Public companies, like republics, end up with the leaders they deserve.
I think the more interesting question is, "Why do boards of directors hire and overpay mediocre CEOs who actively destroy shareholder value?" And why do the shareholders elect board members who do this?
A strong antidote is to a) pay board members minimal cash compensation for their duties and b) ensure board members have a significant portion of their net worth invested in the company they oversee. This rather simply aligns board members’ interests with that of other shareholders. Sitting on a board should not be a cushy job -- it should be a privilege to oversee the management team responsible for making you richer and richer. If enough board members own chunks of the company, then bring in "outsiders" for their perspectives, but always make sure the board collectively has enough skin in the game.
With respect to compensation, I frequently see executive pay associated with bullshitty metrics that are not tied to owners’ total returns or increasing the enterprise’s per-share intrinsic value. When executives are compensated with stock, the cost to owners (share dilution) is frequently obfuscated in the financial reports, or considered income through the use of legal but creative accounting. (Adobe and others were notorious for this chicanery before the dot-com bubble imploded.)
When I consider purchasing shares, I always look at "corporate governance," CEO attitude, and board composition as important qualitative indicators of quality. Frankly I’m shocked by the number of publicly traded enterprises that retain significant earnings, and then piss the money away on failed acquisitions, ostentatious headquarters or skyscrapers, or, in the case of Bethlehem Steel before the bottom fell out of the industry, three separate corporate golf courses -- one for management, middle management, and employees.
This is one of the reasons I’m fond of dividends: I don’t trust many CEOs to smartly allocate capital to generate satisfactory rates of return. It takes a special sort of person to either sit on cash for extended periods until a truly outstanding opportunity presents itself, or just admit that the enterprise has exhausted sensible options for capital redeployment, so time to bust out the dividends and share repurchases.
The topic of corporate governance seems to be in vogue at the moment. Just last week, several CEOs and asset management firms released an open letter advocating for public companies to adopt "commonsense" governance principles [1]. And the large asset management firms like Vanguard are starting to become more vocal about how the companies they own are managed, if this letter is any indication [2]. Vanguard and other "passive" asset management firms have enough weight (literally trillions of dollars under management) to force change, and boards know it.
Right, but how do we reverse the trend of consolidating and increasing power in D.C., at the expense of the people and the states?
It seems no one (outside a small minority) cares about limited government, enumerated powers, the Tenth Amendment, or why we're in a state of perpetual war without a declaration from Congress.
Since I don't see a Cincinnatus or Washington on the horizon, I suspect economic disaster, coupled with a deeply unpopular president (say Clinton or Trump), could force the people to finally act, either through state nullification, calls for a second constitutional convention, or even secession movements. In the meantime, liberty-minded Americans should continue to question the legitimacy of federal programs and initiatives like the "drug war" -- the USSR collapsed, in part, because it lost legitimacy with the people.
The federal government is primarily a mechanism for redistributing wealth on a vast scale, and so in effect all Americans are bribed to turn the other way. (Look at the number of states who accept federal dollars and in exchange surrender part of their sovereignty, e.g. highway funds and the drinking age.) Then you have an entire class -- in the millions -- who receive paychecks directly from the feds, or work for a federal contractor. Don't expect members of this American "Outer Party" to lead the charge for limited government [1].
[1] Last year, I was at a network security training and in attendance were some paper CISSP "cyber warrior" types. You would be horrified if you heard their thoughts on the Fourth Amendment, compelled disclosure, and the secret federal kangaroo courts. The irony is that, like the president, these civil servants take an oath to uphold the Constitution. Your tax dollars at work, folks.
This is what Madison meant when he referred to "parchment barriers." The people of the United States are humiliating themselves and their ancestors by prostrating before the Christ-like executive who will deliver them jobs, hope, free college degrees, and ponies, too! A republic and its constitution are only as strong as the citizens who uphold it.
In a way, it's appropriate that the republic's come to this, as the very monolithic institutions that the "Progressives" and liberals built throughout the 20th century could very well be turned on them if Trump is elected president. Hence Hayek's quote: "We shall never prevent the abuse of power if we are not prepared to limit power in a way which occasionally may prevent its use for desirable purposes."
Congress, though, shares much of the blame for executive overreach. Congress' cowardly (though politically expedient) abdication of its constitutional responsibilities has led to a permanent state of war and emboldened executive.
Though Senator Clinton was not alone in her sentiment, her vote to "authorize" the president to go to war with Iraq, a sovereign nation that did not attack the United States or provide an immediate, existential threat to the republic, is an instructive example of how these people think. From her floor speech:
"...it is a vote that puts awesome responsibility in the hands of our President and we say to him - use these powers wisely and as a last resort."
The Constitution clearly states that Congress is to declare war. There's nothing about giving the president that choice. Instead, Congress punts like political hacks, and refuses to issue a proper declaration of war with their names attached to it.
And in case you think I'm focusing too much on a vote from last decade, remember that the men who founded this republic effectively told the King of Great Britain to fuck himself, signed their lives, fortunes, and sacred honor to the document declaring as much, and then mailed a copy to his office. And the charlatans in Congress can't even follow the constitution when it matters most? And we're considering electing one of them as president?
If nothing else, the disaster that is Trump vs. Clinton might spur a conversation about truly downsizing the federal government and returning more power to the states -- where it belongs and where it was intended to belong.
Thank you for sharing your experiences. Where do you think we go from here? At what point does the whole system collapse? I sometimes think it it will take a prolonged macroeconomic disaster to force a total revamp.
Know who else has that "problem"? Warren Buffett and Berkshire Hathaway. Something like $3 billion in cash arrives in Omaha every month for redeployment. But as a master capital allocator, Buffett is happy to sit on cash until something attractive crosses his desk, i.e., no overvalued "tech" companies.
Unfortunately, the macro pattern over the last few decades has been boom-bust as easy money leads to stupid, short-sighted exuberance for shares of mediocre businesses with owner-unfriendly management (hence the non-GAAP bullshit and stock-based compensation that's somehow not an expense).
The adults in the room endure the pain of sitting on cash -- QE and the central bankers certainly make it hard -- before the the bubble de jour implodes and the markets crash back to reality. But after the party is over, patience is rewarded with bargains for shares of businesses with real, enduring, high-quality profits. Think of it as time and personality arbitrage.
