The Generalist

Housing and Taxes

The stock market is still all over the place, and who knows where the housing market is headed - all I know is I owe a ton of money to the US Treasury and California's Franchise Tax Board. To steal an inappropriate exclamation from WaMu, "Woohoo!"

If the stock market is down to 1997 prices, and assets are highly correlated - as this current bubble bursting has proven - then it follows logically that house prices should also retreat to 1997 levels. If you own a home, I'm sure you're already moving the mouse cursor to the button marked "x" to close this window, but bear with me for a minute. Or, just close it. See if I care.

The "good" news ("good" being a relative term in this context) is that according to Case Schiller, some markets are already back to 2000 levels. Redfin and CalculatedRisk, among others, have highlighted this in recent posts. In my native Bay Area, this has been particularly acute in the less distinctive suburbs, while more established areas - Pacific Heights, Ross, Piedmont, etc. - have been largely immune. Or so it would seem - but for the inventory that's been out there for 180 days in some cases.

I think (and this is where if you own a house you should make for that "x" - and fast) the regions that have been spared the downturn are going to find that the pixie dust wears off with time. Oversupply in exclusive locales isn't the major concern - posh suburbs have restrictive building regulations, little spare land, and a precisely 0% chance for a 50-unit condo building springing up in 2009. It's something much, much more difficult to compete with: the true substitute.

Nobody is thinking, "Do I live in a newly built community in Benicia for $200,000 or a mansion in Pacific Heights for $1.9 million?" But, a lot of people compare a 2-bedroom single family unit in Benecia to, say, a 2-bedroom single family unit in Martinez, where the price was just cut by a little more than the prices in Benicia. And those looking in Pinole might look at a similar unit in Benicia because it's just a little cheaper than it was before, and Pinole hasn't seen those price cuts yet. But now because the buyer bought in Benicia, Pinole asking prices go down. And then a house in El Cerrito never gets an offer because Pinole looks a little cheaper. And on and on until Rockridge is one step from San Francisco, and the softening market there lures city buyers who were looking for a 2 bedroom in Pac Heights but realized that Rockridge was a great alternative - and just as short a commute to downtown (without having to deal with the 30).

Not so suddenly Pacific Heights is actually tied to Benicia. It isn't that John Q. Buyer is comparing them directly; rather, it's a cascade of comparisons, where each individual comparison results in the softening of markets that started in the exurbs, in oversupplied new construction, eventually hitting the storied shores of the city's tawniest neighborhoods. Is Danielle Steele worried? No. But you're not Danielle Steele (Or are you? Ms. Steele, if you are reading this, please leave a comment).

Hello, 2000 prices. Go away, taxman.

On junk mail and credit cards... and UX

At work I'm always watching our user experience (UX for the tech crowd) get better. Tweaking, redesigning, constantly focused on making the site more trustworthy, usable, efficient, etc. So I was shocked to find literally the other side of the UX coin: http://Optoutprescreen.com.

Optoutprescreen is the phishing-like site set up by the major credit reporting agencies, Experian, Equifax, TransUnion, and Innovis Data Solutions where consumers can opt-out from getting credit card solicitations. These "firm" offers of credit are not only a huge risk to consumers who spend too much and can't resist borrowing more, but also are an open door to identity theives, where someone could easily open a credit card in your name and destroy your credit (how? everything they need is right there in your trash! one place, one envelope!).

Congress recognized this danger and, after much lobbying (on both sides - which shows how bad this is for consumers, that this law actually passed over the cries of the credit agencies) the Fair And Accurate Credit Transactions Act went into action in 2003, revising the Fair Credit Reporting Act to require a way for consumers to opt out of receiving these unsolicited credit offers that's included in the soliciations.

I've never actually opened one (I feel that because it's a felony offense to open someone else's mail, it's better to leave the envelopes sealed in the trash - not that an identity theif would care that much) so I've never seen this. But I stumbled on it today from the DMAChoice website, where you can opt out of receiving junk mail - catalogs, ValuePak (whatever that is), etc.

It looks like a scam. They ask for all of your information - date of birth, social security number, it's ridiculous. Why do they need it? They just need your name and your address! But, they've clearly figured out that the sketchier and more illicit this site looks, the less likely you are to put this key information in. You'll "abandon"  - and the credit offers can keep coming.

I'll admit to being skeptical when I found the site, but I clicked through from DMAChoice.org which is a well known site for the Direct Marketing Association, with clear branding, a good user experience, and obvious ties to real companies. So I realized what optoutprescreen (what evil genius came up with that URL, anyway?) was doing - purposefully trying to sketch me out of opting out, and I ignored it.

