I Have Decided that I Believe in the "New Economy"

I have been thinking for a while about the so-called "new economy." Of course, my knowledge of economics is quite limited, just what I've picked up from reading the Wall Street Journal of the years. Nonetheless, I have come to form an opinion on the "new economy," and I have decided I'm for it.

The "new economy," from the perspective of my limited understanding, consists of hedge funds, new ways of packaging debt and investment, and many more leveraged buyouts (LBO's) than in the past. On hedge funds, my understanding is still pretty cloudy. However, I've come to accept the idea that they sometimes serve as a sort of "shock absorber" in the economy.

The new ways of packaging debt and investment have, in large part, led to our current meltdown in the sub-prime housing loan market. This is that of course but it is a probably inevitable result of being in the early part of the learning curve in understanding these new ways of packaging debt and investment.

What is positive is that this sub-prime market meltdown has not resulted in a recession---at least not yet. Apparently, this is because, unlike in the past, banks are not holding the bulk of loans. Therefore, the meltdown in the sub-prime market is not resulting in overall withdrawal of credit from banks. This is a good thing.

Of course, banks are tightening their credit in certain ways this time. Most specifically, they are rapidly and extremely tightening the credit they extend to hedge funds. In part, this is related to the sub-prime market but to be honest, I cannot remember how. But mainly, it is related to the fact that hedge funds have gotten in trouble and banks are more reluctant to lend them money.

At the same time, it must be pointed out that banks are already very committed and vulnerable on large number of loans known as "bridge loans." These are short-term loans that banks give hedge funds and LBO companies. They allow hedge funds and LBO companies to close deals without actually having adequate cash on hand. The deals are closed using the banks money, than the hedge fund and/or LBO company arranges financing.

What is going on now is a bit like musical chairs when the music stops. Unfortunately for the banks, in some cases they are the ones without a chair. The banks are going to be losing some money here and it is making them more cautious in a general way. This is obviously bad news for the economy, reflected in the current stock market. However, it still seems more positive than the previous type of situation where the banks would have been carrying all of the subprime loans and when the sub-prime market fell apart, money would dry up all over the economy, causing a recession.

Because of new ways of packaging loans and investments, businesses are less dependent on banks for financing. This is a good thing. It helps stabilize the economy and allows it to keep a positive track for a longer period of time. On the other hand, the current meltdown in the subprime one market probably would not have occurred without these new ways of packaging loans and investments. Sorry that this is somewhat repetitive, but I was developing another point at the same time I was repeating myself. I lack the time and energy during this period my life to straighten this blog entry out into a well-written piece.

LBO companies are possibly the most positive part of the "new economy." Of course, they are quite negative for many individuals, causing large numbers of layoffs. Nonetheless, I feel that the overall positive for the economy is quite definite. In my mind, LBO's are converting the large-scale economy, which tends to consist of somewhat ossified corporations, into something more resembling the small-scale economy, which tends to consist of aggressive, pennypinching small businesses.

This conversion is uncomfortable to many people who lose their jobs. I was reading the Friday Wall Street Journal about the layoffs that resulted when Blackstone took over a company that was involved in airplane flight reservations. It seemed like they laid off many people in their 50s and 60s with very high paying jobs. Though the article didn't explicitly state this, I drew the implication that they were replacing some of them with younger employees. What the article said was that they were firing some people and then hiring others to adapt to "new technologies."

Yes, this is pretty brutal stuff. However, it is also the nature of capitalism. Our economy already has numerous features to try to help people in transitional job situations and we will probably need to develop more of these features. In regard to the Blackstone example cited above, I imagine some of the people in their 50s and 60s would be able to retire with reasonable comfort, but some would not. In addition, many younger people were also laid off.

In reading about waves of layoffs in the telecommunications industry in the 90s, I found that most of the people laid off got new jobs pretty quickly. This depends on two things: highly trained people and a healthy economy. This is not to discount the pain and suffering involved in being laid off, even if you find a new job fairly quickly. In addition, some do not get new jobs. Another unpleasant fact is that some of the people who were laid off do not perform as well. However, the article seemed to imply that this reality does not exist. They only referred to people who were laid off who had "good performance records." These records are often nonsense, in my opinion.

On the negative side of LBO companies, they are accelerating the process of turnaround. Laying off people faster, cutting expenses faster... This part seems like a scam. You can cut expenses past the desirable point and not affect profits for a while. Then if you sell it fast enough, you can make a big profit yourself. After it is sold however, the company crashes, goes into a hangover, and money needs to be spent to rebuild it. So part of the phenomenon is just a scam, in my view. However, is really impossible to separate this sort of thing from truly adding value, or a should say it is impossible in a general sense. For some people, it is possible to separate scams from adding value. These are the real investors.

