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Google vs. Apple: another standards war

We have blogged about standards wars before (Another standards war, this one with rules, Will this standards ware become a quagmire?, DVD war drags on), and now we see a new one being fought between Google and Apple for a mobile telecommunications/Internet operating sytem.

Adam Schiff analyzes the tradeoffs between an open system (Google, more applications) vs. a closed operating system (Apple, higher quality):

But if I had to bet on it, I’ll bet on Apple. I think people’s preferences for quality are relatively strong, especially among people who want to use Internet applications on their mobile phone. I think a platform that provides some quality control over the applications available on its system will have an advantage over one that doesn’t, even if it reduces the number that are available. Of course, this depends on getting all the prices right — how much to charge for applications and how much to pay developers. This makes me more nervous about betting on Apple, as they don’t have a history of getting prices right the first time.

Are banks hiding more bad news?

In past blogs (Securitisation and its hidden costs, Can functionally organized banks "see" risk?), we have talked about the organizational problems of banks and mortgage brokers that exacerbated the subprime crisis. Now we find out that similar organizational problems may prolong it. Maverecon (via marginalrevolution.com) identifies the bigger problem behind the problem:

the sub-prime crisis is but the tip of the credit risk mis-pricing iceberg. Unsecured consumer loans and car loans, and the large stock of ABS backed by credit card receivables, are waiting to join the credit risk-repricing party.

The single best thing that could happen would be for the true magnitude of the losses suffered by banks and other exposed parties to be revealed and put in the P&L. Until what happens, fear of getting stuck with the hot potato makes banks unnaturally unwilling to extend credit against the kind of collateral that they would not have thought about twice accepting at the beginning of the year.

In other words, banks continue to make bad loans in order to hide the bad loans they have already made.

Is Asia's antitrust "surge" working?

in past posts (What if there were no antitrust?) we have blogged about Asia's antitrust laws. Now, from Tad Lipsky:

Those who scan the horizon for new international antitrust developments will have noticed that South Korea has become a frequent and active player, spearheading what might be viewed as a "surge" in antitrust activity across the Pacific. Japan has adopted a leniency program and is pursuing cartels with new vigor, both alone and in cooperation with other jurisdictions; class actions seem to be emerging as a regular feature of the Australian system, and the ACCC professes interest in criminal remedies; Singapore is rolling out its new law, and with continuation of merger review and the enactment of the first broad-gauge antitrust statute in China, due to go into effect in August 2008, one wonders how close we are to the day when every deal and every major antitrust issue faces an acid test in at least one Asian jurisdiction (in addition to the "standard" US/EU/Canada, etc.). But South Korean enforcement is active right now -- not "over the horizon" or even "on" it.

Beware bearers of bad news

Irwin Stelzer is supicious of the bad news coming out about the economy because those with the best information may be trying to pressure the Fed into cutting rates (from the Weekly Standard)

Had enough gloom and doom? Then consider this. The job market remains strong, not as strong as in the recent past, but strong enough to keep unemployment at low levels and to have Goldman Sachs' economists call it "robust." Productivity rose at the robust annual rate of 4.9 percent in the third quarter, causing labor costs to fall. Core inflation remains low. Most CEOs I meet are expecting profits to grow at double-digit rates in 2008. Personal incomes continue to rise. The economy did grow at a healthy pace in the third quarter. The World Economic Forum ranks America number one in competitiveness, up from sixth last year. The International Monetary Fund expects the world economy to grow at close to 5 percent, which bodes well for U.S. exports. And Ben Bernanke, while at the same time warning of downside risks to any projection, told the Joint Economic Committee late last week that "most businesses appeared to enjoy relatively good access to credit . . . the overall economy remained resilient in recent months," and that he expects growth to resume in the second half of 2008 after a "sluggish" first half, "as the effects of tighter credit and the housing correction begin to wane.

Evolution of Business Education

Harvard Business School professor Rakesh Khurana reviews the evolution of B-school education in his new book, From Higher Aims to Hired Hands (review from Business Week available here).

While I have not read the book myself, it seems to be generating at least a little bit of buzz (here’s a post from our friends at the Organizations and Markets blog). I must admit that I approach the book with a bit of skepticism given that Business Week notes that it argues for “the reinvention of management” to foster virtues like “custodianship, duty, and responsibility.” Oh, boy!

Want a kidney? Wait six years.

In our textbook, one of our best money making ideas is selling kidneys:

If I can borrow $100 million at 20% interest, I can buy a hospital ship, anchor it in international waters, and begin selling kidneys. I can set up a database to match donors to recipients, broker sales, and fly in experienced transplant teams. If I charge $200,000 and earn 10% on each transaction, the break-even quantity is just 1,000 transplant each year. This represents about 1% of the potential demand in the United States alone.

Now the Wall St. Journal reports that since the waiting list has grown to six years, there is growing support for lifting the federal law that led to the shortage:

Dr. Matas, 59 years old, is a Canadian-born physician... [has]...been traveling the country trying to make the case that barring kidney sales is tantamount to sentencing some patients to death.
...
The federal ban on organ sales dates back to 1983, when Virginia physician Dr. H. Barry Jacobs proposed buying kidneys -- mostly from the indigent -- and selling them to whomever could afford to buy. His plan was met with widespread outrage. In Congress, then-Rep. Al Gore (D., Tenn.) introduced legislation banning the sale of organs. The bill became law in 1984.

Can Toyota be big, green, and high quality?

From The Economist

By the end of the year, Toyota is set to edge past General Motors (GM) with forecast group sales of 9.34m vehicles compared with GM's 9.29m. At the same time, it will decisively push Ford into third place in the crucial North American market. ...

The danger Toyota faces is that two of the very things that have made it so successful—the rock-solid reliability of its products and its reputation for making fuel-efficient, greenish vehicles—are threatened by the need to keep feeding its phenomenal growth.

Momentum vs. Mean Reversion

The Economist reports on the fall of Bill Miller and his Legg Mason Value Trust which is trailing the S&P500 by 7%.

Mr Miller calculates that if you had taken the 50 best performing stocks over the 3 years ending December 31st 2006 and taken them as your portfolio for this year, you would have earned a return double that achieved by the S&P 500. In other words, what goes up did not come down but kept on rising.

That is not the traditional pattern of financial markets. Momentum has been a successful strategy but only in the short term (say six to twelve months). Over the longer term, stocks tend to revert to the mean, as attractive companies eventually become overvalued and struggling companies become cheap. This time, the winners have kept on winning, particularly in commodities, industrials and emerging markets. As Mr Miller points out, these all thrive on global reflation and global growth.

Mr Miller has essentially lost by betting on the reversion to the mean, assuming that beaten-up stocks in the financial and consumer sectors would rebound. Given his record, he may well prove to be right in the end, just as they those who forecast the tech bust were eventually vindicated.

Blessings of the Commons

The Economist reports that Spanish fisherman want to establish a fishing reserve out of self interest:

One study of marine reserves in St Lucia and Florida showed that catches by adjacent fisheries increased by around 50%, and the biomass of five types of commercially exploited fish tripled in three years inside the reserves and doubled in adjacent fishing grounds. A more recent study in Sicily showed that a reserve multiplied the catch by a factor of 27 in only five years.