In the last post, I discussed why we're in a bubble. In this post, I'll discuss why people keep founding startups.

Why people start startups

From an engineering perspective, you might rationally work as an employee in a startup under at least one of two conditions (I'll explain this below):

1. you feel that the founders have significant skill or resources that you lack
2. you are receiving a market-reasonable salary

I should clarify that there are a few other reasons you might reasonably work at a startup. Note that I said "reasonably", not "rationally". I'm leaving "rationally" to mean something that's purely economical.

1. you feel that the company has a great product which will change the market
   
2. you really like working with the team
3. you enjoy working on this product
   
4. you can't get a job anywhere else (unlikely)

Those "reasonable" reasons aside, let's get back to being rational. Let's review the economics of being a startup employee. You might expect two things when you're offered a job at a startup -- a salary and stock options. Typically, you might expect your salary to be reasonable -- and a percent or less of stock options; or you might forego a competitive salary in exchange for a few more stock options. It's not reasonable (I learned) to expect more than a percent or two in equity. Even if you're the first engineer, with a very low salary, you shouldn't expect more than 5% in equity. So let's go with half a percent, which is reasonable in a startup with 20 people.

If you're very lucky, the company might be sold for $100M. When you start, the company is probably already worth a fair amount -- say $20M, so the option income might be $400k. Tack this onto a slightly-below market salary of, say, $80k (for someone graduating with a BS), and you've made $180k per year. And again, that's if you're lucky. In contrast, it's not unlikely that you'd make almost this much as a late employee at Facebook, which is going to offer restricted stock units, a much more reliable way of making decent income. To be more clear: there's also a decent chance that the startup will be worth nothing in two years. Then you're out of work, you have Netscape on your resume, and you've made below-market wages for a while.

To be sure, startups aren't a bad lifestyle: you have flexible hours, you learn a lot, and there are a lot of reasonable reasons (second list, above) to work for them. They're particularly great for new grads.

But if you have the same skills and resources as the founders, or at least think you do, then it's completely irrational to work for them, when you could be taking a higher level of equity from the start. A 20% share of that $100M company is now $20M, or $5M/year. With even a 10% success rate, you're taking home an average of $500k / year, compared to your $120k from before.

My suspicion is that this explains the exploding number of startups we're seeing: many reasonably-skilled founders are finding that they don't want to work for Mark Zuckerberg: they want to be the next Mark Zuckerberg.

How will this turn out? My hope is that founders will start giving considerably higher equity to non-founding employees -- co-ops, effectively. Unfortunately, I don't have high hopes for this. First, it doesn't make sense to give high equity to employees whom you barely know. Second, distributing a company more widely gives much less control to the founders. This distributed control might lead to all sorts of infighting, indecision, and bad decisions.

High-risk startups as high-leverage investments

Nobody can go far without hearing discussion about startups or speculation about bubbles:

http://www.businessweek.com/smallbiz/content/mar2011/sb20110329_239744.htm
http://dealbook.nytimes.com/2010/12/03/a-silicon-bubble-shows-signs-of-reinflating/
http://www.businessinsider.com/a-few-points-about-the-tech-bubble-debate-2011-3
http://blogs.reuters.com/mediafile/2011/03/24/the-41-million-mobile-app-or-the-web-bubble-debate-now-in-full-color/

In this post, I'll talk about why we're in a bubble. In the next, I'll talk about why people are still founding startups.

I'm not sure what to make of the startup market either: is it really a bubble? I'll argue that it is. I'll give non-rigorous arguments that (A) tech startup investments tend to be highly leveraged against the broader stock market and (B) our market has at least two factors which might contribute to bubbles. I encourage any readers to contribute market data or ideas.