Capitalism is pretty painful, but so is life. The alternative is a European-type system based on "job protection." However, it seems to me that the European system is inevitably sliding and spiraling downward. I will admit that I'm not sure about this last point.

I will close with a statement made by a person from England who had moved to America. This person said that most of all, they were struck by the optimism of this country. I think optimism springs from opportunity, and we still have it.

Some Thoughts on MEMS in the Human Body

definition from:

	SearchSMB.com Definitions,

http://searchsmb.techtarget.com/sDefinition/0,,sid44_gci214093,00.html


"Micro-electromechanical systems (MEMS) is a technology that combines computers with tiny mechanical devices such as sensors, valves, gears, mirrors, and actuators embedded in semiconductor chips. Paul Saffo of the Institute for the Future in Palo Alto, California, believes MEMS or what he calls analog computing will be "the foundational technology of the next decade." MEMS is also sometimes called smart matter.

MEMS are already used as accelerometers in automobile air-bags. They've replaced a less reliable device at lower cost and show promise of being able to inflate a bag not only on the basis of sensed deceleration but also on the basis of the size of the person they are protecting. Basically, a MEMS device contains micro-circuitry on a tiny silicon chip into which some mechanical device such as a mirror or a sensor has been manufactured. Potentially, such chips can be built in large quantities at low cost, making them cost-effective for many uses.

Among the presently available uses of MEMS or those under study are:

• Global position system sensors that can be included with courier parcels for constant tracking and that can also sense parcel treatment en route
• Sensors built into the fabric of an airplane wing so that it can sense and react to air flow by changing the wing surface resistance; effectively creating a myriad of tiny wing flaps
• Optical switching devices that can switch light signals over different paths at 20-nanosecond switching speeds
• Sensor-driven heating and cooling systems that dramatically improve energy savings
• Building supports with imbedded sensors that can alter the flexibility properties of a material based on atmospheric stress sensing

Saffo distinguishes between sensor-effector type microcomputing (which he calls "MEMS") and micro-devices containing gears, mirrors, valves, and other parts (which he calls "micro-machines")."

My Thoughts:

MEMS devices will probably start being brought into the human body for therapeutic purposes before too long. How will they send data out of the body? MEMS devices could be organized in a network similar to the servers on the Internet. Each device would be capable of short range transmission. The data of the message would be divided into packets like the IP (Internet Protocol) packets. Packets would move randomly through the system until they reached the destination, possibly some kind of data collection device embedded under the skin. Presumably, the data from this device could be read without the direct contact of a port containing bare metal contacts. I presume this for aesthetic reasons---the preference of the patient. Data transfer could be done via RF transmission, possibly utilizing a passive RF circuit similar to those used anti-theft devices and stores. Perhaps data transmission could be done electromagnetically. However, I can't recall reading about data transmission based on this principle---only power transmission.

MEMS devices could be powered by electrical potentials inside the body. I believe devices powered in this way have already been developed, just for demonstration purposes at this point. However, I'm not sure about that, it may have only been speculation. MEMS devices could be composed of very small modules interconnected by biodegradable connectors. That way, the MEMS device would essentially dissolve after a set period of time and be expelled from the body in the urine or feces. I can't imagine that people would want to have this kind of stuff accumulating inside their bodies over time. This leads to an idea for another type of data collection. The MEMS devices could place the data into small capsules designed to be flushed out of the body with the urine. The patient would need to urinate into a receptacle handed over to his or her doctor. There could be redundancy of messages to cover the times when the patient was urinating away from home.

The introduced of MEMS devices into the human body seems quite likely to me. Currently, scientific understanding of disease is advancing and many of the specific mechanisms involved with disease are becoming better understood. For example, microphages, cells inside the bodies of animals that are part of the immune system and that are designed to "eat" bacteria and other small living things, have now been shown to sometimes play a key role in the development of cancer. (This example comes from a recent scientific American article.)

The evidence relates to one of the breeds of mice that has been genetically developed to regularly create cancer inside themselves. It was found that destroying the microphages of this mouse prevented it from developing cancer. Precancerous cells were developed as is normal for this mouse, but they could not convert into cancer.

The microphages are normally controlled by chemical signals created by the mouse's body. However, it now appears that some cancer cells have evolved a way to send bogus chemical signals to the microphages and hijack them. The microphages then play key role in converting precancerous cells into cancer. Killing the microphages in the mouse inhibits the final development of the cancer.