Still when I sent it onto my wife, she was horrified by it and asked if it was a forgery - apparently, other people have too. Just take a look at wikipedia.

Amazing what kind of bad UX smart people can create when they're motivated by evil.   

Hillary for President - On Facebook?

In the afternoon slow period I thought I'd comment on a recent post I found on Hillary Clinton's Facebook "wall" ... wonder if she's come across it yet:

Grant Harris (Erin District High School) wrote
at 4:00pm
well you see first of all bitch and slut are not derogatory terms to women in general i for one think having a women presidant would be a good think...i do think hillary as an individual is a bitch, and i say the same about u, i think bush is a bastard which is equivilent, they are all fucked up...and when did i ever give an opinion on gay marriage and abortion...im not making that an issue people can do w.e they want in their personal lives that should not be a government issue...but thats besides the point here....and u know what the whole feminist movement is becoming really old, i think its pretty obvious in this day and age that women are equal to men...in north america that is...so why dont we cut all this sexist shit its growing really old, what more do you want to be superior then men? because as i see it thats the direction that the feminist movement is heading

I'm sure someone will figure out how to use community technology for politics... looks like Ms. Clinton's staff has some more thinking to do.

The crappiest airline ever

United is the crappiest airline ever. I can’t change my flight tomorrow to a friend's wedding in Toronto  because United won’t change it without redoing my return, and there are no more seats on my return flight (or any other flight that day). Even though I already have a seat on my return flight, I can't keep it if I change the outbound. Of course, there are plenty of flights to change the outbound to – but no return, so there. That's how it works. Period.

What idiots. I hope they go bankrupt.

I’d fly six southwest flights to get to Toronto from SF just out of spite. And, what's more, the return is a codeshare with Air Canada, rumored to be the only airline crappier than United, so I can't upgrade with my crappy devalued United miles that I'm trying desperately to spend before they become even more crappy and devalued.

Dartmouth Alumni Constitution

Dartmouth's board of trustees came under fire a few months (maybe years) ago, and the board's handpicked candidates were rejected in favor of outsiders after a major campaign.

Always one to side with the outsiders, I didn't take much convincing when the same board tried to rewrite the alumni constitution in its entireity last month. While I'm sure a lot of good, hardworking people saw the new constitution as the right thing, their big-brother style approach which consisted of, basically, "trust us on this one", deserved to fail.

The whole affair begged the question, why? And the powers that be didn't have a good answer for it, so the rest of us assumed it was a power grab and rejected it.

Go the rest of us! The consititution does need to be updated, but let's do it right this time.

Here's the email from the alumni office:

Fellow Alumni,

The proposed new constitution for the Association of Alumni of Dartmouth College failed to achieve the level of support necessary for passage in all-media voting that ended October 31.

A total of 12,729 alumni (51 percent) rejected the proposal, while
12,041 alumni (49 percent) voted for it. None of the proposed petition amendments to the current Association constitution received more than 53 percent approval. Approval by two-thirds of alumni voting was required to pass any constitutional amendments. Accordingly, Dartmouth's current system of alumni governance remains unchanged.

Thirty-eight percent of eligible alumni (24,834) participated in the vote, a record turnout of which we can all be proud.

Voting results for the additional four petition amendments to the current constitution are:

Amendment #2:  Article VI (Order of Business)
12,074 voted to accept (51%), 11,587 voted to reject (49%)

Amendment #3: Article III (Meetings)
12,338 voted to accept (52%), 11,273 voted to reject (48%)

Amendment #4: Article VII (Amendments)
11,572 voted to accept (50%), 11,719 voted to reject (50%)

Amendment #5:  Article IV (Officers)
12,533 voted to accept (53%), 10,931 voted to reject (47%)

For a complete description of each amendment, please visit http://www.voxthevote.org.

The Association would like to thank the members of the Alumni Governance Task Force who worked to create this proposal and bring it forward for your consideration.

Sincerely,

Stanley A. Colla Jr. '66 Tu'86

Secretary-Treasurer
Association of Alumni of Dartmouth College

Air Travel: Vaporizing a Business

I'm not sure which is more depressing - the fact that five years after 9/11 we're more vulnerable than ever, or the fact that government leadership incompetence is working to destroy one of the best things America had going for it on 9/10/01 - an extremely reliable, inexpensive commercial airline network.

I've heard two stories about TSA and travel nightmares recently. In one, apparently the rules changed overnight and when my girlfriend checked in for her usual Monday morning flight to her client site, designer makeup - powder, solid, whatever - has been deemed a threat. Especially when carried by cute young consultants who travel on the same exact flight every single week.

