Showing posts with label technology. Show all posts
Showing posts with label technology. Show all posts

Monday, June 28, 2010

Technology And The Growing Dysfunctionality Of The Political Institutions Of The Old Order

In the book Revolutionary Wealth, Alvin and Heidi Toffler writes,

``It becomes clear that what America world [strikethrough mine] confronts today is not simply a runaway acceleration of change but a significant mismatch between the demands of the fast growing new economy and the inertial new institutional structure of the old society. Can a hyperspeed, twenty-first century info-biological economy continue to advance? Or will society’s slow paced, malfunctioning obsolete institutions grind to a halt? Bureaucracy, clogged courts, legislative myopia, regulatory gridlock and pathological incrementalism cannot but take their toll. Something it would appear, will have to give. Few problems will prove more challenging than the growing dysfunctionality of so many related but desynchronized institutions." [bold emphasis added]

Some recent examples where such conflict applies (hat tip David Boaz)

From the Washington Post, (bold emphasis mine)


A satellite TV station co-owned by Rupert Murdoch is pulling in Iranian viewers with sizzling soaps and sitcoms but has incensed the Islamic republic's clerics and state television executives.


Unlike dozens of other foreign-based satellite channels here, Farsi1 broadcasts popular Korean, Colombian and U.S. shows and also dubs them in Iran's national language, Farsi, rather than using subtitles, making them more broadly accessible. Its popularity has soared since its launch in August...

Satellite receivers are illegal in Iran but widely available. Officials acknowledge that they jam many foreign channels using radio waves, but Farsi1, which operates out of the Hong Kong-based headquarters of Star TV, a subsidiary of Murdoch's News Corp., is still on the air in Tehran.

Viewers are increasingly deserting the six channels operated by Iranian state television, with its political, ideological and religious constraints, for Farsi1's more daring fare, including the U.S. series "Prison Break," "24" and "Dharma and Greg."


A move by Pakistan to begin monitoring for anti-Islamic content on major websites—including those run by Google Inc. and Yahoo Inc.—is the latest sign that censorship looms as a threat to Internet companies in a number of countries.

The Pakistan announcement on Friday came a day after a communications minister in Turkey, which has blocked thousands of sites including Google's YouTube, said the video site was "waging a battle against the Turkish Republic" and suggested that the situation could change if Google were to register and pay taxes.

Authorities in Pakistan on Friday said they would start monitoring major Internet search engines, including Google and Microsoft Corp.'s Bing.com, as well as the e-commerce giant Amazon.com Inc. The move follows an action last month against social-networking site Facebook Inc., which Pakistan blocked for several weeks after it hosted a page in which users could post pictures of the Prophet Muhammad. The portrayal of Muhammad is forbidden by Islam, and the ban was lifted when the site removed the page...

Earlier this year Turkey's communications ministry extended the ban to other Google sites, a move that appeared to be triggered by a separate tax battle with the U.S. giant. As a result, Turks suddenly lost direct access to GoogleMaps and other sites, as well as to YouTube. However, many ordinary users have been able to circumvent the closures.

The opposition People's Republican Party, usually a fierce defender of Ataturk's honor, on Thursday attacked the government in parliament for creating what one parliament member called a "culture of censorship" in the country, including Internet censorship.

Some of Turkey's top leaders have sought to distance themselves from the Internet closures. President Abdullah Gul earlier this month sent out a public message through his account on micro-blogging site Twitter.com, saying he "cannot approve of Turkey being in the category of countries that bans YouTube [and] prevents access to Google."


The growing friction between technology and the old political society is definitely taking shape; eventually one has to give. My bet: creative destruction will win.

Friday, July 24, 2009

How Innovation Have Improved Our Lives

In "100 Things Your Kids May Never Know About" Nathan Barry enumerates the casualties of rapid technological innovation.

From wired magazine, ``There are some things in this world that will never be forgotten, this week’s 40th anniversary of the moon landing for one. But Moore’s Law and our ever-increasing quest for simpler, smaller, faster and better widgets and thingamabobs will always ensure that some of the technology we grew up with will not be passed down the line to the next generation of geeks.

``That is, of course, unless we tell them all about the good old days of modems and typewriters, slide rules and encyclopedias …"

The 100 list...

Audio-Visual Entertainment

  1. Inserting a VHS tape into a VCR to watch a movie or to record something.
  2. Super-8 movies and cine film of all kinds.
  3. Playing music on an audio tape using a personal stereo. See what happens when you give a Walkman to today’s teenager.
  4. The number of TV channels being a single digit. I remember it being a massive event when Britain got its fourth channel.
  5. Standard-definition, CRT TVs filling up half your living room.
  6. Rotary dial televisions with no remote control. You know, the ones where the kids were the remote control.
  7. High-speed dubbing.
  8. 8-track cartridges.
  9. Vinyl records. Even today’s DJs are going laptop or CD.
  10. Betamax tapes.
  11. MiniDisc.
  12. Laserdisc: the LP of DVD.
  13. Scanning the radio dial and hearing static between stations. (Digital tuners + HD radio b0rk this concept.)
  14. Shortwave radio.
  15. 3-D movies meaning red-and-green glasses.
  16. Watching TV when the networks say you should. Tivo and Sky+ are slowing killing this one.
  17. That there was a time before ‘reality TV.’