(A) To see why tech startups are a highly leveraged against the broader stock market, consider that many tech startups are eventually acquired by other companies. In many recent cases (at least in the Web- or consumer-facing cases), they are acquired by large companies like Google, IBM, Apple, or Facebook. These acquisitions, however, typically come when the acquiring firm is flush with capital -- and have enough that they can comfortably afford to buy entire companies. Now, a 10% increase in the stock price of Google might give it $18B extra to spend. Surely not all of this will go towards startups; say just 5% of it does. Even that would generously buy about ten $100M startups. In short, a 10% increase in the stock market is enough to promise 10 great prizes to 10 great entrepreneurs. VC firms see this, so they're willing to fund 10 companies -- or more. After all, if they miss on a few but are reasonably accurate, they'll be fine. In fact, they'll be better than fine.

Added 30 March 2010:

The leverage part comes here: say the market increases 10% again. Google can now buy about twenty $100M companies. The market for startups has doubled, on a 21% increase in the stock market. This example is exaggerated, since there's always a market for startups, but it's reasonable to assume that, if tech companies' stocks dropped to 50% of their current value, they wouldn't be acquiring anything for a while. Going by this assumption, the leverage is at least double the stock market.

I've also realized that "beta" might be a more appropriate term to use than "leverage".)

(B) The stock market has bounced back in the past two years, with indices such as the S&P having risen by about 60%. Naturally investors are feeling cushy again (I am, even as a novice investor: I bought an unnecessary car a few months ago). Part of this increase is due to low interest rates: stocks are simply more attractive than bonds right now. Add to this the fact that banks are able to borrow money at record-low rates, and in many cases they're re-investing it in exactly those VC markets that we are talking about.

Here's how it will happen: once our stock market dips again, say 15% (and it's bound to happen eventually, even if it goes up before), Google and other established companies will pare back their acquisitions -- even if it's largely an emotional move. It won't be terrible for them, since they have clear business models and low burn rates. VCs will realize -- from market data, industry hearsay, and experience -- that it's not worth investing as freely in high-risk startups. After all, their hundreds of $100B tech startups no longer have buyers. This won't be the end of VC capital, but it will be enough for a number of tech startups to log off. Of course, many VCs will be hurt by this, which will have second-order market effects as some go bankrupt, and the stock market will drop further, as value is lost overnight. And that's how the bubble will burst.

Google Trends: World War 3

The global recession has encouraged a number of social uprisings, including the recent overthrow of Egypt's autocratic government and milder protests such as those across Europe and in Argentina. Right-wing extremism is predictably on the rise.

It's rather apocalyptic to argue that World War 3 is around the corner, given that I know little about history. Still, I'm placing my bet on increasing nationalism and economic warfare in the next 15 years.

What are people searching for? Right now in Google News, "world war 3" is ranked higher on autocomplete than "world war 2" (this is very possibly an artifact of their autocomplete algorithm). World War 3 picked up in news searches around mid-2009, although it's not clear what the units on these searches are; perhaps the phrase only became popular enough to appear at all at that time. It's also still less frequent than "world war 2".

At the same time, "world war 3" is almost as popular a query as "nationalism": the latter has become less prominent over time. Hedged bets such as "economic warfare" and "trade war" are much less frequent, until you look at concrete examples of these, such as "tariff". "tariff" really picked up in mid-2009 and is much more popular than any of the above queries. India, Norway, South Africa, and Hong Kong are by far the biggest country sources of these queries. Washington, D.C. ranks highest among American cities.

Link to this search

You cannot Endure / Industrial Pesto!

Larry Hosken provided the winning caption to this photo (which was taken from here.)

Clementi's suicide

A freshman at Rutgers committed suicide shortly after his roommate secretly recorded him making out with another guy.

First, there's no question that this is a tragedy.

Further, what Ravi did is terrible: it's an invasion of privacy, and he deserves to be punished for that.

However, Clementi would probably have been less likely to commit suicide if society were more accepting of homosexuality. That Ravi watched Clementi himself may have indicated that Ravi was expressing reaction formation, a common behavior among people battling their homosexual feelings by acting very much against them. Further, he was not attacking Clementi directly; he was clearly doing and saying these things for his friends, probably in part to try to avoid rumors that he might be gay since he has a gay roommate (yes, rumors like this do spread in college dorms). This is unfortunate, but it happens because homosexuality is still socially taboo. Further, what Ravi did is still socially accepted in many social circles (take my highschool football team, whose members tormented gay students in my high school, or my parents and their friends, who make jokes about gay people. This phobia is common in much of America, suggesting that Ravi didn't realize that what he was doing was such a big deal.)