When one considers complex mechanisms like this that are involved in the creation of diseases, one can see the advantage of incorporating MEMS into the body to monitor highly localized processes. Of course, there would need to be some way of knowing where particular pieces of data came from in the body. One way to do this would be to somehow anchor each MEMS into a permanent, known position in the body. Then the doctor would be able to locate the origin of the data from the MEMS's own ID tag which would be included in each piece of data. However, anchoring a MEMS in the body does not sound very easy. Perhaps each MEMS could have a tropism for a particular biochemical environment located at a particular place in the body.

New Ford CEO---Titanic Analogy?

I read an article in the Wall Street Journal today about the new Ford CEO. He talked a lot about the things he was doing to turn Ford around. His statements sounded reasonable as far as they went. However, his basic prioritizing referred to things that were obvious to myself before he took over---just from reading the Wall Street Journal. I refer to the fact that Ford is now building too many SUVs and large cars and has been doing so for a while.

After this rather broad initial analysis, he starts to descend directly into the daily minutia of running each of Ford's many different sections. I would've liked a sharper, deeper cutting analysis of Ford's overall problems---even if he wasn't yet sure what he was going to do about them.

Apparently, he started running Boeing shortly before the 9/11 disaster delivered a major shock to the company---I think it was in the year 2000 that he took over. According to the article, he apparently navigated Boeing through that period of time, which was a great setback to Boeing. Again according to the article, he did very well and turned things around for the company after 9/11.

However, it seems to me to Boeing's major crisis was earlier than this---in the 90s. Furthermore, it seems to me that their major coup of the last 20 years, the Dream liner, was decided on, conceived, and largely developed in the 90s as well. Perhaps my memory is not completely accurate in this matter (excuse my laziness in not googling it up).

But imagine a scenario in which an ace ship captain agrees to take over the Titanic shortly after it has made contact with the iceberg. Suppose he was skillful enough to have avoided hitting the iceberg had he been at the helm. Could he really make a difference after contact had been made? And wouldn't his willingness to take over the ship at that time tell us something about his ability to make assessments?

Why Can't a Microsoft PC Connect Directly to an Online Diagnostic Program?

I did something I don't usually do yesterday: tried to clean out my PC following some instructions I've been given by Microsoft technician when he had earlier solved some problem or other over the telephone. I suppose I made a mistake because I got some dire warnings to the effect that some important file was missing that was crucial for the computer's operation.

I was instructed to insert the XP operating system disc to replace this critical file. Upon doing so, the program told me it was reluctant to download from this desk because I now had a newer version of the operating system that I would lose if I downloaded from the disc.

This scenario makes it seem as if Laurel and Hardy are in charge of Microsoft diagnostics, but that might not be fair. The Microsoft operating system is very complex, it does change pretty quickly, and it is hard to keep track of what is going on, let alone anticipate future changes when the initial diagnostic system is developed.

What I can't understand though, is why I cannot go on to a Microsoft web site that would connect up to built-in "hooks" in the operating system, take a look at what is going on, and recommend a course of action that I could take or not take as I chose. This would, it seems, be much more effective than the built-in diagnostic functions of the operating system, which seem to become obsolete when the first software update occurs.

Of course, such a web site would cost money to operate and maintain but it seems like it would be much less expensive than maintaining the current size of the telephone technician force that is needed. In addition, the online solution would be more effective. Since each specific variation of a problem would only need to be solved once, Microsoft could restrict the personnel working on the diagnostic web site to the very highest quality people. This would eliminate the frequent mistakes that occur with the current current telephone-based diagnostic system. In addition, diagnosis would be much faster.

In terms of my current problem by the way, I remembered how I had solved similar problems in the past. This was done by simply rebooting the computer, apparently eliminating all awareness in the operating system of this "vital" missing file.

Taiwanese Blunder: Taiwan PC Makers Going in Wrong Direction

Within the past few days, I read an article in the Wall Street Journal (WSJ) about how Taiwan PC makers, who have until now been making most of the PCs manufactured in the world, are feeling price pressure competition from China. The feeling in Taiwan is that their PC manufacturing business, as it is currently constituted, is starting to die. The main indication of this is shrinking profit margins.

Clearly, the Taiwan PC manufacturers need to respond in some way. Their response however, as reported in the WSJ, looks like a classic blunder to me. The WSJ reports that they are planning to start branding their PCs themselves. The general form of this blunder is as follows. A manufacturer starts to be forced out of a previous niche. The company responds by saying, "I am about this type of product. What new skills can I acquire to remain competitive in this market?"

The response should be, "I am about these types of skills. What new product can I find to apply these skills to?" Clearly, the skill set would probably need to be modified somewhat to be applied to a new type of product.