Read the rest here

The lists simply shows how our quality of life have vastly been improved by market based innovation.



Tuesday, February 03, 2009

Updated: Democratizing Knowledge Revolution Via $10 Laptops (Still A Dream)

India recently announced that it would be introducing $10 (Php 500) laptop computers soon.

Although it is still unclear as to the real offering price as reports vary, BBC says ``Early reports of the cheap laptop suggested that it would cost only 500 rupees (£7). However, this could be a mistranslation, because transcripts of the speech, in which it was unveiled, mentioned it costing $10 (£7) but this was later corrected to $100 (£70)”.

Albeit the physorg.com says, ``The $10 laptop project is the product of a collaboration among institutions including the Vellore Institute of Technology, the Indian Institute of Science, and IIT-Madras. The project began about three years ago in response to the proposed $100 laptop (the "One Laptop Per Child" project), an idea from MIT's Nicholas Negroponte, which was going to cost $200. Currently, the $10 laptop is projected to cost $20, but India's secretary of higher education R. P. Agarwal hopes that price will come down with mass production. The $10 laptop will be equipped with 2 GB of memory, WiFi, fixed Ethernet, expandable memory, and consume just 2 watts of power.”

The goal of the $10 laptop is ideally meant to broaden the access of computers for ‘poor’ school children around the world. However, considering the onus from the heavy doses of stimulus being applied today to prop global economies, subsidies from governments to finance its distribution would probably be limited. This means successfully bringing prices to this level can only be achieved if it will be driven by the markets.

Nonetheless, the positive outcome from a market based distribution of these inexpensive “socialized laptops” is likely to have a huge impact on laptop and PC prices and sales globally. Notwithstanding the prospects of exponential growth of web based usage.

To give you an idea of the existing industry penetration levels, according to comScore World Metrix, ``global Internet audience (age 15 and older from home and work computers) has surpassed 1 billion visitors in December 2008”.

The breakdown of global audience by region as follows:

Again from comScore World Metrix, ``The Asia-Pacific region accounted for the highest share of global Internet users at 41 percent, followed by Europe (28 percent share), North America (18 percent share), Latin-America (7 percent share), and the Middle East & Africa (5 percent share).”

S
o based on geographic distribution, growth is likely to favor Asia.

And which country holds the most users?

According to the Economist, ``THE number of people going online has passed one billion for the first time, according to comScore, an online metrics company. Almost 180m internet users—over one in six of the world's online population—live in China, more than any other country. Until a few months ago America had most web users, but with 163m people online, or over half of its total population, it has reached saturation point. More populous countries such as China, Brazil and India have many more potential users and will eventually overtake those western countries with already high penetration rates. ComScore counts only unique users above the age of 15 and excludes access in internet cafes and via mobile devices.

To quote Forbes Nanotech's brilliant Josh Wolfe in Airbrushing Airwaves & The Adjacent Possible ``The history of technology has been one of displaced labor. New jobs are birthed as old ones die. Talent is embedded in technology. And technology gets further embedded in advanced materials."

The $10 laptop is likely to democratize the knowledge revolution globally.

Update: From hype to dud, the supposed 'laptop' turns out to be another computing device....

This from the Times of India ``The hype surrounding the $10 laptop ``prototype'' with two GB RAM turned out to be a joke when the department of Human Resources Development announced — during its inauguration in the temple town of Tirupati — that it wasn't a laptop at all but a computing device.

While the world eagerly waited for the launch of the $10 laptop — designed by students of Vellore Institute of Technology, scientists in Indian Institute of Science, Bangalore, IIT-Madras, UGC and MHRD — it wasn't a patch on the $100 laptop made by MIT.

The MHRD officials said the price was working out to be $20 but with mass production it was bound to come down to $10 (Rs 500) and thus become affordable for every student in India.

But netizens were disappointed when the ``laptop'' turned out to be nothing more than a computing device along with a hard disk with e-books, e-journals and relevant educative material through the state-art-of-the-art ``Sakshat'' portal.



Tuesday, January 27, 2009

Technology: From Imagination to Reality (and Business Opportunities too!)

New Scientist suggests of “Ten sci-fi devices that could soon be in your hands(pictures from New Scientist)

1 Super-vision…

The Super-vision technology will be introduced by ``the Prism 200 which can detect people through a brick wall by firing off pulses of ultrawide-band radar and listening for returning echoes.”

2 Disappearing act…

Harry Potter’s ‘invisible cloak’ turns real based on the technology of steering electromagnetic waves by virtue of metamaterials!


3 Hands-free healing…

A band aid kit in the future will possibly include high-frequency sound waves based portable scanner that would not only spot internal injuries (e.g. torn arteries), “but also heal them in a flash.”

4 Spider vs gecko…

Spiderman technology or hair based nanotubes that may allow vertical “stick to the wall” movements!

5 You power…

Gadgets like pacemakers that can be implanted and powered by electricity generators from our heart!

6 Jet packs…

James Bond move over, personal rocket belt jets are coming!

7 My other car is a spaceship…

Space travel coming to reality?!

8. Breathe underwater

Swimming with artificial gills ala Man from Atlantis

9 You speak, it translates

Forget language barriers. The evolving revolutionary technology in speech recognition and translation software is coming to close that gap!