Great post. I never made the connection between the Gracchi brothers and the Progressives and New Dealers, but I think there's definitely something to it.
To your point about the similarities between the decline of the Roman and American republics: Sir John Glubb wrote a paper about how empires collapse ~250 years after their inception. Like you, he's not trying to lay out a numerology theory or "historical law," but uses these similarities to analyze *why* empires collapse. Glubb specifically cites the introduction of the welfare state, followed by liberal granting of citizenship to foreigners, as a common cause of decline. The EU should take note.
"...the Founders, who were very aware of Roman precedent when they designed the government, hoped to prevent."
It's pretty amazing how the Romans' best ideas were transplanted through time and space -- I mean there's a senate that meets atop a Capitol Hill thousands of miles from Rome on a continent they didn't know existed.
"here's why history is important to know something about: to avoid making the same mistakes others have in the past."
One of my favorite American historians, Thomas Bailey, said something like, "Every generation of apes begins where the previous generation began, because apes can hand down no record of their experience. Man leaves a record; but how much better is he than the apes if he does not study it and heed its warning?" Expunging the classics from public schools wasn't a conspiracy per se; I think it was arrogance by the bureaucrats who truly believed that the past is irrelevant.
"What happens when one of these collapses under the insanity of its economic idealism and the population takes refuge on the other?"
A poorly-run state is a disaster for its citizens, sure, but they made their own bed. Better a state fail than the entire republic. What happens when the insanity happens at the *federal* level because we've consolidated too much power and money there? Where do we take refuge?
"in the US being handled by for-profit private institutions rather than the state?"
It's funny that people are upset about Donald Trump's fraudulent for-profit "college" while Bernie "Everyone Gets a Free Horse!" Sanders keeps talking about "free" college courtesy of Uncle Sam: Trump (and the hundreds of others like him) gorged themselves at yet another multi billion dollar federal trough. And that's what always happens when the federal government starts subsidy programs to cure some perceived ill: corruption, inflation, market distortions, etc. The federal government has no business in the college game -- leave it to the states and private institutions and some sanity will return to the market.
"I see similar signs from the U.S. (300 million people), where increasing polarization suggests different groups of people (not necessarily divided along state lines) seem to have different ideas for the best way to proceed, but are getting more and more upset at each other for forcing everyone to go either one way or another."
Montesquieu believed that republics could only survive if they were small. I'm sure this was influenced by his study of the ancient Roman Republic and how it turned into an empire ruled by autocrats and generals. (See "Considerations on the Causes of the Greatness of the Romans and their Decline" -- very readable and considerably shorter than Gibbon's more famous work on the subject.) The fact that tiny Switzerland is probably the most sensible republic in the West is due, in part, to its very smallness.
The Framers of the U.S. Constitution were familiar with Montesquieu; indeed, the entire point of the federal system was to (attempt to) harmonize the need for a stronger federal government to handle things like shared security and trade while still leaving considerable sovereignty to the states.
So to your point: if California wants to be the next socialist utopia with a massive welfare state and useless state-funded high-speed trains, have at it! Likewise, New Hampshire can go full libertarian. It's the whole "laboratories of democracy" concept – different ideas for different groups of people. Totally scalable regardless of population, if the federal government lets it happen, and lets states fail or succeed on their merits.
But Washington directs and influences too much of the economy, e.g., the military-industrial complex is a massive jobs and pork project for literally millions of people. The federal executive branch has so grossly overstepped its constitutional functions that it's horrifying and disgusting. Trump and Clinton would be far less dangerous to the republic if the office was considerably more modest and Americans didn't treat the President as some messianic figure who will deliver them jobs and other goodies! (Remember the days when presidential candidates ran "front porch" campaigns and submitted simple State of the Union letters to the congress instead of performing embarrassing and grandiose speeches?)
The problem in the Western World is the rolling disaster that's political and economic centralization. Brussels, Washington, the central banks, and other supporting institutions are all guilty. Among other ills, they create massive economic distortions (see the current college education bubble) and when everything inevitably explodes, they "save the day" – sort of like the fireman who burns down his own house and trumpets the great job he did later putting out the fire.
Lastly, dwell on this fact: the House of Representatives has had 435 members for almost a century, despite the massive growth in both population and size of the federal government. This means the ratio of citizens to representatives only grows more unfavorable, and at a time when it matters most! Concurrently, U.S. senators are no longer selected by state legislatures, leaving state governments without any way of directly influencing federal legislation. This is a total disaster for the federal republic and the chickens are coming home to roost.
"One straight forward example of what paleopathologists have learned from skeletons concerns historical changes in height. Skeletons from Greece and Turkey show that the average height of hunger-gatherers toward the end of the ice ages was a generous 5' 9'' for men, 5' 5'' for women. With the adoption of agriculture, height crashed, and by 3000 B. C. had reached a low of only 5' 3'' for men, 5' for women. By classical times heights were very slowly on the rise again, but modern Greeks and Turks have still not regained the average height of their distant ancestors. "
"Compared to the hunter-gatherers who preceded them, the [Native American] farmers had a nearly 50 per cent increase in enamel defects indicative of malnutrition, a fourfold increase in iron-deficiency anemia (evidenced by a bone condition called porotic hyperostosis), a threefold rise in bone lesions reflecting infectious disease in general, and an increase in degenerative conditions of the spine, probably reflecting a lot of hard physical labor."
The Alamo Drafthouse had Patton Oswalt perform a "dramatic" reading of a message left at the theater by someone who was angry about having been thrown out for texting during a movie. It's pretty hilarious, and I first learned of the Drafthouse through their campaign of playing the original message as a sort of anti-texting PSA before screenings.
The real economy is based on natural resource extraction and industrial production. As such, I find it important to read about commodities (petrol, natural gas, bananas, cereals, coal, iron ore, etc.) and how they've shaped civilizations through the ages. To this I add books about effective management of water, topsoil, rangeland, and forest resources.
A short list of books related to these subjects:
1) Nature's Metropolis by William Cronin
Cronin tells the story of Chicago's development during the 19th century by tracking the flows of various commodities to and from the city, its hinterlands, and other urban centers. The chapters on how improvements in transportation networks and grain storage facilities led to futures trading are a must-read.
