April 2010 – Page 2 – artdiamondblog.com

“We Don’t Lie Out Here; We Just Remember Big”

(p. W11) Americans love a winner and they remember what they want to remember, and so let us now remember the Central Overland California & Pike’s Peak Express Co.–known from the day it began 150 years ago on April 3, 1860, as the Pony Express.

We remember the Pony Express as one of the most enduring and endearing of American stories, a tale of the frontier, a story of bold entrepreneurs, daring young horsemen, true riders of the purple sage and all that. In truth, the venture hemorrhaged money from day one, was doomed by technology (another particularly American story), lasted a mere 78 weeks, ruined its backers and then disappeared into what historian Bernard DeVoto called “the border land of fable.” Across the wide Missouri, fact and fantasy collided and the Pony Express became “a tale of truth, half-truth and no truth at all,” as another historian observed.
. . .
The service was shut down in the flash of a telegrapher’s key when the transcontinental telegraph was completed in October 1861. The records of the business, if there were any records, were lost. That would prove liberating for later chroniclers.
. . .
If the Pony Express continues to thrill and baffle us, consider the words of an old horseman in western Nebraska who advised me when I expressed some concerns about the pedigree of this yarn. “We don’t lie out here,” he explained kindly. “We just remember big.”

For the full commentary, see:
CHRISTOPHER CORBETT. “Real (and Fake) Hoofbeats of the Pony Express.” The Wall Street Journal (Fri., APRIL 2, 2010): W11.
(Note: ellipses added.)

Underwater Power Cables Maximize Profits and Improve Environment

“Laying line in San Francisco for the Trans Bay Cable project, which submerged 33 miles of cable.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) Generating 20 percent of America’s electricity with wind, as recent studies proposed, would require building up to 22,000 miles of new high-voltage transmission lines. But the huge towers and unsightly tree-cutting that these projects require have provoked intense public opposition.

Recently, though, some companies are finding a remarkably simple answer to that political problem. They are putting power lines under water, in a string of projects that has so far provoked only token opposition from environmentalists and virtually no reaction from the larger public.
. . .
(p. B7) . . . , the underwater approach solves some intractable problems. In San Francisco, for example, old power plants that burn natural gas are about to be retired because a new transmission company has succeeded in running a line 33 miles across the San Francisco Bay.
Mr. Stern said his company’s Neptune Cable, which runs from Sayreville, N.J., to Levittown, N.Y., on Long Island, now carries 22 percent of Long Island’s electricity. His company is trying to complete a deal for a cable that would run from Ridgefield, N.J., to a Consolidated Edison substation on West 49th Street in Manhattan.
Those two cables were not motivated primarily by environmental goals — they are meant to connect cheap generation to areas where power prices are high. Mr. Stern’s company, PowerBridge, is now considering two renewable energy projects, however. One cable would connect proposed wind farms on the Hawaiian islands of Molokai and Lanai to the urban center on Oahu, and another would bring wind power from Maine along the Atlantic coast to Boston.

For the full story, see:
MATTHEW L. WALD. “A Power Line Runs Through It; Underwater Cable an Alternative to Electrical Towers.” The New York Times (Weds., March 17, 2010): B1 & B7.
(Note: ellipses added.)
(Note: the online version is dated March 16, 2010 and has the shorter title “Underwater Cable an Alternative to Electrical Towers.”)

Britannica Imitates Wikipedia

(p. 209) Britannica had already launched a project called WebShare in April 2008, which was described as “A special program for web publishers, including bloggers, webmasters, and anyone who writes for the Internet. You get complimentary access to the Encyclopaedia Britannica online and, if you like, an easy way to give your readers background on the topics you write about with links to complete Britannica articles.” This was a rather radical move, obviously trying to vie with Wikipedia’s emergence as one of the most linked-to resources on the Internet.

But the latest initiative was something quite astonishing, as Britannica was now inviting users to be part of the team of content creators:

To elicit their participation in our new online community of scholars, we will provide our contributors with a reward system and a rich online home that will enable them to promote themselves, their work, and their services. . . . Encyclopaedia Britannica will allow those visitors to suggest changes and additions to that content.

Source:
Lih, Andrew. The Wikipedia Revolution: How a Bunch of Nobodies Created the World’s Greatest Encyclopedia. New York: Hyperion, 2009.
(Note: ellipsis in original.)