10 Smell-o-vision

To make watching TV attain a vicarious experience, smell-o-vision will give off scents/smells that fit the scenes.



Our observations:

Technology, like any businesses undergo transformational cycles as they get accepted into our lifestyles (see above chart).

Such advances may dramatically progress if they are allowed to develop by means of competition and less regulation.

And dramatic improvements of technology should improve our lifestyles or business process flows the way the cellphones and the web has done (lower communication and transaction costs, ease of flow of communications or data, and etc.)

Moreover, technological progression also translates to huge potential investment opportunities, as the transformational cycle allows for greater diffusion of its application. In Austrian economics lingo: lengthening of the production structure.

Read the entire article and its gallery from New Scientist

Wednesday, January 14, 2009

Web based Auction Markets: Virginity for Tuition

The sex trade is supposedly the oldest profession in the world. Nonetheless, today’s technology is giving the trade a facelift.

The web space has introduced a semblance of an auction market to those willing to offer their services. Not only that, services for niche market-virgins.

Excerpts of the new trade from the Telegraph

``A student who is auctioning her virginity to pay for a masters degree in Family and Marriage therapy has seen bidding hit £2.5million ($3.7m)…

``Last September, when her auction came to light, she had received bids up to £162,000 ($243,000) but since then interest in her has rocketed.”…

``She said: "I get some men who are obviously looking for a girlfriend but I try and make it clear that this is a one-night-only offer…

``"I think me and the person I do it with will both profit greatly from the deal."…

$3.7 million for a ONE NIGHT STAND with a virgin! Wow. You can bet on a new market trend to emerge from this. And maybe this may expand to include other niches, especially with today's financial crisis. As an old saw goes, necessity is the mother of innovation.

Sunday, September 14, 2008

Why Doomsday Forecasting And Bad News Sells: Learning From the Black Hole Machine Experience

``You gain strength, courage, and confidence by every experience in which you really stop to look fear in the face. You are able to say to yourself, 'I have lived through this horror. I can take the next thing that comes along.' You must do the thing you think you cannot do." -- Eleanor Roosevelt (1884-1962) former First Lady of the US

Bad news does sell! It had been a fortuitous event to have seen it happen first hand. And it was not just bad news, but a sci-fi version horror story as well.

It was not to my expectation that such an article would command tremendous response when I posted at my blog in the late afternoon of September 9th, about the next day launching of the world’s largest ever scientific experiment called the Large Hardon Collider (LHC).


“Doomsday” was the battlecry of some the critics, see Will Tomorrow Be Doomsday? “Black Hole” Machine Switches On., who vehemently argued that any glitch encountered from such experiment could lead to an insurmountable growth of man made “black hole” that would eventually “consume” the world; our real time Armageddon.


And I thought of sarcastically relating such theme to the financial world: Financial pundits promoting for a global meltdown/depression could have perhaps wrongly premised their theme-instead of selling for financial or economic reasons, selling should have been recommended as the best approach to monetize on everything we own to enjoy the last moments of our lives (that is if there would be any buyers at all).

Figure 1: sitemeter.com: BAD News/Horror Story Causes Readership Spike!

When I checked on my blog counter (sitemeter.com) on September 10th, I was stunned by the number of hits (which had spiked by fourfold) registered mostly from the said article as shown in Figure 1.


It was enough proof that many people can be easily swayed by horror stories!


Why People Love Horror Stories or Bad News


Some scientific research shows that the attachment/addiction to horror movies are partially due biological reasons such as “anxiety disorders” which carries either a genetic component or influenced by the environment where the trauma from horror movies results to the “release of opiate enorphins” or the revving up “the body's sympathetic nervous system” (Swedish.org).


Others say that scary movies could represent our legacy of “tribal rite of passage.” Dr. Glenn Sparks of Perdue University quoted by medicine.net ``There's a motivation males have in our culture to master threatening situations," Sparks says. "It goes back to the initiation rites of our tribal ancestors, where the entrance to manhood was associated with hardship. We've lost that in modern society, and we may have found ways to replace it in our entertainment preferences". In other words, enduring hardships (from horror movies) implicitly signifies as kind of psychological “ego” booster.


For others, it’s all about our alternative emotional safety valve outlet or other means to ease our aggressive impulses. From MSN’s celebrated financial pundit Jim Jubak,


``Sigmund Freud, Carl Jung and Bruno Bettelheim all theorized that we read fairy tales about evil stepmothers, parental abandonment in dark woods and child-eating witches to help us express and then cope with our darkest fears.


``The psychological value of these tales, in this theory, lies in the formulaic, repeated return to archetypical fears in what the reader knows -- even a reader as young as my 6-year-old daughter -- is a fiction. It also helps that, unlike real-life horrors, these tales usually have happy endings.”


Or similarly, why does bad news sells?


It can be little bit of Schandefreude (finding delight on other’s misery) or the release or ease of one’s stress by knowing of the suffering of others or social sympathy (misery loves company?) or occasionally “bad news is better than no news” (sciencedirect.com).


Overall, bad news or horror stories easily connect to the base human emotions of fear or anxiety or insecurity. These psychological aspects represents as an easy way to sell information (or even TV programs -e.g. reality TV as Fear factor!).


What lessons can be learned?