2) The Economic Growth Engine: How Energy and Work Drive Material Prosperity by Robert Ayres and Ben Warr
Ayres (a physicist and economist) has argued for decades that the real growth of the economy is strongly based on how effective civilizations can convert energy resources (especially from fossil fuels) into useful work. In this slightly esoteric work, Ayres and colleague Warr flesh out this idea (the "useful work growth theory") and challenge the Solow model of economic growth and its exogenous variable representing "technological progress" favored by many neoclassical economists. They also discuss topics such as how best to measure energy quality (net energy vs. exergy) and the interplay between thermodynamics and economics.
3) The Rice Economies: Technology and Development in Asian Societies by Francesca Bray
Rice is one of the most important cereals in the world; this book explains how its cultivation has shaped Asian societies. If you're interested in how Asian societies have managed soil fertility and high crop yields over the ages, I also recommend Farmers of Forty Centuries by American agronomist F.H. King.
4) Merchants of Grain by Dan Morgan
About the global grain trade and the titans who control it.
5) Banana: The Fate of the Fruit That Changed The World by Dan Koeppel
Covers banana republics, banana cultivation methods, and the virtual extinction of the Big Mike varietal in the mid-twentieth century. The Big Mike was superior to today's Cavendish banana in taste and durability.
6) A Forest Journey: The Story of Wood and Civilization by John Perlin
This sentence from the last page sums it up nicely:
Most pundits would say that Exxon is the larger company by far in every comparison that matters, particularly when you're thinking about who does or does not drive the American economy.
I would go a step further and say that fossil fuel extraction is the most important sector of the economy, at least from the perspective of what makes industrial civilization possible and allows human beings to number over 7 billion. After all, the last few centuries of technological progress and human biomass growth can largely be attributed to how we've creatively employed the vast armies of energy slaves liberated by the combustion of fossil fuels to do things like power generators, run combines and tractors, and make plastics and fertilizers. And human biomass proliferated in the 20th century largely due to our ability to convert stocks of low entropy stored solar energy into edible calories and fertilizers. The energy sector (which is dominated by fossil fuels) subsidizes other service and production sectors and makes our highly complex society possible (1).
So Apple or some bank may be largest or "most important" based on some metric employing fiat currency (that's being inflated away by the Federal Reserve) or the Wall Street casino's latest valuation based on pixie dust, but energy (or more precisely, exergy) is what really matters for civilization; everything else is just playing with your food.
"So it is said that if you know your enemies and know yourself, you can win a hundred battles without a single loss. If you only know yourself, but not your opponent, you may win or may lose. If you know neither yourself nor your enemy, you will always endanger yourself."
-Sun Tzu, The Art of War
I propose we ban the discussion and analysis of hypothetical terrorist attacks, military invasions, and network breaches because they're insensitive to victims of terrorism, veterans, and poor blokes like me who've had their medical records compromised.
At the end of the day, Steam is the same thing as the Xbox 360 or PS3, from a business perspective at least.
Consoles are sold at a loss with the belief that game royalties, DLC, subscriptions, etc. will make up for hardware costs and then some. The hardware is just a gateway for a locked-down platform where the proprietor gets a cut of every transaction made over the platform.
Valve completely sidestepped the hardware and retail floorspace aspect of the traditional console sales model and delivered a platform straight to users' computers. Like Microsoft and Sony, Valve makes money from every game and DLC pack sold over their service, only Valve didn't have to sink billion of dollars into manufacturing and marketing an entire console to do it. Valve boiled away all of the extraneous stuff and focused on where the money's actually made.
Microsoft and Sony undoubtedly bring in more revenue from their respective videogame divisions, but Steam must have a staggering return-on-investment given that it cost virtually nothing to create.
"Hardcore" videogame consoles only exist because there are a few megacorps out there with enough capital to sink into making them. Given the enormous costs of creating the PS3 and Xbox, it strikes me as a horribly inefficient way of making money. Does anyone know if the PS3 and Xbox divisions are net winners for their respective companies yet?
Xenophon, for those unfamiliar, was an ancient Greek general best known for writing The Anabasis -- an account of the trials and adventures of The Ten Thousand, a group of Greek mercenaries hired by Cyrus the Younger. After he's killed in battle, the Greeks have to march back to Greece from deep within enemy territory. It's quite a thrilling tale with plenty of action and treachery. Surprised they haven't made a movie out of it a la 300.
If I was Mr. Xenophon, I'd rather go up against the Persians than the Scientologists:D In any event, he has an awesome last name.
UT3 is worth $12 and not a cent more, IMHO. I'll probably play it for a few weeks and move on (I purchased it during Steam's holiday sale and finally installed it to check out the update). So the cost/entertainment ratio is pretty good.
Truthfully, most games aren't worth $20, let alone $50. I was browsing Steam the other day and noticed that EndWar -- a months-old console port with an attractive 67/100 Metacritic rating -- is being sold for the same price as Empire Total War and Dawn of War II. Hell, you can buy World in Conflict Gold for $30. So why on earth should I pay $50 for EndWar? Don't get me wrong, EndWar could provide a few days of stupid RTS fun, but it's simply not worth the asking price.
Anyway, thanks to Steam, Impulse, Gamersgate and GOG, I can buy 5 (maybe more) games for the same price as a new one. Good games are always good, ya know? So not only are publishers competing with current games, they're competing with dirt cheap oldies, too.
Enough with the arbitrary $50 price point. Some games are absolutely worth $50; most are not.
Yeah, those 11 million WoW players don't count. In THE YEAR 2009!!!1 they'll all use WINE to play WoW in Ubuntu:rollseyes:
The Orange Box sold very well on the PC, according to Valve's Doug Lombardi, surpassing 360 sales. I'm sure Valve wishes they never wasted money on that whole Steam thing; it's clearly going nowhere...
And I'm sure StarCraft II and Diablo 3 will flop. Blizzard may as well throw in the towel.
Someone better tell Stardock that making PC games is a bad idea.
I also heard that Dawn of War II and Empire Total War are being canceled and removed from Steam in anticipation of the great Linux migration of '09.
FYI: PC games would cease being made if they were unprofitable.
But I agree: idiotic DRM needs to go and publishers need to stop blaming piracy for their inability to make good games. I own a 360, Wii, and gaming PC (that dual-boots Ubuntu) and have plenty of great games for each platform. You're missing out if you write-off PC gaming.