Governor Christie said he didn't see how Ravi and his friend could sleep at night "knowing that they contributed to driving that young man" to suicide. First, we all as a society contributed to this because we do not tolerate homosexuality. Second, such statements are overblown and cruel: suicide is a tragedy, but nobody should be made to feel guilty about something like this (I say this because someone close to me committed suicide, and it's confusing enough to cope with with these things without the guilt).

Ravi should be punished for invasion of privacy, but his punishments should match that for similar behavior, regardless of this death. To do otherwise would be finding a scapegoat for a problem (i.e., widespread homophobia) that we as a society are unwilling to accept responsibility for; instead, we should all admit a little bit of responsibility and try finding ways to improve society's view of gay people.

Add a caption to this image.

In the comments section, add a caption to this image. The best caption gets to go here. The image is taken from this article.

Parroting of the Republican talking points

David Brooks over at the NYT is parroting the typical Republican talking points.

http://www.nytimes.com/2010/07/20/opinion/20brooks.html?hp

Here are some current typical Republican talking points he's squeezing in here, and why they're bad arguments:

1. "the middle is rising up in revolt in the tea party movement" (although he's careful not to mention the tea party) Where's your source, except for Glen Beck and Fox News? Sure, there's a tea party "movement", but it's still relatively small, and Obama's ratings are still relatively high.
2. "Obama and friends are arrogant and think they know everything with their technocratic analysis" Arrogance is a cute spin on obama's cabinet's credentials, but these people certainly don't think they know everything, and you can hardly blame them for using rigorous analysis to understand what's going on. More importantly, they also don't make things up when they don't know something, or when they don't have enough evidence to support their side, and they don't have a record of distorting science.
   
3. "there are sweeping changes going on that people don't agree with" There are always sweeping changes going on in government. There will always be things people don't agree with. But many people are also happy with the changes occurring. See the reader's comment below.
   

I'm not arguing that the Democrats are perfect. U.S. citizens have reasons to be angry at them, too. But these talking points -- outrageous as they are -- are not the right reasons. Instead, Republicans seem to think that real Americans are too dumb to understand more sophisticated arguments, or else that these reasons are not emotionally captivating enough for a broad audience.

In any case, one NYT reader points out in the column's comments that "Brooks only quotes Heritage Foundation and American Enterprise Institute studies".

Another NYT reader (Stefan Cover) makes a good point about how bureaucracy is not really the target of peoples' anger--

Come now - this is not about the role of government; this is about control. Most of the angry would be perfectly happy with lots of bureaucracy if they felt that it served their purposes and was controlled by those who shared their social and political views. Most of their anger is spawned by feelings of disenfranchisement, not by the proliferation of bureaucracy. You vastly overestimate the intelligence behind the backlash

The economics of trust

In this post, I'll explore interest rates with a focus on trust.

Earlier this year I was listening to the book-on-cd version of Alan Greenspan's Age of Turbulence. Greenspan's political views aside, it was an interesting biography which provides some important insight to a dabbler in economics.

One of the things mentioned by Greenspan was the importance of trust in a capitalist economy: Greenspan noted its importance multiple times, citing it as a reason for the problems with some of Russia's past failed attempts at capitalism. And, indeed, it seems that trust can be a useful lens through which to view much of our economy.

First, trust is behind any notion of financial credit (and the two are really synonymous): our own economy has been in dire straights recently because banks are less willing to lend to one another or to individuals. Normally this would drive interest rates up, if the government were not willing to subsidize the credit markets with its record-low federal funds rate. This subsidy of trust can sometimes do wonders to the system, with all sorts of second-order effects (these second-order effects include making safer investments less attractive, which leads investors to invest in more risky securities).

In addition, trust allows disparate groups to work together. Instead of spending economic resources competing, or spending these resources duplicating work, groups can turn attention to shared goals and exchange of legit promises.