Incidentally, my blog (inspired from kiddy blogs then) had been originally setup for archiving purposes (where I can retrieve or search back issues faster) and secondarily, for public consumption. Although I’ve got a relatively small readership base, I hardly thought of it as a business model until the ad sponsorships came (yes, now I am also open to write for company blogs who are in need of outsource writers). Furthermore, I am delighted to see a small but increasing trend of readerships.


Nonetheless, since we knew that bad news sells all along, and if I were to simply aim for more readership in order to expand on my business model, then I would have concentrated on drilling on the bad news theme. But again, since my primary goal is to be profitable in financial market space, I would commit to assiduously to work on to be as objective as possible.


Famed self improvement author Dale Carnegie once said, ``When dealing with people, remember you are not dealing with creatures of logic, but creatures of emotion." (highlight mine)


Emotions such as fear, insecurity and anxiety can be used as Core Buying Emotions (CBE) or from a marketing perspective, a purchase trigger mechanism that could move people into action.


For some, doomsday forecasting can be an attractive CBE platform to promote one’s business. Whether or not such theme could be real world applicable isn’t perhaps the main concern by such promoters, but the business or popularity that could be generated from adhering philosophically to such dire scenarios.


The Black Hole Machine Encounter and Possible Investment Themes


As for the LHC or the “black hole machine”, we are not science experts to agree to disagree with the argument of the risks of its operation. One thing we know is that if the dissenters are right there won’t be anyone left to argue against it since we’d all be gone.


However from the benefit side, the Large Hadron Collider is suppose to uncover the underlying structure of the universe; the Higgs boson “elementary particles cause matter to have mass”, validity of the Grand Unification Theory (are electromagnetism, strong nuclear force and weak nuclear force a single manifestation?), existence of the superstring theory (quantum gravity) and dark matter and dark energy [Yes I am glad to learn that if scientific observation is accurate, the latter two forces dominate the Universe, from the BBC, ``The latest astronomical observations suggest ordinary matter - such as the galaxies, gas, stars and planets - makes up just 4% of the Universe. The rest is dark matter (23%) and dark energy (73%)].


Not only that, the LHC project will allow us to “accelerate computing cycles” (sciam.com) for “safely storing and then processing huge amounts of data” (guardian) which should revolutionize the way we utilize the internet and vastly enhance the research capabilities in the world of science.


In short, from an investment perspective, the LHC could be the nexus or the springboard for the next generation technology BOOM and a great enhancer of the lives of our children and hopefully including us, if scientific discoveries arrive on time and at affordable costs.


Monday, September 01, 2008

Decoupling in Cyberspace? Internet Traffic Begins to Bypass the US!

The following article by New York Times' John Markoff accounts of a monumental watershed development in the world's cyber traffic. This is a compelling read. Here are some excerpts...

``The era of the American Internet is ending.

``Invented by American computer scientists during the 1970s, the Internet has been embraced around the globe. During the network’s first three decades, most Internet traffic flowed through the United States. In many cases, data sent between two locations within a given country also passed through the United States.

``Engineers who help run the Internet said that it would have been impossible for the United States to maintain its hegemony over the long run because of the very nature of the Internet; it has no central point of control.

``And now, the balance of power is shifting. Data is increasingly flowing around the United States, which may have intelligence — and conceivably military — consequences...

``Ms. Claffy said that the shift away from the United States was not limited to developing countries. The Japanese “are on a rampage to build out across India and China so they have alternative routes and so they don’t have to route through the U.S.”

``Andrew M. Odlyzko, a professor at the University of Minnesota who tracks the growth of the global Internet, added, “We discovered the Internet, but we couldn’t keep it a secret.” While the United States carried 70 percent of the world’s Internet traffic a decade ago, he estimates that portion has fallen to about 25 percent.

``Internet technologists say that the global data network that was once a competitive advantage for the United States is now increasingly outside the control of American companies. They decided not to invest in lower-cost optical fiber lines, which have rapidly become a commodity business...

Important Lessons:

1. Government intrusions have been driving away internet traffic from the US.

2. The snowballing realization of the significance of the Internet to the economic sphere has prompted for diversification of internet providers.

3. Developing countries have been pouring massive capital to the industry more than the US

4. The growing diffusion of world internet usage world wide could be seen in the prism of "one of many indicators that the world is becoming a more level playing field both economically and politically." In short, decoupling!

5. Expanding global competition helps drive the spread of internet usage.

Tuesday, August 19, 2008

Olympics: Trend of Breaking Records Accelerates! What drives them?

From the Economist,

``TUMBLING world records are part of the Olympic experience, but just how much have swimmers or runners improved over the past 100 years? In Beijing, new records have been set in the most glamorous events in athletics and swimming—the men's 100m sprint and freestyle. Jamaica's Usain Bolt cruised to victory, taking his own 100m sprint world record down by three-hundredths of a second to 9.69 seconds. In the century or so since official records began, the quickest time has fallen by just under a second—a 9% improvement. But in the pool, Australia's Eamon Sullivan covered 100m in the heats (although he lost in the final) in a world-fastest time of 47.05 seconds, 19 seconds (and 28%) quicker than the record-holder of 1905."

Courtesy of the Economist

With these trends here are some questions we’d like to know…

-Has demographics or world population growth been a significant contributor to these developments?