This study is deeply flawed. Optional checkboxes? A reliance on IP addresses (dynamic, logging in from multiple locations, etc.)? I eagerly await the technical analyses of the study's flaws.
This story is making the rounds surprisingly fast, which is fucking terrible. The study is flawed, but how many readers will see that? Will they take this 80% piracy rate at face value? I really hope not.
To those who think piracy will ruin PC gaming by making profitability impossible, I offer the following analysis of the sales of another DRM-free game: Sins of a Solar Empire.
In September, Stardock reported that Sins sold over 500,000 units: 400,000 at retail and 100,000 online. For the sake of these back-of-the-envelope calculations, I'll assume that the average retail price is $40. The online price is $40. I'll round down total sales to 500,000.
So 500,000 * $40 = $20 million. We know that Stardock took in at least $4 million by virtue of online sales. I don't know enough about retail sales to estimate how much retailers take in per sale.
Sins cost less than $1 million to make. After the retailers get their cut, and Stardock pays for Impulse's bandwidth, I'll estimate that they pocketed at least $10 million, probably more. (I'm being conservative.)
That's at least a 10:1 return on their investment. That sounds like a killing! And Stardock/Ironclad plans several micro expansions in the coming months.
Even with piracy, Stardock did quite well. Hell, even if piracy is 90% (which I think is a buncha crap), they still made plenty of dough. Why? As explained by Brad and others:
1) Ironclad/Stardock kept costs low. I hate how the industry creates these multimillion dollar games that necessitate a huge number of sales to recoup development costs. Piracy or not, the PC gaming market is simply too small to fully recoup the dev costs of today's AAA games (not enough high-end PCs etc. etc.). That's why big-budget games need multiplatform sales.
2) Relatively low system reqs.
3) Sins is a PC game. At the moment, you simply can't have a Sins-like experience on a console. Stardock's offering a game that takes advantage of the PC's strengths. Imagine that, appealing to your target audience. AFAIK, the game doesn't suffer from "consolitis."
4) Excellent customer support and relations. Patches, active forums, listening to customers. The other day, Brad left a post on a somewhat obscure topic at CivFanatics. He wanted to to clear up any misconceptions about Stardock's upcoming fantasy 4X game to an audience that's clearly interested in 4X stuff.
5) Lots of positive press. Slashdot and other PC/geek sites responded positively to the company's anti-DRM messages, the PC gamer bill of rights, etc. This probably attracted customers and overall goodwill.
Now if Sins isn't your kind of game, you probably don't care either way. What I'm arguing is that it's possible to profit handsomely in the non-MMO PC game market, provided you know your audience and release a game worth playing. Having good marketing and PR certainly helps, too.
The latest trend in annoying DRM: publishers using SecuROM and install limits on games sold through Steam. Crysis Warhead, Far Cry 2, and X3 have a 5 install limit, crippling one of Steam's greatest features: unlimited installs on any PC. The former two games also use SecuROM. Why on earth would you add third-party DRM on top of Steam? Maybe because these publishers are run by dicks? Who knows. What I do know is that my PC game purchases have gone down solely because of DRM. I'd love to play Red Alert 3 or Far Cry 2, but I won't until EA gives up on installation limits and SecuROM. Shame, too, since I don't own any consoles.
(I know that Steam is a form of DRM with its own share of problems, but I rather enjoy the service. Unlike SecuROM or similar schemes, Steam at least provides some side benefits to gamers.)
I used to pirate games simply because I could. Looking back, though, I only played about 1/4 of the stuff I downloaded. I guess you could call this the "Pokemon mentality"; I had to collect 'em all. Besides, I was a student who couldn't afford to spend $50 on new games, so they weren't exactly losing money from me.
Although I have more discretionary income these days, I find that most games simply aren't worth $50. Maybe $10 in a bargain bin, but definitely not $50. And if a game isn't on Steam or Impulse (Blizz games excluded), then it doesn't exist as far as I'm concerned. So if you're a game developer who bitches about piracy but fails to put your game on Steam or Impulse, I really don't feel sorry for you.
But if you enjoy a game, please support the developers by purchasing a copy.
Firefox 3 on Ubuntu 8.04 looks like ass. Apparently subpixel hinting for LCD monitors isn't compiled correctly in the Ubuntu package. Most of the posts online are over a month old and, as far as I know, this hasn't been patched yet. Apparently I'm not the only one with this problem:
"I have found the solution to this problem. The reason you have no subpixel hinting is that Fx3 uses the in-tree cairo library, which has no LCD-filtering patches applied. You, or your distro's package maintainer, will have to compile it with following option in.mozconfig: -enable-system-cairo. You'll also need to use this command: export LDFLAGS='-lX11 -lXrender' "
The fonts are so blurry and unreadable that I get a headache just browsing Google News. Until this is resolved, Firefox 3 will remain unusable for me in Hardy Heron.
This is problematic because the largest US ISPs are also big media companies.
Ideally, an ISP would be like a utility company. Pay a metered rate and the ISP moves data in the quickest and most efficient way possible. The ISP shouldn't care if broadband connections are used for streaming TV shows and movies. But many ISPs do care because they own TV networks and movie studios which are threatened by streaming media.
Look at Time Warner's plan to charge customers $1/GB if they exceed the monthly limit of 40 GB. Would you be surprised if Time Warner opens its own online store to sell movies and TV shows, one where downloads aren't counted against the monthly bandwidth limit? You think Apple or Netflix would appreciate that? And given the pitiful state of broadband competitiveness in the US, many consumers would be stuck with Time Warner...that or dial-up.
Just some of the many dangers of media consolidation.
Slashdot Mirror
Public companies, like republics, end up with the leaders they deserve.
I think the more interesting question is, "Why do boards of directors hire and overpay mediocre CEOs who actively destroy shareholder value?" And why do the shareholders elect board members who do this?
A strong antidote is to a) pay board members minimal cash compensation for their duties and b) ensure board members have a significant portion of their net worth invested in the company they oversee. This rather simply aligns board members’ interests with that of other shareholders. Sitting on a board should not be a cushy job -- it should be a privilege to oversee the management team responsible for making you richer and richer. If enough board members own chunks of the company, then bring in "outsiders" for their perspectives, but always make sure the board collectively has enough skin in the game.