Finally, trust improves personal responsibility, as individuals aim to improve their credibility in a system which rewards it.

Trust Bubbles

At other times, subsidized loans can inject too much trust into the economy, as happened originally when the interest rates were too low in the middle of the 2000-2010 decade. Here, market participants all over felt too much trust: mortgage lenders trusted that borrowers would pay back their loans (okay, sometimes this was not true). Both borrowers and lenders trusted that the houses being purchased would continue to be valuable. Once it was clear that these houses were not worth as much, owners began walking away. And those buying these mortgages from the lenders as mortgage-backed securities trusted that the mortgages were actually worth something.

Note that it's not clear whom these borrowers trusted -- there was a mutual trust shared by all market participants -- essentially a bubble. But none of this could have happened if people hadn't trusted one another so much. So how much trust is optimal? I'm not sure yet.

Trust in low-income populations

I'm convinced that improving trust can help certain low-income or historically oppressed populations in the U.S. improve their economic situation. Many of these populations have been found to have low interpersonal trust, and conspiracy theories are associated with lower income (these theories both feed off and encourage mistrust, although the object of this trust is unclear).

Perhaps there could be an effort to improve trust in these socioeconomic groups by subsidizing trust in them. We're already doing this to the larger economy with interest rates and with direct payments to other countries (take our subsidy of trust between the U.S. and Pakistan); it is only natural to improve trust in those parts of our population which need it most.

The advantages are clear: Sam will happily lend his paintbrush to Jonny next door because he knows Jonny will return it. Sam can trust that his neighbor Maggie will carefully watch his toddler while he's at work. And Maggie -- who still needs to support her family -- knows that Sam will pay her at the end of the month when he gets his paycheck. No need for Sam to waste money on payday loans. Jonny does not need to buy his own paintbrush. And Maggie's can make an income from watching Sam's kids. Everybody wins, because of shared trusts.

How can we provide these subsidies? Subsidized sub-prime lending has already been inadvertently tried and failed.

Here are some potential scenarios: the city offers low-income resident groups packages (i.e., money) up front to paint, clean, and maintain certain areas of the city. Once a project has been completed, a new package is offered. This would foster a better relationship between the city and residents, while also improving inter-resident relations and property values.

Another possibility: the city can help property owners to offer financial "options", or a share of any increase in home value, to renters. With an actual stake in the value of their homes, renters will have a clear incentive to improve and maintain their homes. Renter-tenant trust increases with the shared incentive.

Finally, a trust campaign might help. With modest funds from the city's stimulus money, the city can offer an advertising campaign, encouraging residents to trust one another.

These possibilities may or may not work. But if we are able to discern and define exactly the trust we should aim to improve, there must exist an appropriate subsidy.

Finally, the economic importance of trust extends to the city government. Only when the city has demonstrated that its interests lie first and foremost with Saginaw residents will the residents trust the city. And when they trust the city, everyone wins.

(This post is a bit scattered as-is. I may submit some polished version of this to the Saginaw News)

EU flights (including flights by US carriers to/from EU countries) must put you up when you're stranded

Flights by EU carriers and all flights to or from EU countries must put you up and pay for meals when you're stranded. They also must pay you a fee if it's their fault, and they need to reimburse you for cancelled flights.

From TFA:

The rules themselves are fairly simple. When a flight is canceled, regardless of the cause, a passenger can choose to get a refund for the unused portion of the ticket or be rerouted on another flight. If this results in an overnight stay, the airline has to pay for a hotel, meals and transportation between the hotel and the airport, even if the cancellation is due to weather or any other factor outside the airline’s control.

If the cancellation is considered within the airline’s control —such as when the plane has mechanical problems — the carrier must also pay each passenger between 125 and 600 euros, depending on the length of the flight and the delay.

Remember this next time you book a flight. It sounds like you might have to make a fuss, but I suspect they'll give in if make it clear that you'll speak up if they don't follow the law.

Recall also that the EU includes quite a few countries.

This is great if you're a EU carrier. I'm hugely in favor of laws like this in the U.S., but I'm also curious about whether such laws provide an incentive for risky flights when conditions are nasty? (Presumably flights are cancelled due to bad weather conditions by the FAA and its EU counterpart instead of by the carrier, mitigating such incentives?)