Or more people equals better odds for outperformance?

-or has rapid and sweeping advances in technology or “sports science” (sports gears, equipments, arenas-e.g. pool design, scientific training etc…) been the major driver?

Example, this from the New York Times (underscore mine), ``As swimming becomes more popular, it attracts better athletes, who often stay in the sport for more than one Olympics and have access to increasingly sophisticated sports science. Swimmers who once concentrated mostly on endurance now spend up to 50 percent of their training on refining the technical aspects of kicking, pulling, breathing and body position, said Genadijus Sokolovas, director of sports science for USA Swimming….

``American swimmers here are accompanied by four sports-science experts. Each race is videotaped. Immediately after a race, each swimmer has an ear pricked to test for lactic-acid levels. After a warm-down swim, video analysis is made immediately available to monitor stroke counts, distance per stroke, split times, and the biomechanics of takeoffs and turns.

Another example (HT: Forbes’ Josh Wolfe) Phil Mickelson’s Congressional testimony on the importance of Math and Science (emphasis mine)``I use math and science every day, and it's not just adding yardages to the pin. I actually practice based on statistics. I use course management based on numbers. For instance, I know that my margin of error is plus or minus 5 or 6 percent. So if I have a 200 yard shot, 6 percent of that is going to be 32 yards off line - that's going to be my margin of error. And there's even more science involved in equipment I use. Launch angles, spin rate, loft, deflection, initial velocity, the transfer of energy. I continually work with companies like Callaway and some of the most technical design processes to optimize the performance of my clubs.”

I use statistics to maximize my practice. I do a drill with 3-foot putts. And I can make 100% of them. But at 4 feet, it's 88%, at 5 feet 78%, and at 6 feet, it's only 65%. So while I may not be wasting my time trying to add 20 yards to my drives, what I really need to do is hit my chip shots within 3 feet of the hole. That's the best way to lower my score."

-or has the global political economic dimensions of Olympics (globalization’s role-e.g. training abroad or migration trends; investment or financing of participants a function of markets or of government?; type of government and or social acceptability etc..) played a major role?

Saturday, August 09, 2008

Technology Changing The Way Games Are Played (Swimming)

Technology seems to have altered the competitive dimensions in the sport of swimming. Skills will now have to be complimented by hydrodynamic designed swimwear (fabrics with least drag) in order to gain an edge…(yes even in sports, gains can be set at the margins).

Courtesy of menstyle.com

This from the Economist,

``But technology matters even more in the swimming pool. The body suits worn by swimmers today reduce drag through the water—especially after a start and following a turn—by as much as 10% compared with suits worn at the last Olympics.

“The most popular body suit this year—the $550 Speedo LZR Racer—is credited with some 46 world records since it was introduced just six months ago. Comparable bodysuits have since been rushed out by Arena, Adidas and Mizuno in time for the Beijing games.

“Speedo gets its edge from a space-age “pulse” fabric and the way it’s welded together rather than sewn to create a smooth, streamlined shape in the water. Engineers at NASA’s Langley Research Centre in Virginia tested more than 60 different fabrics in a wind-tunnel for Speedo to find out which offered the lowest skin resistance…

“The researchers at Langley found that at the speeds simulated in the wind-tunnel, the smoothest fabrics and weaves had the lowest passive drag (the resistance generated by a swimmer kicking forward with the arms stationary out front after a diving start or turn).”

Speedo LZR Racer in Action Courtesy of the Economist

I guess this means it won’t be just about competitive “Olympic” skills this time. Nonetheless, this should also be seen as an incoming fashion trend.

Simply said, we’d probably see more of this high tech $550* swimwear gear pervade the swimming pools.

*of course, one should expect retail prices to be lower so as to gain a 'critical mass'-often the hallmark of technological innovations

Wednesday, July 30, 2008

Tidal Power As Alternative Energy

Biofuels, Wind or solar power are the popularly known alternative energy.

What is least known is the recent commercialization of tidal power or tidal energy-(wikipedia) “form of hydropower that converts the energy of tides into electricity or other useful forms of power.”

A schematic of how tidal power runs looks like this…

from technologystudent.com

What we’d like to emphasis is-innovation is a natural product of the markets- where rising energy prices has opened the avenues for (substitutes) alternative energy sourced from mother earth.

You can read about the entire article of the first commercial tidal power system in Northern Island here.

courtesy of technologyreview

A short excerpt…

``The world's first commercial tidal-power system has been connected to the National Grid in Northern Ireland. Built by the British tidal-energy company Marine Current Technologies (MCT), the 1.2-megawatt system consists of two submerged turbines that are harvesting energy from Strangford Lough's tidal currents. The company expects that once the system, called SeaGen, is fully operational, it will be able to provide electricity to approximately one thousand homes.

``The system is currently being tested and has briefly generated 150 kilowatts of power into the grid. But it has also damaged one of its rotors due to a failure in the control system when the rotor began turning too fast. Although the problem was a minor setback, the unit is not expected to start running continuously and at full capacity until November, says Peter Fraenkel, the technical director at MCT.