Web Site Dares to Satarize Chávez

“Juan Andrés Ravell and Oswaldo Graziani two of the creators of the Web site El Chigüire Bipolar, or Bipolar Capybara, at their office in Caracas, Venezuela. They drew inspiration from American shows like “The Colbert Report” and Web sites like The Onion.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 8) CARACAS, Venezuela — This may be a perilous time to operate a Web site focused on politics here, given President Hugo Chávez’s recent push for new controls of Internet content. But one plucky Venezuelan satirical site is emerging as a runaway success in Latin America as it repeatedly skewers Mr. Chávez and a host of other leaders.

Named in honor of the capybara, the Labrador retriever-sized rodent that Venezuelans are fond of hunting and eating, the 2-year-old Web site, El Chigüire Bipolar, or Bipolar Capybara, is rivaling or surpassing in page views leading Venezuelan newspapers like the Caracas daily El Nacional.
The rise of Chigüire Bipolar, which has already drawn the wrath of state-controlled media here, and a handful of other popular Venezuelan sites focused on politics is taking place within a journalistic atmosphere here that international press groups say is marked increasingly by fear, intimidation and self-censorship.
. . .
Mr. Ravell and Mr. Graziani, who earn a living as freelance television producers and scriptwriters, finance Chigüire Bipolar out of their own pockets and with a meager revenue stream from advertising and sale of T-shirts printed with their logo.
They produce the site with a third Venezuelan partner based in Miami, Elio Casale, in a chaotic flurry of e-mail, instant-messaging and BlackBerry text messages.
“We don’t actually talk to each other that much,” Mr. Ravell said.
In an interview, Mr. Ravell said he remained hopeful that Chigüire Bipolar was opening the way for more multifaceted debate in Venezuela instead of representing a final burst of expressive ebullience online in a scenario in which Mr. Chávez might succeed in exerting control over a medium that until now has largely escaped his sway.
“Satire,” he said, “always evolves to resist the attempts to extinguish it.”

For the full story, see:
SIMON ROMERO. “A Satirical Site Skewers Chávez and Politics.” The New York Times, First Section (Sun., March 21, 2010): 8.
(Note: ellipsis added.)
(Note: the online version is dated March 20, 2010 and has the title “A Satirical Site Skewers Chávez and Politics.”)

L.A. 5% Electric Rate Increase to Pay for Uneconomical Solar Subsidies

(p. A17) . . . , the Los Angeles Department of Water and Power, the largest municipal utility in the United States, is poised to pass a roughly 5 percent rate increase on electricity use. The proceeds would be earmarked for renewable energy purchases and programs, including one that would repay people or businesses that use solar panels to contribute to the power grid.

. . .
The money would also be used to help pay for what is known as a feed-in tariff, under which the utility will pay a set rate for electricity from customers who install solar panels.
. . .
But “feed-in tariffs for solar power is not good use of money,” Professor Borenstein said. “Solar power at the residential level is not close to economical. There are many things you should do before you subsidize it.”
Californians have been squeezed by high unemployment and fee increases, and Los Angelenos may not cotton easily to a rate increase.
“Californians are environmentally conscious,” said Dan Schnur, the director of the Jesse M. Unruh Institute of Politics at the University of Southern California. “But much less so if it causes them economic difficulty.”

For the full story, see:
JENNIFER STEINHAUER. “Los Angeles Electric Rate Linked to Solar Power.” The New York Times (Thurs., March 11, 2010): A17.
(Note: ellipses added.)
(Note: the online version of the article is dated March 10, 2010.)

Taxpayers Taking a Haircut as States “Scramble” to Find Something New to Tax

“A LITTLE OFF THE TOP; Michigan residents may have to pay a 5.5 percent tax for haircuts. States across the nation are considering similar taxes on services to solve their budget problems.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) In the scramble to find something, anything, to generate more revenue, states are considering new taxes on virtually everything: garbage pickup, dating services, bowling night, haircuts, even clowns.