With respect to compensation, I frequently see executive pay associated with bullshitty metrics that are not tied to owners’ total returns or increasing the enterprise’s per-share intrinsic value. When executives are compensated with stock, the cost to owners (share dilution) is frequently obfuscated in the financial reports, or considered income through the use of legal but creative accounting. (Adobe and others were notorious for this chicanery before the dot-com bubble imploded.)
When I consider purchasing shares, I always look at "corporate governance," CEO attitude, and board composition as important qualitative indicators of quality. Frankly I’m shocked by the number of publicly traded enterprises that retain significant earnings, and then piss the money away on failed acquisitions, ostentatious headquarters or skyscrapers, or, in the case of Bethlehem Steel before the bottom fell out of the industry, three separate corporate golf courses -- one for management, middle management, and employees.
This is one of the reasons I’m fond of dividends: I don’t trust many CEOs to smartly allocate capital to generate satisfactory rates of return. It takes a special sort of person to either sit on cash for extended periods until a truly outstanding opportunity presents itself, or just admit that the enterprise has exhausted sensible options for capital redeployment, so time to bust out the dividends and share repurchases.
The topic of corporate governance seems to be in vogue at the moment. Just last week, several CEOs and asset management firms released an open letter advocating for public companies to adopt "commonsense" governance principles [1]. And the large asset management firms like Vanguard are starting to become more vocal about how the companies they own are managed, if this letter is any indication [2]. Vanguard and other "passive" asset management firms have enough weight (literally trillions of dollars under management) to force change, and boards know it.
[1] https://corpgov.law.harvard.ed...
[2] https://corpgov.law.harvard.ed...
Right, but how do we reverse the trend of consolidating and increasing power in D.C., at the expense of the people and the states?
It seems no one (outside a small minority) cares about limited government, enumerated powers, the Tenth Amendment, or why we're in a state of perpetual war without a declaration from Congress.
Since I don't see a Cincinnatus or Washington on the horizon, I suspect economic disaster, coupled with a deeply unpopular president (say Clinton or Trump), could force the people to finally act, either through state nullification, calls for a second constitutional convention, or even secession movements. In the meantime, liberty-minded Americans should continue to question the legitimacy of federal programs and initiatives like the "drug war" -- the USSR collapsed, in part, because it lost legitimacy with the people.
The federal government is primarily a mechanism for redistributing wealth on a vast scale, and so in effect all Americans are bribed to turn the other way. (Look at the number of states who accept federal dollars and in exchange surrender part of their sovereignty, e.g. highway funds and the drinking age.) Then you have an entire class -- in the millions -- who receive paychecks directly from the feds, or work for a federal contractor. Don't expect members of this American "Outer Party" to lead the charge for limited government [1].
[1] Last year, I was at a network security training and in attendance were some paper CISSP "cyber warrior" types. You would be horrified if you heard their thoughts on the Fourth Amendment, compelled disclosure, and the secret federal kangaroo courts. The irony is that, like the president, these civil servants take an oath to uphold the Constitution. Your tax dollars at work, folks.
This is what Madison meant when he referred to "parchment barriers." The people of the United States are humiliating themselves and their ancestors by prostrating before the Christ-like executive who will deliver them jobs, hope, free college degrees, and ponies, too! A republic and its constitution are only as strong as the citizens who uphold it.
In a way, it's appropriate that the republic's come to this, as the very monolithic institutions that the "Progressives" and liberals built throughout the 20th century could very well be turned on them if Trump is elected president. Hence Hayek's quote: "We shall never prevent the abuse of power if we are not prepared to limit power in a way which occasionally may prevent its use for desirable purposes."
Congress, though, shares much of the blame for executive overreach. Congress' cowardly (though politically expedient) abdication of its constitutional responsibilities has led to a permanent state of war and emboldened executive.
Though Senator Clinton was not alone in her sentiment, her vote to "authorize" the president to go to war with Iraq, a sovereign nation that did not attack the United States or provide an immediate, existential threat to the republic, is an instructive example of how these people think. From her floor speech:
"...it is a vote that puts awesome responsibility in the hands of our President and we say to him - use these powers wisely and as a last resort."
The Constitution clearly states that Congress is to declare war. There's nothing about giving the president that choice. Instead, Congress punts like political hacks, and refuses to issue a proper declaration of war with their names attached to it.
And in case you think I'm focusing too much on a vote from last decade, remember that the men who founded this republic effectively told the King of Great Britain to fuck himself, signed their lives, fortunes, and sacred honor to the document declaring as much, and then mailed a copy to his office. And the charlatans in Congress can't even follow the constitution when it matters most? And we're considering electing one of them as president?
If nothing else, the disaster that is Trump vs. Clinton might spur a conversation about truly downsizing the federal government and returning more power to the states -- where it belongs and where it was intended to belong.
Thank you for sharing your experiences. Where do you think we go from here? At what point does the whole system collapse? I sometimes think it it will take a prolonged macroeconomic disaster to force a total revamp.
Know who else has that "problem"? Warren Buffett and Berkshire Hathaway. Something like $3 billion in cash arrives in Omaha every month for redeployment. But as a master capital allocator, Buffett is happy to sit on cash until something attractive crosses his desk, i.e., no overvalued "tech" companies.
Unfortunately, the macro pattern over the last few decades has been boom-bust as easy money leads to stupid, short-sighted exuberance for shares of mediocre businesses with owner-unfriendly management (hence the non-GAAP bullshit and stock-based compensation that's somehow not an expense).
The adults in the room endure the pain of sitting on cash -- QE and the central bankers certainly make it hard -- before the the bubble de jour implodes and the markets crash back to reality. But after the party is over, patience is rewarded with bargains for shares of businesses with real, enduring, high-quality profits. Think of it as time and personality arbitrage.
Great post. I never made the connection between the Gracchi brothers and the Progressives and New Dealers, but I think there's definitely something to it.
To your point about the similarities between the decline of the Roman and American republics: Sir John Glubb wrote a paper about how empires collapse ~250 years after their inception. Like you, he's not trying to lay out a numerology theory or "historical law," but uses these similarities to analyze *why* empires collapse. Glubb specifically cites the introduction of the welfare state, followed by liberal granting of citizenship to foreigners, as a common cause of decline. The EU should take note.