Knowing when you're in a bubble, case study: college degrees

As we'd seen in the middle of the past decade, knowing when you're in an asset bubble can be extremely difficult, often only obvious in retrospect.

So what are the current bubbles now? It's still hard to say, but I'll posit one bubble. Post a comment if there are other bubbles you see happening right now.

Bubble: The value of a college education. An education is definitely important, but only for certain things and certain people. With very low interest rates, student loans are available at an (apparent) low cost, and many adults dive into an education, with a focus more on the end degree than the actual education: many degrees are simply not marketable. For-profit schools are popping up all over, which means that the value of any degree is decreased, even if these schools are accredited, due to the clear conflict of interest.

And many of these institutions are not accredited at all, including legitimate-sounding names like "West Virginia State University". From Breyer State University:

Is Breyer State University accredited by an accreditor approved by the US Department of Education?

Response: Breyer State University is not accredited by an accreditation agency approved by the U.S. Department of Education. Such approval is a voluntary process, and in fact, the U.S. Department of Education states that accreditation itself is a voluntary process. There is no mandate by federal law for a School, College or University to be accredited. Many good schools are not accredited.

... Breyer State University is an accredited member of [a] private institution...

What they don't tell you is that non-accreditation will prevent many people from getting jobs: some states require job-seekers to divulge when a degree listed in their credentials is non-accredited. And their degrees generally aren't transferable to accredited institutions. That said, it's likely that many employers unknowingly hire people with non-accredited degrees.

I am not suggesting that people not go to college, or even that for-profit schools are inherently evil. But the glut of graduates due to a lower bar from massively available student loans, and due to graduates from non-accredited universities (250k to 500k, by one estimate), will make degrees less meaningful -- and, ultimately, less valuable to future generations. Does that mean fewer people will get degrees? Maybe. Maybe it will encourage more people to get degrees in the short run, since they need to compete somehow. But I suspect that people will gradually find that their investment in questionable degrees is not paying off, and enough people will find that it's more economically viable to skip the degree and make $35k/yr at Uncle Tony's Window Company.

How can you address this bubble? It's not clear how easy -- or ethical -- it would be to short student loans. My hunch (as a non-financial expert) is that there must be publicly traded securities that package up these loans, just like mortgage-backed securities. On the other hand, the federal guarantee of these loans makes them less risky, hence less attractive to short-sellers. So your best best may be to go after the non-accredited (and especially online) institutions that depend on these loans, and to find ways to short them. And remember that you're not attacking education. You're attacking fraudulent education.

Also, make sure the school you attend is a well-known school, that people will recognize. If you're staying local, a major state school or community college that people will recognize should be fine. If you're going national or abroad, try to pick a top-25 school. And, if you're hiring, be scrupulous about checking the accreditation of your newhires' schools.

Engineering life forms

Olivia Judson usually writes pretty interesting pieces for Science Times. Yesterday's article on engineering life forms was a great example (it doesn't present new, groundbreaking research; but you feel like you've learned a bunch after reading the article...

China [burns more coal] than the US, the EU, and China *combined*

Apparently either the US and the EU burn no coal, or China burns infinite coal:

China is the world’s largest consumer of coal, burning more than the United States, the European Union and China combined.

From this article about a freighter crashing into the Great Barrier Reef near Austrailia.

(Note: it looks like this typo has been fixed in the posted article.)

The new healthcare bill

Good news is already happening with the healthcare bill, as insurers are now agreeing to cover children with preexisting conditions. It's hard to believe denying them such coverage was legal before.

Prices will likely increase because of the bill. I'm not too familiar with the legislation, but mark my words: unless there is very close antitrust regulation and monitoring of pricing, insurers will gauge customers, because of either explicit collusion or the inability of customers to easily change insurers. Such collusion and resulting high prices would be an undeserved ticket for republicans to shout, "I told you so!"