In the other, more disturbing incident, TSA gave Mary Hodder's ID to someone else, not to her. And then the TSA agent first denied that that ever happens (while 2 more IDs were turned in as mistakenly not returned while he was talking about how it never happened ever before) and then, when she demanded to be able to file a complaint, he covered his badge and literally ran away. Talk about "cover up". Check out her blog post on it. And, if you know him, please have him arrested (obstructing justice?) and fired.

I'll refrain from my usual anti-TSA rants and focus on the very simple business facts surrounding the airline industry. It's a high operating leverage industry, which is to say, it has high fixed costs and low variable costs, so each additional ticket it sells represents a large portion of profit above a certain point, and below that point each ticket it falls short makes for a massive loss. It does well by filling planes with price sensitive leisure passengers and selling a few price insensitive business travelers ludicrously expensive tickets. What happens when the business traveler segment - which might not care so much about ticket prices, but does care when it comes to standing in line, body cavity searches, and mistreatment at the hands of the high-school educated hourly TSA employee - stops flying and starts using WebEx?

Business travelers are much more price insensitive than leisure travelers - in the short term. However, business travelers are sensitive to the way they are treated and their time. Over the long run business travelers will look for alternatives to travel if the price goes up (even in terms of opportunity cost) or if they don't like it. Today, happily, technology has caught up to the point where it can provide an inexpensive alternative. With a webcam and a WebEx presentation, the relative advantages of flying have been reduced (but certainly not eliminated). Whenever possible, business people will now begin to avoid travel. It's what the new Porter's Five Forces calls a "Substitute" - if you're United, it's called a "bitch" - because it's about to make you even more bankrupt and miserable than you already are.

Meanwhile over in leisure land, travelers are a different kind of demand inelastic and price sensitive. Weddings don't lend themselves to video conferencing, and neither do newborns, high school and college reunions, tailgate parties at so-called Big Games, and the rest of it. Leisure travelers don't mind the occasional TSA grope or gaffe - as much - or the lines because they only travel once in a while. Waiting in a line once every six months is nothing compared to waiting in line twice a week, or more. Leisure travelers will continue to fly, but there are limits to what a family of four can pay to get to a wedding, and at some point a gift becomes an appealing alternative to thousands in non-refundable airfare. Everybody loses. Especially United and its ilk.

So as TSA destroys the customer experience and forces business people to spend hours thinking about new ways to avoid travel (while they're standing in line for something pointless that will, as always, fail to catch whatever it is that can blow up the plane) the airlines will see their customer mix shift from its historical 1:2 business to leisure ratio towards a much more leisure-heavy balance. These customers will be harder to attract, impossible to retain, and much more price sensitive. Major companies will go bankrupt and the slacking overall demand will force skilled employees to retrain and find new industries.

As the country moves further and further away from its reliable and inexpensive network of air transportation, I'm sure it's only a matter of time before a new startup's blog reads like the following:

John Smith, founder and CEO, was waiting in line to check his bag at WTF airport in East Jesus, when it dawned on him that there is a better way. When he landed he went straight to the office, quit, and the next day started UpYoursTSA.com. Today UYTSA has over 100 million users, all of whom credit John with liberating them from America's TSA-induced flying hell. They left the world of rubber gloves and confiscated designer makeup behind to get actual work done. These customers are intelligent people, like you, who want to spend less time with strangers and more time with their families and friends.

(If you've already started that company, by the way, please let me know. I'd like to invest. And, if you didn't know, I'm also looking for work. The less travel the better.)

When I was crisscrossing the country as a consultant before business school I did some research on container security. Port authorities refuse to consider anything that slows down the transit of containers - even by 1%. Any solution has to scan the containers and make them go through the system faster. Because, if you're going to spend all of that money revamping the system, they - like smart managers - insist on operational improvements, in order to justify and recoup some of the immense costs involved. Why do we care more about throughput and time in the system for inanimate steel shipping containers than we do for our fellow man? Are TSA and airline executives really that coldhearted? If the brainless container cares about how long its waiting in line to be scanned, wouldn't a person standing in a line care, too?

Obviously it's not the sensitivities of metal containers, but that the shipping industry is highly operationally leveraged, and tying up containers for 1% longer would require buying millions of new containers and increasing shipping and port capacity, which would result in a rise in prices and a massive loss of business.

Some might say safety matters more for the passengers than for containers. Wrong. Any one of those containers could have a pretty devastating explosive device on it, and in places like the Port of Los Angeles and Long Beach, or ports near New York City, or Seattle-Tacoma, there are a lot of people who that device could kill. More than fit on your turbo-prop from Bakersfield to Sacramento, for one. The difference is the people who sit next to the ports - the port security managers and other executives - would rather not have their entire industry commit paranoia-induced suicide. Like what's happening with the airline industry.