"...the Founders, who were very aware of Roman precedent when they designed the government, hoped to prevent."
It's pretty amazing how the Romans' best ideas were transplanted through time and space -- I mean there's a senate that meets atop a Capitol Hill thousands of miles from Rome on a continent they didn't know existed.
"here's why history is important to know something about: to avoid making the same mistakes others have in the past."
One of my favorite American historians, Thomas Bailey, said something like, "Every generation of apes begins where the previous generation began, because apes can hand down no record of their experience. Man leaves a record; but how much better is he than the apes if he does not study it and heed its warning?" Expunging the classics from public schools wasn't a conspiracy per se; I think it was arrogance by the bureaucrats who truly believed that the past is irrelevant.
"What happens when one of these collapses under the insanity of its economic idealism and the population takes refuge on the other?"
A poorly-run state is a disaster for its citizens, sure, but they made their own bed. Better a state fail than the entire republic. What happens when the insanity happens at the *federal* level because we've consolidated too much power and money there? Where do we take refuge?
"in the US being handled by for-profit private institutions rather than the state?"
It's funny that people are upset about Donald Trump's fraudulent for-profit "college" while Bernie "Everyone Gets a Free Horse!" Sanders keeps talking about "free" college courtesy of Uncle Sam: Trump (and the hundreds of others like him) gorged themselves at yet another multi billion dollar federal trough. And that's what always happens when the federal government starts subsidy programs to cure some perceived ill: corruption, inflation, market distortions, etc. The federal government has no business in the college game -- leave it to the states and private institutions and some sanity will return to the market.
"I see similar signs from the U.S. (300 million people), where increasing polarization suggests different groups of people (not necessarily divided along state lines) seem to have different ideas for the best way to proceed, but are getting more and more upset at each other for forcing everyone to go either one way or another."
Montesquieu believed that republics could only survive if they were small. I'm sure this was influenced by his study of the ancient Roman Republic and how it turned into an empire ruled by autocrats and generals. (See "Considerations on the Causes of the Greatness of the Romans and their Decline" -- very readable and considerably shorter than Gibbon's more famous work on the subject.) The fact that tiny Switzerland is probably the most sensible republic in the West is due, in part, to its very smallness.
The Framers of the U.S. Constitution were familiar with Montesquieu; indeed, the entire point of the federal system was to (attempt to) harmonize the need for a stronger federal government to handle things like shared security and trade while still leaving considerable sovereignty to the states.
So to your point: if California wants to be the next socialist utopia with a massive welfare state and useless state-funded high-speed trains, have at it! Likewise, New Hampshire can go full libertarian. It's the whole "laboratories of democracy" concept – different ideas for different groups of people. Totally scalable regardless of population, if the federal government lets it happen, and lets states fail or succeed on their merits.
But Washington directs and influences too much of the economy, e.g., the military-industrial complex is a massive jobs and pork project for literally millions of people. The federal executive branch has so grossly overstepped its constitutional functions that it's horrifying and disgusting. Trump and Clinton would be far less dangerous to the republic if the office was considerably more modest and Americans didn't treat the President as some messianic figure who will deliver them jobs and other goodies! (Remember the days when presidential candidates ran "front porch" campaigns and submitted simple State of the Union letters to the congress instead of performing embarrassing and grandiose speeches?)
The problem in the Western World is the rolling disaster that's political and economic centralization. Brussels, Washington, the central banks, and other supporting institutions are all guilty. Among other ills, they create massive economic distortions (see the current college education bubble) and when everything inevitably explodes, they "save the day" – sort of like the fireman who burns down his own house and trumpets the great job he did later putting out the fire.
Lastly, dwell on this fact: the House of Representatives has had 435 members for almost a century, despite the massive growth in both population and size of the federal government. This means the ratio of citizens to representatives only grows more unfavorable, and at a time when it matters most! Concurrently, U.S. senators are no longer selected by state legislatures, leaving state governments without any way of directly influencing federal legislation. This is a total disaster for the federal republic and the chickens are coming home to roost.
Jared Diamond wrote a famous article to that effect: "The Worst Mistake in the History of the Human Race."
"One straight forward example of what paleopathologists have learned from skeletons concerns historical changes in height. Skeletons from Greece and Turkey show that the average height of hunger-gatherers toward the end of the ice ages was a generous 5' 9'' for men, 5' 5'' for women. With the adoption of agriculture, height crashed, and by 3000 B. C. had reached a low of only 5' 3'' for men, 5' for women. By classical times heights were very slowly on the rise again, but modern Greeks and Turks have still not regained the average height of their distant ancestors. "
"Compared to the hunter-gatherers who preceded them, the [Native American] farmers had a nearly 50 per cent increase in enamel defects indicative of malnutrition, a fourfold increase in iron-deficiency anemia (evidenced by a bone condition called porotic hyperostosis), a threefold rise in bone lesions reflecting infectious disease in general, and an increase in degenerative conditions of the spine, probably reflecting a lot of hard physical labor."
The Alamo Drafthouse had Patton Oswalt perform a "dramatic" reading of a message left at the theater by someone who was angry about having been thrown out for texting during a movie. It's pretty hilarious, and I first learned of the Drafthouse through their campaign of playing the original message as a sort of anti-texting PSA before screenings.
Oswalt's rendition: http://youtu.be/xnrlVjM715Y
The real economy is based on natural resource extraction and industrial production. As such, I find it important to read about commodities (petrol, natural gas, bananas, cereals, coal, iron ore, etc.) and how they've shaped civilizations through the ages. To this I add books about effective management of water, topsoil, rangeland, and forest resources.
A short list of books related to these subjects:
1) Nature's Metropolis by William Cronin
Cronin tells the story of Chicago's development during the 19th century by tracking the flows of various commodities to and from the city, its hinterlands, and other urban centers. The chapters on how improvements in transportation networks and grain storage facilities led to futures trading are a must-read.
2) The Economic Growth Engine: How Energy and Work Drive Material Prosperity by Robert Ayres and Ben Warr
Ayres (a physicist and economist) has argued for decades that the real growth of the economy is strongly based on how effective civilizations can convert energy resources (especially from fossil fuels) into useful work. In this slightly esoteric work, Ayres and colleague Warr flesh out this idea (the "useful work growth theory") and challenge the Solow model of economic growth and its exogenous variable representing "technological progress" favored by many neoclassical economists. They also discuss topics such as how best to measure energy quality (net energy vs. exergy) and the interplay between thermodynamics and economics.