In regard to the specific situation of the Taiwan PC manufacturers, the manufacturers see themselves as "PC people." They are going to respond to the crisis by learning how to brand and market PCs, which would largely be done in the United States, Europe, and Japan which make up the bulk of the world market. Their reasoning probably go something like this. "I understand the PC product well. Until recently, I have been manufacturing them profitably. This is something that HP and Dell haven't been able to do for years in their own factories. Compared to manufacturing, branding and marketing seems pretty easy. And there's a bigger mark up in that part of the business."

This is a recipe for disaster. Anyone competing successfully in today's competitive world market, possesses a set of sophisticated skills that they developed over time with considerable effort. Everything is considerably more difficult than it looks. The Taiwan PC manufacturers will fail in their effort to brand and market PCs because they know nothing about how to do it and there is no reason to think they will be able to catch up with those who do. The advantages of vertical integration will prove marginal.

What should they do? It seems to me that one possible good answer would be to look for technical manufacturing niches they can evolve into. They should look for a number of products to replace their current single product because none of the new products will be as big as the PC. Learning how to manufacture more technically difficult products will require the development of new skills and the purchase of new equipment. But the skills needed would be an extension of skills they currently have so expanding into these areas would be an organic and natural progression.

Another possible good the answer would be to try to move into the novelty manufacturing area, possibly by forming partnerships with current novelty manufacturing companies (for products such as alarm clocks). These companies excel in things like plastic manufacture, rapid realignment of assembly lines, and stringent price control. However, they are relatively unsophisticated in the area of electronics. A strategy could be developed to upgrade the sophistication of electronics and novelty products while containing costs.

the real story behind PS3

I've been doing some research on the Web of the past few months on PS3. Unfortunately, I did not bookmark any of the web sites and cannot provide any references.

Nonetheless, this is what I've discovered. PS3 contains an amazingly powerful computer. It is immensely more powerful than the Xbox 360. The problem is, at least at the time of the release of PS3, it was also immensely more difficult to program to its full potential than Xbox 360.

As I have come to understand it, Sony released the PS3 before programming aids for the PS3 were available. The references to this are not completely clear and I may be wrong, but this is what I think. According to what I've read, programming the PS three to its full potential without programming aids is so difficult as to be impractical.

At this point in time, at least some of the programming aids have been created and released by Sony. Sony provides these free to any game developer who wants them. I read said at least one game company is developing a "real" version of a PS3 game---a version that utilizes the PS3 to its real potential. The name of this game (an update of a previous game) includes the words "Ninja Gardens."

I'm not a gamer and have played few videogames in my life. However, I am fascinated with technology in general and computer technology in particular. I'm very interested in the PS3 as a piece of technology. as I understand it from my reading, once the PS3 has been programmed to something approaching its full potential, it will be completely incomparable to the Xbox 360. Not only will graphics, strictly speaking be in another league, but the program will be able to incorporate such things as the principles of physics applied to video games. A least one such program is already available. You simply draw some objects, for example, and let them "fall." The program automatically figures out the effects of gravity, momentum, collisions, etc. and automatically generates the graphics for you.

Current versions of PS3 games utilize only a small percentage of the total potential. This kind of programming is much easier on the PS3. There is some debate about exactly how difficult it is to currently program a PS3 to near its full potential, even with the programming aids devised by Sony up to this point, but it clearly seems to be more difficult than programming an Xbox. As a result of this and the fact that programming aids were not available at the time of release (as far as I can determine) current versions of PS3 games are slightly inferior to Xbox 360 versions.

However, when the next generation of games comes out, it will be seen that the PS3 is in a class of its on. I fully believe this at this point, though I do not presented as a fully established fact because some of the evidence has been a little unclear.

As far as I'm concerned, the question now is whether a great PS3 will have a hugely positive impact on Sony or not. Specifically, will it propel Sony's Blu Ray version of the next-generation high-definition DVD player into dominance against its competitor, which I believe is called HD DVD or something like that.

You'll recall, this is a replay of the VCR wars that Sony lost. This despite the apparent fact that they had the best technology. Well, we'll see what happens.

I just read an article in today's Wall Street Journal about people who have a strange deficiency -- they are unable to recognize other people's faces. Apparently, as many as 2.5% of the population may suffer from this condition to one extent or another.

However, it is most interesting in its extreme form. There is a story about a young boy with this problem. His parents have had to transfer him to a small private school because it is so hard for him to deal with other students. The reporter talks to the child and he apparently can only identify two people in his class---due to their distinctive hairstyles. The kid is really struggling to deal with this problem on a daily basis.

While this is indeed unfortunate condition, I couldn't help but wonder. Why don't they just have all the students and teachers in the school wear name tags?