(Hey TSA, get this: they only scan 5% of the cargo containers but that's probably 99.9% of the potentially dangerous ones. Crazy, huh? Amazing what happens when you think about what you're doing just a little bit.)

Taking Aim

I can't believe this guy comes up first in a Google search for "The Generalist" out of the roughly eight million other possibilities Google has in its cache. Among other amazing achievements, he edited the first magazine on trees. Which, I'm sure, was the most captivating magazine on trees of its day. Truly riveting stuff. What an entrepreneur. But I'm more of a generalist, and it's high time we duke it out for the title.

John May, author of that other generalist blog, has given me new purpose in life. I'm going to win the number one spot. With such a big target (think Salesforce.com vs. Siebel or America vs. Evil) I'm sure to have a long fight ahead of me. But at least I'll be fighting the good fight. No Rodin exhibits, no Klimpt on my pages. Just truly generalist thinking.

If only that Rollins guy had goals over at Dell. But I digress. I have to stop writing for the moment, so I can go execute step one of my plan: dye my hair white and take a picture.

The Hezbollah Rockets

(This was originally posted on blogger 7/18/2006)

I recently read Donald Sensing's One Hand Clapping post on the Israel Rocket Blitz and was disappointed with both his logic and conclusion. While I'll never get put at the top of Topix, at least I can point out where he falls short to the three friends who read this blog occasionally. So for today I set aside my new obsession with technology to address my old obsession, revolutions (remember my other master's degree?).

Mr. Sensing argues that Israel must capture the rockets from Hezbollah or all is lost. He reaches this conclusion by drawing a parallel to the German attacks on Great Britain, which flows from a discussion of the history of the Katyusha rockets currently in use. Both his logic and the conclusion it leads him to are dangerously wrong. The rockets are not the problem, and anyone who says Israel "must eliminate the rocket threat from southern Lebanon" both underestimates the capabilities of humans to exercise their will over other humans, and fails to grasp the cause of the problem.

Mr. Sensing, after pointing out that the rockets Hezbollah is currently using have payloads of less than 50 pounds, then compares the number of V1s and V2s launched by the Germans on Great Britain to the number of Katyushas Hezbollah has launched and has in its possession. This is the kind of "strategic bombing" thinking that was prevalent during World War II, which (thankfully) the field of international relations no longer considers viable. Instead one would discuss, at the very least, the effects of the bombs - factories taken out, etc. The US and UK militaries moved on from even that in the late 1990s and look at bombing in terms of capabilities denied the enemy. All of this has nothing to do with payload; in fact, usually smaller payloads are better because they can be better guided to their targets and inflict less collateral damage.

But let's entertain this payload analysis just for fun. Using Mr. Sensing's numbers, the V1 rockets alone represented 18 million pounds of payload. How does that compare with the 50,000 pounds delivered on the 1,000 rockets already launched? Or even the total of 700,000 for all 13,000 Katyushas it is estimated Hezbollah has? Out of 18 million, 50,000 isn't even a rounding error.

Which is nice, but doesn't really matter. What matters is what people think. The advanced portions of the world, particularly the United States, have become obsessed with safety and paranoid of anything dangerous. I don't set myself apart: my car, at last count, has over 10 airbags, among other safety features. But reflect on that 21 million pounds of payload carried to London on V1 and V2 rockets (the extra 3 million not mentioned above comes from the V2 total). It killed 5,500 people. Yes, tragic. But in comparison to what was going on elsewhere in the war? In the Pacific Theater in the last year of the war the United States lost over 1,000 soldiers per month without fighting - to disease, primarily, but also to outlying acts of violence (the sinking of an American supply ship killed over 1,000 in one day). The rockets were terrifying but the terror was contained; the people of London learned to live with them, carried on with their lives, and won the war.

That is the parallel people need to focus on today: not how frightening it is that Hezbollah has 13,000 rockets or that they could reach all of Israel, but that it doesn't matter how many rockets Hezbollah has because Israel will survive, and will be victorious.

Meanwhile, if anyone figures out a way to round up all 13,000 Hezbollah rockets hidden in houses, caves, fields, barns, bars, and who knows where else I'm sure that the United States INS and Border Patrol could put their genius to work rounding up 11 million illegal immigrants living in America in houses, caves, fields, barns, bars and who knows where else. I think a good place to start is thinking about how you put Round Up or some other weedkiller on a B-52. All you need to do is tweak the chemical formula so that it gets the rockets, not the weeds...

Think about it for a minute. Are you kidding?

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