3) The Rice Economies: Technology and Development in Asian Societies by Francesca Bray
Rice is one of the most important cereals in the world; this book explains how its cultivation has shaped Asian societies. If you're interested in how Asian societies have managed soil fertility and high crop yields over the ages, I also recommend Farmers of Forty Centuries by American agronomist F.H. King.
4) Merchants of Grain by Dan Morgan
About the global grain trade and the titans who control it.
5) Banana: The Fate of the Fruit That Changed The World by Dan Koeppel
Covers banana republics, banana cultivation methods, and the virtual extinction of the Big Mike varietal in the mid-twentieth century. The Big Mike was superior to today's Cavendish banana in taste and durability.
6) A Forest Journey: The Story of Wood and Civilization by John Perlin
This sentence from the last page sums it up nicely:
Most pundits would say that Exxon is the larger company by far in every comparison that matters, particularly when you're thinking about who does or does not drive the American economy.
I would go a step further and say that fossil fuel extraction is the most important sector of the economy, at least from the perspective of what makes industrial civilization possible and allows human beings to number over 7 billion. After all, the last few centuries of technological progress and human biomass growth can largely be attributed to how we've creatively employed the vast armies of energy slaves liberated by the combustion of fossil fuels to do things like power generators, run combines and tractors, and make plastics and fertilizers. And human biomass proliferated in the 20th century largely due to our ability to convert stocks of low entropy stored solar energy into edible calories and fertilizers. The energy sector (which is dominated by fossil fuels) subsidizes other service and production sectors and makes our highly complex society possible (1).
So Apple or some bank may be largest or "most important" based on some metric employing fiat currency (that's being inflated away by the Federal Reserve) or the Wall Street casino's latest valuation based on pixie dust, but energy (or more precisely, exergy) is what really matters for civilization; everything else is just playing with your food.
(1) Joseph Tainter, "Complexity, Problem Solving, and Complex Societies."
http://www.oilcrash.com/articles/complex.htm
See also:
Ayres and Warr, "Accounting for Growth: The Role of Physical Work."
http://www.fraw.org.uk/files/economics/ayres_2005.pdf
"So it is said that if you know your enemies and know yourself, you can win a hundred battles without a single loss.
If you only know yourself, but not your opponent, you may win or may lose.
If you know neither yourself nor your enemy, you will always endanger yourself."
-Sun Tzu, The Art of War
I propose we ban the discussion and analysis of hypothetical terrorist attacks, military invasions, and network breaches because they're insensitive to victims of terrorism, veterans, and poor blokes like me who've had their medical records compromised.
At the end of the day, Steam is the same thing as the Xbox 360 or PS3, from a business perspective at least.
Consoles are sold at a loss with the belief that game royalties, DLC, subscriptions, etc. will make up for hardware costs and then some. The hardware is just a gateway for a locked-down platform where the proprietor gets a cut of every transaction made over the platform.
Valve completely sidestepped the hardware and retail floorspace aspect of the traditional console sales model and delivered a platform straight to users' computers. Like Microsoft and Sony, Valve makes money from every game and DLC pack sold over their service, only Valve didn't have to sink billion of dollars into manufacturing and marketing an entire console to do it. Valve boiled away all of the extraneous stuff and focused on where the money's actually made.
Microsoft and Sony undoubtedly bring in more revenue from their respective videogame divisions, but Steam must have a staggering return-on-investment given that it cost virtually nothing to create.
"Hardcore" videogame consoles only exist because there are a few megacorps out there with enough capital to sink into making them. Given the enormous costs of creating the PS3 and Xbox, it strikes me as a horribly inefficient way of making money. Does anyone know if the PS3 and Xbox divisions are net winners for their respective companies yet?
Xenophon, for those unfamiliar, was an ancient Greek general best known for writing The Anabasis -- an account of the trials and adventures of The Ten Thousand, a group of Greek mercenaries hired by Cyrus the Younger. After he's killed in battle, the Greeks have to march back to Greece from deep within enemy territory. It's quite a thrilling tale with plenty of action and treachery. Surprised they haven't made a movie out of it a la 300.
If I was Mr. Xenophon, I'd rather go up against the Persians than the Scientologists :D In any event, he has an awesome last name.
UT3 is worth $12 and not a cent more, IMHO. I'll probably play it for a few weeks and move on (I purchased it during Steam's holiday sale and finally installed it to check out the update). So the cost/entertainment ratio is pretty good.
Truthfully, most games aren't worth $20, let alone $50. I was browsing Steam the other day and noticed that EndWar -- a months-old console port with an attractive 67/100 Metacritic rating -- is being sold for the same price as Empire Total War and Dawn of War II. Hell, you can buy World in Conflict Gold for $30. So why on earth should I pay $50 for EndWar? Don't get me wrong, EndWar could provide a few days of stupid RTS fun, but it's simply not worth the asking price.
Anyway, thanks to Steam, Impulse, Gamersgate and GOG, I can buy 5 (maybe more) games for the same price as a new one. Good games are always good, ya know? So not only are publishers competing with current games, they're competing with dirt cheap oldies, too.
Enough with the arbitrary $50 price point. Some games are absolutely worth $50; most are not.
Yeah, those 11 million WoW players don't count. In THE YEAR 2009!!!1 they'll all use WINE to play WoW in Ubuntu :rollseyes:
The Orange Box sold very well on the PC, according to Valve's Doug Lombardi, surpassing 360 sales. I'm sure Valve wishes they never wasted money on that whole Steam thing; it's clearly going nowhere...
And I'm sure StarCraft II and Diablo 3 will flop. Blizzard may as well throw in the towel.
Someone better tell Stardock that making PC games is a bad idea.
I also heard that Dawn of War II and Empire Total War are being canceled and removed from Steam in anticipation of the great Linux migration of '09.
FYI: PC games would cease being made if they were unprofitable.
But I agree: idiotic DRM needs to go and publishers need to stop blaming piracy for their inability to make good games. I own a 360, Wii, and gaming PC (that dual-boots Ubuntu) and have plenty of great games for each platform. You're missing out if you write-off PC gaming.
