the way in economic segregation is truly sad.

Paradoxically, I believe the “new economy” of Silicon Valley may be contributing as much as anything else to this problem.  When it comes to wealthy getting wealthier, it’s difficult to extract cause and effect, but I believe that education might be the single biggest factor affecting the success of individual workers.  Silicon Valley’s economy is as nearly a pure information economy as you’ll find anywhere, and it’s fueled by smart, well-educated workers.  It’s not just the wealthy getting wealthy there — it’s the smart (and educated) who are getting wealthy, and uneducated workers are left behind to fend for themselves.

Inasmuch as this is true, I think we can draw some pretty compelling conclusions not only for California, but for the rest of the United States, as well:

  • If you’re a parent or a student, pay attention!  Skimping on your education is nothing short of career suicide.  ‘Nuff said.
  • Citizens in other parts of the country should take a good look at California.  The problems you’re already seeing wherever you are not only aren’t going away on their own – they’re probably going to get worse.
  • As a nation, we should be worried about financial segregation.  Generations before us tackled racial equality and gender equality, and even though there’s still work to be done in these areas, we’ve made progress.  I’m not going to offer a solution here, but it’s time we acknowledged the problem.
  • If I’m right about education (and you know I am), then improvements to our educational system are among the most strategic investments we (as a nation) can make.  Not only should we see individual workers able to elevate themselves, but we’d also expect to see stabilization of wages for non-skilled workers as fewer people chase falling wages.

I believe we’ll continue to see problems like this.  These problems are not anomalous, they’re not trivial, and they’re not going away on their own.  What do you think needs to be done about economic stratification?


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Sears wrap-up

If you’ve been following along, you’ll know that I’ve had something of an adventure trying to purchase a garage door opener from Sears online.  Specifically, the logistical challenges of  shipping my package via UPS turned out to be just a little too much for Sears’ customer service team.

Sears Tower Reflection

Sears Tower Reflection (Photo credit: paulmcdee)

I’m happy to report that as of yesterday, I think this adventure is finally through.  When I last updated this story, I’d just been hung up on by Mark at Sears.  It was at that moment that it occurred to me to just go to a Sears store and buy the damned garage door opener.  After all, the whole idea of buying the thing online and getting it shipped to my house was to (1) get a good price, and (2) save myself the hassle of running to the store.  Since the “hassle” benefit had long since evaporated, I was starting to see the appeal of going to the store and not leaving without an opener in my hands.

So, one last call to Sears to make sure that my order was really cancelled and refunded — after all, the last thing I needed was for them to suddenly figure out how to ship to me and get the opener back to my porch after I went and bought one at the store.  This call was accomplished fairly easily, though I’d have to watch to make sure that my refund was really processed as promised.

Next, I’m off to the store.  I found the opener (for the same price as online), and bought it.  I’m not normally one to buy extended warranties, but the manager offered me a two-year warranty for the price of a one-year warranty, and considering the goofy way the current opener failed, I figured this was worth the price — just about exactly what it cost to have the opener shipped, by the way.  Net out-the-door price was just a few bucks different than buying online.  Plus, I had a warranty — not to mention a garage door opener in my hands.  Installation was done the same day — this was a piece of cake, since I was basically just swapping out the head unit.  I’ve now got a big box full of spare parts, should these ever prove useful.

And then yesterday, out of the blue, I got a phone call from someone at Sears — in the Austin, TX, area, I’d guess (I recognized the area code).  Shannon apologized for the snafus so far, assured me that my credit was in-process (I checked later, and it had cleared), and said that Sears was going to send me a gift card for my trouble – for an amount that makes it worth my while to go back to Sears – in person, of course.

I’d be remiss if  I didn’t thank Sears for the call and the gift card, and I’m happy to say that it did make a difference.  Frankly, I still think it would have been cheaper and easier for everyone in the long run to have simply fixed whatever had gone awry in shipping in the first place, but given that didn’t happen, it was nice to see the follow-up from Sears at the end.

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