I've heard about a marketplace for insurance contracts -- that might be one place to avoid collusion and unnecessary gauging; but it will need to happen very soon for the public to not regret passage of the legislation.

How Freeze-drying works

Probably about how you'd expect, given the name and the "light" texture of freeze-dried foods.

Basically, you need to freeze something to below water's ideal point, then reduce the pressure and add enough heat to make the water in the material sublimate (go from a solid directly to a gas).

This is apparently similar to a process by which natural mummification sometimes takes place in high altitudes. This is also reminiscent of the way cheerios are made.

Why have we not tried freeze-drying everything under the sun (well, figuratively), such as tofu and turkey?

http://en.wikipedia.org/wiki/Freeze_drying#Food_industry

Increasing right-wing extremism

About a year ago, the Department of Homeland Security warned of increased right-wing extremism. This is notable because it appears to be true. Since then, the Tea Party Movement, a wacky rightwing movement incubated by conservative organizations, has continued to gather increasing press. More recently, a man furious with the IRS crashed his airplane into an IRS building. And democrats have already received a number of threats over healthcare legislation.

The report (the text of which is available at the Huffington Post link above) notes that these right-wing groups are likely to capitalize on the economic downturn (as has happened in the past) and the election of the first African American president.

Interestingly, it also notes that conspiracy theorists who have anticipated a cataclysmic collapse of the American financial system will be egged on by the current financial crisis; it also notes other sources of paranoia for these extremists -- such as ammunition shortages and the rise of other world economies. Of concern, there has been an increase in stockpiling of ammunition among these groups, and the report notes that they are likely to recruit disgruntled returning war veterans.

Of course, we have an historic healthcare bill coming through congress; those legislators opposing it have reacted rather aggressively. I want to argue that republicans should think carefully before spewing paranoia-inducing rhetoric about healthcare legislation. On the other hand, I feel that arguments which use national security as a supporting argument are often suspect (this cynicism is due to coming of political age in the last 10 years).

Online obituary guestbooks

With the recent death of someone close to me, I discovered the industry of online obituary guestbooks. The industry seems at once disgusting and emotionally manipulative. Upon cursory inspection, one might also infer a network of payments between these guestbooks, online newspapers, and the "comfort industry" (flowers, giftbaskets, etc.), which makes it that much more uncomfortable, given the links between these sites. (The links below are not people I know -- they were selected for illustration purposes).

legacy.com is one of these services. They collect guest comments for a period of time, after which they request that family or friends pay to have access to the book. Conveniently (for them), they're linked off of some online news obituaries such as our very own mlive.com. I don't know whether they pay these news sites, though I suspect they do.

The guestbook remains online for some period of time (a month?). Once this period has passed, Friends and family can pay $2.95 for access for a day. This fee is called an archive activation fee, suggesting that it must be expensive to host gigabytes of text and photos.

Or you can keep the guest book online indefinitely for only $79.99.

These services become especially attractive to families once people have left comments on the service; how could you let positive comments about your loved one disappear?

By doing this, you'll be giving the loved ones of Marilyn Ann Wrobleski a place to express their feelings, and share memories any time they'd like in the months and years ahead.

Well, why not host our own guest book with these comments? Oh, snap -- the terms of use suggests that you cannot reproduce these comments on your own site:

"You may not, for example, incorporate the information, content, or other material in any database, compilation, archive or cache. You may not modify, copy, distribute, re-publish, transmit, display, perform, reproduce, publish, reuse, resell, license, create derivative works from, transfer, or sell any information, content, material, software, products or services obtained from this Site, except as specifically noted above."

These sources also provide links for you to buy flowers or gift baskets for your loved one. No question they're generating revenue through affiliate payments, by inspection of the links: http://flowersallover.com/cgi-bin/exoticitem-db.cgi/FAO-343?source=legacygift2&ovchn=OTHER&ovcpn=giftshop&ovcrn=flowers&ovtac=AD. I've changed "legacygift" to "legacygift2" in the link so we don't earn the site any more money than it deserves.