``The technology works like a wind turbine, but instead of wind, the turbines are driven by the flow of tidal currents. It offers a significant advantage over wind because currents are predictable, says James Taylor, the general manager of environmental planning and monitoring at Nova Scotia Power, a company that also has plans for a one-megawatt tidal-power project. "Wind is intermittent and, because of that, is much more difficult and expensive to integrate in a power system," he says.

Sunday, June 01, 2008

Why Forcible “Free Texting” Will Only Lead To Increased Poverty

``Congress, devoutly promise that all their actions are based on good intentions. But it doesn't matter: bad ideas regarding the nature and role of government breed bad results and suffering occurs nevertheless. Twisted logic, Machiavellian justifications, excuse making, and short-run benefits can never justify the removal of one iota of liberty from any one person if we intend to live in a free society.” US Congressman Ron Paul, The Economics of a Free Society

People always ask why the Philippines remain “poor”? Our reply has been “because of the lack of respect of markets, the dearth of economic common sense, the dependency culture, political hubris and the incessant pandering by authorities to buy public opinion through government intervention”.

``The problem is not that supply and demand is such a complex explanation. The problem is that supply and demand is not an emotionally satisfying explanation. For that, you need melodrama, heroes and villains”, wrote Thomas Sowell. And melodrama is what has prompted for the recent “Free Text” ruction, where in essence this is all about PRICE CONTROL.

Because of the huge profits accrued, domestic telecoms companies have been portrayed by some public officials as “villains” for not providing text messaging services for free. The assumption is that telecom companies have undeservingly been making huge profits at the “expense” of consumers (the “victims”) something analogous to taxation. Thus, the soi-disant “heroes” threatens to impose redistributive “justice” by compelling these “greedy” firms to make good free text messages as part of “social” service….or else!!!

The Survivorship Bias and Earnings Cycles

English novelist George Orwell once wrote, ``Power-worship blurs political judgment because it leads, almost unavoidably, to the belief that present trends will continue. Whoever is winning at the moment will always seem to be invincible.”

Thus before passing any generalization it would be best to examine the facts behind the issues.

For starters, the telecoms industry is a capital intensive industry; it requires Billions of Pesos in capital investments for its infrastructure rollout to be able to operate.

Yet the public or our so called “heroes” DO NOT SEE or REALIZE that the huge sums of investments DO NOT automatically GUARANTEE profits. This is why it is called as RISK CAPITAL. Nobody puts at risk his or her capital without the attendant expectations of profits or return on investments (ROI). If a venture goes wrong, investors LOSE equity, on the other hand, if they are right they deservingly REAP profits. So there is ALWAYS a TRADEOFF.

In the same way, even if the domestic telecom industry have been earning today, this DOES NOT GUARANTEE that they will NOT LOSE tomorrow or sometime in the future. Risk taking endeavor is always an ONGOING DYNAMIC because the challenge is the future. Yesterday’s performance may or may not be the same for tomorrow. The past has been perfected, but the future still needs to be ascertained.

Unfortunately people and those in power simply don’t understand this. They are skewed to only see the profits and NOT the ACCOMPANYING RISKS (called survivorship bias-the fallacy of seeing winners only), hence makes a bigoted issue out of these.

It is not always cloud 9 for the industry.

Figure 1 Ed Yardeni.com: S&P Telecom P/E Ratio

As an example, figure 1 courtesy of Yardeni.com shows of the Price-Earnings Ratio of the US S&P 500 Telecommunication sector. As you can see, the PE ratio peaked in 2000 and collapsed by more than half as the dot.com bust unraveled. This shows of how investors paid exuberantly for share prices of telecom issues in 1998-2000 in the EXPECTATIONS of the continuity of astronomic earnings growth seen in the recent past (early 90s). When reality sunk in, where expectations did not match with real earnings, prices retrenched. Until now or eight years from the pinnacle, the price earnings ratio of the US telecom companies remains depressed!

So huge profits are a permanent fixture for the industry? Think again.

Remember, earnings growth in any industry undergoes cyclicality. For instance, the wireless segment of the telecom sector, the biggest earnings revenue contributor today, is likewise subject to the innovation cycle (innovation, growth, shakeout, maturity and end phase).

As the cycle segues from rapid growth (today) to the maturity phase, the explosive pace of growth will eventually slowdown to match or track the pace of the country’s economic growth or GDP. It can only manage to sustain such extraordinary levels of growth if it is able to introduce more revolutionary innovative products which consumers will patronize. But then again, that is a risk which the industry has to bear with by spending largely for its research and development.

Telecom’s Success Formula: Competition

Another, the telecom industry operates under a deregulated environment. This means that industry firms would have to STIFFLY COMPETE among each other to be able to attract enough subscribers in order to recoup on their investments and eventually earn from it.

And how do they do that? By offering BEST POSSIBLE SERVICES at the MOST AFFORDABLE PRICES.

As the “Text capital” of the world, we are said to have been privileged with the lowest “texting” rates in the region. From the Philippine Star, `` [Globe Telecom senior vice president Rodolfo Salalima] Salalima also emphasized that the Philippines has the lowest text messaging rates in the region. Because of the various promotional campaigns being offered by local telcos, particularly unlimited texting, text-messaging rates in the country have gone down to as low as 13 to 14 centavos per message.

``This rate, he stressed, is extremely low when compared to India’s 61 centavos per text message, Malaysia’s 67 centavos, Indonesian Extelcomindos’ P1.18 per message, China’s P1.55 per text, and Hong Kong CSL’s P15.91 per message.”