“It’s hard enough doing what we do,” grumbled John Luke, a plumber in the Philadelphia suburbs. His services would, for the first time, come with an added tax if the governor has his way.
Opponents of imposing taxes on services like funerals, legal advice, helicopter rides and dry cleaning argue that this push comes as businesses are barely clinging to life and can ill afford to see customers further put off by new taxes. This is especially true, they say, in states like Michigan and Pennsylvania, where some of the most sweeping proposals are being considered this spring.
But this is also a period of economic gloom for states. Pension funds are in the red, federal stimulus help will soon vanish, and revenues from traditional sources like income and property taxes are slumping ever lower, with few elected officials willing to risk voter wrath by raising them.
. . .
(p. 20) But from coast to coast, desperate governments are looking to tap into new revenue streams.
In Nebraska, a lawmaker has introduced a bill to tax armored car services, farm equipment repairs, shoe shines, taxidermy, reflexology and scooter repairs. In Kentucky, Jim Wayne, a state representative, and some fellow Democrats are proposing taxing high-end services: golf greens fees, limousine and hot-air-balloon rides, and private landscaping.
In June, voters in Maine will decide whether to accept a state overhaul of its tax system that would newly tax services like tailor alterations, blimp rides, and entertainment provided by clowns, comedians and jugglers.

For the full story, see:
MONICA DAVEY. “States Seeking Cash Hope to Expand Taxes to Services.” The New York Times, First Section (Sun., ed: March 28, 2010): 1 & 20.
(Note: ellipsis added.)
(Note: the online version of the article is dated March 27, 2010, and has the title “States Seeking Cash Hope to Expand Taxes to Services.”)

Source of graph: online version of the NYT article quoted and cited above.

Highly Reputed Academic Science Journal Found Similar Error Rates in Britannica and Wikipedia

(p. 208) Wikipedia was already highly regarded, anecdotally, but it got a glowing evaluation from the prestigious Nature magazine in December 2005, when it concluded that Wikipedia “comes close” to Britannica in the quality of its science articles. “Our reviewers identified an average of four errors in each Wikipedia article, and three in each Britannica article.”

The news came as a bit of a surprise. Many folks felt Wikipedia did better than they’d have thought, and Britannica did, well, worse than they expected. The result of the study was hotly debated between Nature and Britannica, but to most Wikipedians it was a vindication. They knew that Wikipedia was a minefield of errors, but to be in such close proximity in quality to a traditionally edited encyclopedia, while using such a grassroots process, was the external validation they had been waiting for.
Britannica wasn’t pleased with the methodology, and posted a rebuttal with this criticism: “Almost everything about the journal’s investigation, from the criteria for identifying inaccuracies to the discrepancy between the article text and its headline, was wrong and misleading.” Nature and Britannica exchanged barbs and rebuttals, but in the end, the overall result seemed clear.
“The Nature (sic) article showed that we are on the right track with our current methods. We just need better ways to prevent the display of obvious vandalism at any time,” wrote longtime Wikipedian Daniel Mayer on the mailing list.

Source:
Lih, Andrew. The Wikipedia Revolution: How a Bunch of Nobodies Created the World’s Greatest Encyclopedia. New York: Hyperion, 2009.
(Note: italics in original.)