At least we know that legacy.com's site is guaranteed to host our guestbook indefinitely, even after legacy.com is gone:

"Subject to its suspension, cancellation, and termination rights and rights to remove Material, Legacy.com, Inc. represents that each Guest Book and Moving Tribute sponsored as "permanent" will remain on this Site for the duration of Legacy.com, Inc.’s existence, and that each Guest Book sponsored as "one year" will remain on this Site for one year from the date of sponsorship ..."

Well, okay. For a year. Oh, wait, maybe not even that:

"unless: (a) this Site ceases to exist in whole or in part during the relevant period ..."

In some sense, I'm happy that there exists some service like this; they are providing a service to families and friends of loved ones. At the same time, it treads an uncomfortable ground, because this service seems poised to exploit people at their most vulnerable periods, and their fees seem rather high, given the limited scope of services they provide and the rather prohibitory terms of use, when affiliate payments alone (through flowers, etc.) are probably enough to cover the costs.

"Show Us the E-Mail"

A compelling op-ed by Eliot Spitzer, Frank Partnoy, and William Black appeared in today's NYTimes.

"By [making emails and models related to AIG's counterparties publicly available] online, the government could establish a new form of “open source” investigation."

One argument is that the US is an 80% shareholder -- we should have the shareholder power to compel AIG to make decisions such as this.

An argument against this which I didn't see in the article: perhaps making such emails public, we would hurt AIG, and ultimately ourselves, since it might still be teetering on the edge of collapse. In this case we might be keeping our holding in AIG shares afloat by keeping this information private. But, on the other hand, we also might be missing out on opportunities to claw-back undeserved bonuses or payouts to AIG counterparties.

Learned how to spell two words

I usually consider myself a decent speller, but sometimes I end up writing a word for the first time (since I just never had a reason to write it before). The two words I learned today are "millennium" (note the two N's, which I'd thought was one n) and "inoculate" (I thought there were two n's).

Priorities in Saginaw, MI

The Saginaw News published my letter here.

Here is the text, for readers' convenience:

A letter on Friday, June 26, to The Saginaw News urges readers to donate to the Saginaw fireworks display to make it better than Bay City's. Two days later, the editorial board published a story noting that 65 Saginaw County school teachers have been laid off.

With Saginaw's dismal economic outlook, we must be careful where to place our pride. Instead of spending roughly $70,000 on fireworks to compete with our neighbor, perhaps we can donate $20,000 of that to Bay City for some outstanding Tri-City fireworks, and Bay City can respond by opening up more space for Saginaw vendors.

This would strengthen bonds with Bay City, and we can then donate the remaining $50,000 to our public schools to keep more of our talented teachers' jobs or help attract even more talent to the area.

Nobody will move to Saginaw because it has the best fireworks one night of the year. But with small compromises like this, we can compete to have the best schools in the area 365 days of the year - something that would actually encourage smart families to stay in Saginaw.

Covert Operations Against Iran

With the recent election in Iran, you have to admit that the widespread protests were a bit of a surprise. It seems safe to say that the US has a much greater interest in the outcome -- and a much greater role in the events -- than they are letting on.

The official line (CBS News) is basically that we expect that Iran recognizes that

"the world is watching... I want to repeat it that we stand with those who would look to peaceful resolution of conflict, and we believe that the voices of people have to be heard, that that's a universal value that the American people stand for and this administration stands for.

Obama continues,

"But the last point I want to make on this - this is not an issue of the United States or the West versus Iran. This is an issue of the Iranian people. The fact that they are on the streets under pretty severe duress, at great risk to themselves, is a sign that there's something in that society that wants to open up.

So the US is emphatically and conspicuously not taking sides.

On the other hand, by late 2007, Congress had agreed to fund a major escalation of covert operations against Iran (last year, I'd made a quick note about these operations). These operations

"are designed to destabilize the country’s religious leadership. The covert activities involve support of the minority Ahwazi Arab and Baluchi groups and other dissident organizations

Indeed, these minority groups are involved in the protests.
Granted, these covert operations were initiated under a very different administration than the Obama administration; but a Counterpunch article by Paul C. Roberts, assistant secretary of the treasury in the Reagan administration, seems to put these doubts to rest.