Meanwhile, the penetration levels for domestic mobile have reached 51% or some 46 million in early 2007(marketreserach.com), which means more than half of the population is now connected.

Yes, the success to spread connectivity in the country today is principally due to intense competition, which has immensely LOWERED prices and thus added subscriber volume or by expanding coverage.

Economics 101 tells us that if you want more of anything you simply lower the cost and if you want less of anything you increase the cost. But as a caveat this important insight from Mr. Jeff Bezo, Amazon.com’s CEO, ``Lowering prices is easy. Being able to afford to lower prices is hard", which alternately means lowering prices has its limits. You can afford to lower prices enough to keep some profits to ensure the survivability of the company.

And this has not been an isolated or a Philippine only phenomenon but a global one as shown in Figure2.


Figure 2: ITU: Global Mobile Industry has been Powered by Competition

Where monopoly once dominated the telecom industry today competition has taken over. Because of competition which brought upon affordable pricing worldwide, in 2007 mobile the penetration level have exploded to around 49% or some 3.3 billion subscribers (news.com.au).

Enormous Capital Investments Need Huge Earnings

It does not end here.

Because the industry is technology laden, this means that it would require CONTINUOUS ACCESS to risk capital in order to EXPAND CAPACITY (think nationwide coverage, reduction of dead spots, reduced time lags from message sending to receiving, international roaming et. al.), UPDATE/UPGRADE TECHONOLOGY (think Multi-media messaging, 3G) or to INNOVATE (think WIMAX, IPTV) its infrastructure or to even CUSTOMIZE PRICING (think unlimited texting or calls) for the very same purpose of attaining viability of the project by offering QUALITY and EFFICIENT SERVICES at AFFORDABLE PRICES to attract MORE subscribers and earn profits from it. As earlier mentioned it has to also spend for considerable investments on RESEARCH and DEVELOPMENT.

Not only that…billions of Pesos of existing infrastructure is similarly subject to OBSOLESCENCE RISK-where the risk to infrastructure or extant technology becomes obsolete or outmoded!

Figure 3 Ray Kurzweil: Moore’s Law

Figure 3 from futurist Ray Kurzweil shows of how technology propelled innovation have accelerated exponentially or the “S” Curve. This means that technology based companies like those in the telecoms will have to be nimble enough to adapt to the swift advances in technology or lose subscribers and money.

In short, HUGE PROFITS are thereby REQUIRED for the UPKEEP of the capital intensive system of the telecom industry to ensure its survival. Nonetheless, what needs to be further stressed is that such profits are never guaranteed and is never static since it breathes upon the patronage of fickle consumers! Consumers like voters can easily change preferences for whatever reasons.

Consumer Sovereignty and Patriotism as Refuge of Scoundrels

When consumers subscribe to a company’s service (post paid or pre paid), this is because of the perceived satisfaction or utility derived from the services offered. They are done VOLUNTARILY and NOT BY FIAT. Consumers always have the option to terminate or transfer to other firms offering similar generic services (or more) because they see it fit according to their interests. This is called consumer sovereignty. It is unlike taxation which derives revenues by FIAT or decree. By the same token it means that earning by risk taking and earning by coercion are TWO different animals.

It is obvious that the failure to understand the dynamics of the industry is by itself a manifestation of grand myopia. Thus, the projection of the “immorality” of profits is totally unwarranted, unjustified and unfair.

Yet while pretending to serve for the best interest of the populace or consumers, this propaganda or threat to intervene via price controls actually seems more of a camouflage for punishing them.

The threats to compel free text messaging signify irresponsible statements which are wantonly absurd and have far reaching dire unintended consequences. The unfortunate part of government intervention is- “they make the rules, we the nation suffer from it”.

What possibly happens when such policies gets implemented?

Since text messaging for the telecom industry today is a MAJOR profit center, it will shift to a COST CENTER or at worst transform into a SUNK COST.

Stated differently, the telecom industry’s incentives will be overhauled overnight. Companies will either (at best) marginalize on improving on the cost center subject to subsidies from HIGHER PRICES of other services (higher toll fee for wireless, landline, data and other services) or look for other sources of revenue center (maybe via a shift towards content subscription) or (at worst and most likely path) totally ABANDON the text services altogether.

In the private sector, a nonprofit cost center can only exist when it indirectly contributes to other sources of revenues. (Think GOOGLE-it provides free search engine as a come on in order to generate significant traffic volume from which attracts advertisers-the company’s main revenue source). However, if the cost to maintain the cost center exceeds the profit potential from its major sources of revenues then it bleeds the overall operation of the company which leads to imminent closure.

Plainly said, the revenues lost from text messaging will now be recovered in the form of HIGHER prices of OTHER services. If they are not able to do so, you can kiss text messaging goodbye.

Think of it, who in the right mind would spend tens of millions or billions of capital to upgrade the network if it is non-revenue generating anyway or if it does not compliment to revenue generation?

Remember, this is NOT a government bureaucracy which can afford to subsidize one sector. In the market, revenues are derived from VOLUNTARY exchanges. In government, revenues are derived from seignorage (money issuance) or taxation-which comes out of compulsion as a subject of the state. In short, taxation is predatory-people don’t have the LEGAL option to say NO to taxes, except by tax evasion or smuggling which is punishable by law.