This study is deeply flawed. Optional checkboxes? A reliance on IP addresses (dynamic, logging in from multiple locations, etc.)? I eagerly await the technical analyses of the study's flaws.
This story is making the rounds surprisingly fast, which is fucking terrible. The study is flawed, but how many readers will see that? Will they take this 80% piracy rate at face value? I really hope not.
To those who think piracy will ruin PC gaming by making profitability impossible, I offer the following analysis of the sales of another DRM-free game: Sins of a Solar Empire.
In September, Stardock reported that Sins sold over 500,000 units: 400,000 at retail and 100,000 online. For the sake of these back-of-the-envelope calculations, I'll assume that the average retail price is $40. The online price is $40. I'll round down total sales to 500,000.
So 500,000 * $40 = $20 million. We know that Stardock took in at least $4 million by virtue of online sales. I don't know enough about retail sales to estimate how much retailers take in per sale.
Sins cost less than $1 million to make. After the retailers get their cut, and Stardock pays for Impulse's bandwidth, I'll estimate that they pocketed at least $10 million, probably more. (I'm being conservative.)
That's at least a 10:1 return on their investment. That sounds like a killing! And Stardock/Ironclad plans several micro expansions in the coming months.
Even with piracy, Stardock did quite well. Hell, even if piracy is 90% (which I think is a buncha crap), they still made plenty of dough. Why? As explained by Brad and others:
1) Ironclad/Stardock kept costs low. I hate how the industry creates these multimillion dollar games that necessitate a huge number of sales to recoup development costs. Piracy or not, the PC gaming market is simply too small to fully recoup the dev costs of today's AAA games (not enough high-end PCs etc. etc.). That's why big-budget games need multiplatform sales.
2) Relatively low system reqs.
3) Sins is a PC game. At the moment, you simply can't have a Sins-like experience on a console. Stardock's offering a game that takes advantage of the PC's strengths. Imagine that, appealing to your target audience. AFAIK, the game doesn't suffer from "consolitis."
4) Excellent customer support and relations. Patches, active forums, listening to customers. The other day, Brad left a post on a somewhat obscure topic at CivFanatics. He wanted to to clear up any misconceptions about Stardock's upcoming fantasy 4X game to an audience that's clearly interested in 4X stuff.
5) Lots of positive press. Slashdot and other PC/geek sites responded positively to the company's anti-DRM messages, the PC gamer bill of rights, etc. This probably attracted customers and overall goodwill.
Now if Sins isn't your kind of game, you probably don't care either way. What I'm arguing is that it's possible to profit handsomely in the non-MMO PC game market, provided you know your audience and release a game worth playing. Having good marketing and PR certainly helps, too.
Source: http://news.bigdownload.com/2008/09/04/over-500-000-total-sins-of-a-solar-empire-units-sold/
The latest trend in annoying DRM: publishers using SecuROM and install limits on games sold through Steam. Crysis Warhead, Far Cry 2, and X3 have a 5 install limit, crippling one of Steam's greatest features: unlimited installs on any PC. The former two games also use SecuROM. Why on earth would you add third-party DRM on top of Steam? Maybe because these publishers are run by dicks? Who knows. What I do know is that my PC game purchases have gone down solely because of DRM. I'd love to play Red Alert 3 or Far Cry 2, but I won't until EA gives up on installation limits and SecuROM. Shame, too, since I don't own any consoles.
(I know that Steam is a form of DRM with its own share of problems, but I rather enjoy the service. Unlike SecuROM or similar schemes, Steam at least provides some side benefits to gamers.)
Log-in to iGoogle through www.google.co.uk and enjoy...at least until Google forces the new layout on UK users.
The new sidebar, weather gadget, and Gmail preview take up too much space, even on my 24'' monitor.
And nothing of value was lost.
I used to pirate games simply because I could. Looking back, though, I only played about 1/4 of the stuff I downloaded. I guess you could call this the "Pokemon mentality"; I had to collect 'em all. Besides, I was a student who couldn't afford to spend $50 on new games, so they weren't exactly losing money from me.
Although I have more discretionary income these days, I find that most games simply aren't worth $50. Maybe $10 in a bargain bin, but definitely not $50. And if a game isn't on Steam or Impulse (Blizz games excluded), then it doesn't exist as far as I'm concerned. So if you're a game developer who bitches about piracy but fails to put your game on Steam or Impulse, I really don't feel sorry for you.
But if you enjoy a game, please support the developers by purchasing a copy.
In addition to your representative and senators, you should contact Senator Obama and let him know how you feel about the pending FISA legislation.
Washington D.C. Office
713 Hart Senate Office Building
Washington, D.C. 20510
(202) 224-2854
(202) 228-4260 fax
(202 228-1404 TDD
How can we expect Obama to be "the leader of the free world" if he's unwilling to defend freedom as a U.S. senator?
Firefox 3 on Ubuntu 8.04 looks like ass. Apparently subpixel hinting for LCD monitors isn't compiled correctly in the Ubuntu package. Most of the posts online are over a month old and, as far as I know, this hasn't been patched yet. Apparently I'm not the only one with this problem:
Here
Here
"I have found the solution to this problem. The reason you have no subpixel hinting is that Fx3 uses the in-tree cairo library, which has no LCD-filtering patches applied. You, or your distro's package maintainer, will have to compile it with following option in .mozconfig: -enable-system-cairo. You'll also need to use this command: export LDFLAGS='-lX11 -lXrender' "
And here
The fonts are so blurry and unreadable that I get a headache just browsing Google News. Until this is resolved, Firefox 3 will remain unusable for me in Hardy Heron.
This is problematic because the largest US ISPs are also big media companies.
Ideally, an ISP would be like a utility company. Pay a metered rate and the ISP moves data in the quickest and most efficient way possible. The ISP shouldn't care if broadband connections are used for streaming TV shows and movies. But many ISPs do care because they own TV networks and movie studios which are threatened by streaming media.
Look at Time Warner's plan to charge customers $1/GB if they exceed the monthly limit of 40 GB. Would you be surprised if Time Warner opens its own online store to sell movies and TV shows, one where downloads aren't counted against the monthly bandwidth limit? You think Apple or Netflix would appreciate that? And given the pitiful state of broadband competitiveness in the US, many consumers would be stuck with Time Warner...that or dial-up.
Just some of the many dangers of media consolidation.