Warren Buffett and Ted Turner Did OK After Harvard Rejections

“Ted Turner, Entrepreneur. Rejected by Princeton and Harvard. ‘I want to be sure to make this point: I did everything I did without a college degree.'” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. D1) Few events arouse more teenage angst than the springtime arrival of college rejection letters. With next fall’s college freshman class expected to approach a record 2.9 million students, hundreds of thousands of applicants will soon be receiving the dreaded letters.
Teenagers who face rejection will be joining good company, including Nobel laureates, billionaire philanthropists, university presidents, constitutional scholars, best-selling authors and other leaders of business, media and the arts who once received college or graduate-school rejection letters of their own.
. . .
Mr. Buffett regards his rejection at age 19 by Harvard Business School as a pivotal episode in his life. Looking back, he says Harvard wouldn’t have (p. D2) been a good fit. But at the time, he “had this feeling of dread” after being rejected in an admissions interview in Chicago, and a fear of disappointing his father.
As it turned out, his father responded with “only this unconditional love…an unconditional belief in me,” Mr. Buffett says. Exploring other options, he realized that two investing experts he admired, Benjamin Graham and David Dodd, were teaching at Columbia’s graduate business school. He dashed off a late application, where by a stroke of luck it was fielded and accepted by Mr. Dodd. From these mentors, Mr. Buffett says he learned core principles that guided his investing. The Harvard rejection also benefited his alma mater; the family gave more than $12 million to Columbia in 2008 through the Susan Thompson Buffett Foundation, based on tax filings.
. . .
Rejected once, and then again, by business schools at Stanford and Harvard, Scott McNealy practiced the perseverance that would characterize his career. A brash economics graduate of Harvard, he was annoyed that “they wouldn’t take a chance on me right out of college,” he says. He kept trying, taking a job as a plant foreman for a manufacturer and working his way up in sales. “By my third year out of school, it was clear I was going to be a successful executive. I blew the doors off my numbers,” he says. Granted admission to Stanford’s business school, he met Sun Microsystems co-founder Vinod Khosla and went on to head Sun for 22 years.
. . .
Time puts rejection letters in perspective, says Ted Turner. He received dual rejections as a teenager, by Princeton and Harvard, he says in an interview. The future America’s Cup winner attended Brown University, where he became captain of the sailing team. He left college after his father cut off financial support, and joined his father’s billboard company, which he built into the media empire that spawned CNN. Brown has since awarded him a bachelor’s degree.
Tragedies later had a greater impact on his life, he says, including the loss of his father to suicide and his teenage sister to illness. “A rejection letter doesn’t even come close to losing loved ones in your family. That is the hard stuff to survive,” Mr. Turner says. “I want to be sure to make this point: I did everything I did without a college degree,” he says. While it is better to have one, “you can be successful without it.”

For the full story, see:
SUE SHELLENBARGER. “Before They Were Titans, Moguls and Newsmakers, These People Were . . . Rejected; At College Admission Time, Lessons in Thin Envelopes.” The Wall Street Journal (Weds., MARCH 24, 2010): D1 & D2.
(Note: ellipses added.)

“Warren Buffett, Chairman of Berkshire Hathaway Inc. After Harvard Business School said no, everything ‘I thought was a crushing event at the time, has turned out for the better.'” Source of caption and photo: online version of the WSJ article quoted and cited above.

Speculators Absorb Risk Others Do Not Want to Bear and They Make Prices More Accurate

(p. A19) Speculators earn a profit by absorbing risk that others don’t want. Without speculators, investors would find it difficult to quickly hedge or sell their positions.

Speculators also provide us with information about the fundamental values of investments. When the fundamentals appear favorable, they buy. Otherwise, they sell. If their forecasts are correct, they profit. This causes prices to more accurately forecast an investment’s value, spreading useful information.

For the full commentary, see:
DARRELL DUFFIE. “In Defense of Financial Speculation; It is not the same thing as market manipulation.” The Wall Street Journal (Weds., FEBRUARY 24, 2010): A19.

Quants Confused Mathematical Models and Reality

Source of book image: http://seekingalpha.com/article/188632-the-quants-review-when-the-money-grid-went-dark

(p. 7) The virtually exclusive use of mathematical models, Mr. Patterson says, was what separated the younger cohorts of quants from their Wall Street forebears. Unlike Warren Buffett or Peter Lynch, the quants did not focus on so-called market fundamentals like what goods or services a particular company actually produced. Seldom if ever did they act on old-fashioned gut instinct. Instead, they focused on factors like how cheap a stock was relative to the rest of the market or how quickly its price had risen or fallen.

Therein was the quants’ flaw, according to Mr. Patterson. Pioneers like Mr. Thorp understood that while the math world and the financial world have much in common, they aren’t always in sync. The quant traders’ model emphasized the most likely moves a stock or bond price could make. It largely ignored the possibility of big jolts caused by human factors, especially investor panics.
“The model soon became so ubiquitous that, hall-of-mirrors-like, it became difficult to tell the difference between the model and the market itself,” Mr. Patterson declares.
Move ahead to August 2007 and beyond, when markets swooned on doubts about subprime mortgages. Stocks that the model predicted were bound to go up went sharply down, and vice versa. Events that were supposed to happen only once in 10,000 years happened three days in a row.

For the full review, see:

HARRY HURT III. “Off the Shelf; In Practice, Stock Formulas Weren’t Perfect.” The New York Times, SundayBusiness Section (Sun., February 21, 2010): 7.
(Note: the online version of the article is dated February 20, 2010.)

The reference to Patterson’s book, is:
Patterson, Scott. The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It. New York: Crown Business, 2010.