Put differently, in the market, people have the power to say NO to poor services by voting with their money. In government, people are NOT empowered with the same privilege. Instead we will have to bear with the inadequacy of public services because it is imposed by edict.

So applied to price controls, the choice would be having jerrybuilt or substandard services (think severely delayed text messages which may take hours, days, weeks to receive-if at all) or none at all! Besides, anything free could mean an exponential rise in usage which may vastly exceed the network capacity (systems overload) of telecom firms and thus heighten risks of a network system crash!

Moreover, because of reduced earnings, companies in the embryonic stage or with razor thin margins will simply vanish due to insolvencies.

All these combined, you can be guaranteed of even more HIGHER rates for the other residual services from the remaining service providers!

As Ludwig von Mises wrote, ``If the government fixes a maximum price for certain commodities below the level which the unhampered market would have determined for them and makes it illegal to sell at the potential market price, production involves a loss for the marginal producers. Those producing with the highest costs go out of the business and employ their production facilities for the production of other commodities, not affected by price ceilings. The government's interference with the price of a commodity restricts the supply available for consumption. This outcome is contrary to the intentions which motivated the price ceiling. The government wanted to make it easier for people to obtain the article concerned. But its intervention results in shrinking of the supply produced and offered for sale.”

Because reduced supply from policy initiated incentives equals higher prices, price controls do more harm than what is intended.

At the end of the day, the road to hell is paved with noble intentions. Free text messaging equals no text messaging and or higher cost of other communication services.

On the other hand, the only more viable way to bring down prices is to liberalize the industry or open it to MORE competition as shown above.

Aside, our authorities have another option of reducing prices: REDUCE TAXES but with CORRESPONDING DEDUCTION IN SOCIAL SPENDING. Our glib talking politicians should not only vent on the industry but should look at their own bureaucracy as a source of savings. They should consider giving back to the people their wasteful and inefficacious boondoggles in the form of pork barrel!

Nationalization Next?

So once interventionism creeps in, what’s to stop the government from going further?

The next step would probably be to put a cap or ceiling on prices of the other sources of revenue sources. This should translate to humongous losses and lead to industrywide foreclosures.

In the same manner if the government compels companies to operate free text services by bleeding them dry, the industry would simply allow itself to be taken over.

Hence, government completes the transition by effectively “nationalizing” the industry.

By nationalization, government would need tons of capital from which would come from taxpayer funding. Remember, the lifeblood of this industry requires recycling of huge capital. The assumption that government can manage the monopoly profitably is wishful thinking given its horrible track record and its LACK of resources.

As a political entity, the cosmetically rehabilitated state owned company will only be an endemic source for political appointments which will be hobbled with incompetence, abuse, corruption and other forms of capital allocation inefficiencies. It will be another potential cow to milk at the expense of consumers.

If the company will offer mobile services (at subsidized rates) under subsidies from the national government, losses accumulated will be charged to the unfortunate productive taxpayers, whom will bear the brunt of higher taxes and or higher costs of living.

If they should charge for services, given the monopoly and inherent inefficiencies, whatever services will be paid for will be at VASTLY greater prices than what it is today even at the face of dysfunctional or shoddy quality of services.

Thus, your free text becomes both a DIRECT and INDIRECT tax to consumers!

In a world where technology has helped improved the lives of people by increasing communications, connectivity, interaction and business transactions and trades by lowering costs, price controls and unnecessary intrusions by government will undo these progress. We are likely to materially slowdown, if not regress.

Ultimately all these should lead to immense lost productivity, loss of competitiveness, loss of investments, capital flight, loss of jobs, higher taxes, higher cost of living, lower the standard of living, a more intensified corruption and worst of all increased poverty.

Politics Likely A Factor-“Flexing Political Muscles”

The incumbent President is an economist, so we are inclined to believe that she is very much aware of the negative repercussions from the derring-do actions of her subordinates, unless she is a closet hammer and sickle bearing ideologue (which so far enough hasn’t been the case).

That said, it is likely that the administration could be seen as “flexing its political muscle” as a demonstration of strength that it is still a power to reckon with even as her tenure approaches the twilight (or the projection that the administration is not in a lame duck state). This is especially directed to whom she perceives as her political opponents. (Yes some of the supporters of her adversaries are stalwarts from the industry).

Yet political maneuverings will do us no good by signaling to investors of the country’s vacillation to sanctify contracts and or uphold private ownership rights. Moreover, it is this kind of interventionist culture that inhibits a market economy from flourishing, aside from the perpetuation of the state of corruption.

As the illustrious economist Milton Friedman once said, ``There is no such thing as a FREE Lunch! To paraphrase, ``There is no such thing as a workable forced free texting!

As a final thought and disclaimer, my perception of the industry is one where it has been cherry picked or where the “low hanging fruits” have already been harvested. The rapid growth phase seems likely to transit into a mature phase which should grow in line with the economy over the coming years. Thus the performance of the telecom sector should reflect the growth of the Phisix than massively outperform as in the past, in my view. As a market participant who aims for “growth” and unpopular “value”, the industry has not been much of a priority, which means I DON’T OWN any telecom issues as of this writing.